10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

FOR QUARTERLY AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
(X)   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended September 30, 2004
OR
(  )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 1-8538

ASCENT ASSURANCE, INC.
(Exact Name of Registrant as Specified in its Charter)

DELAWARE (State of Other Jurisdiction of Incorporation or Organization)	73-1165000 (I.R.S. Employer Identification No.)
3100 Burnett Plaza, 801 Cherry Street, Unit 33, Fort Worth, Texas (Address of Principal Executive Offices)	76102 (Zip Code)

Registrant's Telephone Number, including Area Code
(817) 878-3300

Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock (par value $.01)

Indicate, by check mark, whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES     X         NO        

Indicate, by check mark, whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

YES                 NO    X  

Common Stock — Par value $0.01; 50,606,876 shares outstanding at November 2, 2004.

ASCENT ASSURANCE, INC.
INDEX TO FORM 10-Q

PART I — FINANCIAL INFORMATION		Page No.
Item 1 –	Financial Statements
	Ascent Assurance, Inc. Condensed Consolidated Balance Sheets at September 30, 2004 and December 31, 2003	3
	Ascent Assurance, Inc. Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2004 and 2003	4
	Ascent Assurance, Inc. Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2004 and 2003	5
	Ascent Assurance, Inc. Consolidated Statement of Changes in Stockholders' Equity for the Nine Months Ended September 30, 2004	6
	Ascent Assurance, Inc. Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30, 2004 2003	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2 –	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	General	13
	Business Overview	13
	Forward – Looking Statements	14
	Operating Results	15
	Financial Condition	18
	Liquidity, Capital Resources and Statutory Capital and Surplus	20
Item 3 –	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4 –	Controls and Procedures	22
PART II — OTHER INFORMATION
Item 6 –	Exhibits and Reports on Form 8-K	22

ASCENT ASSURANCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2004 (Unaudited)			December 31, 2003
	(inthousands, except share data)
Assets
Investments:
Fixed Maturities:
Available-for-sale, at market value (amortized cost $97,502 and $93,922)	$	100,669		$	96,968
Short-term investments		4,013			5,631
Other investments, at market value (cost $353 and $383)		376			396
Total Investments		105,058			102,995
Cash		1,153			2,244
Accrued investment income		1,353			1,309
Receivables from agents, net of allowance for doubtful accounts
of $3,589 and $3,439		3,896			4,484
Deferred policy acquisition costs, net		21,079			21,819
Property and equipment, net of accumulated depreciation
of $5,765 and $5,000		2,376			3,084
Other assets		7,907			7,994
Total Assets	$	142,822		$	143,929
Liabilities and Stockholders' Equity
Liabilities:
Policy liabilities and accruals:
Future policy benefits	$	53,551		$	54,872
Claim reserves		25,297			26,196
Total Policy Liabilities and Accruals		78,848			81,068
Accounts payable and other liabilities		12,960			9,760
Notes payable to bank		250			500
Notes payable to related party		15,982			15,270
Total Liabilities		108,040			106,598
Stockholders' Equity:
Redeemable convertible Series B preferred stock ($1,000
stated value, 40,000 shares authorized, 37,504 shares
issued and outstanding at December 31, 2003)		-			37,504
Common stock ($0.01 par value, 75,000,000 and 30,000,000
shares authorized; 50,606,876 and 6,532,100 shares
issued and outstanding)		506			65
Capital in excess of par value		66,580			29,143
Accumulated other comprehensive income		3,190			3,059
Retained Deficit		(35,494	)		(32,440	)
Total Stockholders' Equity		34,782			37,331
Total Liabilities and Stockholders' Equity	$	142,822		$	143,929

See the Notes to the Condensed Consolidated Financial Statements.

ASCENT ASSURANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(in thousands, except per share data)
Revenues:
Premiums:
First-year premium	$	4,036		$	4,306		$	12,038		$	14,583
Renewal premium		19,054			21,255			57,883			62,727
Total premiums		23,090			25,561			69,921			77,310
Net investment income		1,362			1,563			4,093			4,798
Fee and service income		882			1,838			2,790			5,795
Other insurance revenues		448			558			1,415			1,805
Net realized (loss) gain on investments		(15	)		53			(20	)		330
Total revenues		25,767			29,573			78,199			90,038
Benefits, claims and expenses:
Benefits and claims		14,842			17,447			46,013			52,620
Change in deferred policy acquisition costs		429			561			740			583
Commissions		2,507			2,859			7,702			9,127
General and administrative expenses		5,454			5,416			15,855			16,938
Fee and service operating expenses		666			1,554			2,124			4,957
Special executive compensation and severance		3,035			-			3,035			-
Taxes, licenses and fees		843			921			2,729			2,775
Interest expense on notes payable		260			624			765			1,844
Interest expense on redeemable preferred stock		-			914			-			914
Total expenses		28,036			30,296			78,963			89,758
(Loss) income from continuing operations
before income taxes		(2,269	)		(723	)		(764	)		280
Federal income taxes		-			-			-			-
(Loss) income from continuing operations		(2,269	)		(723	)		(764	)		280
Loss from discontinued operations, including loss
on disposal in 2004 of ($1,206)		(1,458	)		(305	)		(1,843	)		(757	)
Federal income taxes		-			-			-			-
Loss from discontinued operations		(1,458	)		(305	)		(1,843	)		(757	)
Net loss		(3,727	)		(1,028	)		(2,607	)		(477	)
Preferred stock dividends		-			-			430			1,759
Loss applicable to common stockholders	$	(3,727	)	$	(1,028	)	$	(3,037	)	$	(2,236	)
Basic and diluted loss from continuing
operations
per common share	$	(.04	)	$	(.11	)	$	(.03	)	$	(.23	)
Basic and diluted loss per common share	$	(.07	)	$	(.16	)	$	(.08	)	$	(.34	)
Weighted average shares outstanding:
Basic and diluted		50,561			6,532			38,659			6,530

See the Notes to the Condensed Consolidated Financial Statements.

ASCENT ASSURANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(in thousands)
Net loss	$	(3,727	)	$	(1,028	)	$	(2,607	)	$	(477	)
Other comprehensive income (loss):
Unrealized holding gain (loss) arising during period		2,464			(1,374	)		111			739
Reclassification adjustment of loss (gain) on sales
of investments included in net loss		15			(53	)		20			(330	)
Comprehensive loss	$	(1,248	)	$	(2,455	)	$	(2,476	)	$	(68	)

See the Notes to the Condensed Consolidated Financial Statements.

ASCENT ASSURANCE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, except share data)

	Redeemable Convertible Series B Preferred Stock						Common Stock				Capital in Excess of Par		Accumulated Other Comp.		Retained (Deficit)			Total Stockholders'
		Shares			Amount			Shares		Amount		Value		Income		Earnings			Equity
Balance at January 1, 2004		37,504		$	37,504			6,532,100	$	65	$	29,143	$	3,059	$	(32,440	)	$	37,331
Net loss																(2,607	)		(2,607	)
Series B preferred stock dividends												430				(430	)		-
Other comprehensive income														131					131
Amortization of unearned      compensation												1							1
Minority interest in subsidiary																(17	)		(17	)
Common stock issued								79,750		1									1
Conversion of Series B redeemable      convertible preferred stock      to common stock		(37,504	)		(37,504	)		43,995,026		440		37,006							(58	)
Balance at September 30, 2004		-		$	-			50,606,876	$	506	$	66,580	$	3,190	$	(35,494	)	$	34,782

See the Notes to the Condensed Consolidated Financial Statements.

ASCENT ASSURANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(in thousands)
Cash Flows From Operating Activities:
Net loss	$	(3,727	)	$	(1,028	)	$	(2,607	)	$	(477	)
Adjustments to reconcile net loss to cash
(used for) provided by operating activities:
(Increase) decrease in accrued investment income		(2	)		71			(44	)		64
Decrease in deferred policy acquisition costs		429			561			740			583
(Increase) decrease in receivables from agents		(70	)		237			438			859
Provision for uncollectible agent receivables		37			302			150			627
(Increase) decrease in other assets		(348	)		139			87			696
Decrease in policy liabilities and accruals		(1,599	)		(2,394	)		(2,220	)		(6,809	)
Increase in accounts payable and other liabilities		4,197			541			3,200			1,977
Interest expense on redeemable convertible
preferred stock		-			914			-			914
Interest expense on note payable to related party		245			610			712			1,775
Other, net		424			260			1,306			951
Net Cash (Used for) Provided by Operating Activities		(414	)		213			1,762			1,160
Cash Flows From Investing Activities:
Purchases of fixed maturity investments		(3,522	)		(3,855	)		(17,783	)		(63,381	)
Sales of fixed maturity investments		476			8,153			4,717			59,749
Maturities and calls of fixed maturity investments		3,138			793			8,930			5,410
Cost of equity securities purchased		-			-			-			(55	)
Sale of equity securities		-			67			-			80
Net decrease (increase) in short-term and other investments		288			(4,474	)		1,648			1,341
Property and equipment purchased		(20	)		(43	)		(57	)		(710	)
Net Cash Provided by (Used for) Investing Activities		360			641			(2,545	)		2,434
Cash Flows from Financing Activities:
Retire Series B redeemable convertible preferred
stock upon conversion to common stock		-			-			(37,504	)		-
Issue common stock upon conversion of Series B
redeemable convertible preferred stock		-			-			37,446			-
Repayment of notes payable		-			-			(250	)		(3,260	)
Net Cash Used for Financing Activities		-			-			(308	)		(3,260	)
(Decrease) Increase in Cash During Period		(54	)		854			(1,091	)		334
Cash at Beginning of Period		1,207			1,358			2,244			1,878
Cash at End of Period	$	1,153		$	2,212		$	1,153		$	2,212

See the Notes to the Condensed Consolidated Financial Statements.

ASCENT ASSURANCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS

Ascent Assurance, Inc. (“Ascent”) is the successor to a Delaware company incorporated in 1982 as an insurance holding company. Ascent, through its applicable subsidiaries, is engaged in the development, marketing, underwriting and administration of medical expense and supplemental health insurance products, primarily to self-employed individuals and small business owners.

The Company’s revenues result primarily from premiums and fees from the insurance products sold by its wholly-owned subsidiaries National Foundation Life Insurance Company (“NFL”), Freedom Life Insurance Company of America (“FLICA”), National Financial Insurance Company (“NFIC”) and American Insurance Company of Texas (“AICT”), and together with NFL, NFIC and FLICA, collectively, the “Insurance Subsidiaries”, and marketed by NationalCare^® Marketing, Inc. (“NCM”) and AmeriCare Benefits, Inc. (“ACB”), also wholly-owned subsidiaries. The Company, through applicable subsidiaries, also derives fee and service revenue from (i) telemarketing services, (ii) printing services, (iii) renewal commissions for prior year sales of both affiliated and unaffiliated insurance products, and (iv) commissions on the sale of the benefits of unaffiliated membership benefit programs.

NOTE 2 – ACCOUNTING PRINCIPLES

Basis of Presentation.    The accompanying unaudited condensed consolidated financial statements of the Company are prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant accounting estimates relate to investments, agent receivables, deferred policy acquisition costs, deferred tax assets, claim reserves, future policy benefit reserves, reinsurance and statutory accounting practices. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications of prior years’ amounts have been made to conform to the 2004 financial statement presentation. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Ascent’s Annual Report on Form 10-K for the year ended December 31, 2003.

Cash Equivalents.    Cash equivalents consist of highly liquid instruments with maturities at the time of acquisition of three months or less. Cash equivalents are stated at cost, which approximates market.

Short-Term Investments.    Short-term investments are stated at cost, which approximates market.

Investments.     The Company’s fixed maturity portfolio is classified as available-for-sale and is carried at estimated market value. Equity securities consisting of common stocks, which are included in other investments, are also carried at estimated market value. Changes in aggregate unrealized appreciation or depreciation on fixed maturity and equity securities are reported directly in stockholders’ equity and, accordingly, will have no effect on current operations.

Deferred Policy Acquisition Costs (“DPAC”).    Policy acquisition costs consisting of commissions and other policy issue costs, which vary with and are primarily related to the production of new business, are deferred and amortized over periods not to exceed the estimated premium-paying periods of the related policies. Also included in Other Assets is the value of business acquired. The amortization of these costs is based on actuarially estimated future premium revenues, and the amortization rate is adjusted periodically to reflect actual experience. Projected future levels of premium revenue are estimated using assumptions as to interest, mortality, morbidity and withdrawals, consistent with those used in calculating liabilities for future policy benefits.

