8-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): December 31, 2003

ASCENT ASSURANCE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation) 1-8538 (Commission File Number) 73-1165000 (IRS Employer Identification Number )

3100 Burnett Plaza, 801 Cherry Street, Unit 33, Fort Worth, Texas 76102

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (817) 878-3300

110 W. Seventh Street, Fort Worth, Texas 76102

(Former Name or Former Address, if Changed Since Last Report)

ITEM 5.     OTHER EVENTS

On December 31, 2003, Ascent Assurance, Inc. (the “Company”) completed a restructuring of the preferred stock and notes of the Company held by affiliates of Credit Suisse First Boston (together, “CSFB”) that has resulted in an extension of the maturity dates of such preferred stock and notes from March 24 and April 17, 2004, respectively, until March 24, 2010. The restructuring was effected pursuant to an Exchange Agreement dated as of December 31, 2003 between the Company and CSFB (the “Exchange Agreement”).

Prior to the consummation of the restructuring, CSFB held all outstanding shares of the 10.25% Series A Convertible Preferred Stock of the Company (the “Series A Preferred Stock”) with a stated value of approximately $37.5 million (including accrued and unpaid dividends) and the 12% notes of the Company (the “Notes”) with a principal amount of approximately $15.3 million (including accrued and unpaid interest). Prior to the restructuring, CSFB was the Company’s largest stockholder, owning approximately 49% of the outstanding shares of Common Stock of the Company (the “Common Stock”) and, on an as-converted, fully-diluted basis assuming conversion of the outstanding Series A Preferred Stock, approximately 75.4% of the Common Stock.

Pursuant to the Exchange Agreement, CSFB has received 37,504 shares of a new series of 5.5% Series B Convertible Preferred Stock of the Company (the “Series B Preferred Stock”) in exchange for the shares of Series A Preferred Stock held by CSFB. As a result of the exchange, CSFB owns, on an as-converted, fully-diluted basis, 93% of the Common Stock and the public stockholders have retained a 7% equity interest in the Company. At a meeting to be held no later than June 30, 2004, the stockholders of the Company will be asked to adopt a Board-recommended amendment to the Company’s certificate of incorporation to authorize additional shares of Common Stock in an amount necessary to permit the conversion of the Series B Preferred Stock in full. Upon the effectiveness of such amendment and the obtaining of all necessary insurance regulatory approvals, the Series B Preferred Stock will automatically convert into Common Stock and no preferred stock will remain outstanding. CSFB has agreed to be present in person or by proxy at the meeting and to vote all of its shares of Common Stock in favor of such amendment.

The restructuring of the terms of the Notes has been effected pursuant to an amendment of the Credit Agreement dated as of April 17, 2001 between the Company and CSFB. In addition to the extension of the maturity date of the Notes, the interest rate of the Notes has been reduced from 12% to 6% per annum. Also, a $1.5 million facility fee that was payable upon maturity of the Notes has been waived. In the event that the Company fails to receive the approval of its stockholders in favor of the amendment to the certificate of incorporation described above by June 30, 2004, other than if such failure is the direct or indirect result of any action taken or failed to be taken by CSFB, such failure shall constitute an event of default under the Notes which, among other things, will result in the holder of the Series B Preferred Stock having the right to vote on all matters thereafter brought to the stockholders of the Company (other than the election of directors). CSFB has also agreed that the Notes will be subordinate to up to $10 million in borrowings under the Company’s agent debit balance credit facility. The Company, certain of its subsidiaries, CSFB and the lender under such credit facility have entered into an Intercreditor and Subordination Agreement dated as of December 31, 2003 to give effect to this subordination agreement.

The seven-member Board of Directors of the Company has been reconstituted and, pursuant to the Exchange Agreement, two of its members (who will be entitled to appoint their successors) will be required to be independent of both CSFB and management until such time as the Company no longer has any public stockholders or, if sooner, upon the sale of the Company to an unaffiliated third party. To qualify as an independent director, the director shall not be an officer of the Company or any of its subsidiaries, shall not otherwise be an affiliate of CSFB and shall qualify as “independent” under the rules or listing standards of any securities exchange or market on which any of the Company’s securities are listed or approved for trading, or if not so listed or approved, the rules or listing standards of the Nasdaq Stock Market.

The Exchange Agreement also provides that, during the period that the Company is required to have two independent directors, independent director approval will be required for transactions between CSFB or its affiliates and the Company, except for (i) transactions under $100,000 in the ordinary course and (ii) as described below, certain business combination transactions in which the public stockholders receive all cash in exchange for their shares. Following conversion of the Series B Preferred Stock, CSFB will have sufficient voting power to be able to approve a short-form merger with the Company without a vote of the Board of Directors or the public stockholders. However, CSFB has agreed in the Exchange Agreement that the Company will not consummate such a transaction at a cash price per share that does not reflect fair value under applicable Delaware law as reasonably determined by the controlling stockholder; provided that, prior to January 1, 2005, such price cannot be less than $.40 per share. The public stockholders would also have appraisal rights under Delaware law in connection with any short-form merger.

CSFB has agreed and consented to the provisions of the Exchange Agreement described in the preceding two paragraphs, and has agreed to vote its shares of Common Stock in favor of the two independent directors selected in accordance with the Exchange Agreement so as to give effect to such provisions. The Exchange Agreement provides that the provisions relating to independent director approval of related party transactions shall be enforceable by the Company’s public stockholders, or by the independent directors on their behalf. The Company has agreed to pay for reasonable fees and expenses of one law firm engaged to represent the independent directors in connection with an action by them to enforce the provisions of the Exchange Agreement on behalf of the public stockholders that is brought and pursued with the good faith approval of each independent director.

The Company and CSFB have also entered into an amendment to the Registration Rights Agreement dated March 24, 1999 providing that the shares of Common Stock issuable upon conversion of the Series B Preferred Stock will be considered “Registrable Securities” for purposes of CSFB’s registration rights under that agreement.

In connection with approving the Exchange Agreement, the Board also approved the extension for three years from the closing date of the exercise period applicable to options held by the two directors who resigned from the Board in connection with the consummation of the Exchange Agreement.

The restructuring transaction contemplated by the Exchange Agreement was negotiated and approved by a Special Committee of the Board of Directors consisting exclusively of directors independent of CSFB and management. The Special Committee received an opinion from Houlihan Lokey Howard & Zukin, Inc. that the restructuring transaction is fair, from a financial point of view, to the Company and the public stockholders not affiliated with CSFB.

The summary descriptions of the Exchange Agreement and the transactions contemplated thereby, the terms of the Series B Preferred Stock and the Notes and the other agreements described above do not purport to be complete and are qualified in their entirety by reference to the text of such documents, which are filed as exhibits hereto and incorporated herein by reference.

The Company issued a press release on December 31, 2003 announcing the completion of the restructuring of CSFB’s preferred stock and notes pursuant to the Exchange Agreement, a copy of which press release is filed as an exhibit hereto and incorporated herein by reference.

ITEM 7.	FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
	(a)    Financial Statements of Business Acquired
	Not applicable.
	(b)    Pro Forma Financial Information
	Not applicable.
	(c)     Exhibits:

EXHIBIT NO.	DESCRIPTION
3.1	Certificate of Elimination of the Series A Convertible Preferred Stock.
3.2	Certificate of Designation of the Series B Convertible Preferred Stock.
10.1	Exchange Agreement dated as of December 31, 2003 among the Company, Credit Suisse First Boston Management LLC and Special Situations Holdings, Inc.-Westbridge.
10.2	First Amendment to Registration Rights Agreement dated as of December 31, 2003 between the Company and Special Situations Holdings, Inc.-Westbridge.
10.3	Second Amendment to Credit Agreement dated as of December 31, 2003 among the Company and the Lenders, the Administrative Agent and the Arranger identified therein.
10.4	First Amendment and Waiver to Guaranty and Security Agreement dated as of December 31, 2003 among the Grantors, the Lenders, the Administrative Agent and the Secured Party identified therein.
10.5	Intercreditor and Subordination Agreement dated as of December 31, 2003 among The Frost National Bank, Credit Suisse First Boston Management LLC and the Company and its subsidiaries a party thereto.
99.1	Press Release issued by the Company on December 31, 2003 with respect to the restructuring of the preferred stock and notes pursuant to the Exchange Agreement.

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ASCENT ASSURANCE, INC.
Date: January 6, 2004
	By:    /s/ Cynthia B. Koenig
	Cynthia B. Koenig           Senior Vice President,           Chief Financial Officer           and Treasurer           (Principal Financial and Accounting Officer)

EXHIBIT INDEX

   EXHIBIT NO.                    DESCRIPTION

3.1 Certificate of Elimination of the Series A Convertible Preferred Stock.

3.2 Certificate of Designation of the Series B Convertible Preferred Stock.

10.1 Exchange Agreement dated as of December 31, 2003 among the Company, Credit Suisse First Boston Management LLC and Special Situations Holdings, Inc.-Westbridge.

10.2 First Amendment to Registration Rights Agreement dated as of December 31, 2003 between the Company and Special Situations Holdings, Inc.-Westbridge.

10.3 Second Amendment to Credit Agreement dated as of December 31, 2003 among the Company and the Lenders, the Administrative Agent and the Arranger identified therein.

10.4 First Amendment and Waiver to Guaranty and Security Agreement dated as of December 31, 2003 among the Grantors, the Lenders, the Administrative Agent and the Secured Party identified therein.

10.5 Intercreditor and Subordination Agreement dated as of December 31, 2003 among The Frost National Bank, Credit Suisse First Boston Management LLC and the Company and its subsidiaries a party thereto.

99.1 Press Release issued by the Company on December 31, 2003 with respect to the restructuring of the preferred stock and notes pursuant to the Exchange Agreement.

EX-3.1

Exhibit 3.1

CERTIFICATE OF ELIMINATION

OF

SERIES A CONVERTIBLE PREFERRED STOCK

OF

ASCENT ASSURANCE, INC.

________________

ASCENT ASSURANCE, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware,

        DOES HEREBY CERTIFY:

        FIRST: That at a meeting of the Board of Directors of Ascent Assurance, Inc., resolutions were duly adopted setting forth the proposed elimination of the Series A Convertible Preferred Stock as set forth herein:

RESOLVED, that no shares of the Series A Convertible Preferred Stock are outstanding and none will be issued; and

RESOLVED FURTHER, that a Certificate of Elimination be executed, which shall have the effect when filed with the Secretary of State of the State of Delaware of eliminating from the Second Amended and Restated Certificate of Incorporation all reference to the series of preferred stock designated as the “Series A Convertible Preferred Stock.”

        SECOND: None of the authorized shares of the Series A Convertible Preferred Stock are outstanding and none will be issued.

        THIRD: That in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Second Amended and Restated Certificate of Incorporation is hereby amended to eliminate all reference to the series of preferred stock designated as the “Series A Convertible Preferred Stock.”

        IN WITNESS WHEREOF, said Ascent Assurance, Inc. has caused this certificate to be signed by Patrick H. O’Neill, its Executive Vice President, this 31st day of December, 2003.

ASCENT ASSURANCE, INC.

By:    Patrick H. O’Neill                  

          Patrick H. O’Neill

          Executive Vice President

EX-3.2

Exhibit 3.2

CERTIFICATE OF DESIGNATION

FOR SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK

OF

ASCENT ASSURANCE, INC.

        Pursuant to Section 151 of the General Corporation Law of the State of Delaware

            ASCENT ASSURANCE, INC., a corporation organized and existing under and by virtue of the laws of the State of Delaware (the “Corporation”), does hereby certify that the Board of Directors of the Corporation has adopted the following resolution fixing the designation and certain terms, powers, preferences and other rights of a new series of the Corporation’s preferred stock, par value $.01 per share, and certain qualifications, limitations and restrictions thereof:

RESOLVED, that there is hereby established a new series of Preferred Stock, par value $.01 per share, of the Corporation, and the designation and certain terms, powers, preferences and other rights of the shares of such series, and certain qualifications, limitations and restrictions thereof, are hereby fixed as follows:

        Section 1.     DESIGNATION AND AMOUNT.

        The shares of such series shall be designated as the “Series B Convertible Participating Preferred Stock” (the “Series B Preferred Stock”) and the number of shares initially constituting such series shall be 40,000, which number may be decreased (but not increased) by the Board of Directors without a vote of stockholders; PROVIDED, HOWEVER, that such number may not be decreased below the number of then currently outstanding shares of Series B Preferred Stock. The stated value per share (the “Stated Value”) of the Series B Preferred Stock shall be $1,000.

        Section 2.     DEFINITIONS.

        Capitalized terms used herein shall have the meanings set forth in this Section 2:

        “ANNUAL DIVIDEND PAYMENT DATE” has the meaning ascribed to such term in Paragraph (b) of Section 3.

        “ANNUAL DIVIDEND PERIOD” has the meaning ascribed to such term in Paragraph (b) of Section 3.

        “AVERAGE MARKET PRICE PER SHARE OF COMMON STOCK” on any date shall be deemed to be the average of the Closing Prices per share of Common Stock for the thirty (30) consecutive Trading Days commencing forty-five (45) Trading Days immediately prior to such date.

        “BOARD OF DIRECTORS” means the Board of Directors of the Corporation.

        “BUSINESS DAY” means any day other than Saturday, Sunday or a day on which banking institutions in the States of New York or Texas are authorized or obligated by law or executive order to close.

        “CERTIFICATE OF INCORPORATION” means the Second Amended and Restated Certificate of Incorporation of the Corporation, as it may be amended from time to time.

        “CHARTER AMENDMENT” means any amendment to the Certificate of Incorporation that effects an increase in the number of authorized shares of Common Stock, such that immediately upon effectiveness of such amendment, there would be sufficient unissued shares of Common Stock authorized under the Certificate of Incorporation to permit the conversion of all of the shares of Series B Preferred Stock designated hereunder.

        “CLOSING PRICE PER SHARE OF COMMON STOCK” on any date shall be the last reported sale price or, in case no such sale takes place on such day, the average of the closing bid and asked prices of the Common Stock, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors. If the Common Stock is not publicly held or so listed or publicly traded, “CLOSING PRICE PER SHARE OF COMMON STOCK” shall mean the Fair Market Value per share as determined in good faith by the Board of Directors.

        “COMMON STOCK” means the common stock, par value $.01 per share of the Corporation.

        “CONVERSION PRICE” shall be an amount equal to $0.85246, as adjusted from time to time pursuant to Section 8.

        “DGCL” means the General Corporation Law of the State of Delaware.

        “DIVIDEND RATE” means an annual rate of 5.5%.

        “EFFECTIVE DATE” means December 31, 2003.

        “FAIR MARKET VALUE” means an amount determined in good faith by the Board of Directors and certified in a resolution sent to all holders of shares of Series B Preferred Stock.

        “JUNIOR STOCK” means the Common Stock and any other stock of the Corporation ranking junior to the Series B Preferred Stock with respect to the payment of dividends and the distribution of assets, whether upon liquidation or otherwise.

        “PARITY STOCK” means any stock of the Corporation ranking on a parity with the Series B Preferred Stock either with respect to the payment of dividends or the distribution of assets, whether upon liquidation or otherwise, and provided such stock is not Senior Stock.

        “PERSON” means any person or entity of any nature whatsoever, specifically including an individual, a firm, a company, a corporation, a partnership, a limited liability company, a trust or other entity.

        “PREFERRED STOCK” means the preferred stock, par value $.01 per share, of the Corporation.

        “REORGANIZATION” has the meaning ascribed to such term in Section 4.

        “SEC” means the Securities and Exchange Commission.

        “SECRETARY” means the Secretary of the Corporation.

        “SENIOR STOCK” means any stock of the Corporation ranking prior to the Series B Preferred Stock either with respect to the payment of dividends or the distribution of assets, whether upon liquidation or otherwise.

        “SERIES B PREFERRED STOCK” has the meaning ascribed to such term in Section 1.

        “STATED VALUE” has the meaning ascribed to such term in Section 1.

        “SUBSIDIARY” of any Person means any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.

        “TRADING DAY” means a day on which any national securities exchange on which the Common Stock is then listed is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, any Business Day.

        “TRIGGER EVENT” has the meaning ascribed to such term in Section 4.

        “TRIGGER EVENT CURE” has the meaning ascribed to such term in Section 4.

        Section 3.     DIVIDENDS AND DISTRIBUTIONS.

         (a)     The holders of shares of Series B Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds of the Corporation legally available for the payment of dividends,

    (i)     Preferential cumulative dividends in respect of each outstanding share of Series B Preferred Stock at the Dividend Rate, payable in cash or by issuing a number of additional fully paid and non assessable shares of Series B Preferred Stock in respect of each outstanding share of Series B Preferred Stock determined by dividing the amount of the dividend not paid in cash by the Stated Value, and

    (ii)     dividends and distributions (payable in cash, stock or otherwise, other than any stock dividend for which there is an adjustment pursuant to Section 8(b)), on each date that dividends or other distributions are payable on or in respect of Common Stock, in an amount per whole share of Series B Preferred Stock equal to the aggregate amount (in cash or other property) of dividends or other distributions that would be payable on such date to a holder of the number of shares of Common Stock into which such shares of Series B Preferred Stock would be then convertible pursuant to Section 8 below.

        (b)     Dividends pursuant to clause (i) of Paragraph (a) of this Section 3 shall be payable annually in arrears on the last day of January (or if such day is not a Business Day, the Business Day next preceding such day) in each year (each such date being referred to herein as an “Annual Dividend Payment Date”), in respect of the annual period ending on the last day of the immediately preceding calendar year (each such period being referred to herein as an “Annual Dividend Period”), so long as shares of Series B Preferred Stock are outstanding; PROVIDED that the first Annual Dividend Payment Date shall be January 31, 2005 in respect of the period from and including the Effective Date through December 31, 2004.

        (c)      Dividends payable pursuant to clause (i) of Paragraph (a) of this Section 3 shall begin to accrue and be cumulative from and including the Effective Date, whether or not in any Annual Dividend Period or Annual Dividend Periods there shall be funds of the Corporation legally available for the payment of dividends. The amount of dividends payable per share of Series B Preferred Stock on any Annual Dividend Payment Date pursuant to clause (i) of Paragraph (a) of Section 3 shall equal the Dividend Rate; PROVIDED that with respect to the first Annual Dividend Payment Date, the amount of dividends payable per share of Series B Preferred Stock shall be computed by dividing the Dividend Rate by three hundred sixty (360) and multiplying the result by the number of days from the Effective Date to the last day of the applicable Annual Dividend Period. The amount of dividends payable for any period shorter or longer than a full Annual Dividend Period, including the first Annual Dividend Period, shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated PRO RATA on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty (60) days nor less than ten (10) days prior to the date fixed for the payment thereof (which record and payment dates in the case of clause (ii) of Paragraph (a) above shall be the same dates as the record and payment dates for the corresponding payment of dividends on the Common Stock).