Agent Receivables.    In the ordinary course of business, a subsidiary of Ascent advances commissions on policies written by its general agencies and their agents. Net agent receivables were approximately $3.9 million and $4.5 million at September 30, 2004 and December 31, 2003, respectively. Such subsidiary is reimbursed for these advances from the commissions earned over the respective policy’s life. In the event that policies lapse prior to the time the subsidiary has been fully reimbursed, the general agencies or the individual agents, as the case may be, are responsible for reimbursing the subsidiary for the outstanding balance of the commission advances. A reserve for uncollectible agents’ balances is routinely established based upon historical experience and projected commission earnings. As of September 30, 2004 and December 31, 2003, the Company’s allowances for uncollectible commission advances were $3.6 million and $3.4 million, respectively.

Property and Equipment.     Property and equipment is stated on the basis of cost and consists primarily of furniture, fixtures, leasehold improvements and software. Depreciation is computed principally by the straight-line method for financial reporting purposes using estimated useful lives of 3 to 10 years.

Future Policy Benefits.     Liabilities for future policy benefits not yet incurred are computed primarily using the net level premium method including actuarial assumptions as to investment yield, mortality, morbidity, withdrawals, persistency and other assumptions, which were appropriate at the time the policies were issued. Assumptions used are based on the Insurance Subsidiaries experience as adjusted to provide for possible adverse deviation. Generally, these actuarial assumptions are fixed and, absent material adverse benefit experience, are not adjusted.

Claim Reserves.     Claim reserves represent the estimated liabilities on claims reported plus claims incurred but not yet reported. The process of estimating claim reserves involves the active participation of experienced actuarial consultants with input from the underwriting, claims, and finance departments. The inherent uncertainty in estimating claim reserves is increased when significant changes occur. Changes impacting the Insurance Subsidiaries include: (1) changes in economic conditions; (2) changes in state or federal laws and regulations, particularly insurance reform measures; (3) writings of significant blocks of new business; and (4) significant changes in claims payment patterns. Because claim reserves are estimates, management monitors reserve adequacy over time, evaluating new information as it becomes available and adjusting claim reserves as necessary. Such adjustments are reflected in current operations.

Notes Payable.     Notes payable are stated at cost, which approximates market.

Federal Income Taxes.     The Company records income taxes based on the asset and liability approach, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequence of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The tax effect of future taxable temporary differences (liabilities) and future deductible temporary differences (assets) are separately calculated and recorded when such differences arise. A valuation allowance, reducing any recognized deferred tax asset, must be recorded if it is determined that it is more likely than not that such deferred tax asset will not be realized. The Company carries a 100% valuation allowance, and therefore no income tax expense or benefit was recognized for the third quarters of 2004 and 2003 and for the nine months ended September 30, 2004 and 2003. Net deferred tax assets of $18.0 million and $18.4 million at September 30, 2004 and December 31, 2003, respectively, were fully reserved.

Recognition of Revenue.     Premium revenues from insurance contracts are recognized when due from policyholders. Fee and service income is recognized when earned, the services have been provided and collection is reasonably assured.

Earnings Per Share.     Under GAAP, there are two measures of earnings per share: “basic earnings per share” and “diluted earnings per share”. Basic earnings per share are computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were converted or exercised. For the nine months ended September 30, 2004, 43,995,026 of common shares attributable to the conversion of Ascent’s Series B convertible participating preferred stock (see the Notes to the Condensed Consolidated Financial Statements – Note 4 – Conversion of Redeemable Convertible Preferred Stock) were included in the computation of basic and diluted earnings per share as of March 15, 2004. To include the common shares attributable to the conversion of Ascent’s preferred stock in the computation of diluted earnings per share from the beginning of 2004 would have been anti-dilutive. For the nine months ended September 30, 2004, stock options of 5,680,919 were anti-dilutive and were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive. For the nine months ended September 30, 2003, stock options of 926,650 and the conversion of the preferred stock were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.

The following table reflects the calculation of basic and diluted EPS:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(amounts in thousands, except per share amounts)
(Loss) income from continuing operations	$	(2,269	)	$	(723	)	$	(764	)	$	280
Loss from discontinued operations		(1,458	)		(305	)		(1,843	)		(757	)
Net loss		(3,727	)		(1,028	)		(2,607	)		(477	)
Preferred stock dividends		-			-			(430	)		(1,759	)
Loss applicable to common stockholders	$	(3,727	)	$	(1,028	)	$	(3,037	)	$	(2,236	)
Weighted average shares outstanding:
Basic		50,561			6,532			38,659			6,530
Diluted		50,561			6,532			38,659			6,530
Basic and diluted loss per share from continuing operations		(.04	)	$	(.11	)	$	(.03	)	$	(.23	)
Basic and diluted loss per share from discontinued operations	$	(.03	)	$	(.05	)	$	(.05	)	$	(.12	)
Basic and diluted loss per common share	$	(.07	)	$	(.16	)	$	(.08	)	$	(.34	)

NOTE 3 – RELATED PARTY FINANCING

Ascent received debt financing to fund an $11 million capital contribution to FLICA in April 2001 from Credit Suisse First Boston Management LLC, (“CSFBM”), which is an affiliate of Special Situations Holdings, Inc. – Westbridge (“SSHW”) (Ascent’s largest common stockholder), and a subsidiary of Credit Suisse First Boston LLC (“CSFB”). The Credit Agreement relating to that loan (“CSFBM Credit Agreement”) provided Ascent with total loan commitments of $11 million, all of which were drawn in April 2001. Under restructured terms effective December 31, 2003, the loan bears interest at a rate of 6% per annum and matures in March 2010. Absent any acceleration following an event of default, Ascent may elect to pay interest in kind by the issuance of additional notes. During the nine months ended September 30, 2004, Ascent issued $712,000 in additional notes for payment of interest in kind which increased the notes payable balance to CSFBM at September 30, 2004 to approximately $16.0 million. Ascent’s obligations to CSFBM are secured, pursuant to a guaranty and security agreement and pledge agreements, by substantially all of the assets of Ascent and its subsidiaries (excluding the capital stock and the assets of AICT, FLICA, NFL, NFIC, NCM, Ascent Funding, Inc. and Ascent Management, Inc., some, or all, of which is pledged as collateral for bank financing described in Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations). Ascent’s subsidiaries (other than those listed above) have also guaranteed Ascent’s obligations under the CSFBM Credit Agreement. At September 30, 2004, there were no events of default.

NOTE 4 – CONVERSION OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

On March 15, 2004, Ascent’s common shareholders approved an amendment to the Company’s Certificate of Incorporation to increase the authorized number of shares of common stock to 75 million shares from 30 million shares. The approval of this amendment resulted in the automatic conversion of all 37,504 outstanding shares of the Company’s Series B convertible participating preferred stock (“Series B Preferred Stock”) into 43,995,026 shares of common stock. As a result, preferred stock dividends of $430,000 accrued through March 15, 2004, were credited to capital in excess of par value, and had no impact on total stockholders’ equity. All outstanding shares of the Series B Preferred Stock were held by SSHW, the Company’s largest shareholder. The conversion of the Series B Preferred Stock increased the ownership percentage of SSHW in the Company’s common stock to approximately 93% from 49%.

NOTE 5 – EMPLOYEE BENEFIT PLANS

Ascent applies the intrinsic value method, in accordance with APB 25, in accounting for its stock options issued to employees of one of its subsidiaries and non-employee directors. Accordingly, no compensation expense has been recognized for options granted with an exercise price equal to market value at the date of grant. Ascent applies the fair value method in accounting for stock options issued to consultants (including marketing agents).

Compensation cost recognized in the income statement for stock-based employee and consultants (including marketing agents) compensation awards were approximately $130 and $4,500 for the three months ended September 30, 2004 and 2003, respectively, and $1,330 and $7,200 for the nine months ended September 30, 2004 and September 30, 2003, respectively.

The following table illustrates the effect on the loss to common stockholders and loss per share if Ascent had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Loss applicable to common stockholders	$	(3,727	)	$	(1,028	)	$	(3,037	)		(2,236	)
Total stock-based employee compensation
expense determined under fair value
based method for all awards,
net of related tax effects		(6	)		(71	)		(33	)		(196	)
Pro forma loss	$	(3,733	)	$	(1,099	)	$	(3,070	)		(2,432	)
Loss per share:
Basic - as reported	$	(.07	)	$	(.16	)	$	(.08	)	$	(.34	)
Basic - pro forma	$	(.07	)	$	(.17	)	$	(.08	)	$	(.37	)
Diluted - as reported	$	(.07	)	$	(.16	)	$	(.08	)	$	(.34	)
Diluted - pro forma	$	(.07	)	$	(.17	)	$	(.08	)	$	(.37	)

For purposes of pro forma disclosure, the estimated fair value of the stock compensation is amortized to expense over the stock’s vesting period. The effect on the loss to common stockholders of the stock compensation amortization for the year presented above is not likely to be representative of the effects on reported income for future years.

NOTE 6 – DISCONTINUED OPERATIONS

During the third quarter of 2004, Ascent’s management committed to a plan to sell its printing subsidiary, Westbridge Printing Services, Inc. (“WPS”), and exit the printing business. Ascent’s Board of Directors has approved such action. On October 29, 2004, Ascent entered into a definitive sales agreement to sell the capital stock of WPS to an unrelated third party. In accordance with Financial Accounting Standard No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company’s printing subsidiary is “held for sale” and is reported as discontinued operations as of September 30, 2004 in the accompanying consolidated condensed financial statements. The Company’s estimated loss from discontinued operations of approximately ($1.5) million and ($1.8) million for the three and nine months ended September 30, 2004, respectively, was comprised of an estimated ($1.2) million loss on the sale and a ($252,000) and ($637,000) operating loss from WPS for the three months and nine months ended September 30, 2004, respectively. Included in the estimated loss is a ($539,000) loss for a contingency related to a long-term lease on which Ascent remains a lessee. The operating losses of WPS for prior periods presented have been reflected in discontinued operations for comparative purposes. The assets of $842,000 and liabilities of $305,000 included in the accompanying balance sheet at September 30, 2004 that are to be transferred to the purchaser in connection with the sale consists primarily of trade receivables, inventory, equipment and trade payables.

NOTE 7 – SPECIAL EXECUTIVE COMPENSATION AND SEVERANCE

Effective September 1, 2004, Benjamin Cutler, former Chairman of Assurance Health (previously Fortis Health), was appointed Chairman and Chief Executive Officer of Ascent. In connection with Mr. Cutler’s employment agreement, Ascent recorded a $2 million liability for deferred compensation and $308,000 in employment expenses for the third quarter of 2004. Under the employment agreement, Mr. Cutler also is to receive options to purchase 5,025,619 shares of Ascent’s common stock and receive a liquidity performance bonus. The exercise price of the options equals the fair market value of Ascent’s common shares as determined by Ascent’s Board of Directors in good faith based on generally accepted industry valuation methodologies on the Early Exercise Date as defined in Mr. Cutler’s employment agreement.

In addition, the Company paid severance expense of approximately $727,000 to its former Chairman.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

In the normal course of its business operations, the Company is involved in various claims, other business related suits (alleging actual as well as substantial exemplary damages) and regulatory matters. In the opinion of management, the Company is not a party to any pending litigation which is reasonable likely to have an adverse result or disposition that would have a material adverse effect on the Company’s business, consolidated financial position or consolidated results of operations.

The Company’s Insurance Subsidiaries are subject to extensive governmental regulation and supervision at both federal and state levels. Such regulation includes premium rate levels, premium rate increases, policy forms, minimum loss ratios, dividend payments, claims settlement, licensing of insurers and their agents, capital adequacy, transfer of control, and amount and type of investments. Additionally, there are numerous health care reform proposals and regulatory initiatives under consideration, which, if enacted, could have significant impact on the Company’s results of operations.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Ascent Assurance, Inc. (“Ascent”) is the successor to a Delaware company incorporated in 1982 as an insurance holding company. Ascent, through its applicable subsidiaries, is engaged in the development, marketing, underwriting and administration of medical expense and supplemental health insurance products, primarily to self-employed individuals and small business owners.

The following discussion provides management’s assessment of financial condition at September 30, 2004 as compared to December 31, 2003 and results of operations for the three and nine months ended September 30, 2004 as compared to the comparable 2003 period for the Company. This discussion updates the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2003 Report on Form 10-K and should be read in conjunction therewith.

Business Overview.     The Company’s revenues result primarily from premiums and fees from the insurance products sold by its wholly-owned subsidiaries National Foundation Life Insurance Company (“NFL”), Freedom Life Insurance Company of America (“FLICA”), National Financial Insurance Company (“NFIC”) and American Insurance Company of Texas (“AICT”), and together with NFL, NFIC and FLICA, collectively, the “Insurance Subsidiaries” and marketed by NationalCare^® Marketing, Inc. (“NCM”) and AmeriCare Benefits, Inc. (“ACB”), also wholly-owned subsidiaries. The Company, through applicable subsidiaries, also derives fee and service revenue from (i) telemarketing services, (ii) printing services, (iii) renewal commissions for prior year sales of both affiliated and unaffiliated insurance products, and (iv) commissions on the sale of benefits of unaffiliated membership benefit programs.

The Company’s operations are comprised of one segment, Accident and Health insurance. The principal products currently marketed by NCM and ACB and underwritten by NFL and FLICA are medical expense reimbursement policies. These products are designed with flexibility as to benefits, deductibles, coinsurance and premium payments, which can be adapted to meet regional sales or competitive needs, as well as those of the individual policyholders. The principal product groups currently underwritten by NFL and FLICA are comprehensive major medical products, hospital/surgical medical expense products and supplemental specified disease products:

o Comprehensive major medical products are generally designed to reimburse insureds for eligible expenses incurred for hospital confinement, surgical expenses, physician services, outpatient services and the cost of inpatient medicines.

o Hospital/surgical medical expense products are similar to comprehensive major medical products except that benefits are generally limited to medical and surgical services received in a hospital either as an inpatient or outpatient (services such as outpatient physician office visits and outpatient prescription drugs are excluded) and deductibles and coinsurance provisions are generally higher.

o Supplemental specified disease products include blanket group accident coverages, blanket group hospital daily indemnity coverages, as well as indemnity policies for hospital confinement and convalescent care for treatment of specified diseases and “event specific” policies, which provide fixed benefits or lump sum payments directly to the insured upon diagnosis of certain types of internal cancer or heart disease.

Prior to 1998, some of the Insurance Subsidiaries also actively underwrote Medicare Supplement products designed to provide reimbursement for certain expenses not covered by the Medicare program. Such Insurance Subsidiaries continue to receive premiums on Medicare Supplement policies sold prior to that date.

Forward-Looking Statements.    Statements contained in this analysis and elsewhere in this document that are not based on historical information are forward-looking statements and are based on management’s projections, estimates and assumptions. In particular, forward-looking statements can be identified by the use of words such as “may”, “will”, “should”, “expect”, “anticipate”, “estimate”, “continue”, or similar words. Management cautions readers regarding its forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Various statements contained in the Management’s Discussion and Analysis of Financial Condition and Results of Operation, are forward-looking statements. These forward-looking statements are based on the intent, belief or current expectations of Ascent and members of its senior management team. While Ascent’s management 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.

Important factors known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this Report include, but are not limited to:

o any limitation imposed on the Insurance Subsidiaries’ 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;

o the impact of changing health care trends on the Insurance Subsidiaries’ ability to accurately estimate claim and settlement expense reserves;

o the ability of the Company to fund competitive commission advances to its agents from internally generated cash flow or external financing;

o developments in health care reform and other regulatory issues, including the Health Insurance Portability and Accountability Act of 1996 and increased privacy regulation, and changes in laws and regulations in key states where the Company operates;

o Ascent’s ability to make additional investment in its Insurance Subsidiaries in the form of capital contributions, if needed, in order for such subsidiary to comply with regulatory capital or debt covenant requirements;

o default by issuers of fixed maturity investments owned by the Insurance Subsidiaries; and

o the loss of key management personnel.

Subsequent written or oral statements attributable to Ascent or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this Report and those in Ascent’s reports previously filed with the SEC. Copies of these filings may be obtained by contacting Ascent or the SEC.

OPERATING RESULTS

Consolidated results of operations for Ascent are reported for the three and nine months ended September 30, 2004 and 2003. (In thousands except insurance operating ratios.)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Premiums	$	23,090		$	25,561		$	69,921		$	77,310
Other insurance revenues		448			558			1,415			1,805
Net investment income		1,362			1,563			4,093			4,798
Total insurance revenues		24,900			27,682			75,429			83,913
Benefits and claims		14,842			17,447			46,013			52,620
Commissions		2,507			2,859			7,702			9,127
Change in deferred policy acquisition costs		429			561			740			583
General and administrative expense		5,454			5,416			15,855			16,938
Special executive compensation and severance		3,035			-			3,035			-
Taxes, licenses and fees		843			921			2,729			2,775
Interest expense on bank facilities		15			16			47			70
Interest expense on note payable to related party		245			608			718			1,774
Interest expense on redeemable preferred stock		-			914			-			914
Total insurance operating expenses		27,370			28,742			76,839			84,801
Insurance operating results		(2,470	)		(1,060	)		(1,410	)		(888	)
Fee and service income		882			1,838			2,790			5,795
Fee and service expenses		666			1,554			2,124			4,957
Fee and service results		216			284			666			838
Net realized (loss) gain on investments		(15	)		53			(20	)		330
(Loss) income from continuing operations
before income taxes		(2,269	)		(723	)		(764	)		280
Federal income taxes		-			-			-			-
(Loss) income from continuing operations		(2,269)			(723)			(764)			280
Loss from discontinued operations,including
loss on disposal in 2004 of ($1,206)		(1,458	)		(305	)		(1,843	)		(757	)
Federal income taxes		-			-			-			-
Loss from discontinued operations		(1,458	)		(305	)		(1,843	)		(757	)
Net loss		(3,727	)		(1,028	)		(2,607	)		(477	)
Preferred stock dividends		-			-			430			1,759
Loss applicable to common stockholders	$	(3,727	)	$	(1,028	)	$	(3,037	)	$	(2,236	)
Insurance operating ratios*
Benefits and claims		64.3%			68.3%			65.8%			68.1%
Commissions		10.9%			11.2%			11.0%			11.8%
Change in deferred policy acquisition costs		1.9%			2.2%			1.1%			0.8%
General and administrative expenses		23.2%			20.7%			22.2%			21.4%
Taxes, licenses and fees		3.7%			3.6%			3.9%			3.6%

* Ratios are calculated as a percent of premium with the exception of the general and administrative expense ratio, which is calculated as a percent of premiums plus other insurance revenues

Overview.     For the third quarter of 2004, net loss was ($3.7) million compared to a net loss of ($1.0) million for the corresponding period in 2003. The ($2.7) million increase in the net loss was principally due to non-recurring charges of ($3.0) million for executive compensation and severance and a ($1.2) million increase in loss from discontinued operations offset by a $1.3 million decrease in interest expenses on notes payable to and redeemable preferred stock held by related parties. For the nine months ended September 30, 2004, the net loss was ($2.6) million compared to a net loss of ($477,000) for the corresponding period in 2003. The ($2.1) million increase in the net loss was principally due to non-recurring charges of ($3.0) million for executive compensation and severance and a ($1.1) million increase in loss from discontinued operations offset by a $2.0 million decrease in interest expenses on notes payable to and redeemable preferred stock held by related parties.

Effective September 1, 2004, Benjamin M. Cutler was appointed Chairman and Chief Executive Officer of the Company. In connection with Mr. Cutler’s employment agreement, the Company recorded a $2.0 million liability for deferred compensation and $308,000 in employment expenses. In addition, the Company paid severance expense of approximately $727,000 to its former Chairman.

In August 2004, the Company decided to exit the printing business and subsequently entered into definitive agreement to sell its printing subsidiary effective October 29, 2004. The loss from discontinued operations of ($1.5) million for the third quarter of 2004 is comprised of a ($1.2) million loss on sale of the printing subsidiary and a ($252,000) operating loss compared to a ($305,000) operating loss for the third quarter of 2003. The loss from discontinued operations of ($1.8) million for the nine months ended September 30, 2004 is comprised of a ($1.2) million loss on sale of the printing subsidiary and a ($637,000) operating loss compared to a ($757,000) operating loss for the nine months ended September 30, 2003.

Interest expense on the note payable to related party decreased due to the restructuring of the note payable on December 31, 2003 that reduced the interest rate from 12% to 6% per annum. The Company’s preferred stock was converted to common stock on March 15, 2004.

The Company reported no income tax expense or benefit for the third quarters of 2004 and 2003 and for the nine months ended September 30, 2004 and 2003 as the Company maintains a 100% valuation allowance for its net deferred tax asset (See Note 2 to the Condensed Consolidated Financial Statements at Item 1.)

On March 15, 2004, Ascent’s shareholders approved an amendment to the Company’s Certificate of Incorporation to increase the authorized number of shares of common stock to 75 million shares from 30 million shares. The approval of this amendment resulted in the automatic conversion of all 37,504 outstanding shares of the Company’s convertible participating Series B preferred stock into 43,995,026 shares of common stock and eliminated the requirement to pay preferred stock dividends. As a result, preferred stock dividends of $430,000 accrued through March 15, 2004 were credited to capital in excess of par value and had no impact on total stockholders’ equity.

The following narratives discuss the principal components of insurance operating results.

Premiums.     The Insurance Subsidiaries’ premium revenue is derived principally from the following medical expense reimbursement products: comprehensive major medical, hospital/surgical medical expense, supplemental products including specified disease coverage and Medicare supplement. Comprehensive major medical products are generally designed to reimburse insureds for eligible expenses incurred for hospital confinement, surgical expenses, physician services, outpatient services, and the cost of laboratory and diagnostic services, as well as inpatient medicines. Hospital surgical medical expense products are similar to comprehensive major medical products with respect to benefits for inpatient services, except that deductibles and coinsurance provisions are generally higher. However, benefits for outpatient services are generally more limited under hospital/surgical medical expense coverage than comprehensive major medical coverage. Supplemental products include blanket group accident coverages, blanket group hospital daily indemnity coverages, as well as individual indemnity policies for hospital confinement and convalescent care for treatment of specified diseases and “event specific” individual policies, which provide fixed benefits or lump sum payments directly to the insured upon diagnosis of certain types of internal cancer or heart disease. Prior to 1998, the Insurance Subsidiaries also underwrote Medicare supplement products and continue to receive renewal premiums from such policies.

Premium revenue, in thousands, for each major product line is set forth below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
Major medical:
First-year	$	3,887	$	4,204	$	11,611	$	14,239
Renewal		10,811		11,839		32,634		34,869
Subtotal		14,698		16,043		44,245		49,108
Supplemental specified disease:
First-year		67		21		206		82
Renewal		4,908		5,170		14,925		15,768
Subtotal		4,975		5,191		15,131		15,850
Medicare supplement:
Renewal		2,942		3,887		9,234		10,999
Subtotal		2,942		3,887		9,234		10,999
Other		475		440		1,311		1,353
Consolidated Premium Revenue	$	23,090	$	25,561	$	69,921	$	77,310

Total premiums decreased ($2.5) million, or (9.7%), for the third quarter of 2004 as compared to the third quarter of 2003. Total premiums decreased ($7.4) million, or (9.6%), for the nine months ended September 30, 2004 as compared to the 2003 corresponding period. Major medical premiums declined due to lower new business sales resulting from delays in new product deliveries to NCM in 2003 and a disciplined pricing philosophy focused upon profitability. In addition, supplemental specified disease and Medicare supplement premiums declined due to normal lapsing of policies.

Benefits and Claims.     Benefits and claims are comprised of (1) claims paid, (2) changes in claim reserves for claims incurred (whether or not reported), and (3) changes in future policy benefit reserves (see Financial Condition – “Claims Reserves” and “Future Policy Benefit Reserves”). The decrease in the benefits and claims ratio from 68.3% for the third quarter of 2003 to 64.3% for the third quarter of 2004 and from 68.1% for year to date September 30, 2003 to 65.8% for year to date September 30, 2004 is principally attributable to improved large claim experience for 2004.