        (d)     So long as any shares of Series B Preferred Stock shall be outstanding, no dividend shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other shares of Junior Stock, nor shall any Common Stock nor any other shares of Junior Stock or Parity Stock be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to, set aside or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation or any of its Subsidiaries, unless, in each case, the full cumulative dividends (including the dividend to be due upon payment of such dividend, distribution, redemption, purchase or other acquisition) on all outstanding shares of Series B Preferred Stock shall have been, or shall then be, paid.

        Section 4.     VOTING RIGHTS.

        (a)      Except as provided in paragraphs (b) and (c) of this Section 4, and except for any voting rights provided by law, the holders of shares of Series B Preferred Stock shall have no voting rights and their consent shall not be required for the taking of any corporate action.

        (b)        (i)     If (a) an Event of Default shall have occurred under the Credit Agreement, dated as of April 17, 2001 between the Corporation, as borrower, and Credit Suisse First Boston Management Corporation, as administrative agent, arranger and lender, as such agreement may be amended from time to time (the “Credit Agreement”), or (b) the Corporation shall fail to redeem the Series B Preferred Stock in accordance with the provision of Section 5 (any such event described in the preceding clauses (a) and (b) referred to as a “Trigger Event”), a vote of the holders of Series B Preferred Stock, voting as a single class, will be required on all matters thereafter brought to stockholders of the Corporation (other than the election of directors). Whenever all Events of Default under the Credit Agreement have been cured and the Corporation shall be in compliance with any redemption obligations under Section 5 (the “Trigger Event Cure”), then the right of the holders of Series B Preferred Stock to vote as described in this Paragraph (b) of Section 4 shall cease (but subject always to the same provisions for the vesting of such voting rights if any Trigger Event occurs).

    (ii)     If and whenever dividends payable on shares of Series B Preferred Stock pursuant to Paragraph (a) of Section 3 in cash or shares in an amount equivalent to or exceeding the amount of dividends payable thereon for one Annual Dividend Period shall be past due, thereafter and until all accrued and unpaid dividends payable pursuant to Paragraph (a) of Section 3 shall have been paid in full or declared and set apart for payment, the holders of shares of Series B Preferred Stock, together with the holders of any other series of Preferred Stock as to which dividends are in arrears and as a result are entitled to the rights described in this paragraph, shall have the right, notwithstanding anything to the contrary in the Certificate of Incorporation or the By-Laws, voting together as a single class with such other series, to elect one director of the Corporation, such director to be in addition to the number of directors constituting the Board of Directors immediately prior to the accrual of such right, with the remaining directors to be elected by the other class or classes of stock entitled to vote therefor at any meeting of the stockholders held for the purpose of electing directors. Such right of the holders of Series B Preferred Stock to vote for the election of a director may be exercised at any annual meeting of stockholders of the Corporation or at any special meeting of stockholders of the Corporation called for such purpose as hereinafter provided or at any adjournment thereof, or by the written consent, delivered to the Secretary, of the holders of a majority of all outstanding shares of Series B Preferred Stock as of the record date of such written consent, until all accrued and unpaid dividends payable pursuant to Paragraph (a) of Section 3 shall have been paid in full or declared and set apart for payment, at which time the term of office of the director so elected shall terminate automatically. So long as such right to elect a director continues (and unless such right has been exercised by written consent of the holders of a majority of the outstanding shares of Series B Preferred Stock as hereinabove authorized), the Secretary may call, and upon the written request of the holders of record of at least twenty percent (20%) of the outstanding shares of Series B Preferred Stock addressed to the Secretary at the principal executive offices of the Corporation shall call, a special meeting of the holders of such shares for the election of such director as provided herein. Such meeting shall be held within thirty (30) days after delivery of such request to the Secretary, at the place and upon the notice required for meetings of stockholders provided in the By-Laws or by law for the holding of meetings of stockholders. No such special meeting or adjournment thereof shall be held on a date less than thirty (30) days before an annual meeting of stockholders of the Corporation or any special meeting in lieu thereof at which the holders of the Series B Preferred Stock are given the opportunity to elect one director in accordance with this Paragraph (b). If at any such annual or special meeting or any adjournment thereof the holders of a majority of the then outstanding shares of Series B Preferred Stock entitled to vote in such election shall be present or represented by proxy, or if the holders of a majority of the outstanding shares of Series B Preferred Stock shall have acted by written consent in lieu of a meeting with respect thereto, then the authorized number of directors shall be increased by one and the holders of the Series B Preferred Stock shall be entitled to elect such additional director. The absence of a quorum of the holders of any other class or series of capital stock of the Corporation at any such annual or special meeting shall not affect the exercise by the holders of the Series B Preferred Stock of their right to elect a director in accordance with this Paragraph (b). The director so elected shall serve until the next annual meeting of stockholders of the Corporation or until their successors shall be elected and shall qualify, unless the term of office of the persons so elected as a director shall have terminated under the circumstances set forth in the second sentence of this Paragraph (b). In case the director elected by the holders of the Series B Preferred Stock pursuant to this Paragraph (b) shall cease to serve as a director for any reason prior to the expiration of his or her term, the holders of the Series B Preferred Stock then outstanding and entitled to vote for such director may, by written consent as hereinabove provided, or at a special meeting of such holders called as provided above, elect a successor to hold office for the unexpired term of the director whose place shall be vacant.

    (iii)     The rights of the holders of Series B Preferred Stock to elect one director pursuant to the terms of this Paragraph (b) shall not be adversely affected by the voting or other rights applicable to any other security of the Corporation.

        (c)      So long as any shares of Series B Preferred Stock shall be outstanding and unless the consent or approval of a greater number of shares shall then be required by law, without first obtaining the consent or approval of the holders of a majority of the shares of Series B Preferred Stock then outstanding, voting as a single class, given in person or by proxy at a meeting at which the holders of such shares shall be entitled to vote separately as a class, or by written consent, the Corporation shall not: (i) authorize or create any class or series, or any shares of any class or series, of Senior Stock; (ii) authorize or create any class or series, or any shares of any class or series, of Parity Stock; (iii) reclassify any shares of capital stock of the Corporation into shares of Senior Stock or Parity Stock; (iv) authorize any security exchangeable for, convertible into, or evidencing the right to purchase any shares of Senior Stock or Parity Stock; (v) amend, alter or repeal the Certificate of Incorporation (by merger or otherwise) to alter or change the preferences, rights or powers of the Series B Preferred Stock so as to affect the Series B Preferred Stock adversely or to increase the authorized number of shares of Series B Preferred Stock (provided that any such amendment that changes the dividend payable on, the Conversion Rate with respect to, or the liquidation preference of the Series B Preferred Stock shall require the affirmative vote at a meeting or by written consent, of each holder of Series B Preferred Stock); or (vi) effect the sale, lease, conveyance or exchange of all or substantially all of the assets, property or business of the Corporation, or the merger or consolidation of the Corporation with or into any other entity (such transactions being hereinafter in this proviso referred to as “Reorganization”), PROVIDED, HOWEVER, that no separate vote of the holders of the Series B Preferred Stock as a class shall be required in the case of a Reorganization if (a) the Corporation is the surviving corporation and the Series B Preferred Stock remains outstanding without change to its preferences, rights and powers, or (b) each holder of shares of Series B Preferred Stock immediately preceding such Reorganization will receive from the resulting, surviving or acquiring corporation in exchange therefor shares of stock, with substantially the same preferences, rights and powers.

        Section 5.     REDEMPTION.

        (a)      On March 24, 2010, the Corporation shall redeem all outstanding shares of Series B Preferred Stock out of funds of the Corporation legally available therefor, by paying therefor in cash an amount equal to the Stated Value per share plus all accrued and unpaid dividends thereon to the date of redemption.

        (b)        (i)     Notice of any redemption of shares of Series B Preferred Stock pursuant to Paragraph (a) of this Section 5 shall be mailed not less than thirty (30) nor more than sixty (60) days prior to the redemption date to each holder of shares of Series B Preferred Stock to be redeemed, at such holder’s address as it appears on the transfer books of the Corporation. Each such notice shall state: (w) the date fixed for redemption, (x) the place or places where the redemption price will be paid (if other than the principal executive offices of the Corporation), (y) the current Conversion Price and (z) that dividends on the shares of Series B Preferred Stock will cease to accrue on the date fixed for redemption. In order to facilitate the redemption of shares of Series B Preferred Stock, the Board of Directors may fix a record date for the determination of shares of Series B Preferred Stock to be redeemed, not more than sixty (60) days nor less than thirty (30) days prior to the date fixed for such redemption.

    (ii)     Notice having been given pursuant to Subparagraph (i) of Paragraph (b) of this Section 5, from and after the date specified therein as the date of redemption, unless default shall be made by the Corporation in providing for the payment of the applicable redemption price, all dividends on the Series B Preferred Stock thereby called for redemption shall cease to accrue, and from and after the date of redemption so specified, unless default shall be made by the Corporation as aforesaid, or from and after the date (prior to the date of redemption so specified) on which the Corporation shall provide for the payment of the redemption price by depositing the requisite amount of moneys (and other property, if applicable) with a bank or trust company having a capital and surplus of at least $50,000,000, PROVIDED that the notice of redemption shall state the intention of the Corporation to deposit such moneys (and other property, if applicable) on a date in such notice specified, all rights of the holders thereof as stockholders of the Corporation, except the right to receive the applicable redemption price (but without interest) and except the right to exercise any privileges of conversion, shall cease and terminate. Any interest allowed on moneys so deposited shall be paid to the Corporation. Any moneys (and other property, if applicable) so deposited which shall remain unclaimed by the holders of Series B Preferred Stock at the end of six (6) years after the redemption date shall become the property of, and be paid by such bank or trust company to, the Corporation. Except for any amounts deposited in payment of accrued and unpaid dividends, in the event that moneys are deposited pursuant to this paragraph in respect of shares of Series B Preferred Stock that are converted in accordance with the provisions of Section 8, such moneys shall, upon such conversion, revert to the general funds of the Corporation, and upon demand, such bank or trust company shall pay over to the Corporation such moneys and shall be relieved of all responsibility to the holders of such converted shares in respect thereof.

        Section 6.      REACQUIRED SHARES.

        Any shares of Series B Preferred Stock converted, redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof, and, if necessary to provide for the lawful redemption or purchase of such shares, the capital represented by such shares shall be reduced in accordance with the DGCL. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of the same series of Preferred Stock, or, following the filing of a certificate of elimination with respect to such series, may be reissued as part of another series.

        Section 7.    LIQUIDATION, DISSOLUTION OR WINDING UP.

        (a)     In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of shares of Series B Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to its stockholders, an amount equal to the higher of the Stated Value per share plus all accrued and unpaid dividends thereon to the date of such payment or an amount equal to the amount such holders would receive if such shares of Series B Preferred Stock had been converted into Common Stock immediately prior to the distribution, and no distribution shall be made by the Corporation or any of its Subsidiaries (i) to the holders of shares of Common Stock or any other capital stock of the Corporation ranking junior to the Series B Preferred Stock upon liquidation, dissolution or winding up, unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received an amount equal to the higher of the Stated Value per share plus all accrued and unpaid dividends thereon to the date of such payment or an amount equal to the amount such holders would receive if such shares of Series B Preferred Stock had been converted into Common Stock immediately prior to the distribution, or (ii) to the holders of any capital stock of the Corporation ranking on a parity with the Series B Preferred Stock upon liquidation, dissolution or winding up, except distributions made ratably on the Series B Preferred Stock and all such other capital stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up of the Corporation.

        (b)     Neither the consolidation, merger or other business combination of the Corporation with or into any other Person or Persons nor the sale, lease, exchange or conveyance of all or any part of the property, assets or business of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 7.

        Section 8.     CONVERSION.

        Each share of Series B Preferred Stock may, subject to Paragraph (e) of this Section 8, at any time, at the option of the holder thereof, be converted into shares of Common Stock, on the terms and conditions set forth in this Section 8.

        (a)      Each share of Series B Preferred Stock shall be convertible in the manner hereinafter set forth into a number of fully-paid and nonassessable shares of Common Stock equal to the result obtained (calculated to the nearest 1/1,000th of a share) by dividing the Stated Value by the Conversion Price.

        (b)      The Conversion Price shall be adjusted from time to time as follows:

    (i)    In case the Corporation shall at any time after the Effective Date (i) declare a dividend on the Common Stock payable in shares of Common Stock, (ii) subdivide or reclassify the outstanding Common Stock or (iii) combine or reclassify the outstanding Common Stock into a smaller number of shares, the Conversion Price in effect on the record date for such dividend or on the effective date of such subdivision, combination or reclassification shall be adjusted by multiplying such Conversion Price by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event. Such adjustment shall be made successively whenever any event listed above shall occur.

    (ii)    If at any time after the Effective Date the Corporation shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them (for a period expiring within forty-five (45) days after such record date) to subscribe for or to purchase shares of Common Stock (or securities convertible into shares of Common Stock) at a price per share, or having a conversion price per share of Common Stock (if a security is convertible into Common Stock), less than the Average Market Price per share of Common Stock on such record date, the Conversion Price shall be decreased to an amount determined by multiplying such Conversion Price in effect immediately prior to such record date by a fraction, the numerator of which is the sum of (x) the total number of shares of Common Stock outstanding on such record date and (y) the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock to be so offered (or the aggregate initial conversion price of the convertible securities to be so offered plus any subscription or purchase price of such securities) would purchase at such Average Market Price per share of Common Stock and the denominator of which shall be the sum of (a) the number of shares of Common Stock outstanding on such record date and (b) the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible securities to be so offered are initially convertible). In the event such subscription or purchase price is paid, in whole or in part, with consideration other than cash, the value of such consideration shall be as determined by the Board of Directors, whose determination shall be conclusive. Such adjustment shall be made successively whenever such a record date is fixed and, in the event that such rights or warrants are not issued, the Conversion Price shall be adjusted to the Conversion Price which was in effect prior to such record date.

    (iii)    If at any time after the Effective Date the Corporation shall fix a record date for the making of a distribution to all holders of its Common Stock of evidences of its indebtedness or assets (excluding cash distributions made as a dividend payable out of earnings or out of surplus legally available for dividends under the laws of the jurisdiction of the Corporation), securities convertible into Common Stock or rights to subscribe (excluding those referred to in Subparagraph (ii) of this Paragraph (b)), then in each case the Conversion Price in effect immediately prior to such record date shall be decreased to an amount determined by multiplying such Conversion Price by a fraction, the numerator of which is the Average Market Price per share of Common Stock on such record date less the then fair market value per share of Common Stock (as determined by the Board of Directors, whose determination shall be conclusive) of the assets or evidences of indebtedness so distributed or of such subscription rights and the denominator of which is the Average Market Price per share of Common Stock on such date. Such adjustment shall be made successively whenever such a record date is fixed and, in the event that such distribution is not so made, the Conversion Price shall be adjusted to the price which was in effect prior to such record date.

    (iv)    In case the Corporation shall be a party to any transaction (including, without limitation, a merger, consolidation, sale of all or substantially all of the Corporation’s assets or recapitalization of the Common Stock and excluding any transaction to which Subparagraph (i) of this Paragraph (b) applies) in which the previously outstanding Common Stock shall be changed into or, pursuant to the operation of law or the terms of the transaction to which the Corporation is a party, exchanged for different securities of the Corporation or common stock or other securities of another corporation or interests in a noncorporate entity or other property (including cash) or any combination of any of the foregoing, then, as a condition of the consummation of such transaction, lawful and adequate provision shall be made so that each holder of shares of Series B Preferred Stock shall be entitled, upon conversion, to an amount per share equal to (A) the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged in such transaction times (B) the number of shares of Common Stock into which a share of Series B Preferred Stock is convertible immediately prior to the consummation of such transaction.

    (v)    In case at any time or from time to time, the Corporation shall take any action of the type contemplated herein but not expressly provided for by such provisions, then, unless in the opinion of the Board of Directors such action is not reasonably likely to have a material adverse effect upon the rights of the Series B Preferred Stock (taking into consideration, if necessary, any prior actions which the Board of Directors hereunder deemed not reasonably likely to materially adversely affect the rights of the holders of Series B Preferred Stock), the Series B Preferred Stock shall be adjusted in such manner and at such time as the Board of Directors may in good faith determine to be equitable in the circumstances.

        (c)      In case the Corporation shall be a party to a transaction described in Subparagraph (iv) of Paragraph (b) above, effective provision shall be made, in the articles or certificate of incorporation of the resulting or surviving corporation or other corporation issuing or delivering such shares, other securities or property or otherwise, so that the provisions set forth herein for the protection of the conversion rights of the Series B Preferred Stock shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion of the Series B Preferred Stock remaining outstanding or other convertible stock or securities received by the holders in place thereof; and any such resulting or surviving corporation or other corporation issuing or delivering such shares, other securities or property shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, securities or property as the holders of the Series B Preferred Stock remaining outstanding, or other convertible stock or securities received by the holders in place thereof, shall be entitled to receive, pursuant to the provisions hereof, and to make provision for the protection of the conversion right as above provided. In case shares, securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references to Common Stock in Paragraph (b) of this Section 8 shall be deemed to apply, so far as provided and as nearly as is reasonable, to any such shares, other securities or property.

        (d)     The holder of any shares of Series B Preferred Stock may exercise such holder’s right to convert such shares into shares of Common Stock by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series B Preferred Stock to be converted accompanied by a written notice stating that such holder elects to convert all or a specified whole number of such shares in accordance with the provisions of this Section 8 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. Other than such taxes, the Corporation will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series B Preferred Stock pursuant hereto. As promptly as practicable after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Corporation that such taxes have been paid), the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Series B Preferred Stock so converted shall be entitled and (ii) if less than the full number of shares of Series B Preferred Stock evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversion shall be deemed to have been made at the close of business on the date of giving of such notice and of such surrender of the certificate or certificates representing the shares of Series B Preferred Stock to be converted so that the rights of the holder thereof as to the shares being converted shall cease except for the right to receive shares of Common Stock, and the person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. The Corporation shall not be required to convert, and no surrender of shares of Series B Preferred Stock shall be effective for that purpose, while the transfer books of the Corporation for the Common Stock are closed for any purpose (but not for any period in excess of ten (10) Business Days); but the surrender of shares of Series B Preferred Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such shares of Series B Preferred Stock were surrendered, and at the conversion rate in effect at the date of such surrender. Notwithstanding the foregoing, shares of Series B Preferred Stock may not be converted into Common Stock for so long as, but only to the extent that, there are not sufficient unissued shares of Common Stock authorized under the Certificate of Incorporation so as to give effect to such conversion.