For the past several years, the costs of medical services covered by the Company’s major medical insurance policies has increased dramatically, with medical inflation averaging 15% to 20% annually in comparison to an average increase in the consumer price index of 3%. To maintain a consistent ratio of claims and benefits to premium into future periods, the Company must accurately estimate future medical inflation and implement timely premium rate increases for both new major medical product sales and the majority of its in force insurance policies, including supplemental specified disease and Medicare supplement policies.

Commissions.     The commissions to premiums ratio decreased by .3 and .8 percentage points in third quarter 2004 and year to date September 30, 2004, respectively, as compared to the corresponding prior year periods as a result of the decrease in first year major medical premiums. Commission rates on first year premiums are significantly higher than those for renewal premiums.

FINANCIAL CONDITION

Investments.     The following table summarizes the Company’s fixed maturity securities, excluding short-term investments and certificates of deposit. All of the Company’s fixed maturity securities are classified as available-for-sale and are carried at market value. Investments in the debt securities of corporations are principally in publicly traded bonds.

	September 30, 2004			December 31, 2003
Fixed Maturity Securities		Market Value	%		Market Value	%
	(in 000's)			(in 000's)
U.S. Government and governmental agencies
and authorities (except mortgage backed)	$	10,644	10.6	$	10,887	11.2
Finance companies		21,325	21.2		19,209	19.8
Public utilities		11,358	11.3		8,645	8.9
Mortgage-backed securities		18,875	18.7		23,567	24.3
States, municipalities and political subdivisions		2,318	2.3		2,297	2.4
All other corporate bonds		36,149	35.9		32,363	33.4
Total fixed maturity securities	$	100,669	100.0	$	96,968	100.0

The following table indicates by rating the composition of the Company’s fixed maturity securities portfolio, excluding short-term investments and certificates of deposit.

	September 30, 2004			December 31, 2003
Composition of Fixed Maturity Securities by Rating		Market Value	%		Market Value	%
	(in 000's)			(in 000's)
Ratings
Investment grade:
U.S. Government and agencies	$	17,668	17.5	$	20,147	20.8
AAA		14,079	14.0		16,514	17.0
AA		4,089	4.1		1,648	1.7
A		33,734	33.5		33,082	34.1
BBB		29,272	29.1		23,438	24.2
Non-Investment grade:
BB		1,293	1.3		1,640	1.7
B and below		534	0.5		499	0.5
Total fixed maturity securities	$	100,669	100.0	$	96,968	100.0

The Company monitors the financial condition and operations of securities rated below investment grade and of certain investment grade securities on which there are concerns regarding credit quality. In evaluating fixed maturities to determine whether any of the unrealized losses are other than temporary, management’s assessments as to the nature of declines in fair values are based upon historical operating trends, business prospects, status of the industry in which the company operates, analyst ratings on the issuer and sector, the quality of the investments, the severity and duration of the unrealized losses and the Company’s ability or intent to hold the investments. If fair value is less than the carrying value and the decline is determined to be other than temporary, an appropriate write-down is recorded. The scheduled contractual maturities of the Company’s fixed maturity securities, excluding short-term investments and certificates of deposit, at September 30, 2004 and December 31, 2003 are shown in the table below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	September 30, 2004			December 31, 2003
Composition of Fixed Maturity Securities by Maturity		Market Value	%		Market Value	%
	(in 000's)			(in 000's)
Scheduled Maturity
Due in one year or less	$	1,428	1.4	$	3,868	4.0
Due after one year through five years		28,528	28.3		23,688	24.4
Due after five years through ten years		35,180	35.0		28,844	29.8
Due after ten years		16,658	16.5		17,001	17.5
Mortgage-backed and asset-backed
securities		18,875	18.8		23,567	24.3
Total fixed maturity securities	$	100,669	100.0	$	96,968	100.0

Claim Reserves.     Claim reserves are established by the Insurance Subsidiaries for benefit payments which have already been incurred by the policyholder but which have not been paid by the applicable Insurance Subsidiary. Claim reserves totaled $25.3 million at September 30, 2004 as compared to $26.2 million at December 31, 2003. The process of estimating claim reserves involves the active participation of experienced actuarial consultants with input from the underwriting, claims, and finance departments. The inherent uncertainty in estimating claim reserves is increased when significant changes occur. Changes impacting the Insurance Subsidiaries include: (1) changes in economic conditions; (2) changes in state or federal laws and regulations, particularly insurance reform measures; (3) writings of significant blocks of new business and (4) significant changes in claims payment patterns. Because claim reserves are estimates, management monitors reserve adequacy over time, evaluating new information as it becomes available and adjusting claim reserves as necessary. Such adjustments are reflected in current operations.

Management considers many factors when setting reserves including: (1) historical trends; (2) current legal interpretations of coverage and liability; (3) loss payments and pending levels of unpaid claims; and (4) product mix. Based on these considerations, management believes that adequate provision has been made for the claim reserves of the Insurance Subsidiaries. Actual claims paid may deviate, perhaps substantially, from such reserves.

Future Policy Benefit Reserves.    Future policy benefit reserves are established by each applicable Insurance Subsidiary for benefit payments that have not been incurred but which are estimated to be incurred in the future. Future policy benefit reserves totaled $53.6 million at September 30, 2004 as compared to $54.9 million at December 31, 2003. Future policy benefit reserves are calculated according to the net level premium reserve method and are equal to the discounted present value of the applicable Insurance Subsidiary’s expected future policyholder benefits minus the discounted present value of its expected future net premiums. These present value determinations are based upon assumed fixed investment yields, the age of the insured(s) at the time of policy issuance, expected morbidity and persistency rates, and expected future policyholder benefits. Except for purposes of reporting to insurance regulatory authorities and for tax filing, policy benefit reserves are determined in accordance with GAAP.

In determining the morbidity, persistency rate, claim cost and other assumptions used in determining future policy benefit reserves, the Insurance Subsidiaries each rely primarily upon their own respective benefit payment history and upon information developed in conjunction with actuarial consultants and industry data. Persistency rates have a direct impact upon their policy benefit reserves because the determinations for these reserves are, in part, a function of the number of policies in force and expected to remain in force to maturity. If persistency is higher or lower than expected, future policyholder benefits will also be higher or lower because of the different than expected number of policies in force, and the policy benefit reserves will be increased or decreased accordingly.

In accordance with GAAP, actuarial assumptions of each of the Insurance Subsidiaries are generally fixed, and absent materially adverse benefit experience, are not generally adjusted. The Insurance Subsidiaries each monitor the adequacy of their policy benefit reserves on an ongoing basis by periodically analyzing the accuracy of their actuarial assumptions. The adequacy of policy benefit reserves may also be impacted by the development of new medicines and treatment procedures which may alter the incidence rates of illness and the treatment methods for illness and accident (such as out-patient versus in-patient care) or prolong life expectancy. Changes in coverage provided by major medical insurers or government plans may also affect the adequacy of reserves if, for example, such developments had the effect of increasing or decreasing the incidence rate and per claim costs of occurrences against which the applicable Insurance Subsidiary insures. An increase in either the incidence rate or the per claim costs of such occurrences could result in the need for the Insurance Subsidiaries to post additional reserves, which could have a material adverse effect upon Ascent’s liquidity, capital resources and results of operations.

LIQUIDITY, CAPITAL RESOURCES AND STATUTORY CAPITAL AND SURPLUS

General.     The primary sources of cash for the Company’s consolidated operations are premiums and fees from insurance policies, sales and maturity of invested assets and investment income while the primary uses of cash are payments of insurance policy benefits, claims and commissions, and general operating expenses. Net cash (used for) provided by operations totaled ($414,000) and $1.8 million for the three and nine months ended September 30, 2004, and totaled $213,000 and $1.2 million for the three and nine months ended September 30, 2003.

Ascent is a holding company, the principal assets of which consist of the capital stock of its subsidiaries and invested assets. Ascent’s principal sources of funds are comprised of dividends from its non-insurance subsidiaries. The Insurance Subsidiaries are precluded from paying dividends without prior approval of the Texas Insurance Commissioner, as the Insurance Subsidiaries’ earned surplus is negative due to statutory losses incurred prior to 2003. Ascent’s principal uses of cash are for general and administrative expenses and to make discretionary additional investments in its Insurance Subsidiaries in the form of capital contributions to maintain desired statutory capital and surplus levels. Ascent funded capital contributions to the Insurance Subsidiaries totaling approximately $0.7 million during the nine months ended September 30, 2003 and made no contributions during the nine months ended September 30, 2004. As of September 30, 2004, Ascent had approximately $3.0 million in unrestricted cash and invested assets.

Related Party Financing.    Ascent received debt financing to fund an $11 million capital contribution to FLICA in April 2001 from Credit Suisse First Boston Management LLC, (“CSFBM”), which is an affiliate of Special Situations Holdings, Inc. – Westbridge (“SSHW”) (Ascent’s largest common stockholder), and a subsidiary of Credit Suisse First Boston LLC (“CSFB”). The Credit Agreement relating to that loan (“CSFBM Credit Agreement”) provided Ascent with total loan commitments of $11 million, all of which were drawn in April 2001. Under restructured terms effective December 31, 2003, the loan bears interest at a rate of 6% per annum and matures in March 2010. Absent any acceleration following an event of default, Ascent may elect to pay interest in kind by issuance of additional notes. During the nine months ended September 30, 2004, Ascent issued $712,000 in additional notes for payment of interest in kind which increased the notes payable balance to CSFBM at September 30, 2004 to approximately $16.0 million. Ascent’s obligations to CSFBM are secured, pursuant to a guaranty and security agreement and pledge agreements, by substantially all of the assets of Ascent and its subsidiaries (excluding the capital stock and the assets of AICT, FLICA, NFL, NFIC, NCM, Ascent Funding, Inc. and Ascent Management, Inc., some or all of which is pledged as collateral for bank financing described below). Ascent’s subsidiaries (other than those listed above) have also guaranteed Ascent’s obligations under the CSFBM Credit Agreement. At September 30, 2004, there were no events of default.

Conversion of Related Party Preferred Stock.     On March 15, 2004, Ascent’s shareholders approved an amendment to the Company’s Certificate of Incorporation to increase the authorized number of shares of common stock to 75 million shares from 30 million shares. The approval of this amendment resulted in the automatic conversion of all 37,504 outstanding shares of the Company’s Series B convertible participating preferred stock (“Series B Preferred Stock”) into 43,995,026 shares of common stock. All outstanding shares of the Series B Preferred Stock were held by SSHW, the Company’s largest shareholder. The conversion of the Series B Preferred Stock increased the ownership percentage of SSHW in the Company’s common stock to approximately 93% from 49%.

Bank Financing.     The majority of commission advances to NCM’s and ACB’s agents are financed through Ascent Funding, Inc. (“AFI”), an indirect wholly-owned subsidiary of Ascent. On December 31, 2003, AFI entered into a Credit Agreement (the “Credit Agreement”) with Frost National Bank (“Frost”) that provides AFI with a $3.0 million revolving loan facility, the proceeds of which are used to purchase agent advance receivables from NCM, ACB and other affiliates. As of September 30, 2004 and December 31, 2003, $250,000 and $500,000, respectively, were outstanding under the Credit Agreement. The Credit Agreement matures on January 15, 2005, at which time the outstanding principal and interest will be due and payable. The Company maintains an agent receivable financing arrangement to facilitate growth in new business sales.

AFI’s obligations under the Credit Agreement are secured by liens upon substantially all of AFI’s assets. AFI’s principal assets at September 30, 2004 are net agent receivables of $3.9 million. In addition, NCM, ACB and Ascent have guaranteed AFI’s obligation under the Credit Agreement, and have pledged all of the issued and outstanding shares of the capital stock of AFI, NFL, and FLICA as collateral for those guaranties (the “Guaranty Agreements”). As of September 30, 2004, there were no events of default under the Credit or Guaranty Agreements.

Inflation.     Inflation impacts claim costs and overall operating costs and, although inflation has been lower the last few years, hospital and medical costs have still increased at a higher rate than general inflation, especially prescription drug costs. New, more expensive and wider use of pharmaceuticals is inflating health care costs. The Insurance Subsidiaries will continue to establish premium rates in accordance with trends in hospital and medical costs along with concentrated efforts in various cost containment programs. However, there can be no assurance that these efforts will fully offset the impact of inflation or that increases in premium rates will equal or exceed increasing health care costs.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Ascent has no material changes to the disclosure concerning market risk made in its Annual Report on Form 10-K for the year ended December 31, 2003.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.    Under the supervision and with the participation of Ascent’s management, including the Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures as of September 30, 2004, the end of the period covered by this report. Based on such evaluation, Ascent’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2004, the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by Ascent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

Changes in internal control over financial reporting.    There were no changes in the Company’s internal controls over financial reporting that have materially affected, or, are reasonably likely to materially affect, these controls during the period covered by this quarterly report.

PART II

ITEM 6 — EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

The following exhibits are filed herewith. Exhibits incorporated by reference are indicated in the parentheses following the description.

3.1 Second Amended and Restated Certificate of Incorporation of the Company filed with the Secretary of State of Delaware on March 24, 1999 (incorporated by reference to Exhibit 3.1 to the Ascent’s Form 8-A filed on March 25, 1999).

3.2 Amended and Restated By-Laws of Ascent’s, effective as of March 24, 1999 (incorporated by reference to Exhibit 3.2 to Ascent’s Form 8-A filed on March 25, 1999).

3.3 Amendment to the By-Laws of Ascent, effective as of April 5, 2000 (incorporated by reference to Exhibit 3.3 to Ascent’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000)

3.4 Certificate of Elimination of Series A Preferred Stock of Ascent Assurance, Inc. dated December 31, 2003 (incorporated by reference to Exhibit 3.1 to Ascent's 8-K filed on January 6, 2004).

3.5 Certificate of Designation for Series B Convertible Participating Preferred Stock of Ascent Assurance, Inc. dated December 31, 2003 (incorporated by reference to Exhibit 3.2 to Ascent's 8-K filed on January 6, 2004).

4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Ascent’s Form 8-A filed on March 25, 1999).

4.2 Form of Warrant Certificate, included in the Form of Warrant Agreement (incorporated by reference to Exhibit 4.2 to Ascent’s Form 8-A filed on March 25, 1999).

4.3 Form of Warrant Agreement dated as of March 24, 1999, between Ascent and LaSalle National Bank, as warrant agent (incorporated by reference to Exhibit 4.3 to Ascent’s Form 8-A filed on March 25, 1999).

4.4 Form of Preferred Stock Certificate (incorporated by reference to Exhibit 4.4 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 1998).

10.1 First Amendment to Guaranty Agreement dated as of March 24, 1999 between Westbridge Capital Corp. in favor of LaSalle National Bank (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998).

10.2 Registration Rights Agreement dated as of March 24, 1999 between Ascent and Special Situations Holdings, Inc. – Westbridge (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998).

10.3 1999 Stock Option Plan dated as of March 24, 1999 (incorporated by reference to Ascent’s Schedule 14A filed with the Commission on April 30, 1999).

10.4 Installment Note Agreement dated July 20, 1999 between Ascent Management, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.4 to Ascent’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999).

10.5 Second Amendment to Credit Agreement dated August 12, 1999 between Ascent Funding, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.5 to Ascent’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999).

10.6 Second Amendment to Guaranty Agreement dated July 20, 1999 between Ascent Assurance, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.6 to Ascent’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999).

10.7 Third Amendment to Guaranty Agreement dated April 17, 2000 between Ascent Assurance, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.7 to Ascent’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).

10.8 Fourth Amendment to Guaranty Agreement dated August 10, 2000 between Ascent Assurance, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.10 to Ascent’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).

10.9 First Amendment to Pledge Agreement, dated as of November 30, 2000, by and among Ascent Assurance, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.22 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2000).

10.10 Fifth Amendment to Guaranty Agreement, dated as of November 30, 2000, by and among Ascent Assurance, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.23 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2000).

10.11 Third Amendment to Credit Agreement, dated as of November 30, 2000, by and among Ascent Funding, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.24 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2000).

10.12 First Amendment to Security Agreement, dated as of November 30, 2000, by and among Ascent Management, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.25 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2000).

10.13 Credit Agreement dated April 17, 2001 between Ascent Assurance, Inc. and Credit Suisse First Boston Management Corporation (incorporated by reference to Exhibit 10.1 to Ascent’s Form 8-K filed April 25, 2001).

10.14 Guaranty and Security Agreement dated April 17, 2001 among Foundation Financial Services, Inc., NationalCare(R)Marketing, Inc., LifeStyles Marketing Group, Inc., Precision Dialing Services, Inc., Senior Benefits L.L.C. and Westbridge Printing Services, Inc., and Credit Suisse First Boston Management Corporation (incorporated by reference to Exhibit 10.2 to Ascent's Form 8-K filed April 25, 2001).

10.15 Pledge Agreement dated April 17, 2001 between Ascent Assurance, Inc. and Credit Suisse First Boston Management Corporation (incorporated by reference to Exhibit 10.3 to Ascent’s Form 8-K filed April 25, 2001).

10.16 Sixth Amendment to Guaranty Agreement and Waiver dated April 17, 2001 between Ascent Assurance, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.4 to Ascent’s Form 8-K filed April 25, 2001).

10.17 Fourth Amendment to Credit Agreement dated April 17, 2001 between Ascent Funding, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.5 to Ascent’s Form 8-K filed April 25, 2001).

10.18 Fifth Amendment to Credit Agreement dated November 27, 2001 between Ascent Funding, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.31 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2001).

10.19 Sixth Amendment to Credit Agreement dated May 15, 2002 between Ascent Funding, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.23 to Ascent’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).

10.20 Seventh Amendment to Credit Agreement dated November 20, 2002 between Ascent Funding, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.35 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.21 Employment Agreement dated as of December 18, 2002, by and between Ascent, Ascent Management, Inc. and Mr. Patrick J. Mitchell (incorporated by reference to Exhibit 10.36 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.22 Employment Agreement dated as of December 18, 2002, by and between Ascent, Ascent Management, Inc. and Mr. Patrick H. O’Neill (incorporated by reference to Exhibit 10.37 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.23 Employment Agreement dated as of January 10, 2003, by and between Ascent, Ascent Management, Inc. and Mr. Konrad H. Kober (incorporated by reference to Exhibit 10.38 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.24 Employment Agreement dated as of January 10, 2003, by and between Ascent, Ascent Management, Inc. and Ms. Cynthia B. Koenig (incorporated by reference to Exhibit 10.39 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.25 Seventh Amendment to Guaranty Agreement dated January 27, 2003 between Ascent and LaSalle Bank National Association (incorporated by reference to Exhibit 10.40 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.26 Eighth Amendment to Credit Agreement dated January 27, 2003 between Ascent Funding, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.41 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.27 Second Amendment to Security Agreement dated January 27, 2003 between Ascent Management, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.42 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.28 First Amendment to Pledge Agreement dated January 27, 2003 between Ascent and LaSalle Bank National Association (incorporated by reference to Exhibit 10.43 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.29 Termination Agreement dated January 31, 2003 executed by LaSalle Bank National Association acknowledging payment in full of Ascent Management, Inc. note payable (incorporated by reference to Exhibit 10.44 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.30 First Amendment to Credit Agreement dated February 26, 2003 between Ascent and Credit Suisse First Boston Management Corporation (incorporated by reference to Exhibit 10.45 to Ascent’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.31 Ninth Amendment to Credit Agreement dated July 25, 2003 between Ascent Funding, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit 10.35 to Ascent’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003).

10.32 Termination Agreement Dated November 25, 2003 between Ascent Funding, Inc. and LaSalle Bank National Association (Incorporated by reference to Exhibit 10.43 to Ascent’s 10-K for the year ended December 31, 2003).

10.33 Exchange Agreement Among Ascent Assurance, Inc., Credit Suisse First Boston Management, LLC, and Special Situations Holdings, Inc. – Westbridge dated December 31, 2003 (incorporated by reference to Exhibit 10.1 to Ascent’s 8-K filed on January 6, 2004).

10.34 First Amendment to Registration Rights Agreement between Ascent Assurance, Inc. and Special Situations Holdings, Inc. – Westbridge dated December 31, 2003 (incorporated by reference to Exhibit 10.2 to Ascent’s 8-K filed on January 6, 2004).

10.35 Second Amendment to Credit Agreement dated December 31, 2003 between Ascent Assurance, Inc. and Credit Suisse First Boston Management, LLC (incorporated by reference to Exhibit 10.3 to Ascent’s 8-K filed on January 6, 2004).

10.36 First Amendment and Waiver to Guaranty and Security Agreement dated December 31, 2003 between Foundation Financial Services, Inc., NationalCare(R)Marketing, Inc., Lifestyles Marketing Group, Inc., Precision Dialing Services, Inc., Senior Benefits, LLC, and Westbridge Printing Services, Inc. and Credit Suisse First Boston Management, LLC (incorporated by reference to Exhibit 10.4 to Ascent’s 8-K filed on January 6, 2004)

10.37 Intercreditor and Subordination Agreement among the Frost National Bank, Credit Suisse First Boston Management, LLC, and Ascent Assurance, Inc. and named subsidiaries dated December 31, 2003 (incorporated by reference to Exhibit 10.5 to Ascent’s 8-K filed on January 6, 2004).

10.38 Credit Agreement dated as of December 31, 2003 among Ascent Funding, Inc., Ascent Assurance, Inc., NationalCare^® Marketing, Inc. and the Frost National Bank including exhibits to such agreement, Pledge and Security Agreement dated December 31, 2003 between NationalCare^® Marketing, Inc. and Frost National Bank, Pledge and Security Agreement dated December 31, 2003 between Ascent Assurance, Inc. and Frost National Bank, Revolving Promissory Note dated December 31, 2003 between Ascent Funding, Inc. and Frost National Bank, Security Agreement dated December 31, 2003 between Ascent Funding, Inc. and Frost National Bank, Waiver of Jury Trial and Notice of Final Agreement dated December 31, 2003 between Ascent Funding, Inc. and Frost National Bank and Intercreditor and Subordination Agreement among Frost National Bank, Credit Suisse First Boston Management, LLC and Ascent Assurance, Inc. and named subsidiaries dated December 31, 2003 (Incorporated by reference to Exhibit 10.49 to Ascent’s 10-K for the year ended December 31, 2003).

10.39 Extension of Employment Agreement dated as of March 16, 2004 by and between Ascent, Ascent Management, Inc. and Mr. Patrick J. Mitchell. (Incorporated by reference to Exhibit 10.39 to Ascent’s 10Q for the quarter ended March 31, 2004.)

10.40 Extension of Employment Agreement dated as of March 16, 2004 by and between Ascent, Ascent Management, Inc. and Mr. Patrick H. O’Neill. (Incorporated by reference to Exhibit 10.40 to Ascent’s 10Q for the quarter ended March 31, 2004.)

10.41* First Amendment To Credit Agreement And Security Agreement dated as of July 6, 2004 between Ascent Funding, Inc., Ascent Assurance, Inc., NationalCare^®Marketing, Inc., AmeriCare Benefits, Inc. and Frost National Bank including exhibits to such agreement, Guaranty Agreement between AmeriCare Benefits, Inc. and Frost National Bank; First Restated Guaranty Agreement between NationalCare^®Marketing, Inc. and Frost National Bank dated July 6, 2004; First Amendment to Intercreditor and Subordination Agreement among Frost National Bank, Credit Suisse First Boston Management, LLC and Ascent Assurance, Inc. and named subsidiaries dated as of July 6, 2004.

10.42* Employment Agreement dated as of September 1, 2004 by and between Ascent Assurance, Inc. and Mr. Benjamin M. Cutler.

10.43* Third Amendment to Credit Agreement dated September 1, 2004 between Ascent Assurance, Inc. and Credit Suisse First Boston Management, LLC.

10.44* First Amendment to Pledge Agreement dated October 28, 2004 between Ascent Assurance, Inc. and Credit Suisse First Boston Management, LLC.

10.45* Second Amendment and Consent to Guaranty and Security Agreement dated October 28, 2004 between Foundation Financial Services, Inc., NationalCare^®Marketing, Inc., Lifestyles Marketing Group, Inc., Precision Dialing Services, Inc., Senior Benefits LLC, and Westbridge Printing Services, Inc. and Credit Suisse First Boston Management LLC.