        (e)      Shares of Series B Preferred Stock may be converted at any time up to the close of business on the Business Day next preceding the date fixed for redemption of such shares pursuant to Section 5, unless the Corporation shall have defaulted in its obligations under such Section to make the redemption payment.

        (f)      In any case in which Paragraph (b) of this Section 8 shall require that an adjustment as a result of any event becomes effective after a record date for such event, the Corporation may elect to defer until after the occurrence of such event (i) issuing to the holder of any shares of Series B Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion over and above the shares of Common Stock issuable upon such conversion on the basis of the conversion rate prior to adjustment and (ii) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to Paragraph (g) below; and, in lieu of the shares the issuance of which is so deferred, the Corporation shall issue due bills or other appropriate evidence of the right to receive such shares.

        (g)      In connection with the conversion of any shares of Series B Preferred Stock, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Average Market Price per share of Common Stock on the day on which such shares of Series B Preferred Stock are deemed to have been converted.

        (h)     The Corporation shall at all times following the effectiveness of a Charter Amendment, reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all shares of Series B Preferred Stock then outstanding. The Corporation shall from time to time, subject to and in accordance with the DGCL, increase the authorized amount of Common Stock if at any time the number of authorized shares of Common Stock remaining unissued shall not be sufficient to permit the conversion at such time of all shares of Series B Preferred Stock then outstanding. The Corporation shall cause any shares of Common Stock issued upon conversion of Series B Preferred Stock to be listed for trading on any securities exchange on which the Common Stock is at the time listed, and shall deliver such notices as may be required by such exchange in connection with any such issuance. The Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares of Series B Preferred Stock or for dividends on the shares of Common Stock issued upon such conversion.

        (i)      Notwithstanding anything to the contrary contained herein, if adjustments of the Conversion Price have caused the Conversion Price to be lower than the par value, if any, of the Common Stock, upon any conversion of shares of Series B Preferred Stock the Corporation shall, to the maximum extent it is legally able to do so, issue to the converting holder the shares of Common Stock into which the shares of Series B Preferred Stock being converted are convertible, and, in addition, the Corporation shall pay the converting holder an amount in cash equal to the Average Market Price per share of Common Stock multiplied by the number of shares and fractions thereof of Common Stock which the converting holder would have been entitled to receive except for the limitation on lawful issuance described in this paragraph.

        (j)      Notwithstanding anything to the contrary contained herein, no adjustment in the Conversion Price pursuant to this Section 8 shall be required unless such adjustment would require an increase or decrease of at least 1% in such Conversion Price, PROVIDED, HOWEVER, that any adjustments which, by reason of this Paragraph (j), are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 8 shall be made to the nearest cent and to the nearest one-hundredth of a share, as the case may be.

        (k)      Upon the expiration of any rights, options or warrants to purchase or other securities convertible into or exchangeable for shares of Common Stock, if any thereof shall not have been exercised, converted or exchanged, the Conversion Price shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) on the basis of (i) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options or warrants to purchase or securities convertible into or exchangeable for shares of Common Stock and (ii) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise plus the consideration, if any, actually received by the Corporation for the issuance, sale or grant of all such rights, options or warrants to purchase or securities convertible into or exchangeable for shares of Common Stock, whether or not exercised; PROVIDED, HOWEVER, that no such readjustment shall have the effect of increasing the Conversion Price by an amount in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options or warrants to purchase, or securities convertible into or exchangeable for, shares of Common Stock.

        Section 9.      AUTOMATIC CONVERSION BY THE CORPORATION UPON EFFECTIVENESS OF CHARTER AMENDMENT.

        (a)     Immediately upon the filing and effectiveness of a Charter Amendment and subject to the prior receipt of any required regulatory approvals, including any approvals of the Commissioner of Insurance of the State of Texas, and without further action required by the Corporation, all shares of Series B Preferred Stock outstanding on such date shall automatically be converted into the right to receive such number of shares of Common Stock and any other consideration into which such shares of Series B Preferred Stock would otherwise be convertible in accordance with Section 8 hereof, in whole but not in part.

        (b)     Upon filing and effectiveness of the Charter Amendment and subject to the prior receipt of any required regulatory approvals, including any approvals of the Commissioner of Insurance of the State of Texas, the Corporation will deliver written notice of the automatic conversion of shares of Series B Preferred Stock pursuant to this Section 9 to holders of record of the Series B Preferred Stock so converted. Such notice shall include (i) a statement signed by one of the Corporation’s executive officers certifying that shares of Common Stock are available for the conversion, (ii) an opinion of counsel that all the shares of Common Stock receivable as a result of the automatic conversion of the Series B Preferred Stock have been duly authorized and when issued, will be validly issued and nonassessable and (iii) instructions for the surrender of certificates of Series B Preferred Stock so converted, together with the means for designating the name or names in which the holder wishes the certificate or certificates for Common Stock receivable by such holder to be issued and any other information reasonably necessary for the Corporation to issue the shares of Common Stock and any other consideration receivable by the holder in connection with the automatic conversion and to otherwise give full effect to such conversion. Such notice shall be provided by mailing notice of such conversion first class mail postage prepaid, to each holder of record of the Series B Preferred Stock to be converted, at such holder’s address as it appears on the stock register of the Corporation.

        Section 10.    REPORTS AS TO ADJUSTMENTS.

        Whenever the Conversion Price is adjusted as provided in Section 8, the Corporation shall promptly mail to the holders of record of the outstanding shares of Series B Preferred Stock at their respective addresses as the same shall appear in the Corporation’s stock records a notice stating that the Conversion Price has been adjusted and setting forth the new Conversion Price and the new number of shares of Common Stock (or describing the new stock, securities, cash or other property) into which each share of Series B Preferred Stock is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof, and when such adjustment became effective.

        Section 11.    RANK.

        The Series B Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the Corporation, (i) prior to all shares of Junior Stock (including, without limitation, the Common Stock) and (ii) prior to all shares of any other series of Preferred Stock, unless and to the extent such other series, the authorization and creation of which was approved or consented to by the requisite holders of Series B Preferred Stock in accordance with the provisions of Paragraph (c) of Section 4, by its terms ranks on a parity with or senior to the Series B Preferred Stock in any respect.

        IN WITNESS WHEREOF, said Ascent Assurance, Inc. has caused this certificate to be signed by Patrick H. O’Neill, its Executive Vice President, this 31st day of December, 2003.

ASCENT ASSURANCE, INC.

By:    Patrick H. O’Neill                  

          Patrick H. O’Neill

          Executive Vice President

EX-10.1

Exhibit 10.1

EXCHANGE AGREEMENT

Among

ASCENT ASSURANCE, INC.,

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC,

and

SPECIAL SITUATIONS HOLDINGS, INC. — WESTBRIDGE

Dated as of December 31, 2003

TABLE OF CONTENTS

Page

ARTICLE I	DEFINITIONS	2
ARTICLE II	THE TRANSACTIONS	3
2.1	The Exchange	3
2.2	CSFB Loan Documents Amendment.	3
2.3	The Closing	3
2.4	The Charter Amendment	4
2.5	Certain Effects of the Transactions on Capitalization	5
2.6	Dissenters Rights	5
ARTICLE III	CORPORATE GOVERNANCE FOLLOWING THE EXCHANGE	5
3.1	New Board	5
3.2	Independent Directors; Related Party Transactions	6
ARTICLE IV	REPRESENTATIONS AND WARRANTIES	7
4.1	Representations and Warranties of the Company	7
4.2	Representations and Warranties of the CSFB Entities	11
ARTICLE V	ADDITIONAL AGREEMENTS AND COVENANTS	12
5.1	Taxation	12
5.2	Publicity	12
5.3	Expenses	12
5.4	Indemnification	12
5.5	Rule 144	13
5.6	New Frost Facility	13
5.7	Restriction on Business Combinations	13
5.8	Registration Rights Agreement	14
5.9	Regulatory Approvals	14
ARTICLE VI	MISCELLANEOUS AND GENERAL	14
6.1	Survival	14
6.2	Entire Agreement; No Other Representations	14
6.3	Modification or Amendment	15
6.4	Waiver of Conditions	15
6.5	Counterparts	15
6.6	Governing Law and Venue; Waiver of Jury Trial	15
6.7	Notices and Waivers	15
6.8	No Third Party Beneficiaries	16
6.9	Further Assurances	16
6.10	Transfer Taxes	16
6.11	Severability	16
6.12	Interpretation	17
6.13	Assignment; CSFB Transferees	17
6.14	Specific Performance	17
6.15	Knowledge	17
EXHIBITS
EXHIBIT A	Certificate of Designation of Series B Preferred Stock
EXHIBIT B	Amendment to CSFB Credit Agreement
EXHIBIT C	Security Agreement Amendment
EXHIBIT D	Intercreditor and Subordination Agreement

EXCHANGE AGREEMENT

        EXCHANGE AGREEMENT (hereinafter called this “Agreement”), dated as of December 31, 2003, among ASCENT ASSURANCE, INC., a Delaware corporation (the “Company”), CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC (formerly known as Credit Suisse First Boston Management Corporation, “Management LLC”), and SPECIAL SITUATIONS HOLDINGS, INC. – WESTBRIDGE (“SPV”, and together with Management LLC, “CSFB Entities”).

RECITALS

        WHEREAS, the Company and the CSFB Entities have been in ongoing discussions regarding: (i) the mandatory redemption of the shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred”) on March 24, 2004, all of which are owned by SPV, and (ii) the maturity of the loans made under the Credit Agreement, dated as of April 17, 2001, as amended, between the Company, as borrower, and Management LLC, as administrative agent, arranger and lender (the “CSFB Credit Agreement”);

        WHEREAS, the members of the Board of Directors of the Company (the “Board”) unaffiliated with the CSFB Entities, after considering alternative financing sources, have determined that in light of prevailing circumstances and recent events and negotiations, it was in the best interests of the stockholders of the Company unaffiliated with the CSFB Entities to attempt to negotiate terms for the extension of the respective maturity dates for the Series A Preferred and the loans made under the CSFB Credit Agreement, while continuing efforts to renew or replace its agent debit balance financing facility with LaSalle Bank, NA (the “La Salle Facility”);

        WHEREAS, the Board has established a special committee of its independent members (the “Special Committee”) and hired independent legal and financial advisors to assist it to (i) evaluate and negotiate the terms of a transaction and this Agreement with the CSFB Entities, (ii) determine whether the issuance of new securities in exchange for redemption of the Series A Preferred and the amendment to the CSFB Credit Agreement in accordance with the terms of this Agreement is fair to the stockholders of the Company that are unaffiliated with the CSFB Entities (the “Public Holders”) and (iii) determine whether or not the Company shall otherwise consummate the Exchange (as hereinafter defined); and

        WHEREAS, the Special Committee (i) has determined that it is fair to and in the best interest of the Public Holders to consummate the Transactions (as hereinafter defined) upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”) and (ii) has approved the Transactions and this Agreement.

        NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the CSFB Entities and the Company hereby agree as follows:

ARTICLE I

DEFINITIONS

        “Affiliate” or “affiliate” shall mean with respect to a specified person, a person that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified; provided that the Company and its Subsidiaries shall not, and the executive officers or directors or officers of the Company or any of its Subsidiaries shall not, solely as a result of holding such office, be deemed an “Affiliate” of any of the CSFB Entities; and provided, further, that for purposes of this definition, the term “control” (including the terms “controlling,” “controlled by” and “under common control with”) shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person through the ownership of more than fifty percent (50%) of the voting securities of such person or the ability to otherwise designate a majority of the board of directors or managers of such person.

        “DGCL” has the meaning set forth in the fourth Whereas clause.

        “Exchange Act” means the Securities Exchange Act of 1934, as amended.

        “Houlihan” means Houlihan Lokey Howard & Zukin, in its capacity as financial advisor to the Special Committee.

        “Material Adverse Effect” means a material adverse effect on the financial condition, properties, business or results of operations of the Company and its Subsidiaries taken as a whole; provided, however, that any such effect resulting from any change (i) in law, rule, or regulation or generally accepted accounting principles (“GAAP”) or interpretations thereof that applies to the Company and similar entities on substantially the same basis or (ii) in the health insurance sector specifically, or economic or business conditions generally, shall not be considered when determining if a Material Adverse Effect has occurred.

        “Related Party” shall mean SPV, Management LLC and any of their respective Affiliates.

        “SEC” means the Securities and Exchange Commission.

        “Securities Act” means the Securities Act of 1933, as amended.

        “Subsidiary” means, with respect to any party, any entity, whether incorporated or unincorporated, 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 such party or by one or more of its respective Subsidiaries or by such party and any one or more of its respective Subsidiaries.

ARTICLE II

THE TRANSACTIONS

2.1. The Exchange. On the terms and subject to the conditions set forth herein, including in accordance and subject to Section 2.5(a) below, at the Closing:

(a) SPV agrees that it shall contribute, convey, transfer, assign and deliver, or cause to be contributed, conveyed, transferred, assigned and delivered, to the Company all of the shares of Series A Preferred held by SPV free and clear of any Liens, and the Company agrees that it shall accept and receive all of such shares of Series A Preferred, which shares upon receipt by the Company shall no longer be deemed outstanding.

(b) The Company agrees that immediately following receipt of the shares of Series A Preferred as described in paragraph (a), it shall issue to SPV in consideration thereof an aggregate of 37,504 shares of Series B Convertible Participating Preferred Stock, par value $.01 per share (the “Series B Preferred”) having the terms set forth in the form of Certificate of Designation for the Series B Preferred set forth as Exhibit A hereto, and deliver to SPV a certificate or certificates representing such shares of Series B Preferred (the “Exchange”).

2.2. CSFB Loan Documents Amendment. On the terms and subject to the conditions set forth herein, at the Closing, each of Management LLC and the Company agrees to enter into or cause to be entered into an amendment to the CSFB Credit Agreement (the “Credit Agreement Amendment” and the CSFB Credit Agreement, as amended, the “New CSFB Credit Agreement”) having the terms set forth in the form of Amendment to the Credit Agreement set forth as Exhibit B hereto, together with any corresponding amendments to the related Guaranty and Security Agreement dated as of April 17, 2001 among Management LLC and the Company’s Subsidiaries party thereto (the “Security Agreement Amendment”) (all such foregoing amendments, collectively referred to herein as the “CSFB Loan Documents Amendments”), and to execute, file and/or deliver or cause to be executed, filed and/or delivered any filings, applications or other documents required to be executed, filed or delivered in connection therewith.

2.3. The Closing.

(a) Closing Date. The closing of the Exchange and the CSFB Loan Documents Amendments (the “Closing”) shall take place at the offices of Stroock & Stroock & Lavan LLP at 180 Maiden Lane, New York, New York, contemporaneously with the execution of this Agreement. The date on which the Closing occurs is referred to as the “Closing Date.”

(b) Closing Deliveries.

(i)     Company Deliveries. In connection with and at the Closing, the Company shall deliver to the CSFB Entities the following items:

        (A)     one or more certificate(s) representing 37,504 shares of Series B Preferred issued in accordance with Section 2.1(b), duly executed;

        (B)     a certificate of elimination in respect of the Series A Preferred, executed by a duly authorized officer of the Company and duly approved by the Board, as filed with the Secretary of State of the State of Delaware (the “Certificate of Elimination”), and the Certificate of Designation for the Series B Preferred in the form of Exhibit A attached hereto, each executed by a duly authorized officer of the Company and duly approved by the Board, as filed with the Secretary of State of the State of Delaware;

        (C)     duly executed counterparts of the CSFB Loan Documents Amendments, including but not limited to the Credit Agreement Amendment and the Security Agreement Amendment as set forth in Exhibit C hereto;

        (D)     the legal opinions of Milbank, Tweed, Hadley & McCloy LLP as to the Exchange and the shares of Series B Preferred issued in connection therewith and the CSFB Loan Documents Amendments, in each case dated as of the Closing Date, in form and substance reasonably satisfactory to the CSFB Entities and duly executed;

        (E)     a certificate, dated as of the Closing Date, and signed by the general counsel of the Company as to the Company’s organizational documents, resolutions authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby, the certificate(s) representing the shares of Series B Preferred to be issued in the Exchange and attesting to the incumbency of its signing officers, duly executed;

        (F)     a “long form” good standing certificate for the Company, dated no more than two business days prior to the Closing Date, issued by the Secretary of State of the State of Delaware; and

        (G)     such other written instruments, certificates or documents as the CSFB Entities or their counsel may reasonably request.

(ii)     CSFB Entities’ Closing Deliveries. In connection with and at the Closing, the CSFB Entities shall deliver to the Company the following items:

        (A)     Certificates representing (and/or duly executed affidavits of lost certificates in respect of) 36,567 shares of Series A Preferred to be delivered in exchange for the certificate(s) representing 37,504 shares of Series B Preferred to be issued in accordance with Section 2.1(b);

        (B)     duly executed counterparts of the CSFB Loan Documents Amendments, including but not limited to the Credit Agreement Amendment and the Security Agreement Amendment; and

        (C)     such other written instruments, certificates or documents as the Company or its counsel may reasonably request.

2.4. The Charter Amendment.

(a) Adoption. On the Closing Date the Board of the Company (subject to obtaining the requisite approval of the Company’s stockholders) shall approve and recommend, and on and after the Closing Date the Company shall take all steps necessary and appropriate to effect, the convening of a meeting of holders of shares of its Common Stock (as hereinafter defined) (including any such meeting held pursuant to an adjournment or postponement, the “Stockholders Meeting”) as promptly as practicable, but no later than June 30, 2004, to consider and vote upon the approval of the amendment to its certificate of incorporation to increase the number of authorized shares of Common Stock to 75,000,000 (the “Charter Amendment”), it being understood that the foregoing requirement to convene a Stockholders Meeting may be satisfied in connection with the Company’s scheduled May 2004 annual meeting of stockholders. The Company agrees that the New Board (as defined below) shall not, except as otherwise required in order to comply with applicable fiduciary duties, revoke such recommendation and approval and shall take all lawful and reasonable action to solicit such approval and the obtaining of the affirmative vote of a majority of the outstanding shares of Common Stock (the “Charter Amendment Vote”) in connection therewith. The Charter Amendment, the Exchange and the CSFB Loan Documents Amendments are hereinafter collectively referred to as, the “Transactions.”

(b) CSFB Entities’ Vote. Each of the CSFB Entities agrees to be present in person or by proxy at the Stockholders Meeting duly called by the Company to obtain the Charter Amendment Vote and at any adjournment or postponement thereof and to vote any and all shares of capital stock of the Company held by it and any of its affiliates in support of the Charter Amendment.

(c) Filing and Effective Time. The Company shall file the Charter Amendment with the Secretary of State of the State of Delaware as promptly as practicable after the Company obtains the Charter Amendment Vote. The Charter Amendment shall become effective upon such filing with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with, the relevant provisions of the DGCL (the “Charter Amendment Effective Time”).

2.5. Certain Effects of the Transactions on Capitalization. As a result of the applicable Transaction and without any action on the part of the CSFB Entities:

(a) The Preferred Stock Exchange. As of the Closing, the certificates representing the shares of Series A Preferred subject to the Exchange will no longer be outstanding and shall be retired and cancelled and immediately upon receipt of such certificates representing the Series A Preferred, the Company shall file the Certificate of Elimination. All 40,000 shares of Preferred Stock, par value $.01 per share (the “Preferred Stock”), authorized under the its certificate of incorporation (the “Charter”) shall immediately thereafter upon the filing of the Certificate of Designation for the Series B Preferred be redesignated and available for reissuance as shares of Series B Preferred. All shares of Series B Preferred to be issued pursuant to the Exchange shall be deemed issued and outstanding as of the Closing Date.

(b) The CSFB Loan Documents Amendments. At and after the Closing, the parties acknowledge and agree that the New CSFB Credit Agreement and the obligations of the Company thereunder shall continue to remain outstanding and in full force and effect.

2.6. Dissenters’ Rights. In accordance with Section 262 of the DGCL, no appraisal rights shall be available to holders of shares of Common Stock in connection with the Transactions.

ARTICLE III

CORPORATE GOVERNANCE FOLLOWING THE EXCHANGE

3.1. New Board. The Company shall take any and all actions necessary on its part (including obtaining the resignation of directors) to cause the directors comprising the full Board, subject to the completion of the Exchange and with effect as of January 1, 2004, to consist of those members in the table set forth below (the “New Board”), in each case such appointments to be in accordance with the Charter and to remain effective through and from January 1, 2004 in accordance with the Charter, the Company’s by-laws (the “By-Laws”) and applicable law. The directors comprising the New Board shall, from and after January 1, 2004, be the directors of the Company until their successors have been duly elected or appointed and qualified or until their earlier death, resignation, removal or replacement in accordance with the Charter, the Bylaws and applicable law. Thereafter, except as set forth in Section 3.2, all nominations and elections shall be governed in accordance with the Charter, the By-Laws, each as amended from time to time, and applicable law.

Director Name	Class
George Hornig	Re-Election in 2006
Alan Freudenstein	Re-Election in 2006
Mike Kramer	Re-Election in 2005
Paul Suckow	Re-Election in 2005
Patrick Mitchell	Re-Election in 2004
Greg Grimaldi	Re-Election in 2004
*	Re-Election in 2004
* To be appointed as designee by CSFB Entities after Closing Date.

3.2. Independent Directors; Related Party Transactions.

(a) The Company agrees that, following the Closing until the earlier of such date as of which there cease to be any Public Holders or the date of consummation of a Sale Transaction (as defined below), (i) the Company shall at all times maintain Messrs. Kramer and Suckow and/or each or both of their respective successors in accordance with paragraph (b) below (the “Independent Directors”) on the New Board (each of whom to be qualified shall not be officers of the Company or any of its Subsidiaries, shall not otherwise be affiliates of any of the CSFB Entities and shall qualify as “independent” under the rules or listing standards of any securities exchange or market on which any of the Company’s securities are listed or approved for trading or, if not so listed or approved, under the rules or listing standards of the Nasdaq Stock Market in effect from time to time) and (ii) the Company shall not, and shall not permit any of its Subsidiaries to, consummate a Related Party Transaction (as defined below) that has not been approved by the Independent Directors; provided, however, that in no event shall the foregoing approval of the Independent Directors be required, if (x) the Related Party Transaction is a Business Combination Transaction (as hereinafter defined) consummated in accordance with Section 5.7 or (y) the Related Party Transaction is a short-form merger consummated pursuant to Section 253 of the DGCL that has an effective date on or after January 1, 2005 and that provides for merger consideration to the Public Holders (1) which consideration is all cash and (2) which consideration has been reasonably determined by the relevant parent stockholder to constitute fair value (after subtracting debt and other liabilities of the Company and its Subsidiaries) within the meaning of Section 262 of the DGCL.

(b) For as long as the requirement to have Independent Directors serving on the New Board is in effect in accordance with this Section 3.2, the Independent Directors shall have the right to designate nominees for election to at least two seats (including the right to fill any vacancy in any other Independent Director seat occurring between regular elections), such that immediately following such election at least two of the Independent Directors serving on the Board will be either Messrs. Kramer and Suckow or designees of such persons who shall also otherwise qualify as Independent Directors hereunder. Each Independent Director shall undertake to resign from the Board promptly following such time as the requirement to have Independent Directors serving on the New Board ceases to be in effect in accordance with this Section 3.2.

(c) For purposes of this Section 3.2, the following defined terms shall have the following meanings:

(i)     A “Sale Transaction” shall mean the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the property or assets of the Company to, or the consolidation or merger of the Company with, one or more other corporations or other entities, where the stockholders of the Company immediately prior to such transaction receive the same proportionate consideration for their shares and thereafter do not beneficially own, collectively, shares of capital stock representing at least a majority of the voting power of all outstanding securities entitled to vote generally in election of directors or persons performing a similar function of the surviving or successor corporation or other entity. The good faith determination of a majority of the New Board (or persons performing a similar function of a successor entity), together with the consent of the Independent Directors (which consent shall not be unreasonably withheld or delayed), that a Sale Transaction has occurred shall conclusively establish the occurrence of such event.

(ii)     A “Related Party Transaction” shall mean, directly or indirectly and in any transactions or series of related transactions:

        (A)     Any amendment or modification of, or waiver of any right of the Company under, this Agreement, the Series B Preferred, the Registration Rights Agreement (as hereinafter defined), as amended in accordance with Section 5.8 hereof, or the CSFB Credit Agreement and all related documents and agreements; or

        (B)     Any sale of the assets or issuance of shares of capital stock of the Company or any Subsidiary (including a Business Combination Transaction) to (or any acquisition of assets from or share subscription in) a Related Party, other than a subscription for shares of the Company by any Related Party pursuant to a rights offering made available to all holders of Common Stock on a pro rata basis and for the same amount and form of consideration and otherwise on substantially the same terms and conditions; or

        (C)     Any merger or consolidation between or among the Company or any Subsidiary (including a Business Combination Transaction) and any Related Party; or

        (D)     Any merger, statutory share exchange or consolidation involving the Company or any Subsidiary (including a Business Combination Transaction) pursuant to which any Related Party is entitled to receive consideration in respect of its securities in the Company that is different in form or amount from that offered all holders of the same class of such securities, other than ancillary arrangements or rights entailing no monetary payments and other than reasonable third-party legal fees, out-of-pocket expense reimbursement and indemnification for the benefit of a Related Party for liabilities in respect of which other holders of the same class have no liability; or

        (E)     Any other transaction or series of related transactions (including a Business Combination Transaction) between or among the Company and/or any Subsidiary on the one hand and any Related Parties on the other hand, other than payments in respect of customary director fees in accordance with past practice or other ordinary course transactions the value of any of which does not exceed $100,000.

(d) Each of the CSFB Entities hereby acknowledge and consent to the provisions of this Section 3.2 and agrees to vote any shares of Common Stock held by it in favor of the Independent Directors nominated in accordance with this Section 3.2 so as to give effect to such provisions.

(e) The Public Holders may rely on the provisions of this Section 3.2, which provisions are intended to be for the benefit of the Public Holders and shall be enforceable by each of the Public Holders or by the Independent Directors on behalf of the Public Holders. The Company hereby agrees that it will pay for reasonable fees and expenses of one firm of counsel engaged to represent the Independent Directors in connection with any actions to enforce the provisions hereof on behalf of the Public Holders that is brought and pursued with the good faith approval of each Independent Director.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

4.1. Representations and Warranties of the Company. Except as set forth in the corresponding sections or subsections of the disclosure letter delivered to the CSFB Entities by the Company on or prior to entering into this Agreement (the “Disclosure Letter”), the Company hereby represents and warrants to the CSFB Entities that:

(a) Organization, Good Standing and Qualifications. Each of the Company and each Subsidiary is duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its properties or conduct of its business requires such qualification, except where the failure to be so qualified or in such good standing, when taken together with all other such failures, is not reasonably likely to prevent, materially delay or materially impair the ability of it to consummate the Transactions.

(b) Corporate Authority; Binding and Enforceable. The Company has all requisite power and authority and has taken all action necessary under the DGCL and under its governing documents in order to execute, deliver and perform its obligations under this Agreement and to consummate the Transactions, subject to the Charter Amendment Vote. This Agreement is a valid and binding agreement of the Company, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and general equity principles.

(c) No Organic or Legal Violations. The execution, delivery and performance of this Agreement by the Company do not, and the consummation by the Company of any applicable Transactions will not, constitute or result in (i) a breach or violation of, or a default under, its Charter or its By-Laws, or (ii) a breach or violation of, or a default under, or the acceleration of any obligations, or the creation of a Lien (as defined below) on its assets (with or without notice, lapse of time or both) pursuant to any federal, state, local or foreign law, statute, ordinance, rule, regulation, judgment, order, injunction, decree, arbitration award, agency requirement or similar restriction (collectively, “Laws”) of any court or any foreign or domestic governmental, regulatory or self-regulatory authority, agency, commission, body or other entity (each, a “Governmental Entity”) to which it is subject.

(d) Capital Structure. The authorized capital stock of the Company consists of 30,000,000 shares of Common Stock, par value $.01 per share (“Common Stock”) and 40,000 shares of Preferred Stock, all of which until the Closing Date were designated as the Series A Preferred (the Preferred Stock, together with the Common Stock, the “Capital Stock”). As of the close of business on December 31, 2003 there were outstanding 6,532,100 shares of Common Stock and 36,567 shares of Series A Preferred. All of the outstanding shares of Common Stock and the Series A Preferred have been duly authorized and are validly issued, fully paid and nonassessable. In addition, as of the close of business on December 31, 2003, the Company has outstanding 971,266 warrants to purchase 971,266 shares of Common Stock at an exercise price of $9.04 per share (the “Warrants”). The Company has no shares of Capital Stock reserved for issuance, except that, as of the close of business on December 31, 2003, there were 1,606,704 shares of Common Stock reserved for issuance pursuant to the Company’s Stock Plans, and 971,266 shares of Common Stock reserved for issuance upon the exercise of the Warrants. Each of the outstanding shares of capital stock or other securities of each of the Company’s Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and owned by the Company or by a direct or indirect wholly owned Subsidiary of the Company, free and clear of Liens. Except as set forth above, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements or commitments to issue or sell any shares of capital stock or other securities of the Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. The Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or, convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter (“Voting Debt”).

Section 4.1(d) of the Disclosure Letter contains a correct and complete list of each outstanding Warrant and of each option or similar right (including any stock appreciation rights) to purchase or acquire any shares of Common Stock under the Stock Plan (each such option or similar right, an “Option”) including the holder, the date of grant, exercise price and number of shares subject thereto.

(e) Required Stockholder Votes; Issuance of Capital Stock; Board Approval.

(i)     The only approval of stockholders of the Company required for the Company to execute, deliver and perform its obligations under this Agreement and to consummate the Transactions is the Charter Amendment Vote to effect the Charter Amendment.

(ii)     Prior to the Closing, the Company will have taken all action necessary to permit it to issue the shares of Series B Preferred required to be issued in the Exchange. The shares of Series B Preferred, when issued in the Exchange, will be validly issued, fully paid and nonassessable, and no stockholder of the Company will have any preemptive right of subscription or purchase in respect thereof.

(iii)     Each of the Board and the Special Committee of the Company has unanimously approved this Agreement and each of the Transactions and the other transactions contemplated hereby.

(f) Opinion of Financial Advisor. The Special Committee has received the written opinion of Houlihan dated the date of this Agreement to the effect that, as of the date of this Agreement, the Transactions are fair to the Company and to the Public Holders from a financial point of view and such opinion has not been withdrawn. A copy of such opinion has been delivered to the CSFB Entities.

(g) Governmental Filings; No Registration. Other than the filings and notices (i) pursuant to or required in connection with Section 2.4 (The Charter Amendment) or (ii) to comply with state securities or “blue-sky” laws or (iii) made pursuant to a Current Report on Form 8-K to announce the consummation of the Transactions, no notices, reports or other filings are required to be made by the Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by it from, any court or Governmental Entity in connection with the execution and delivery of this Agreement and the consummation of the Transactions by the Company, except those that the failure to make or obtain are not, individually or in the aggregate, reasonably likely to prevent, materially delay or materially impair the ability of it to consummate the Transactions.

(h) Securities Act Exemption. The Company acknowledges and agrees that the shares of Series B Preferred to be issued in the Exchange are being issued in a transaction intended to be exempt from registration under Section 3(a)(9) of the Securities Act and accordingly it is not be necessary to register under the Securities Act the offer and sale of the shares of Series B Preferred to be issued by the Company in the Exchange. Assuming the accuracy of the CSFB Entities representations in Section 4.2(d) to the extent applicable, the issuance of shares of Series B Preferred in the Exchange also qualifies for the exemption from registration provided by Section 4(2) of the Securities Act and Regulation D thereunder.

(i) No Contract Violations. The execution, delivery and performance of this Agreement by the Company do not, and the consummation by the Company of the Transactions will not, constitute or result in a breach or violation of, or a default under, the acceleration of any obligations of, or the creation of any Lien on the assets of, the Company or any of its Subsidiaries (with or without notice, lapse of time or both) pursuant to, any agreement, lease, contract, note, mortgage, indenture, arrangement or other obligation not otherwise terminable by either party thereto on 30 days’ or less notice (“Contracts”), and binding upon the Company or any of its Subsidiaries or any change in the rights or obligations of any party under any of the Contracts, except for “change in control” or similar provisions disclosed in Section 4.1(l) of the Disclosure Letter and except for any breach, violation, default, acceleration, creation or change that, individually or in the aggregate, is not reasonably likely to have a Material Adverse Effect or to prevent, materially delay or materially impair the ability of the Company to consummate the Transactions.

(j) Company Reports; Financial Statements. The Company has delivered to the CSFB Entities, each registration statement, report, proxy statement or information statement prepared by it since December 31, 2002 (the “Audit Date”), including (i) the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, and (ii) the Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2003, June 30, 2003 and September 30, 2003, each in the form (including exhibits, annexes and any amendments thereto) filed with the SEC (collectively, the “Company Reports”). As of their respective dates, the Company Reports did 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. Each of the consolidated balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) fairly presents the consolidated financial position of the Company and its Subsidiaries as of its date and each of the consolidated statements of income and of changes in financial position included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presents the results of operations, retained earnings and changes in financial position, as the case may be, of the Company and its Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to notes and normal year-end audit adjustments that will not be material in amount or effect), in each case in accordance with GAAP consistently applied during the periods involved, except as may be noted therein.

(k) Litigation and Liabilities. Except as disclosed in the Company Reports filed prior to the date hereof, there are no (i) civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of the executive officers of the Company, threatened against the Company or any of its affiliates, or (ii) obligations or liabilities, whether or not accrued, contingent or otherwise and whether or not required to be disclosed, including those relating to tax or to environmental and occupational safety and health matters, or any other facts or circumstances of which the executive officers of the Company have knowledge that could result in any claims against, or obligations or liabilities of, the Company or any of its affiliates, except for those that are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect or to prevent or to materially impair the ability of the Company to consummate the Transactions.

(l) Employee Benefits.

(i)     A copy of each bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock, Stock Option, employment, termination, severance, compensation, medical, health, life, disability or other plan, agreement, policy or arrangement that covers employees, directors, former employees or former directors of the Company and its Subsidiaries (the “Compensation and Benefit Plans”) and any trust agreement or insurance contract forming a part of such Compensation and Benefit Plans has been made available to the CSFB Entities prior to the date hereof.

(ii)     The Compensation and Benefit Plans are listed in Section 4.1(l) of the Disclosure Letter and any “change of control” or similar provisions therein are specifically identified in such Section of the Disclosure Letter.

(iii)     Neither the Company nor any of its Subsidiaries has engaged in a transaction with respect to any Compensation and Benefit Plan that would subject the Company or any of its Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or Section 502 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

(iv)     As of the date hereof, no liability under subtitle C or D of Title IV of ERISA has been or is expected to be incurred by the Company or any Subsidiary with respect to any ongoing, frozen or terminated “single-employer plan”, within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the single-employer plan of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an “ERISA Affiliate”). The Company and its Subsidiaries either (a) have not incurred and do not expect to incur any withdrawal liability with respect to a multiemployer plan under Subtitle E to Title IV of ERISA or (b) have not contributed, or been obligated to contribute, to a multiemployer plan under Subtitle E of Title IV of ERISA at any time since September 26, 1980. No notice of a “reportable event”, within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any pension plan or by any ERISA Affiliate within the 12-month period ending on the date hereof or will be required to be filed in connection with the Transactions.

(v)     Neither any pension plan nor any single-employer plan of an ERISA Affiliate has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA and neither the Company, its Subsidiaries or any ERISA Affiliate has failed to make when due all quarterly contributions required under Section 412 of the Code or Section 302 of ERISA. Neither the Company nor its Subsidiaries has provided, or is required to provide, security to any Compensation and Benefit Plan that is an “employee pension benefit plan” within the meaning of section 3(2) of ERISA (any such plan, a “Pension Plan”) or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.