10.46* Sale and Purchase Agreement dated October 29, 2004 between Ascent Assurance, Inc. and Printers Alliance, Inc.

31.1* Certification of Benjamin M. Cutler, Chairman and Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2* Certification of Cynthia B. Koenig, Chief Financial Officer and Treasurer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1* Certification of Benjamin M. Cutler, Chairman and Chief Executive Officer and Cynthia B. Koenig, Senior Vice President, Chief Financial Officer and Treasurer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

The registrant filed a Report on Form 8-K dated August 3, 2004 under “Item 9. Regulation FD Disclosure” and also under “Item 12. Results of Operations and Financial Condition” attaching a copy of the registrants press release reporting the registrants financial results for the second quarter of 2004.

The registrant filed a Report on Form 8-K dated September 1, 2004 reporting a material definitive agreement under Item 1.01; reporting the departure of directors or principal officers, election of directors, appointment of principal officers under item 5.02; and attaching a copy of the Company’s press release related to the aforementioned items under Item 9.01.

* Filed Herewith

Form 10-Q

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 thereunto duly authorized.

ASCENT ASSURANCE, INC.

/s/ Cynthia B. Koenig                     

Cynthia B. Koenig

Senior Vice President,

Chief Financial Officer and Treasurer

(Principal Financial and

Accounting Officer)

Dated at Fort Worth, Texas
November 5, 2004

EX-10.41

Exhibit 10.41

FIRST AMENDMENT TO CREDIT AGREEMENTAND
SECURITY AGREEMENT

        This FIRST AMENDMENT TO CREDIT AGREEMENT AND SECURITY AGREEMENT (this “Amendment”), dated as of July 6, 2004, is among ASCENT FUNDING, INC., a Delaware corporation (“Borrower”), ASCENT ASSURANCE, INC., a Delaware corporation (“AAI”), NATIONALCARE® MARKETING, INC., a Delaware corporation (“NCM”), AMERICARE BENEFITS INC., a Delaware corporation (“ABI”), and THE FROST NATIONAL BANK, a national banking association (“Lender”).

RECITALS:

        The Borrower, AAI, NCM and the Lender have previously entered into the Credit Agreement dated as of December 31, 2003 (such agreement, together with all amendments and restatements, the “Credit Agreement”). The Borrower and the Lender have previously entered into the Security Agreement dated as of December 31, 2003 (such agreement, together with all amendments and restatements, the “Security Agreement”).

        The Borrower, AAI, ABI, NCM and the Lender now desire to amend the Credit Agreement to add ABI as an Eligible MGA, to amend the Security Agreement and to make other modifications, as provided in this Amendment.

AGREEMENT:

        NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I

Definitions

1.1 Definitions. All capitalized terms not otherwise defined herein have the same meanings as in the Credit Agreement.

ARTICLE II

Amendments to Credit Agreement

2.1 Amendments to Credit Agreement Section 1.1.

Credit Agreement Section 1.1 is amended as follows:

The following terms are added in alphabetical order:

“ABI” means AmeriCare Benefits, Inc., a Delaware corporation.

“ABI Guaranty” means the Guaranty Agreement between ABI and the Lender, substantially in the form of Exhibit Q hereto, duly executed and delivered by ABI, as amended or supplemented from time to time with the consent of the Lender.

“Agent Receivables Collateral Account” means an interest-bearing deposit account owned by, in the name of and under the exclusive control of the Lender.

        The definition of “Borrowing Base” is deleted in its entirety and the following is substituted in lieu thereof:

“Borrowing Base” means, as of any date of determination, seventy-five percent (75%) of an amount equal to (a) the difference between (i) total outstanding Agent Receivables, minus (ii) the amount of the allowance for doubtful accounts with respect to such Agent Receivables, all as stated on Borrower’s most recent available monthly balance sheet prepared by the Borrower in accordance with GAAP and as certified in the most recent Borrowing Base Certificate, plus (b) the amount of any Agent Receivables purchased by the Borrower since the date of such balance sheet (which, for the avoidance of doubt, will include any Accounts Receivable being purchased by the Borrower on the date that such Borrowing Base is being determined) net of an allowance for doubtful accounts determined in accordance with GAAP and supported by a settlement statement between the Borrower and the respective Eligible MGA, a copy of which is delivered to the Borrower and the Lender. Each Agent Receivable included in the Borrowing Base shall have been purchased by Borrower from an Eligible MGA pursuant to the Receivables Purchase Agreement to which such Eligible MGA is a party, shall have been assigned to Borrower pursuant to the Receivables Purchase Agreement and shall be subject to a perfected, first priority security interest in favor of the Lender.

        The definition of “Eligible MGA” is deleted in its entirety and the following is substituted in lieu thereof:

“Eligible MGA” means ABI and NCM.

        The definition of “Guarantor” is deleted in its entirety and the following is substituted in lieu thereof:

“Guarantor” means AAI, ABI and NCM.

        The definition of “Loan Documents” is deleted in its entirety and the following is substituted in lieu thereof:

“Loan Documents” means this Agreement, the Note, the AAI Guaranty, the ABI Guaranty, the NCM Guaranty, the Security Agreement, the AAI Pledge Agreement, the NCM Pledge Agreement, the Intercreditor Subordination Agreement, and any other documents, agreements, reports, and instruments now or hereafter executed in connection herewith or contemplated hereby.

        The definition of “Master General Agent” is deleted in its entirety and the following is substituted in lieu thereof:

“Master General Agent” means ABI, NCM and any other Agent that has entered into a Master General Agent Contract with NFL or FLICA.

        The definition of “Obligor” is deleted in its entirety and the following is substituted in lieu thereof:

“Obligor” means each of Borrower, AAI, ABI and NCM.

        The definition of “Receivables Purchase Agreement” is deleted in its entirety and the following is substituted in lieu thereof:

“Receivables Purchase Agreement” means each of (a) the Third Amended and Restated Receivables Purchase and Sale Agreement dated as of the Closing Date by and between the Borrower and NCM, a copy of which is attached as Exhibit N hereto, as amended from time to time in accordance with the Loan Documents, and (b) the Receivables Purchase and Sale Agreement dated as of _______, 2004, by and between the Borrower and ABI, a copy of which is attached as Exhibit N hereto, as amended from time to time in accordance with the Loan Documents.

2.2 Amendment to Credit Agreement Article IV.The introductory paragraph of Credit Agreement Article IV is deleted in its entirety and the following is substituted in lieu thereof:

Each Obligor hereby represents and warrants, as to itself and its Subsidiaries, as applicable, the following:

2.3 Amendment to Credit Agreement Section 4.13. The last sentence of Credit Agreement Section 4.13 is deleted in its entirety and the following is substituted in lieu thereof:

None of Borrower, ABI and NCM has knowledge of any fact which would impair the validity or collectibility of aggregate Agent Receivables, net of the allowance for doubtful accounts established by Borrower in accordance with GAAP, except to the extent that such impairment could not reasonably be expected to have a Materially Adverse Effect.

2.4 Amendment to Credit Agreement Article V. The introductory paragraph of Credit Agreement Article V is deleted in its entirety and the following is substituted in lieu thereof:

During the term of this Agreement, and until performance, payment and/or satisfaction in full of the Obligations and the termination of the Lender’s obligation to extend credit to the Borrower, each Obligor covenants and agrees that, as to itself, it shall, and shall cause each of its Subsidiaries that is an Obligor or an Insurance Affiliate to, unless the Lender otherwise consents in writing:

2.5 Amendment to Credit Agreement Section 5.8. The introductory paragraph to Credit Agreement Section 5.8 is deleted in its entirety and the following is substituted in lieu thereof:

The Borrower, AAI, ABI and NCM, as appropriate, shall furnish to the Lender:

2.6 Amendment to Credit Agreement Section 5.8(c). Credit Agreement Section 5.8(c) is deleted in its entirety and the following is substituted in lieu thereof:

Quarterly GAAP Statements of each Obligor. As soon as available, and in any event within fifty days after the end of each quarterly fiscal period of each Obligor, copies of the unaudited balance sheet of such Obligor at the end of such fiscal quarter, and the unaudited statement of operations and statements of stockholders’ equity and cash flows of such Obligor for such fiscal quarter and the portion of such fiscal year ended with such fiscal quarter, in each case setting forth in comparative form the figures for the preceding fiscal year and prepared in accordance with GAAP all in reasonable detail and certified by a Senior Officer of such Obligor as presenting fairly in accordance with GAAP the financial condition of such Obligor as of the end of such period and the results of operations for such period, subject only to normal year-end accruals and audit adjustments and the absence of footnotes.

2.7 Amendment to Credit Agreement Section 5.9(a). The introductory paragraph of Credit Agreement Section 5.9(a) is deleted in its entirety and the following is substituted in lieu thereof:

Simultaneously with each delivery of financial statements and information pursuant to Sections 5.8(a), (b), (c) and (d), the Obligors shall deliver to the Lender:

2.8 Amendment to Credit Agreement Section 5.9(a)(ii). Credit Agreement Section 5.9(a)(ii) is deleted in its entirety and the following is substituted in lieu thereof:

A Compliance Certificate for the period covered by the financial statements then being delivered; provided, no Obligor is required to deliver a Compliance Certificate with the financial information required by Section 5.8(d).

2.9 Amendment to Credit Agreement Section 6.8. Credit Agreement Section 6.8 is amended by deleting clause (c) in its entirety and substituting the following in lieu thereof.

(c) intercompany advances made by the Borrower to an Eligible MGA from time to time, and

2.10 Amendments to Credit Agreement Section 7.2. Credit Agreement Section 7.2 is deleted in its entirety and the following is substituted in lieu thereof:

Section 7.2. Remedies.

(a)  Without limiting any other rights or remedies of the Lender provided for elsewhere in the Loan Documents, or by applicable law, or in equity, or otherwise, if any Event of Default described in Section 7.1(a), (b) (as to any failure to perform or observe any term, covenant, or agreement in Article VI), (f), (g), (h) or (l) shall occur and be continuing, each Eligible MGA shall deliver to the Lender all payments and other amounts due and payable by such Eligible MGA pursuant to its respective Receivables Purchase Agreement, all of which amounts shall be deposited by Lender into the Agent Receivables Collateral Account and held as collateral. If an Event of Default exists, the Lender may exercise any remedy available to it under the Loan Documents or applicable law with respect to all property in the Agent Receivables Collateral Account and apply the proceeds in accordance with the Security Agreement. If prior to any such exercise of remedies by the Lender, each Default and Event of Default is cured or waived to the satisfaction of the Lender pursuant to its written agreement, or as may otherwise be agreed to by the Lender, the Lender shall deliver all property in the Agent Receivables Collateral Account (including any accrued interest thereon) to the Borrower.

(b)  Without limiting any other rights or remedies of the Lender provided for elsewhere in the Loan Documents, or by applicable law, or in equity, or otherwise, if any Event of Default shall occur and be continuing, the Lender may by notice to the Borrower, (i) declare the Commitment to be terminated, whereupon the same shall forthwith terminate, and (ii) declare all amounts owing under this Agreement and the Note (whether or not such Obligations be contingent or unmatured) to be forthwith due and payable, whereupon all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided that, in the case of an Event of Default referred to in Section 7.1(l) with respect to the Borrower, the Commitment shall be immediately terminated, and all such amounts shall be immediately due and payable without notice, presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Borrower.

(c)  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

2.11 Exhibits.

(a)        Exhibit B to the Credit Agreement is amended by adding the form of Agent Contract for ABI, in the form of Exhibit B attached hereto, to Exhibit B to the Credit Agreement.

(b)        Exhibit C to the Credit Agreement is amended by adding the form of the Master General Agent Contract between ABI and NFL and the Master General Agent Contract between ABI and FLICA, in the form of Exhibit C attached hereto, to Exhibit C to the Credit Agreement.

(c)        Exhibit N to the Credit Agreement is amended by adding the form of Receivables Purchase Agreement between ABI and the Borrower, in the form of Exhibit N attached hereto, to Exhibit N to the Credit Agreement.

(d)        Exhibit O (Compliance Certificate) to the Credit Agreement is deleted in its entirety and a new Exhibit O, in the form of Exhibit O attached hereto, is substituted in lieu thereof.

(e)        A new Exhibit Q (ABI Guaranty), in the form of Exhibit Q attached hereto, is added to the Credit Agreement.

ARTICLE III

Amendments to Security Agreement

3.1 Amendment to Security Agreement Section 6(b). Security Agreement Section 6(b) is deleted in its entirety and the following is substituted in lieu thereof:

(b)        Power of Attorney. Debtor hereby irrevocably appoints Secured Party as Debtor’s attorney-in-fact, such power of attorney being coupled with an interest, with full authority in the place and stead of Debtor and in the name of Debtor or otherwise, exercisable after the occurrence of (i) an Event of Default, to take any action and to execute any instrument which Secured Party may deem necessary or appropriate to accomplish the purposes of this Agreement, including without limitation: (A) to obtain and adjust insurance required by Secured Party hereunder; (B) to demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of the Collateral; (C) to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (A) or (B) above; and (D) to file any claims or take any action or institute any proceedings which Secured Party may deem necessary or appropriate for the collection and/or preservation of the Collateral or otherwise to enforce the rights of Secured Party with respect to the Collateral, and (ii) a Default or an Event of Default, to take any action and to execute any instrument which Secured Party may deem necessary or appropriate to receive, endorse and collect any drafts or other instruments and documents for deposit to the Agent Receivables Collateral Account.

3.2 Amendment to Security Agreement Section 6(d). Security Agreement Section 6(d) is deleted in its entirety and the following is substituted in lieu thereof:

(d)        Debtor’s Receipt of Proceeds.

(i)         All amounts and proceeds (including instruments and writings) received by Debtor in respect of Collateral (other than amounts of and accounts constituting Agent Receivables, proceeds of Agent Receivables or general intangibles) shall be received in trust for the benefit of Secured Party hereunder and, upon request of Secured Party, shall be segregated from other property of Debtor and shall be forthwith delivered to Secured Party in the same form as so received (with any necessary endorsement).

(ii)         If no Default or Event of Default exists, all amounts and proceeds of accounts constituting Agent Receivables, proceeds of Agent Receivables and general intangibles shall only be deposited in a deposit account described in Schedule 9 or otherwise agreed to by Secured Party. If an Event of Default described in Credit Agreement Section 7.1(a), (b) (as to any failure to perform or observe any term, covenant, or agreement in Credit Agreement Article VI), (f), (g), (h) or (l) exists, all amounts of and proceeds of accounts constituting Agent Receivables, proceeds of Agent Receivables and general intangibles shall be segregated from other property of Debtor and shall be forthwith delivered to Secured Party in the same form as so received (with any necessary endorsement).

3.3 Amendment to Security Agreement Section 8(c). Security Agreement Section 8(c) is deleted in its entirety and the following is substituted in lieu thereof:

(c)        Application of Proceeds.

(i)         If any Event of Default exists, Secured Party may at its discretion apply or use any cash held (other than cash in the Agent Receivables Collateral Account) by Secured Party as Collateral, and any cash proceeds received by Secured Party in respect of any sale or other disposition of, collection from, or other realization upon, all or any part of the Collateral held (other than cash in the Agent Receivables Collateral Account) as follows in such order and manner as Secured Party may elect:

(A) to the repayment or reimbursement of the reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred by Secured Party in connection with (1) the administration of the Loan Documents, (2) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, the Collateral, and (3) the exercise or enforcement of any of the rights and remedies of Secured Party hereunder;

(B) to the payment or other satisfaction of any Liens and other encumbrances upon the Collateral;

(C) to the satisfaction of the Indebtedness;

(D) by holding such cash and proceeds as Collateral prior to application to the Indebtedness if required by applicable law or any court or governmental authority;

(E) to the payment of any other amounts required by applicable law (including without limitation, Section 9.615(a)(3) of the Code or any other applicable statutory provision); and

(F) by delivery to Debtor or any other party lawfully entitled to receive such cash or proceeds whether by direction of a court of competent jurisdiction or otherwise.

(ii)         If an Event of Default exists, Secured Party shall apply all amounts in the Agent Receivables Collateral Account in the order provided in Section 8(c)(i) upon the first to occur of (A) the election by the Secured Party to so apply such amount, and (B) receipt by the Secured Party of written notice from the Debtor instructing the Secured Party to so apply such amounts.

ARTICLE IV

Conditions Precedent

4.1 Conditions. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent:

(a)        Documents. The Lender shall have received all of the following, each dated (unless otherwise indicated) the date of this Amendment, and the following shall have occurred, in form and substance satisfactory to the Lender:

(i)         This Amendment executed by the Borrower, ABI, each other Obligor, and the Lender.

(ii)        the ABI Guaranty duly executed by ABI.

(iii)       the First Restated Guaranty, in the form of Exhibit W hereto, duly signed by NCM.

(iv)       the Receivables Purchase Agreement duly executed and delivered by the Borrower and ABI.

(v)        The First Amendment to Third Amended and Restated Receivables Purchase and Sale Agreement duly executed and delivered by Borrower and NCM.

(vi)       the amendment to the Financing Statements of the Borrower, as Debtor.

(vii)      the First Amendment to Intercreditor Subordination Agreement, in the form of Exhibit X hereto, signed by all parties thereto.

(viii)     a certificate of the Secretary or Assistant Secretary of ABI, dated the date of this Amendment, attesting on behalf of ABI to all corporate action taken by ABI, including resolutions of its Board of Directors authorizing the execution, delivery and performance of the ABI Guaranty and each other document to be delivered by ABI pursuant to the Credit Agreement, and attesting to the names and true signatures of the officers of ABI authorized to sign the ABI Guaranty and the other documents to be delivered by ABI pursuant to the Credit Agreement and to the completeness and correctness of the attached Articles of Incorporation and Bylaws of ABI.

(ix)      a certificate of good standing for ABI as of a recent date issued by the Secretary of State of its jurisdiction of incorporation and each state where ABI, by the nature of its business, is required to qualify to do business, except where the failure to be so qualified could not reasonably be expected to have a Materially Adverse Effect.

(x)        a favorable opinion of general counsel to ABI and each other Obligor dated the date of this Amendment, in substantially the form set forth in Exhibit Y hereto.

(xi)       each Master General Agent Contract to which ABI is a party, attached to a certificate of a Senior Officer of ABI certifying that each such Master General Agent Contract is a true, correct and complete copy, including all amendments and supplements thereto, and is in full force and effect on the date of this Amendment.

(xii)      the Receivables Purchase Agreement between ABI and the Borrower, attached to a certificate of a Senior Officer of ABI certifying that such Receivables Purchase Agreement is a true, correct and complete copy, including all amendments and supplements thereto, and is in full force and effect on the date of this Amendment.

(xiii)     the Receivables Purchase Agreement between NCM and the Borrower, attached to a certificate of a Senior Officer of NCM certifying that such Receivables Purchase Agreement is a true, correct and complete copy, including all amendments and supplements thereto, and is in full force and effect on the date of this Amendment.

(xiv)     the letter agreement among Borrower, AAI, NCM, ABI and Lender regarding notice under each Receivables Purchase Agreement, duly executed and delivered by each party thereto.

(xv)      a copy of the form of Agency Contract of ABI, attached to a certificate of a Senior Officer of ABI certifying that such form is a true, correct and complete copy of the form of Agent Contract of ABI.

(xvi)     all corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by Amendment, the ABI Guaranty, the Receivables Purchase Agreement to which ABI is a party and the other Loan Documents shall be reasonably satisfactory in form and substance to the Lender and the Lender shall have received any and all other information and documents with respect to ABI and each other Obligor, which it may reasonably request.

(xvii)    searches of the Uniform Commercial Code, tax lien, real property and other records with respect to any Obligor as the Lender may require.

(xviii)   a Waiver of Jury Trial and Notice of Final Agreement executed by all parties thereto in the form of Exhibit Z hereto.

(b)        No Default. No Default of Event of Default shall exist.

(c)        Representations and Warranties. All of the representations and warranties contained in Article IV of the Credit Agreement, as amended hereby, and in the other Loan Documents shall be true and correct on and as of the date of this Amendment with the same force and effect as if such representations and warranties had been made on and as of such date, except to the extent such representations and warranties speak to a specific date.

4.2 Expenses of Lender. As provided in the Credit Agreement, Borrower shall pay on demand all reasonable costs and expenses incurred by the Lender in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Documents executed pursuant hereto, including without limitation the reasonable fees and expenses of the Lender’s legal counsel.

ARTICLE V

Ratifications, Representations and Warranties

5.1 Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. Each Obligor and the Lender agree that the Credit Agreement, as amended hereby, and the other Loan Documents shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. Upon the effectiveness of this Amendment, ABI shall be a party to the Credit Agreement and an Obligor.

5.2 Representations and Warranties. Each Obligor hereby represents and warrants to the Lender that (i) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite action on the part of such Obligor and will not violate any organizational document of such Obligor, (ii) the representations and warranties contained in the Credit Agreement, as amended hereby, and each other Loan Document are true and correct on and as of the date hereof as though made on and as of the date hereof, except to the extent such representations and warranties speak to a specific date, (iii) no Default or Event of Default exists, (iv) the organizational and governance documents of such Obligor have not been modified in any respect from the copies thereof previously provided to the Lender in connection with the Credit Agreement, and (v) such Obligor is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended hereby, and the other Loan Documents to which it is a party or it or its property is subject. AAI and ABI represent and warrant that ABI is a wholly-owned Subsidiary of AAI.

ARTICLE VI

Miscellaneous

6.1 Reference to Credit Agreement. Each of the Loan Documents, including the Credit Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby.

6.2 Severability. The provisions of this Amendment are intended to be severable. If for any reason any provision of this Amendment shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.

6.3 Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Amendment by signing any such counterpart.

6.4 INTEGRATION. THIS AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES 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.

6.5 GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

6.6 Authorization of Third Parties to Deliver Opinions, Etc. Each Obligor hereby authorizes and directs each Person whose preparation or delivery to the Lender of any opinion, report or other information is a condition or covenant under this Amendment to so prepare or deliver such opinion, report or other information for the benefit of the Lender.

6.7 Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of the Lender and each Obligor and their respective successors and assigns, except no Obligor may assign or transfer any of its rights or obligations hereunder without the prior written consent of the Lender. Signatures hereto transmitted by facsimile shall be effective as originals.

        THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.

        Executed as of the date first written above.

BORROWER:	ASCENT FUNDING, INC.
	By:/s/ Cynthia B. Koenig Print Name: Cynthia B. Koenig Print Title: Sr. Vice Presidnet, CFO and Treasurer

OBLIGORS:	ASCENT ASSURANCE, INC.
	By:/s/ Cynthia B. Koenig Print Name: Cynthia B. Koenig Print Title: Sr. Vice Presidnet, CFO and Treasurer
	NATIONALCARE® MARKETING, INC.
	By:/s/ Cynthia B. Koenig Print Name: Cynthia B. Koenig Print Title: Sr. Vice Presidnet, CFO and Treasurer
	AMERICARE BENEFITS, INC.
	By:/s/ Cynthia B. Koenig Print Name: Cynthia B. Koenig Print Title: Sr. Vice Presidnet, CFO and Treasurer
LENDER:	THE FROST NATIONAL BANK
	By:/s/ Adam Palmer       Adam Palmer       Senior Vice President

EXHIBIT B

(ABI Agent Contract)

EXHIBIT C

        (Master General Agent Contract with NFL and FLICA)

EXHIBIT N

(ABI Receivables Purchase Agreement)

EXHIBIT O

(Compliance Certificate)

EXHIBIT Q

(ABI Guaranty)

EXHIBIT W

(First Restated Guaranty — NCM)

EXHIBIT X

(First Amendment to Intercreditor Subordination Agreement)

EXHIBIT Y

(Opinion of Obligor Counsel)

EXHIBIT Z

(Waiver of Jury Trial and Notice of Final Agreement)

GUARANTY AGREEMENT

        THIS GUARANTY AGREEMENT (“Guaranty”) is made as of July 6, 2004, by Guarantor (as hereinafter defined) for the benefit of Lender (as hereinafter defined).