(vi)     Under each Pension Plan which is a single-employer plan, as of the last day of the most recent plan year ended prior to the date hereof, the actuarially determined present value of all “benefit liabilities”, within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in the Pension Plan’s most recent actuarial valuation), did not exceed the then current value of the assets of such Pension Plan, and there has been no material change in the financial condition of such Pension Plan since the last day of the most recent plan year.

(vii)     Neither the Company nor its Subsidiaries have any obligations for post-termination health, life or other non-pension benefits under any Compensation and Benefit Plan, except as set forth in Section 4.1(l) of the Disclosure Letter or as required pursuant to Section 4980B of the Code and Sections 601 through 608 of ERISA. The Company or its Subsidiaries may amend or terminate any such plan under the terms of such plan at any time without incurring any material liability thereunder with respect to events subsequent to such termination.

(viii)     Except as disclosed pursuant to clause (ii) above, the consummation of the Transactions will not (x) entitle any employees of the Company or its Subsidiaries to severance pay, (y) accelerate the time of payment or vesting or trigger any payment of compensation or benefits under, increase the amount payable or trigger any other obligation pursuant to, any of the Compensation and Benefit Plans or (z) result in any breach or violation of, or a default under, any of the Compensation and Benefit Plans.

(ix)     No event has occurred in connection with which the Company, any Subsidiary, any ERISA Affiliate or any Compensation and Benefit Plan, directly or indirectly could be subject to any liability (a) under any statute, regulation, or governmental order relating to any Compensation and Benefit Plan or and single employer plan of an ERISA Affiliate or (b) pursuant to any obligation of the Company or a Subsidiary to indemnify a person against liability incurred under any such statute, regulation or order as they relate to the Compensation and Benefit Plans.

(m) Compliance with Laws; Permits. Except as set forth in the Company Reports filed prior to the date hereof, the businesses of each of the Company and its Subsidiaries have not been, and are not being, conducted in violation of any Laws, except for violations or possible violations that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect or to prevent or materially impair the ability of the Company to consummate the Transactions. Except as set forth in the Company Reports filed prior to the date hereof, no investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or, to the knowledge of the executive officers of the Company, threatened, nor has any Governmental Entity indicated an intention to conduct the same, except for those the outcome of which are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect or to prevent or materially impair the ability of the Company to consummate the Transactions. To the knowledge of the executive officers of the Company, no material change is required in the Company’s or any of its Subsidiaries’ processes, properties or procedures in connection with any such Laws, and the Company has not received any notice or communication of any material noncompliance with any such Laws that has not been cured as of the date hereof. The Company and each of its Subsidiaries have all permits, licenses, trademarks, patents, trade names, copyrights, service marks, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals necessary to conduct its business as presently conducted except those the absence of which are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect or to prevent or materially impair the ability of the Company to consummate the Transactions.

(n) Takeover Statutes. The Company acknowledges and agrees that notwithstanding this Agreement and the consummation of the Transactions contemplated hereby, neither Section 203 of the DGCL nor any similar takeover law now or hereafter prohibit the CSFB Entities or any of their affiliates from entering into a “business combination” with the Company as an “interested stockholder” (in each case as such term is used in Section 203 of the Delaware Law).

(o) Tax Matters. As of the date hereof, neither the Company nor any of its affiliates has taken or agreed to take any action, nor do the executive officers of the Company have any knowledge of any fact or circumstance, that would prevent the Exchange from qualifying as a reorganization within the meaning of Section 368(a)(1)(E) of the Code.

(p) Taxes. The Company and each of its Subsidiaries (i) have prepared in good faith and duly and timely filed (taking into account any extension of time within which to file) all Tax Returns (as defined below) required to be filed by any of them and all such filed Tax Returns are complete and accurate in all material respects; (ii) have paid all Taxes (as defined below) that are shown as due on such filed Tax Returns or that the Company or any of its Subsidiaries are obligated to withhold from amounts owing to any employee, creditor or third party, except with respect to matters contested in good faith; and (iii) have not waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. As of the date hereof, there are not pending or, to the knowledge of the executive officers of the Company threatened in writing, any audits, examinations, investigations or other proceedings in respect of Taxes or Tax matters. There are not, to the knowledge of the executive officers of the Company, any unresolved questions or claims concerning the Company’s or any of its Subsidiaries’ Tax liability that are reasonably likely to have a Material Adverse Effect.

As used in this Agreement, (i) the term “Tax” (including, with correlative meaning, the terms “Taxes” and “Taxable”) includes all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and (ii) the term “Tax Return” includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to Taxes.

(q) Brokers and Finders. Neither the Company nor any of its officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with the Transactions except that the Company has employed Houlihan to render a fairness opinion in connection with the Transactions, the arrangements with which have been disclosed to the CSFB Entities prior to the date hereof.

4.2 Representations and Warranties of the CSFB Entities. Each of Management LLC and SPV hereby represents and warrants to the Company that:

(a) Organization, Good Standing and Qualifications. Each of Management LLC and SPV is duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate or similar power and authority to own and operate its properties and assets and carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its properties or conduct of its business requires such qualification, except where the failure to be so qualified or in such good standing, when taken together with all other such failures, is not reasonably likely to prevent, materially delay or materially impair the ability of it to consummate the Transactions.

(b) Corporate Authority; Binding and Enforceable. Each of the CSFB Entities has all requisite power and authority and has taken all action necessary under the laws of the State of Delaware and under its governing documents in order to execute, deliver and perform its obligations under this Agreement and to consummate the Transactions. This Agreement is a valid and binding agreement of each of the CSFB Entities, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and general equity principles.

(c) No Violations. Subject to the receipt of regulatory approvals required to be obtained by the CSFB Entities in connection with the conversion of the shares of Series B Preferred, which approvals the CSFB Entities shall seek to obtain in accordance with Section 5.9 hereof, the execution, delivery and performance of this Agreement by the CSFB Entities do not, and the consummation by Management LLC and SPV of any applicable Transactions and the other transactions contemplated hereby will not, constitute or result in (i) a breach or violation of, or a default under, their governing documents or (ii) a breach or violation of, or a default under, or the acceleration of any obligations or the creation of Liens on their assets pursuant to any Laws of any Governmental Entity to which they are subject.

(d) Status and Investment Intent. Each of the CSFB Entities is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act. SPV is acquiring the shares of Series B Preferred issuable pursuant to the Exchange for its own account and for investment purposes only and not with a view to, or for resale in connection with, any distribution thereof in violation of the Securities Act.

(e) Brokers and Finders. Neither the CSFB Entities nor any of their affiliates, officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with the Transactions.

(f) Restricted Securities. Each of the CSFB Entities agrees that, at the time of issuance, the shares of Series B Preferred to be issued hereunder and the shares of Common Stock issuable upon conversion thereof will not be registered under the Securities Act or qualified under any state securities laws. Such securities are being issued on the basis that the Exchange and the issuance by the Company of such securities under this Agreement are exempt from registration under the Securities Act and from applicable state securities laws. The CSFB Entities agree that the reliance by the Company on certain of the applicable exemptions is predicated, in part, on the CSFB Entities’ representations and warranties and other agreements set forth in this Agreement. The CSFB Entities acknowledge and agree that each certificate representing shares of Series B Preferred issued in the Exchange or shares of Common Stock issuable upon conversion of Series B Preferred shall bear substantially the following legend and that each certificate for shares of Series B Preferred shall bear any additional restrictive legends required by the certificate of designation for the Series B Preferred:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS, OR (ii) IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, REGISTRATION UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH TRANSFER.

(g) Amendment to Schedule 13D. The CSFB Entities have provided the Company with a true and complete copy of a draft Amendment No. 2 to Schedule 13D, which draft is substantially in the form in which such Amendment No. 2 to Schedule 13D shall be filed on behalf of the CSFB Entities with the SEC promptly following the execution of this Agreement.

ARTICLE V

ADDITIONAL AGREEMENTS AND COVENANTS

5.1 Taxation. The Company shall not take or cause to be taken any action after the Closing Date, that would disqualify the Exchange as a “reorganization” within the meaning of Section 368(a)(1)(E) of the Code.

5.2 Publicity. The Company and the CSFB Entities shall consult with each other prior to issuing any press releases or otherwise making public announcements with respect to the Transactions contemplated hereby except as may be required by Law.

5.3 Expenses. Except as otherwise specified in this Section 5.3 or agreed in writing by the parties, all costs and expenses incurred in connection with this Agreement and Transactions shall be paid by the party incurring such cost or expense; provided, that all liability for transfer taxes or other similar taxes and fees incurred in connection with the Transactions shall be paid by the Company in accordance with Section 6.10 hereof.

5.4 Indemnification.

(a) From and after Closing Date, the Company agrees that it will indemnify and hold harmless each present and former director and officer of the Company determined as of Closing Date (the “Indemnified Parties”) against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities (collectively, “Costs”) incurred in their capacity as a director or officer in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring on or prior to the Closing Date (including this Agreement, the Transactions and the other transactions contemplated hereby), whether asserted or claimed prior to, at or after the Closing Date, to the fullest extent that the Company would have been permitted under the DGCL and its Charter and By-Laws as in effect on the date hereof to indemnify such Person (and the Company shall also advance expenses as incurred to the fullest extent permitted under applicable law, provided the Person to whom expenses are advanced provides an undertaking to repay such advances if it is finally judicially determined (and such determination is nonappealable) that such Person is not entitled to indemnification).

(b) Any Indemnified Party wishing to claim indemnification under paragraph (a) of this Section 5.4, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify the Company thereof, but the failure to so notify shall not relieve the Company of any liability it may have to such Indemnified Party except to the extent such failure materially prejudices the Company. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Closing Date), (i) the Company shall have the right to assume the defense thereof and shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if the Company elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between the Company and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and the Company shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; provided, however, that the Company shall be obligated pursuant to this paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in any jurisdiction unless the use of one firm of counsel would present such counsel with a conflict of interest, (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) the Company shall not be liable for any settlement effected without its prior written consent; and provided, further, that the Company shall not have any obligation hereunder to any Indemnified Party to the extent a court of competent jurisdiction shall finally determine, and such determination shall have become nonappealable, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. If any indemnity hereunder is for any reason found not to be available with respect to any Indemnified Party, then the Company and the Indemnified Party shall contribute to the amount payable in such proportion as is appropriate to reflect relative faults and benefits. Notwithstanding anything herein to the contrary, no Indemnified Party shall have any rights to indemnification or contribution under this Section 5.4 with respect to Costs arising out of any claims, actions, suits or proceedings initiated by such Indemnified Party (other than claims to enforce rights to indemnification hereunder).

(c) The Company, and its successors or assigns, shall not (i) consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) sell, lease or transfer all or substantially all of its properties and assets to any individual, corporation or other entity, unless and in each such case, proper provisions shall be made so that the successors and assigns of the Company, on such properties and assets, shall assume or effectively provide for all of the obligations set forth in this Section 5.4.

5.5 Rule 144. The Company shall file any reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder and, to the extent required to file such reports under the Exchange Act, will take such further action as any of the CSFB Entities may reasonably request to make available adequate current public information with respect to the Company meeting the current public information requirements of Rule 144(c) under the Securities Act to the extent required to enable such CSFB Entity to sell shares of Common Stock held by the CSFB Entities 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.

5.6 New Frost Facility. The Company shall use commercially reasonable efforts to enter into, or cause Ascent Funding, Inc. to enter into, a new replacement facility for the LaSalle Facility as promptly as practicable on terms reasonably acceptable to the CSFB Entities (it being understood that, unless otherwise agreed by the CSFB Entities, the maximum principal amount of borrowings permitted under such facility at any one time outstanding shall be $3 million) (the “New Senior Facility”). In connection with the Company entering into the New Senior Facility, Management LLC agrees that it shall consent to the subordination of the Company’s obligations in respect of the New CSFB Credit Agreement to the Company’s obligations in respect of the New Senior Facility, subject to the terms and conditions set forth in the form of Intercreditor and Subordination Agreement attached hereto as Exhibit D.

5.7 Restriction on Business Combinations.

(a) Until January 1, 2005, the Company shall not effect a Business Combination Transaction (as defined below) to or with any Significant Holder (as defined below), or any Affiliate thereof, unless (in addition to any other conditions applicable to such Business Combination Transaction under the Charter, the By-Laws or other applicable law) the Business Combination Transaction results in cash consideration to the Public Holders that is equal to the greater of (i) the Floor Price (as defined below) or (ii) an aggregate cash consideration per share that has been reasonably determined by the relevant Significant Holder to constitute fair value (after subtracting debt and other liabilities of the Company and its Subsidiaries) within the meaning of Section 262 of the DGCL.

(b) For purposes of this Section 5.7, the following terms shall have the meanings set forth below:

(i)     “Significant Holder” shall mean either CSFB Entity or any person or group that beneficially owns more than fifty percent of the shares of capital stock of the Company entitled to vote generally in the election of directors (excluding from such beneficial ownership any shares deemed owned solely by virtue of entering into an agreement to acquire such shares in connection with a Sale Transaction).

(ii)     The “Floor Price” means an aggregate cash consideration per share of Common Stock equal to $0.40, subject to customary adjustments for any stock dividends, stock splits, recapitalizations and similar events.

(iii)     A “Business Combination Transaction” shall mean any merger, statutory share exchange, consolidation or recapitalization (including a reverse stock split) of the Company in connection with which the Common Stock outstanding prior to the transaction shall be changed into or exchanged for cash or different securities of the Company or capital stock or other securities of another corporation or interests in a noncorporate entity or other assets or property (or any combination of the foregoing), or any sale, transfer or other disposition of substantially all the assets of the Company.

(c) The Public Holders may rely on the provisions of this Section 5.7, which provisions are intended to be for the benefit of the Public Holders and shall be enforceable by each of the Public Holders and by the Independent Directors on behalf of the Public Holders. The Company hereby agrees that it will pay for reasonable fees and expenses of one firm of counsel engaged to represent the Independent Directors in connection with any actions to enforce the provisions hereof on behalf of the Public Holders that is brought and pursued with the good faith approval of each Independent Directors.

5.8 Registration Rights Agreement. The Company hereby agrees to amend the Registration Rights Agreement, dated as of March 24, 1999, between the Company and SPV (the “Registration Rights Agreement”), to grant SPV registration rights with respect to the shares of Common Stock issuable upon conversion of the shares of Series B Preferred held by SPV, by providing that the definition of “Registrable Securities” therein shall hereafter be deemed to include the shares of Common Stock issuable upon conversion of the shares of Series B Preferred held by SPV.

5.9 Regulatory Approvals. As promptly as practicable following the Closing the CSFB Entities shall prepare and submit all regulatory filings required to be submitted by them, and shall use reasonable efforts to obtain all regulatory approvals required to be obtained by them (including by responding on a timely basis to any requests for additional information by the applicable Governmental Entity following any regulatory filing), in order to effect the conversion of the shares of Series B Preferred issued to SPV under this Agreement, including any filings with or approvals of the Commissioner of Insurance of the State of Texas; it being understood that any and all of the foregoing filings shall be submitted by a date no later than February 16, 2004.

ARTICLE VI

MISCELLANEOUS AND GENERAL

6.1 Survival. The representation and agreements of the parties contained in Sections 2.4 and 2.5(b), Article III, Sections 4.1(a)-(e), 4.1(h), 4.1(n), 4.1(o), 4.1(q), 4.2(a)-(g), Article V and this Article VI shall survive the consummation of the Transactions.

6.2 Entire Agreement; No Other Representations. This Agreement (including any Exhibits hereto), the Registration Rights Agreement, as amended in accordance with Section 5.8 hereof, and the CSFB Loan Documents Amendments, constitute the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties both written and oral, among the parties, with respect to the subject matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NO PARTY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER’S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.

6.3 Modification or Amendment. Subject to the provisions of the applicable law and Section 3.2(a), the parties hereto may modify or amend this Agreement, by written agreement executed and delivered by duly authorized officers of all of the respective parties.

6.4 Waiver of Conditions. The conditions to the parties’ obligations to consummate the Transactions are for the sole benefit of each such party and may be waived by such party in whole or in part to the extent permitted by applicable law and subject to Section 3.2(a).

6.5 Counterparts. This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

6.6 Governing Law and Venue; Waiver of Jury Trial.

(a) 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 LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF, EXCEPT TO THE EXTENT THAT THE DGCL IS MANDATORILY APPLICABLE TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. The parties hereby irrevocably submit to the jurisdiction of the courts of the State and County of New York and the Federal courts of the United States of America located in the Southern District of the State of New York solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, 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 or any such document 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 6.7 on notices below or in such other manner as may be permitted by law shall be valid and sufficient service thereof.

(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

6.7 Notices and Waivers. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party at its address or facsimile number set forth below or such other address or facsimile number as such party may hereafter specify in accordance with this Section 6.7 for the purpose by notice to the party sending the communication. Each such notice, request or other communication shall be effective (a) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 6.7 and receipt thereof is confirmed, (b) if given by mail, three (3) business days after such communication is deposited in the mail registered or certified, return receipt requested, with postage prepaid, addressed as aforesaid, (c) if given by an overnight delivery service, one (1) business day after such communication is deposited with a reputable, overnight delivery service, postage or delivery charges prepaid, addressed as aforesaid, or (d) if given by any other means, when delivered at the address as specified in this Section 6.7:

(a)    If to the Company, to:

Ascent Assurance, Inc.
3100 Burnett Plaza>
801 Cherry Street, Unit 33
Forth Worth, Texas 76102
Attention: Patrick J. Mitchell
Facsimile: (817) 878-3672

with a copy to:

Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, New York 10005
Attention: Robert S. Reder, Esq.
Facsimile: (212) 822-5680

(b)    If to the CSFB Entities, to:

Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010
Attention: Alan Freudenstein
Facsimile: (212) 325-5490
and
Attention: Ivy Dodes
Facsimile: (212) 538-3948

with a copy to:

Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attention: Mark E. Palmer, Esq.
Facsimile: (212) 806-1306.
and
Attention: Patricia Perez, Esq.
Facsimile: (212) 806-7735

or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above.

6.8 No Third Party Beneficiaries. Other than Indemnified Parties under Section 5.4 and the rights of Public Holders to enforce Sections 3.2 and 5.7, this Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.

6.9 Further Assurances. Each of the parties hereto covenants and agrees upon the request of the other and its expense, to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably necessary or desirable to give full effect to the Transactions.

6.10 Transfer Taxes. Any and all transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including penalties and interest) incurred in connection with the Transactions shall be paid by the Company when due.

6.11 Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability or the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefore in order to carry out, so far as, and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

6.12 Interpretation. The table of contents and headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Where a reference in this Agreement is made to a Section or Exhibit, such reference shall be to a Section or Exhibit to this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

6.13 Assignment; CSFB Transferees. This Agreement shall not be assignable by operation of law or otherwise, except that the CSFB Entities may assign all or any of their rights and obligations hereunder to any affiliate of the CSFB Entities, provided that no such assignment shall relieve the assigning party of its obligations hereunder if such assignee does not perform such obligations.

6.14 Specific Performance. The parties hereto recognize that in the event either party hereto should refuse to perform under or comply with the provisions of this Agreement, monetary damages alone will not be adequate. The parties hereto, and (to the limited extent permitted by this Agreement as third party beneficiaries of certain provisions hereof) each Indemnified Party and Public Holder, shall therefore be entitled, in addition to any other remedies that may be available, to specific performance and injunctive or other equitable relief as a remedy for such failure to perform or noncompliance, and each party agrees to waive any requirement for the securing or posting of a bond in connection with such remedy.

6.15 Knowledge. For purposes of this Agreement, the phrase “to the knowledge of the executive officers of the Company” or “to the knowledge of the Company” or any variation thereof shall mean the actual knowledge of the following officers of the Company: Patrick J. Mitchell, Chairman, President and Chief Executive Officer; Patrick O’Neill, Executive Vice President and General Counsel; Cynthia Koenig, Senior Vice President and Chief Financial Officer; and Konrad Kober, Senior Vice President and Chief Administration Officer, in each case, after reasonable inquiry by such officers of those members of senior management having supervisory roles with respect to the areas of the Company’s business and operations that are the subject of the representations and warranties of the Company hereunder. For purposes of this Agreement, the phrase “to the knowledge of the CSFB Entities” or any variation thereof shall mean the actual knowledge of the following officers of the CSFB Entities: Alan Freudenstein, Managing Director.

           IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first written above.

ASCENT ASSURANCE, INC.

By:    Patrick J. Mitchell                  

          Patrick J. Mitchell

          Chief Executive Officer

CREDIT SUISSE FIRST BOSTON
MANAGEMENT LLC

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

SPECIAL SITUATIONS HOLDINGS, INC.
— WESTBRIDGE

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

EX-10.2

Exhibit 10.2

FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT

        This First Amendment to Registration Rights Agreement (this “First Amendment to Registration Rights Agreement”) is made as of this 31st day of December, 2003, between ASCENT ASSURANCE, INC. (the “Company”) and SPECIAL SITUATIONS HOLDINGS, INC. – WESTBRIDGE (“SPV”).

WITNESSETH

        WHEREAS, the Company and SPV are parties to a Registration Rights Agreement dated as of March 24, 1999 (the “Registration Rights Agreement”), providing, subject to the terms and conditions thereof, for the registration under the Securities Act of Registrable Securities owned by Holders; and

        WHEREAS, the parties have entered into the Exchange Agreement dated as of December 31, 2003 providing, among other things, for the amendment to the Registration Rights Agreement contemplated hereby;

        NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the adequacy of which is hereby acknowledged, and subject to the terms and conditions hereof, the parties hereto hereby agree as follows:

        Section 1. Definitions. Except as otherwise defined in this First Amendment to Registration Rights Agreement, terms defined in the Registration Rights Agreement are used herein as defined therein.

        Section 2. Amendments. The Registration Rights Agreement shall, effective as of the date hereof, be amended as follows:

        2.1.        Registration Rights Agreement References. References in the Registration Rights Agreement (including references to the Registration Rights Agreement as amended hereby) to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein” and “hereof”) shall be deemed to be references to the Registration Rights Agreement as amended hereby.

        2.2.        Definitions. (a) Section 1(b) of the Registration Rights Agreement shall be amended by adding the following new definition in alphabetical order:

        “Series B Preferred Stock” means the Series B Convertible Participating Preferred Stock, par value $.01 per share, of the Company.

    (b)        The definition of “Registrable Securities” contained in Section 1(b) of the Registration Rights Agreement shall be amended by:

    (i)        Adding to the end of clause (iii) thereof, before the word “and”, the following phrase: “or any shares of Common Stock issued upon conversion of shares of Series B Preferred Stock”; and

    (ii)        Adding to the last sentence thereof, after the words “Preferred Stock” in the two places that such words appear in such sentence, the following words: “or the Series B Preferred Stock”.

        Section 3. Miscellaneous. Except as herein provided, the Registration Rights Agreement shall remain unchanged and in full force and effect. This First Amendment to Registration Rights Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. This First Amendment to Registration Rights Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of laws thereof, as if it were a contract between the Company and SPV made and to be performed entirely within that State.

        IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Registration Rights Agreement to be duly executed and delivered as of the day and year first above written.

ASCENT ASSURANCE, INC.

By:    Patrick J. Mitchell                  

          Patrick J. Mitchell

          Chief Executive Officer

SPECIAL SITUATIONS HOLDINGS, INC. – WESTBRIDGE

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

EX-10.3

Exhibit 10.3

SECOND AMENDMENT TO CREDIT AGREEMENT

        This Second Amendment to Credit Agreement (this “Second Amendment to Credit Agreement”) is made as of this 31st day of December, 2003, between ASCENT ASSURANCE, INC. (the “Borrower”); the several entities identified on the signature pages to the Credit Agreement (as defined below) as Lenders and each other person that becomes a Lender (collectively, “Lenders,” and each individually, a “Lender”); and CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC (formerly CREDIT SUISSE FIRST BOSTON MANAGEMENT CORPORATION) (“CSFBM”), as Administrative Agent (in such capacity, the “Administrative Agent”), and as Arranger (in such capacity, the “Arranger”).

WITNESSETH

        WHEREAS, the Borrower, the Lenders, the Administrative Agent and the Arranger are parties to a Credit Agreement dated as of April 17, 2001, as amended (the “Credit Agreement”), providing, subject to the terms and conditions thereof, for extensions of credit to be made by the Lenders to the Borrower; and

        WHEREAS, the parties wish to amend the Credit Agreement to, among other things, reduce the interest rate payable on, and extend the maturity date of, the loans made thereunder.

        NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the adequacy of which is hereby acknowledged, and subject to the terms and conditions hereof, the parties hereto hereby agree as follows:

        Section 1. Definitions. Except as otherwise defined in this Second Amendment to Credit Agreement, terms defined in the Credit Agreement are used herein as defined therein.

        Section 2. Amendments. Upon satisfaction of the conditions set forth in Section 5 of this Second Amendment to Credit Agreement, the Credit Agreement shall, effective as of the date hereof, be amended as follows:

    2.1.        Credit Agreement References. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein” and “hereof”) shall be deemed to be references to the Credit Agreement as amended hereby.

    2.2.        Definitions. (a) Section 1.1 of the Credit Agreement shall be amended by adding the following new definitions in alphabetical order :

        “AFI” means Ascent Funding, Inc., a Delaware corporation that is a wholly owned subsidiary of the Borrower.

        “Frost” means The Frost National Bank.

        “NCM” means NationalCare® Marketing, Inc., a Delaware Corporation.

        “Receivables Financing Agreements” means the Credit Agreement being entered into as of the date hereof between AFI and Frost, pursuant to which Frost will loan to AFI from time to time an aggregate amount at any one time outstanding of up to $3,000,000, the Guaranty Agreement between the Borrower and Frost, the Guaranty Agreement between NCM and Frost, the Pledge Agreement between the Borrower and Frost, the Pledge Agreement between NCM and Frost, the Security Agreement between AFI and Frost and each other agreement to be entered into in connection therewith.

    (b)        Section 1.1 of the Credit Agreement shall be amended by deleting the definitions of “Applicable Rate”, “Intercreditor Agreement” and “Maturity Date” and replacing them in their entirety with the following definitions:

                   “Applicable Rate” means 6% per annum.

       “Intercreditor Agreement” means the Intercreditor and Subordination Agreement, dated as of December 31, 2003 among Frost and the Administrative Agent on its own behalf and on behalf of the Lenders.

                  “Maturity Date” means March 24, 2010.

    2.3.        Facility Fee. Section 5.13 of the Credit Agreement shall be deleted in its entirety.

    2.4.        Permitted Liens. Section 6.4 of the Credit Agreement shall be amended to include the following new subsection (h):

    “(h)        Liens created in and pursuant to the Receivables Financing Agreements”

    2.5.        Guaranties. Section 6.6 of the Credit Agreement shall be amended to include the following new subsection (c):

    “(c)        Guaranties created in and pursuant to the Receivables Financing Agreements”

    2.6.        Senior Debt Limit. Section 6.8(c) of the Credit Agreement shall be replaced in its entirety with the following:

    “(c)        an investment permitted by any guaranty agreement included in the Receivables Financing Agreements”

    2.7.        Limitation on Indebtedness. Section 6.10 of the Credit Agreement shall be amended to include the following new subsection (e):

    “(e)        Indebtedness of the Borrower created in and pursuant to the Receivables Financing Agreements, in a maximum principal amount not to exceed $10,000,000"

    2.8.        Events of Default. Section 7.1 of the Credit Agreement shall be amended to include the following new subsection (j):

    “(j)        The Borrower shall fail to effect the Charter Amendment contemplated by the Exchange Agreement among Ascent Assurance, Inc., Credit Suisse First Boston Management, LLC and Special Situations Holdings, Inc. — Westbridge, dated as of December 31, 2003 (such agreement, as it may be amended from time to time, the “Exchange Agreement”), by June 30, 2004, other than if such failure is the direct or indirect result of any action taken or failed to be taken by Credit Suisse First Boston Management, LLC or Special Situations Holdings, Inc. — Westbridge or any of their affiliates (as such term is defined in the Exchange Agreement).”

    2.9.        Intercreditor Agreement. Section 8.10 of the Credit Agreement shall be replaced in its entirety with the following:

    “8.10 Intercreditor Agreement. Each Lender hereby irrevocably instructs the Administrative Agent to enter into the Intercreditor Agreement on behalf of that Lender and to take and refrain from taking all actions provided for therein in accordance with the terms of that agreement. Each Lender confirms that it is bound by the terms of the Intercreditor Agreement, acknowledging that it provides for the subordination of such Lender’s claims hereunder and under the other Loan Documents to certain claims of Frost identified in the Intercreditor Agreement.”

    2.10.        Forms of Notes. The forms of Notes attached as Exhibit A-1 and Exhibit A-2 to the Credit Agreement shall be deleted and replaced in their entirety, respectively, with the forms of Notes attached hereto as Exhibit A-1 and Exhibit A-2.

    2.11.        Notes. The Notes issued by Borrower to each Lender in connection with the Credit Agreement shall be replaced with Notes of the same denominations, in the Forms attached hereto as Exhibit A-1 and Exhibit A-2, as applicable.

        Section 3. Consent to Receivables Financing. The Lenders, the Administrative Agent and the Arranger hereby consent to the execution, delivery and performance by AFI, the Borrower and certain of their affiliates of each of the Receivables Financing Agreements (as defined in Section 2.2 above). Notwithstanding anything in the Credit Agreement, the Guaranty Agreement or any of the related agreements to the contrary, the execution, delivery and performance of the Receivables Financing Agreements shall not constitute a Default or an Event of Default under the Credit Agreement, the Guaranty Agreement or any of the related agreements.

        Section 4. Reaffirmation of the Borrower. The Borrower hereby represents and warrants to CSFBM that upon execution hereof no Event of Default has occurred and is continuing under the Credit Agreement and the Credit Agreement, as so amended, shall remain in full force and effect, subject to the execution and delivery of the First Amendment and Waiver to Guaranty and Security Agreement being entered into on the date hereof among Foundation Financial Services, Inc., NationalCare® Marketing, Inc., Lifestyles Marketing Group. Inc., Precision Dialing Services, Inc., Senior Benefits, L.L.C., and Westbridge Printing Services, Inc., each as Grantor; each Lender which is a Beneficiary thereunder from time to time; and CSFBM, as Administrative Agent and Secured Party and no Event of Default will occur as a result of the transactions contemplated hereby.

        Section 5. Conditions Precedent. The effectiveness of this Second Amendment to Credit Agreement is expressly conditioned upon CSFBM having received one or more counterparts of this Second Amendment to Credit Agreement duly executed by the Borrower.

        Section 6. Miscellaneous. Except as herein provided, the Credit Agreement and each other Loan Document shall remain unchanged and in full force and effect. This Second Amendment to Credit Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. This Second Amendment to Credit Agreement shall be governed by, and construed in accordance with, the law of the State of New York.

        [The remainder of this page is intentionally left blank]

        IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Credit Agreement to be duly executed and delivered as of the day and year first above written.

BORROWER:

ASCENT ASSURANCE, INC.

By:    Patrick J. Mitchell                  

          Patrick J. Mitchell

          Chief Executive Officer

ADMINISTRATIVE AGENT AND ARRANGER:

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

LENDERS:

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

EXHIBIT A-1

FORM OF NOTE

$________________* New York, New York
December __, 2003

        FOR VALUE RECEIVED, the undersigned promises to pay to the order of (the “Lender”), the principal amount of ____________ DOLLARS ($ ____________ ) or such lesser aggregate principal amount of the Loans of the Lender that may be outstanding from time to time under the Credit Agreement referred to below, payable as hereinafter set forth. The undersigned promises to pay interest on the principal amount hereof remaining unpaid from time to time from the date hereof until the date of payment in full, payable as hereinafter set forth.

        Reference is made to the Agreement dated as of April 17, 200l (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among Ascent Assurance, Inc., a Delaware corporation, as borrower, Credit Suisse First Boston Management LLC (formerly Credit Suisse First Boston Management Corporation), as Administrative Agent (in that capacity, the “Administrative Agent”) and Arranger, and the Lenders from time to time party thereto. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings given those terms in the Credit Agreement. This is one of the Notes referred to in the Credit Agreement, and any holder hereof is entitled to all of the rights, remedies, benefits and privileges provided for in the Credit Agreement as originally executed or as it may from time to time be supplemented, modified or amended. The Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof, and the optional and mandatory prepayment in whole or in part hereof, upon the happening of certain stated events upon the terms and conditions therein specified.

        This Note is secured by Collateral and Pledged Collateral as more fully set forth in the Security Documents.

        The outstanding principal indebtedness evidenced by this Note shall be payable as provided in the Credit Agreement and in any event on the Maturity Date.

        Interest shall be payable hereunder on the outstanding daily unpaid principal amount of each Loan hereunder, and, to the extent permitted by applicable law, on any unpaid interest payable hereon, from the date that Loan is made or, in the case of interest, from the date it falls due, shall accrue at the rate of 6% per annum and shall be payable on the dates set forth in the Credit Agreement until each such amount of principal and interest is paid in full (both before and after judgment).

        The amount of each payment due hereunder shall be made to the Administrative Agent at the Administrative Agent’s Office for the account of the Lender in immediately available funds not later than 12: 00 noon (New York City time) on the day the payment is due. All payments received after 12: 00 noon (New York City time) on any particular Business Day shall be deemed received on the next succeeding Business Day. All payments shall be made in lawful money of the United States of America, provided however, that interest hereon may be paid in the form of PIK Interest Notes in the circumstances permitted in the Credit Agreement.

        The holder of this Note is authorized to record the date and amount of each Loan of the Lender and the date and amount of each payment or prepayment of principal thereof on the schedules annexed hereto and made a part hereof, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded absent manifest error; provided that the failure of the holder to make such recordation (or any error in such recordation) shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.

        The undersigned hereby promises to pay all reasonable costs and expenses of any rightful holder hereof incurred in collecting the undersigned’s obligations hereunder or in enforcing or attempting to enforce any of such holder’s rights hereunder, including reasonable attorneys’ fees and disbursements as contemplated in the Credit Agreement, whether or not an action is filed in connection therewith.

___________________________
^* Commitment of relevant Lender

        Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided therein.

        All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand for payment, dishonor, notice of dishonor, protest, notice of protest and (except to the extent expressly required in the Credit Agreement) any other notice or formality, to the fullest extent permitted by applicable laws.

        THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

ASCENT ASSURANCE, INC.

By:                      

          NAME

          TITLE

Schedule to Note

LOANS AND
PAYMENTS

Date Amount of Loan Made Amount of Principal Repaid
or Prepaid Unpaid Amount of
Principal Notation Made by

EXHIBIT A-2

FORM OF PIK INTEREST NOTE

$________________* New York, New York
December __, 2003

        FOR VALUE RECEIVED, the undersigned promises to pay to the order of (the “Lender”), the principal amount of _____________ ($______________ ) or such lesser amount as equals the aggregate outstanding amount of PIK Interest (as defined in the Credit Agreement referred to below) that has been paid through its conversion to the principal amount of a Loan of the Lender pursuant to Section 2.6(d) of the Credit Agreement, payable as hereinafter set forth. The undersigned promises to pay interest on each amount of PIK Interest that remains unpaid from time to time from the date such amount of PIK Interest becomes principal as provided in Section 2.6(d) of the Credit Agreement (the “Increase Date” for such PIK Interest) until the date of payment in full, payable as hereinafter set forth.

        Reference is made to the Credit Agreement dated as of April 17,200l (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among Ascent Assurance, Inc., a Delaware corporation, as borrower, Credit Suisse First Boston Management LLC (formerly Credit Suisse First Boston Management Corporation), as Administrative Agent (in that capacity, the “Administrative Agent”) and Arranger, and the Lenders from time to time party thereto. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings given those terms in the Credit Agreement. This Note is one of the PIK Interest Notes and Notes referred to in the Credit Agreement, and any holder hereof is entitled to all of the rights, remedies, benefits and privileges provided for in the Credit Agreement as originally executed or as it may from time to time be supplemented, modified or amended. The Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof, and the optional and mandatory prepayment in whole or in part hereof, upon the happening of certain stated events upon the terms and conditions therein specified.

        This Note has been issued to evidence interest paid in kind under the Credit Agreement, and all amounts due hereunder shall be treated as additional amounts of principal due in respect of the Loans of the Lender.

        This Note is secured by Collateral and Pledged Collateral as more fully set forth in the Security Documents.

        The outstanding principal indebtedness evidenced by this Note shall be payable as provided in the Credit Agreement and in any event on the Maturity Date.

        Interest shall be payable hereunder on the outstanding daily unpaid principal amount hereof, and, to the extent permitted by applicable law, on any unpaid interest payable hereon, from the Increase Date for such PIK Interest, shall accrue at the rate of 6% per annum and shall be payable dates set forth in the Credit Agreement until each such amount of principal and interest is paid in full (both before and after judgment).

        The amount of each payment due hereunder shall be made to the Administrative Agent at the Administrative Agent’s Office for the account of the Lender in immediately available funds not later than 12:00 noon (New York City time) on the day the payment is due. All payments received after 12:00 noon (New York City time) on any particular Business Day shall be deemed received on the next succeeding Business Day. All payments shall be made in lawful money of the United States of America, provided however, that interest hereon may be paid in the form of PIK Interest Notes in the circumstances permitted in the Credit Agreement.

        The holder of this Note is authorized to record the date and amount of each of its Loans consisting of PIK Interest added to the principal hereof and the date and amount of each payment or prepayment of principal thereof on the schedules annexed hereto and made a part hereof, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded absent manifest error; provided that the failure of the holder to make such recordation (or any error in such recordation) shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.

_________________________
^* PIK Interest Note amount of relevant Lender. Aggregate amount of interest due to Lender under Credit Agreement assuming full amount of Commitment is borrowed on the Closing Date and each amount of interest thereon and on the principal of this PIK Interest Note is paid through increase of the principal of this PIK Interest Note (total amount for all PIK Interest Notes for all Lenders will be $4,738,457.00)

        The undersigned hereby promises to pay all reasonable costs and expenses of any rightful holder hereof incurred in collecting the undersigned’s obligations hereunder or in enforcing or attempting to enforce any of such holder’s rights hereunder, including reasonable attorneys’ fees and disbursements as contemplated in the Credit Agreement, whether or not an action is filed in connection therewith.

        Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided therein.

        All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand for payment, dishonor, notice of dishonor, protest, notice of protest and (except to the extent expressly required in the Credit Agreement) any other notice or formality, to the fullest extent permitted by applicable laws.

        THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF , LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

ASCENT ASSURANCE, INC.

By:                      

          NAME

          TITLE

LOANS AND
PAYMENTS

Date Amount of PIK Intereste
Increase to Outstanding
Note Principal Amount of Principal Repaid
or Prepaid Unpaid Amount of
Principal Notation
Made by

EX-10.4

Exhibit 10.4

FIRST AMENDMENT AND WAIVER TO GUARANTY AND
SECURITY AGREEMENT

        This First Amendment and Waiver to Guaranty and Security Agreement (the “First Amendment”) is made as of this 31st day of December, 2003 by and among, between FOUNDATION FINANCIAL SERVICES, INC., NATIONALCARE® MARKETING, INC., LIFESTYLES MARKETING GROUP, INC., PRECISION DIALING SERVICES, INC., SENIOR BENEFITS, L.L.C., and WESTBRIDGE PRINTING SERVICES, INC., each, as Grantor (collectively, “Grantors,” and each individually, a “Grantor”); each Lender which is a Beneficiary thereunder from time to time (collectively, “Lenders,” and each individually, a “Lender”); and CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC (formerly CREDIT SUISSE FIRST BOSTON MANAGEMENT CORPORATION) (“CSFBM”), as Administrative Agent (in such capacity, the “Administrative Agent”) and Secured Party (in such capacity, the “Secured Party”).

WITNESSETH

        WHEREAS, the Grantors, the Lenders, the Administrative Agent and the Secured Party are parties to the Guaranty and Security Agreement dated as of April 17, 2001 (the “Guaranty Agreement”);

        WHEREAS, pursuant to an Intercreditor and Subordination Agreement among LaSalle Bank National Association (“LaSalle”) and CSFBM, as Administrative Agent, for itself and for certain lenders identified therein, certain amounts owed by Ascent Assurance Inc. (the “Borrower”) were subordinated to amounts owed by the Borrower and its affiliates to LaSalle (the “Senior Obligations”);

        WHEREAS, the Credit Agreement between Ascent Funding, Inc. (“AFI”), a wholly owned subsidiary of the Borrower, and LaSalle and the agreements relating thereto (collectively, the “LaSalle Financing Documents”), pursuant to which the Senior Obligations were owed to LaSalle, have been terminated;

        WHEREAS, the Borrower and AFI now desire to replace the financing previously available under the LaSalle Financing Documents by entering into a similar financing arrangement with The Frost National Bank (“Frost”) and, in connection therewith, providing Frost with security and collateral for such financing that is comparable to the collateral provided to LaSalle;

        WHEREAS, the Grantors, the Lenders, the Administrative Agent and the Secured Party desire to allow the Borrower, AFI and certain of their affiliates to enter into such arrangements; and

        WHEREAS, in order for the Borrower, AFI and such affiliates to be able to enter into the financing arrangements with Frost, the Lenders, the Administrative Agent and the Secured Party have agreed to waive certain terms under the Guaranty Agreement and allow the Grantors to grant certain security interests under the Receivables Financing Agreements;

        NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Grantors, the Lenders, the Administrative Agent and the Secured Party hereby agree as follows:

        Section 1. Amendments. Upon satisfaction of the conditions set forth in Section 3 of this First Amendment, effective as of the date hereof, the Guaranty Agreement shall be amended as follows:

        1.1.        Definitions. Unless otherwise defined in this First Amendment, terms defined in the Guaranty Agreement are used herein as defined therein. Section 1 of the Guaranty Agreement shall be amended by adding the following new definitions in alphabetical order:

        “AFI” means Ascent Funding, Inc., a Delaware corporation that is a wholly owned subsidiary of the Borrower.

        “Frost” means The Frost National Bank.

        “LaSalle” means LaSalle Bank National Association.

        “LaSalle Financing Documents” means collectively, the Credit Agreement between AFI and LaSalle and the agreements relating thereto.

        “NCM ” means NationalCare® Marketing, Inc., a Delaware Corporation.

        “Receivables Financing Agreements” means the Credit Agreement being entered into as of the date hereof between AFI and Frost, pursuant to which Frost will loan to AFI from time to time an aggregate amount at any one time outstanding of up to $3,000,000, the Guaranty Agreement between the Borrower and Frost, the Guaranty Agreement between NCM and Frost, the Pledge Agreement between the Borrower and Frost, the Pledge Agreement between NCM and Frost, the Security Agreement between AFI and Frost and each other agreement to be entered into in connection therewith.

        1.2.        References to LaSalle. The Lenders, the Administrative Agent and the Secured Party hereby acknowledge that, as a result of the termination of the LaSalle Financing Documents and the execution and delivery of the Receivables Financing Agreements, Frost will receive a security interest in substantially all of the collateral that previously secured the obligations owed to LaSalle under the LaSalle Financing Documents, as well as certain corporate guarantees. Without limiting the generality of the foregoing, it is understood that pursuant to the Receivables Financing Agreements, AFI will pledge all of its assets to Frost, each of the Borrower and NCM will guarantee the obligations of AFI under the Credit Agreement, Frost will receive a security interest in, and a pledge of, all of the outstanding capital stock of AFI, Freedom Life Insurance Company of America and National Foundation Life Insurance Company, and certain other collateral will secure the obligations of AFI and its affiliates under the Receivable Financing Agreements, all as set forth therein. Accordingly, all references to LaSalle in the Guaranty Agreement (including the schedules and exhibits thereto) are no longer applicable and, unless the context otherwise requires, such references shall hereafter be deemed to refer to “The Frost National Bank” and any references related to the LaSalle Credit Agreement or any of the related agreements shall be deemed to be amended to refer to the corresponding Receivables Financing Agreement, as appropriate. Without limiting the generality of the foregoing, the definition of “Excluded Property” in Section 1 of the Guaranty Agreement shall be deemed to include the collateral set forth in Section 6.4(h) of Credit Agreement between the Borrower and the Lender, dated as of April 17, 2001, as amended.

        Section 2. Consent to Receivables Financing. The Lenders, the Administrative Agent and the Secured Party hereby consent to the execution, delivery and performance by AFI, the Borrower and certain of their affiliates of each of the Receivables Financing Agreements (as defined in Section 1.1 above) in substantially the forms attached hereto as Exhibit A. Notwithstanding anything in the Credit Agreement, the Guaranty Agreement or any of the related agreements to the contrary, the execution, delivery and performance of the Receivables Financing Agreements shall not constitute a Default or an Event of Default under the Credit Agreement, the Guaranty Agreement or any of the related agreements.

        Section 3. Conditions. The effectiveness of this First Amendment is expressly conditioned upon receipt by CSFBM of one or more copies of this First Amendment executed by the Grantors.

        Section 4. Miscellaneous. Except as herein provided, the Guaranty Agreement shall remain unchanged and in full force and effect. This First Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. This First Amendment shall be governed by, and construed in accordance with, the law of the State of New York.

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        IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered as of the day and year first above written.

GRANTORS:

FOUNDATION FINANCIAL SERVICES, INC.,

By:    Patrick J. Mitchell                  

          Patrick J. Mitchell

          President

NATIONALCARE® MARKETING, INC.,

By:    Patrick J. Mitchell                  

          Patrick J. Mitchell

          Chief Executive Officer

LIFESTYLES MARKETING GROUP, INC.,

By:    Patrick J. Mitchell                  

          Patrick J. Mitchell

          President

PRECISION DIALING SERVICES, INC.,

By:    Patrick J. Mitchell                  

          Patrick J. Mitchell

          Chief Executive Officer

SENIOR BENEFITS, L.L.C.,

By:    Patrick J. Mitchell                  

          Patrick J. Mitchell

          Chief Executive Officer

WESTBRIDGE PRINTING SERVICES, INC.,

By:    Patrick J. Mitchell                  

          Patrick J. Mitchell

          Chief Executive Officer

LENDERS:

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

ADMINISTRATIVE AGENT:

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

SECURED PARTY:

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

EXHIBIT A

RECEIVABLES FINANCING AGREEMENTS

1.     Credit Agreement among Ascent Funding, Inc., Ascent Assurance, Inc. and NationalCare® Marketing, Inc. and The Frost National Bank dated as of December 31, 2003.

2.     Security Agreement by Ascent Funding, Inc. for the benefit of The Frost National Bank dated as of December 31, 2003.

3.     Pledge and Security Agreement between Ascent Assurance, Inc. and The Frost National Bank dated as of December 31, 2003.

4.     Guaranty Agreement by Ascent Assurance, Inc. in favor of The Frost National Bank dated as of December 31, 2003.

5.     Pledge and Security Agreement between NationalCare® Marketing, Inc. and The Frost National Bank dated as of December 31, 2003.

6.     Guaranty Agreement by NationalCare® Marketing, Inc. in favor of The Frost National Bank dated as of December 31, 2003.

EX-10.5

Exhibit 10.5

INTERCREDITOR AND SUBORDINATION AGREEMENT

among

THE FROST NATIONAL BANK,

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC,
as Administrative Agent,
for itself and for the Lenders parties to the
Ascent Holdings Credit Agreement referred to herein
and
ASCENT ASSURANCE, INC.,
and its subsidiaries a party hereto

Dated as of December 31, 2003

        INTERCREDITOR AND SUBORDINATION AGREEMENT dated as of December 31, 2003, among THE FROST NATIONAL BANK (the “Bank”), CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC (“CSFBM”), as Administrative Agent under the Ascent Holdings Credit Agreement referred to below (the “Administrative Agent”), for itself as such and as Agent for each of the Lenders party to that Agreement (each a “Lender”), ASCENT ASSURANCE, INC., a Delaware corporation (“Holdings”), and the subsidiaries of Holdings a party hereto (each a “Subsidiary”).

Preliminary Statement

        A.        The Bank has provided financing to Ascent Funding, Inc. a Delaware corporation and subsidiary of Holdings (“Funding”), pursuant to the agreements and instruments identified in Schedule 2 hereto (such agreements, together with all amendments and restatements, the “Receivables Financing Agreements”).

        B.        The Lenders have provided financing to Holdings, pursuant to a Credit Agreement dated as of April 17, 2001, among Holdings, the Administrative Agent, the Lenders and CSFBM, as arranger (such agreement, together with all amendments and restatements, the “Ascent Holdings Credit Agreement”) and the agreements and instruments identified in Schedule 1 hereto (such agreements, together with all amendments and restatements, the “Holdings Agreements”).

        C.        As of the date hereof, neither CSFBM nor any of its affiliates shall be the holder of any shares of Series A Convertible Preferred Stock of Holdings, all of which shares of Series A Convertible Preferred Stock held by CSFBM or its affiliates shall have been exchanged on the date hereof for shares of Series B Convertible Participating Preferred Stock (such Series B Convertible Participating Preferred Stock and the Certificate of Designation and other agreements governing the rights of holders thereof, and all applicable laws related thereto, together with all amendments and restatements of the same, the “Holdings Equity Agreements”).

        D.        The Bank has agreed to consent to the creation by Holdings and one of its subsidiaries of certain liens in favor of the Lenders and the Administrative Agent under the security documents described in Schedule 1 (the “Security Documents”) subject to certain conditions, which include the execution and delivery by the Lenders, the Administrative Agent, Holdings and the subsidiaries of Holdings of this Agreement relating to circumstances in which payments of amounts due to (i) the Lenders and the Administrative Agent under the Ascent Holdings Credit Agreement and all other Loan Documents referred to therein (collectively, such agreements, together with all amendments and restatements, the “Ascent Holdings Loan Documents”) may not be made, or if made, may not be retained, if at the time an Event of Default (as that term is defined in the Funding Credit Agreement) exists, and (ii) CSFBM under or in respect of the Holdings Equity Agreements may be made.

        E.        In consideration of that consent, CSFBM, the Lenders and the Administrative Agent are willing to enter into this Agreement with the Bank relating to amounts that may become due from time to time to the Lenders and the Administrative Agent under the Ascent Holdings Loan Documents referred to therein, and to CSFBM under or in respect of any stock or other equity interest of Holdings.

AGREEMENT:

        NOW, THEREFORE, in consideration of the agreement of the parties set forth herein and to induce the Bank to provide the consent referred to above, the parties hereto agree as follows:

        1.        All obligations of Holdings and each subsidiary of Holdings, including, but not limited to, Funding (singly, a “Company,” and collectively, the “Companies”), howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing or due or to become due, are called “Liabilities”. All Liabilities to the Bank under, or in connection with, the Receivables Financing Agreements are called “Senior Liabilities”; and all Liabilities to the Lenders and the Administrative Agent under, or, in connection with, the Ascent Holdings Loan Documents, and all liabilities to CSFBM under, or in connection with, the Holdings Equity Agreements are called “Junior Liabilities”; it being expressly understood and agreed that the term “Senior Liabilities,” as used herein, shall include, without limitation, any and all interest accruing on any of the Senior Liabilities after the commencement of any proceedings referred to in Section 3, notwithstanding any provision or, rule of law which might restrict the rights of the Bank, as against any Company or anyone else, to collect such interest. Senior Liabilities shall not include principal of the Loans (as that term is defined in the Receivables Financing Agreements) in excess of $10,000,000. All amounts due or payable to the Bank pursuant to this Agreement shall be applied first to all amounts constituting Senior Liabilities until all Senior Liabilities are finally paid in full in cash. Notwithstanding the exclusion of principal of such Loans in excess of $10,000,000 from Senior Liabilities, CSFBM, Administrative Agent and Lenders shall comply with this Agreement until all Senior Liabilities are finally paid in full in cash, all as if no amounts were excluded from Senior Liabilities.

        2.        Except as expressly otherwise provided herein, or as the Bank may hereafter otherwise expressly consent in writing, the payment of all Junior Liabilities shall be postponed and subordinated to the payment in full in cash of all Senior Liabilities, and no payment or other distribution whatsoever in respect of any Junior Liabilities shall be made, nor shall any property or assets of the Companies be applied to the purchase of other acquisition or retirement of any Junior Liabilities until all Senior Liabilities have been paid in full in cash; provided, that (a) Holdings may (i) pay PIK Interest (as that term is defined in the Ascent Holdings Credit Agreement) in accordance with the terms of the Ascent Holdings Credit Agreement as it exists on the date of this Agreement, and (ii) so long as no Event of Default exists immediately prior to or after giving effect thereto, make, and the Lenders may retain, cash interest payments on the Loans (as defined in the Ascent Holdings Credit Agreement), if such interest is (A) accrued at the interest rate provided for in the Ascent Holdings Credit Agreement (without giving effect to any amendment or restatement of any Ascent Holdings Loan Document after the date of this Agreement), and (B) paid on the scheduled payment date stated in the Ascent Holdings Credit Agreement (without giving effect to any amendment or restatement of any Ascent Holdings Loan Document after the date of this Agreement), and (b) Holdings may issue shares in exchange for or conversion of Junior Liabilities and may pay dividends in respect of stock of Holdings if all of such dividends are payable solely in either common stock or in Series B Convertible Participating Preferred Stock of Holdings.

        3.        In the event of any dissolution, winding up, liquidation, reorganization or other similar proceeding relating to any Company or to its creditors, as such, or to its property (whether voluntary or involuntary, partial or complete, and whether in bankruptcy, insolvency or receivership, or upon an assignment for the benefit or creditors, or any other marshalling of the assets and liabilities of such Company, or any sale of all or substantially all of the assets of such Company, or otherwise), other than such transactions solely among the Companies and their Subsidiaries, all Senior Liabilities shall first be paid in full in cash before the undersigned shall be entitled to receive and to retain any payment or distribution in respect of any of the Junior Liabilities, and, in order to implement the foregoing:

                    a.        all payments and distributions of any kind or character in respect of the Junior Liabilities to which CSFBM, the Lenders and the Administrative Agent would be entitled, if the Junior Liabilities were not subordinated pursuant to this Agreement, shall be made directly to the Bank,

                    b.        CSFBM, the Lenders and the Administrative Agent shall promptly file a claim or claims, in the form required in such proceeding, for the full outstanding amount of the Junior Liabilities, and shall cause said claim or claims to be approved and all payments and other distributions in respect thereof to be made directly to the Bank, and

                    c.        CSFBM, the Lenders and the Administrative Agent hereby irrevocably agree that the Bank may, at its sole discretion, in the name of CSFBM, the Lenders and the Administrative Agent, or any one of them, or otherwise, demand, sue for, collect, receive and receipt of any and all such payments or distributions, and file and prove, and, to the extent permitted by applicable law, vote or consent in any such proceedings with respect to, any and all claims of CSFBM, the Lenders and the Administrative Agent relating to the Junior Liabilities.

        4.        In the event that CSFBM, the Lenders and the Administrative Agent receive any payment or other distribution of any kind or character from any Company or from any other source whatsoever in respect of any of the Junior Liabilities, other than as expressly permitted by the terms of this Agreement, such payment or other distribution shall be received in trust for the Bank and promptly turned over by CSFBM, the Lenders and the Administrative Agent to the Bank. CSFBM, the Lenders and the Administrative Agent will cause to be clearly inserted in any agreement, promissory note, certificate or other instrument, which at any time, evidences any of the Junior Liabilities a statement to the effect that the payment thereof is subordinated in accordance with the terms of this Agreement. CSFBM, the Lenders and the Administrative Agent will execute such further documents or instruments and take such further action as the Bank may reasonably, from time to time, request to carry out the intent of this Agreement.

        5.        All payments and distributions received by the Bank in respect of the Junior Liabilities, to the extent received in, or converted into cash, may be applied by the Bank first to the payment of any and all expenses (including reasonable attorneys’ fees and legal expenses) paid or incurred by the Bank in enforcing this Agreement, or in endeavoring to collect, or realize upon any of the Junior Liabilities, or any security therefore, and any balance thereof shall, solely as among CSFBM, the Lenders and the Administrative Agent and the Bank, be applied by the Bank, in such order of application as the Bank may, from time to time, select toward the payment of the Senior Liabilities remaining unpaid; but, as between the Company and its creditors, no such payment or distribution of any kind or character shall be deemed to be a payment or distribution in respect of the Senior Liabilities; and, notwithstanding any such payment or distribution received by the Bank in respect of the Junior Liabilities and so applied by the Bank toward the payment of the Senior Liabilities, CSFBM, the Lenders and the Administrative Agent shall be subrogated to the then existing rights of the Bank, if any, in respect of the Senior Liabilities only at such time as the Senior Liabilities shall have been finally paid in full in cash.

        6.        Each of CSFBM, the Administrative Agent and Lenders hereby waives:

                    a.        notice of acceptance by the Bank of this Agreement;

                    b.        notice of the existence, or creation of nonpayment of all, or any of the Senior Liabilities;

                    c.        notice of any renewal, extension, modification or substitution of any Senior Liabilities;

                    d.        demand, presentment for payment, and notice of demand, dishonor, nonpayment, non-performance or default; and

                    e.        all diligence in collection, or protection of, or realization upon, the Senior Liabilities, or any thereof, or any security thereof.

        7.        CSFBM, the Lenders and the Administrative Agent will not, without the prior written consent of the Bank:

                    a.        transfer or assign (other than (i) transfers or assignments of Ascent Holdings Loan Documents to an entity which is an Affiliate (as that term is defined in the Ascent Holding Credit Agreement) of a Lender, and (ii) transfers and assignments of Holding Equity Agreements to any such Affiliate; provided that prior to each such transfer or assignment, such Affiliate has agreed in writing to be bound by the terms of this Agreement), or attempt to collect, or subordinate to any Liabilities other than the Senior Liabilities, any Junior Liabilities or any rights in respect therefore;

                    b.        seek to enforce any lien or security interest securing performance of any of the Junior Liabilities;

                    c.        convert or exchange any Junior Liabilities into or for stock or other equity interests; provided, any or all of the Junior Liabilities may be converted or exchanged into stock or other equity interests of Holdings if (i) none of such stock or other equity interest matures or can be redeemed prior to final payment in full in cash of all Senior Liabilities, (ii) the performance of such stock or other equity interest is not secured by any lien, security interest or collateral and does not benefit from any guarantee or sinking fund, (iii) no dividends, other than dividends payable solely in stock or other equity interests of Holdings, are payable prior to final payment in full in cash of all Senior Liabilities, and (iv) Holdings delivers to the Bank, not later than fourteen days prior to the proposed effective date of such conversion or exchange, an opinion (either addressed to or expressly providing that such opinion can be relied upon by the Bank) of counsel reasonably satisfactory tot he Bank stating that such exchange will not result in any tax liability with respect to which Holdings will be required to make any cash payment or transfer any other property of Holdings; or

                    d.        commence, or join with any other creditor in commencing, any bankruptcy, reorganization or insolvency proceeding with respect to any Company.

        8.        This Agreement shall, in all respects, be a continuing agreement and shall remain in full force and effect (notwithstanding, without limitation, the dissolution of any of the undersigned or that, at any time, or from time to time, all Senior Liabilities may have been paid in full) until all Senior Liabilities shall have been finally paid in full in cash and the Commitment under and as defined in the Receivables Financing Agreement shall have terminated.

        9.        The Bank may, from time to time, at its sole discretion and without notice to CSFBM, the Lenders and the Administrative Agent, take any or all of the following actions:

                    a.        retain or obtain a security interest in any property to secure any of the Senior Liabilities,

                    b.        retain or obtain the primary or secondary obligation of any other obligor or obligors with respect to any of the Senior Liabilities,

                    c.        increase the Commitment to an amount not greater than $10,000,000;

                    d.        extend or renew for one or more periods (whether or not longer than the original period), alter or exchange any of the Senior Liabilities, or release or compromise any obligation of any nature of any obligor with respect to any of the Senior Liabilities,

                    e.        release its security interest in, or surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Senior Liabilities, or extend or renew for one or more periods (whether or not longer than the original period) or release, compromise, alter or exchange any obligation of any nature of any obligor with respect to any such property; and

                    f.        amend or restate in whole or in part any of the Receivables Financing Agreements.

        10.        The Bank may, from time to time, without notice to CSFBM, the Lenders and the Administrative Agent, assign or transfer its interest in any or all of the Senior Liabilities; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Senior Liabilities shall be and remain Senior Liabilities for the purposes of this Agreement, and every immediate and successive assignee or transferee of any of the Senior Liabilities or of any interest therein shall, to the extent of the interest of such assignee or transferee in the Senior Liabilities, be entitled to the benefits of this Agreement to the same extent as the applicable assignor or transferor.

        11.        The Bank shall not be prejudiced in its rights under this Agreement by any act or failure to act of any Company, CSFBM, the Lenders or the Administrative Agent, or any noncompliance of any Company, CSFBM, the Lenders or the Administrative Agent with any agreement or obligation, regardless of any knowledge thereof which the Bank may have, or with which the Bank may be charged; and, no action of the Bank permitted hereunder shall, in any way, affect or impair the rights of the Bank and the obligations of CSFBM, the Lenders, the Administrative Agent or Companies under this Agreement.

        12.        No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Bank, of any right or remedy, shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any provision of this Agreement be binding upon the Bank except as expressly set forth in writing duly signed and delivered on behalf of the Bank.

        13.        The Lenders and the Administrative Agent represent and warrant to Bank that:

                    a.        Attached as Schedule 1 is a complete and correct description of all Ascent Holdings Loan Documents.

                    b.        The undersigned Lender is the sole Lender and legal and beneficial owner of all of the loans under the Ascent Holdings Credit Agreement.

                    c.        The execution, delivery and performance by the Lenders and the Administrative Agent of this Agreement have been duly authorized by all necessary limited liability company action.

                    d.        This Agreement is a legal, valid and binding obligation of the Lenders and the Administrative Agent, enforceable against the Lenders and the Administrative Agent in accordance with its terms, except to the extent such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

        14.        CSFBM represents and warrants to the Bank that:

                    a.        As of the execution of this Agreement, CSFBM and its Affiliates do not own any equity interest of Holdings other than common stock and Series B Convertible Participating Preferred Stock.

                    b.        As of the execution of this Agreement, neither CSFBM nor any of its affiliates holds any shares of Series A Convertible Preferred Stock of Holdings.

                    c.        The execution, delivery and performance by CSFBM of this Agreement have been duly authorized by all necessary limited liability company action.

                    d.        This Agreement is a legal, valid and binding obligation of CSFBM, enforceable against CSFBM in accordance with its terms, except to the extent such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

        15.        Holdings represents and warrants to the Bank that:

                    a.        As of the execution of this Agreement, all Series A Convertible Preferred Stock of Holdings has been cancelled.

                    b.        Bank has been provided with a complete and correct copy of the Certificate of Designation of Series B Convertible Participating Preferred Stock of Holdings, as filed with the Delaware Secretary of State on December 31, 2003.

        16.        This Agreement shall be binding upon the Companies, CSFBM, the Lenders and the Administrative Agent and upon the successors and assigns of the Companies, CSFBM, the Lenders and the Administrative Agent; and all references herein to the Companies, CSFBM, the Lenders and the Administrative Agent, respectively, shall be deemed to include any successor or assign to such entity.

        17.        Companies join herein to acknowledge the terms of this Agreement, waive notice of acceptance hereof by the Bank, and agree to be bound by the terms and provisions hereof, to make no payments or distributions contrary to the terms and provisions hereof, and to do every other act and thing necessary or appropriate to carry out such terms and provisions.

        18.        All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or, in the case of notice by mail, when received, or, in the case of facsimile notice, when received, addressed as follows or, in any case, to such other address as may be hereafter notified by the respective parties hereto.

If to the Bank:

The Frost National Bank

P.O. Box 1600

San Antonio , Texas 78296

Attn: Ms. Kathy Hargrave

Facsimile: (210) 220-4258

and to

The Frost National Bank

777 Main Street

Fort Worth, Texas 76102

Attn: Mr. Adam Palmer

Facsimile: (817) 420-5250

If to the Administrative Agent:

Credit Suisse First Boston Management Corporation

11 Madison Avenue, 16^th Floor

New York, NY 10010

Attention: Mr. Alan Freudenstein

Facsimile: (212) 538-0424

If to any Lender:

c/o Credit Suisse First Boston Management Corporation

11 Madison Avenue, 16^th Floor

New York, NY 10010

Attention: Mr. Alan Freudenstein

Facsimile: (212) 538-0424

If to CFSB:

c/o Credit Suisse First Boston Management Corporation

11 Madison Avenue, 16^th Floor

New York, NY 10010

Attention: Mr. Alan Freudenstein

Facsimile: (212) 538-0424

If to any Company:

Ascent Assurance, Inc.

3100 Burnett Plaza, Unit 33

801 Cherry Street

Fort Worth, Texas 76102

Attention: Chief Financial Officer

Facsimile: (817) 878-3880

        19.        THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. WHEREVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS AGREEMENT.

        20.        CSFBM, THE LENDERS AND THE ADMINISTRATIVE ASSISTANT (AND, BY ACCEPTING THE BENEFITS HEREOF, THE BANK) EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, OR, UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED, OR WHICH MAY, IN THE FUTURE, BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

        THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES REGARDING THE SUBJECT MATTER OF THIS AGREEMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[SIGNATURES FOLLOW]

        IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.

THE FROST NATIONAL BANK

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC,

as Administrative Agent

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC,

as Lender

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

        Special Situations Holdings, Inc. — Westbridge (“Westbridge”) joins herein to (a) acknowledge the terms of this Agreement, (b) represent and warrant to Bank that Westbridge is the sole owner of legal and equitable title to all Series B Convertible Participating Preferred Stock of Holdings and that all representations and warranties of CSFBM in this Agreement are, as to and as if made by Westbridge, true and correct, and (c) agree to be bound by all obligations of CSFBM pursuant to this Agreement with respect to the Holdings Equity Agreements and, if at any time Westbridge has any interest in any other Junior Liabilities, all Junior Liabilities.

SPECIAL SITUATIONS HOLDINGS, INC. - WESTBRIDGE

By:    Alan Freudenstein                  

          Alan Freudenstein

          President

ASCENT ASSURANCE, INC.

By:    Patrick J. Mitchell                  

          Name: Patrick J. Mitchell

          Title: Chairman of the Board

FOUNDATION FINANCIAL SERVICES, INC.

By:    Patrick J. Mitchell                  

          Name: Patrick J. Mitchell

          Title: Chairman of the Board

NATIONALCARE®MARKETING, INC.

By:    Patrick J. Mitchell                  

          Name: Patrick J. Mitchell

          Title: Chairman of the Board

PRECISION DIALING SERVICES, INC.

By:    Patrick J. Mitchell                  

          Name: Patrick J. Mitchell

          Title: Chairman of the Board

SENIOR BENEFITS, L.L.C.

By:    Patrick J. Mitchell                  

          Name: Patrick J. Mitchell

          Title: Chairman of the Board

WESTBRIDGE PRINTING SERVICES, INC.

By:    Patrick J. Mitchell                  

          Name: Patrick J. Mitchell

          Title: Chairman of the Board

ASCENT FUNDING, INC.

By:    Patrick J. Mitchell                  

          Name: Patrick J. Mitchell

          Title: Chairman of the Board

SCHEDULE 1

HOLDINGS AGREEMENTS

1.     Ascent Holdings Credit Agreement

2.     Pledge Agreement between Ascent Assurance, Inc. and CSFBM dated April 17, 2001.

3.     Guaranty and Security Agreement among NationalCare Marketing, Inc., Foundation Financial Services, Inc., Precision Dialing Service, Inc., Senior Benefits, L.L.C., and Westbridge Printing Services, Inc. and CSFBM dated April 17, 2001, as amended.

SCHEDULE 2

RECEIVABLES FINANCING AGREEMENTS

1.     Credit Agreement among Ascent Funding, Inc., Ascent Assurance, Inc. and NationalCare® Marketing, Inc. and The Frost National Bank dated as of December 31, 2003.

2.     Security Agreement by Ascent Funding, Inc. for the benefit of The Frost National Bank dated as of December 31, 2003.

3.     Pledge and Security Agreement between Ascent Assurance, Inc. and The Frost National Bank dated as of December 31, 2003.

4.     Guaranty Agreement by Ascent Assurance, Inc. in favor of The Frost National Bank dated as of December 31, 2003.

5.     Pledge and Security Agreement between NationalCare® Marketing, Inc. and The Frost National Bank dated as of December 31, 2003.

6.     Guaranty Agreement by NationalCare® Marketing, Inc. in favor of The Frost National Bank dated as of December 31, 2003.

EX-99.1

Exhibit 99.1

Ascent Assurance, Inc.

PRESS RELEASE
Source:     Ascent Assurance, Inc.

Corporate Contact:

                  Cynthia B. Koenig

                  Chief Financial Officer

                  (817) 878-3732

FOR IMMEDIATE RELEASE:                        
      December 31, 2003                                      

ASCENT ASSURANCE COMPLETESRESTRUCTURING OF
PREFERRED STOCK AND NOTES HELD BY CSFB

FORT WORTH, Texas, December 31, 2003…Ascent Assurance, Inc. announced today that it has completed a restructuring of the terms of the $37.5 million in preferred stock and $15.3 million in notes held by affiliates of Credit Suisse First Boston, resulting in an extension of their maturity dates from early 2004 until March 24, 2010. Prior to the restructuring, CSFB was the Company’s largest stockholder, owning approximately 49% of the common stock outstanding and approximately 74.5% on an as-converted, fully-diluted basis. Patrick J. Mitchell, Chairman and CEO of Ascent, said “We are very pleased with the results of the transaction to extend the terms of the CSFB securities. These extensions provide the Company with the needed flexibility to continue forward with our business plan.”

As part of the restructuring, the CSFB affiliates will receive a new series of 5.5% convertible preferred stock in exchange for the shares of 10.25% convertible preferred stock currently held by them. As a result of the exchange, the CSFB affiliates will own, on an as-converted, fully-diluted basis, 93% of the outstanding common stock and the public stockholders will retain a 7% equity interest in the Company. Upon approval by Company stockholders of a Board-recommended amendment of the Company’s certificate of incorporation to authorize additional shares of common stock necessary to permit the conversion of the new convertible preferred stock in full, the new convertible preferred stock will automatically convert into the underlying common stock and no preferred stock will remain outstanding. It is expected that a meeting of stockholders will be called to approve this amendment early next year.

In addition to the extension of the maturity date of the notes currently held by the CSFB affiliates, the interest rate of the notes has been reduced from 12% to 6% per annum. Also, a $1.5 million facility fee that would have been payable upon maturity has been waived.

The seven member Board of Directors of the Company has been reconstituted, and two of its members will be required to be independent of both CSFB and management until such time as the Company no longer has any public stockholders. During this period, independent director approval will be required for transactions between CSFB or its affiliates and the Company, except that such approval will not be required for a short-form merger in which the public stockholders receive cash in exchange for their shares in an amount that reflects fair value as reasonably determined by the controlling stockholder and, if the transaction occurs prior to January 1, 2005, the price received by the public stockholders cannot be less than $.40 per share. The public stockholders would also have appraisal rights under Delaware law in connection with any short-form merger.

The restructuring of CSFB’s interests in the Company has been negotiated and approved by a Special Committee of the Board of Directors consisting exclusively of directors independent of CSFB and management. The Special Committee has received an opinion from Houlihan, Lokey, Howard & Zukin, Inc. that the restructuring transaction is fair, from a financial point of view, to the Company and the public stockholders not affiliated with CSFB.

Ascent Assurance, Inc. is an insurance holding company primarily engaged in the development, marketing, underwriting and administration of medical-surgical expense, supplemental health, life and disability insurance products to self-employed individuals and small business owners. Marketing is achieved primarily through the career agency force of its marketing subsidiary. The Company’s goal is to combine the talents of its employees and agents to market competitive and profitable insurance products and provide superior customer service in every aspect of operations. (www.ascentassurance.com)

(Forward-Looking Statements: The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This press release contains forward-looking statements regarding the intent, belief or current expectations of the Company and members of its senior management team. While the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Factors that would cause actual results to differ materially from those contemplated within this press release can be found in the Company’s Form 10-K for the year ended December 31, 2002 and Form 10-Qs for the quarters ended March 31, 2003, June 30, 2003 and September 30,2003. Such factors include but are not limited to: any limitation imposed on the Company’s ability to control the impact of rising health care costs, especially prescription drugs, and rising medical service utilization rates through product and benefit design, underwriting criteria, premium rate increases, utilization management and negotiation of favorable provider contracts; the impact of changing health care trends on the Company’s ability to accurately estimate claim and settlement expense reserves; developments in health care reform and other regulatory issues, including the Health Insurance Portability and Accountability Act and increased privacy regulation, and changes in laws and regulations in key states where the Company operates; the Company’s ability to meet minimum regulatory capital requirements for its Insurance Subsidiaries; the ability of the Company to maintain adequate liquidity for its non-insurance subsidiary operations including financing of commission advances to agents; default by issuers of fixed maturity investments owned by the Company; and the loss of key management personnel.)