1. Definitions. As used in this Guaranty, the following terms shall have the meanings indicated below:

(a) “Lender” means THE FROST NATIONAL BANK, a national banking association, whose address for notice purposes is the following:

P.O. Box 1600
San Antonio, Texas 78296
Attn: Adam Palmer

(b) “Borrower” means Ascent Funding, Inc., a Delaware corporation.

(c) “Guarantor” means AmeriCare Benefits, Inc., a Delaware corporation, whose address for notice purposes is the following:

3100 Burnett Plaza
801 Cherry Street
Fort Worth, Tarrant County, Texas 76102
Attn: Chief Financial Officer.

(d) “Guaranteed Indebtedness” means (i) all Obligations now or hereafter existing of Borrower and each other Obligor under the Credit Agreement, (ii) all obligations of Borrower and each other Obligor under each other Loan Document, (iii) all other indebtedness, obligations and liabilities of Borrower and each other Obligor to Lender of any kind or character, now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several (excluding only indebtedness originally payable to or in favor of a Person other than Lender and subsequently acquired by Lender), and all indebtedness, obligations and liabilities of Borrower and each other Obligor to Lender now existing or hereafter arising by note, draft, acceptance, guaranty, endorsement, letter of credit, assignment, purchase, overdraft, discount, indemnity agreement or otherwise, (iv) all accrued but unpaid interest (including all interest that would accrue but for the existence of a proceeding under any Debtor Relief Laws) on any of the indebtedness described in this definition of “Guaranteed Indebtedness”, (v) all costs and expenses incurred by Lender in connection with the collection and administration of all or any part of the indebtedness and obligations described in this definition of “Guaranteed Indebtedness” or the protection or preservation of, or realization upon, the Collateral securing all or any part of such indebtedness and obligations, including without limitation all reasonable attorneys’ fees, and (vi) all renewals, extensions, modifications and rearrangements of the indebtedness and obligations described in this definition of “Guaranteed Indebtedness.”

(e) “Credit Agreement” means the Credit Agreement dated as of December 31, 2003, among Borrower, each other Obligor, and Lender, together with all amendments and restatements thereto.

(f) “Loan Documents” means the Credit Agreement, each note executed pursuant to the Credit Agreement, each document securing or guaranteeing performance of the obligations of Borrower and each other Obligor under the Credit Agreement, each other document, instrument, financing statement, public notice and the like executed in connection with Liens in favor of Lender or collateral, and all other documents and instruments executed and delivered to Lender by any Obligor or any other Person in connection with the Credit Agreement, and each other document evidencing, securing, guaranteeing, governing and/or pertaining to all or any part of the indebtedness and obligations described in clause (iii) of “Guaranteed Indebtedness.”

        Capitalized terms not otherwise defined herein have the meaning specified in the Credit Agreement.

2. Obligations. As an inducement to Lender to extend or continue to extend credit and other financial accommodations to Borrower, Guarantor, for value received, does hereby unconditionally and absolutely guarantee the prompt and full payment and performance of the Guaranteed Indebtedness when due or declared to be due and at all times thereafter; provided, however, Guarantor’s obligations hereunder for that portion of the Guaranteed Indebtedness that represents principal shall be limited to the aggregate amount of the outstanding Loans (at any time demand is made for payment under this Guaranty) the proceeds of which were used by Borrower to purchase Agent Receivables from Guarantor pursuant to the Receivables Purchase Agreement between Borrower and Guarantor. Notwithstanding anything in this Guaranty to the contrary, the obligations of Guarantor under this Guaranty shall be limited to a maximum aggregate amount equal to the largest amount that would not render Guarantor’s obligations hereunder subject to avoidance as a fraudulent transfer or fraudulent conveyance under Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law (collectively, the “Fraudulent Transfer Laws”), in each case after giving effect to all other liabilities of Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, reimbursement or contribution of Guarantor pursuant to (a) applicable law, or (b) any agreement providing for rights of subrogation, reimbursement or contribution in favor of Guarantor, or for an equitable allocation among Guarantor, Borrower, any other Obligor, and any other Person of obligations arising under guaranties by such Persons.

3. Character of Obligations.

(a) This is an absolute, continuing and unconditional guaranty of payment and not of collection and if at any time or from time to time there is no outstanding Guaranteed Indebtedness, the obligations of Guarantor with respect to any and all Guaranteed Indebtedness incurred thereafter shall not be affected. This Guaranty and the Guarantor’s obligations hereunder are irrevocable. All of the Guaranteed Indebtedness shall be conclusively presumed to have been made or acquired in acceptance hereof. Guarantor shall be liable, jointly and severally, with Borrower and any other guarantor of all or any part of the Guaranteed Indebtedness.

(b) Lender may, at its sole discretion and without impairing its rights hereunder, (i) apply any payments on the Guaranteed Indebtedness that Lender receives from Borrower or any other source other than Guarantor to that portion of the Guaranteed Indebtedness, if any, not guaranteed hereunder, and (ii) apply any proceeds it receives as a result of the foreclosure or other realization on any collateral for the Guaranteed Indebtedness to that portion, if any, of the Guaranteed Indebtedness not guaranteed hereunder or to any other indebtedness secured by such collateral.

(c) Guarantor agrees that its obligations hereunder shall not be released, diminished, impaired, reduced or affected by the existence of any other guaranty or the payment by any other guarantor of all or any part of the Guaranteed Indebtedness and Guarantor’s payment obligations hereunder shall continue (except as provided in Paragraph 23) until Lender has received payment in full of the Guaranteed Indebtedness and all obligations of Lender to extend credit to Borrower under the Loan Documents are terminated.

(d) Guarantor’s obligations hereunder shall not be released, diminished, impaired, reduced or affected by, nor shall any provision contained herein be deemed to be a limitation upon, the amount of credit which Lender may extend to Borrower, the number of transactions between Lender and Borrower, payments by Borrower to Lender or Lender’s allocation of payments by Borrower.

(e) Without further authorization from or notice to Guarantor, Lender may compromise, accelerate, or otherwise alter the time or manner for the payment of the Guaranteed Indebtedness, increase or reduce the rate of interest thereon, or release or add any one or more guarantors or endorsers, or allow substitution of or withdrawal of collateral or other security and release collateral and other security or subordinate the same; provided that, the Commitment will not be increased to greater than $3,000,000 without the prior written consent of Guarantor.

4. Representations and Warranties. Guarantor hereby represents and warrants the following to Lender:

(a) This Guaranty may reasonably be expected to benefit, directly or indirectly, Guarantor, and the Board of Directors of Guarantor has determined that this Guaranty may reasonably be expected to benefit, directly or indirectly, Guarantor; and

(b) Guarantor is familiar with, and has independently reviewed the books and records regarding, the financial condition of Borrower and is familiar with the value of any and all collateral intended to be security for the payment of all or any part of the Guaranteed Indebtedness; provided, however, Guarantor is not relying on such financial condition or collateral as an inducement to enter into this Guaranty; and

(c) Guarantor has adequate means to obtain from Borrower on a continuing basis information concerning the financial condition of Borrower and Guarantor is not relying on Lender to provide such information to Guarantor either now or in the future; and

(d) Guarantor has the corporate power and authority to execute, deliver and perform this Guaranty and any other agreements executed by Guarantor contemporaneously herewith, and the execution, delivery and performance of this Guaranty and any other agreements executed by Guarantor contemporaneously herewith do not and will not violate (i) any material agreement or instrument to which Guarantor is a party and with respect to which Guarantor has not obtained a waiver or consent of each such violation, (ii) any material law, rule, regulation or order of any governmental authority to which Guarantor is subject, or (iii) its articles or certificate of incorporation or bylaws; and

(e) Neither Lender nor any other party has made any representation, warranty or statement to Guarantor in order to induce Guarantor to execute this Guaranty; and

(f) The financial statements regarding Guarantor heretofore and hereafter delivered to Lender pursuant to the Credit Agreement fairly present in all material respects the consolidated financial position of Guarantor and its consolidated Subsidiaries as of the dates thereof, and no material adverse change has occurred in the financial condition of Guarantor reflected in the financial statements regarding Guarantor heretofore delivered to Lender since the date of the last statement thereof; and

(g) As of the date hereof, and after giving effect to this Guaranty and the obligations evidenced hereby, Guarantor is and will be Solvent; and

(h) Guarantor has not entered into this Guaranty or any of the other Loan Documents to which it is a party or its property is subject with the intent to hinder, delay or defraud any creditor.

5. Covenants. Guarantor hereby covenants and agrees with Lender as follows:

(a) Guarantor shall not, so long as its obligations under this Guaranty continue, transfer or pledge any (i) material portion of its assets for less than full and adequate consideration (as reasonably determined by Guarantor’s Board of Directors), or (ii) of its assets subject or intended to be subject to a Lien in favor of Lender or its affiliates; and

(b) Guarantor shall comply with all terms and provisions of the Loan Documents to which it is a party; and

(c) Guarantor shall promptly inform Lender of (i) any litigation or governmental investigation against Guarantor or affecting any security for all or any part of the Guaranteed Indebtedness or this Guaranty which could reasonably be expected to have a material adverse effect upon the financial condition of Guarantor or upon such security or could reasonably be expected to cause a default under any of the Loan Documents, (ii) any claim or controversy which might become the subject of such litigation or governmental investigation, and (iii) any material adverse change in the financial condition of Guarantor.

6. Consent and Waiver.

(a) Guarantor waives (i) promptness, diligence and notice of acceptance of this Guaranty and notice of the incurring of any obligation (subject to the proviso of Section 3(e)), indebtedness or liability to which this Guaranty applies or may apply and waives presentment for payment, notice of nonpayment, protest, demand, notice of protest, notice of intent to accelerate, notice of acceleration, notice of dishonor, diligence in enforcement and indulgences of every kind, and (ii) the taking of any other action by Lender, including without limitation giving any notice of default or any other notice to, or making any demand on, Borrower, any other guarantor of all or any part of the Guaranteed Indebtedness, any other Obligor or any other party.

(b) Guarantor waives any rights Guarantor has under, or any requirements imposed by, Chapter 34 of the Texas Business and Commerce Code, as in effect on the date of this Guaranty or as it may be amended from time to time.

(c) Lender may at any time (subject to the other Loan Documents), without the consent of or notice to Guarantor, without incurring responsibility to Guarantor and without impairing, releasing, reducing or affecting the obligations of Guarantor hereunder: (i) change the manner, place or terms of payment of all or any part of the Guaranteed Indebtedness, or renew, extend, modify, rearrange or alter all or any part of the Guaranteed Indebtedness; (ii) change the interest rate accruing on any of the Guaranteed Indebtedness (including, without limitation, any periodic change in such interest rate that occurs because such Guaranteed Indebtedness accrues interest at a variable rate which may fluctuate from time to time); (iii) sell, exchange, release, surrender, subordinate, realize upon or otherwise deal with in any manner and in any order any collateral for all or any part of the Guaranteed Indebtedness or this Guaranty or setoff against all or any part of the Guaranteed Indebtedness; (iv) neglect, delay, omit, fail or refuse to take or prosecute any action for the collection of all or any part of the Guaranteed Indebtedness or this Guaranty or to take or prosecute any action in connection with any of the Loan Documents; (v) exercise or refrain from exercising any rights against Borrower, any other Obligor or others, or otherwise act or refrain from acting; (vi) settle or compromise all or any part of the Guaranteed Indebtedness and subordinate the payment of all or any part of the Guaranteed Indebtedness to the payment of any obligations, indebtedness or liabilities which may be due or become due to Lender or others; (vii) apply any deposit balance, fund, payment, collections through process of law or otherwise or other collateral of Borrower to the satisfaction and liquidation of the indebtedness or obligations of Borrower and each other Obligor to Lender not guaranteed under this Guaranty; and (viii) apply any sums paid to Lender by Guarantor, Borrower, any other Obligor or others to the Guaranteed Indebtedness in such order and manner as Lender, in its sole discretion, may determine.

(d) Should Lender seek to enforce the obligations of Guarantor hereunder by action in any court or otherwise, Guarantor waives any requirement, substantive or procedural, that (i) Lender first enforce any rights or remedies against Borrower, any other Obligor or any other Person liable to Lender for all or any part of the Guaranteed Indebtedness, including without limitation that a judgment first be rendered against Borrower, any other Obligor or any other Person, or that Borrower, any other Obligor or any other Person should be joined in such cause, or (ii) Lender first enforce rights against any collateral which shall ever have been given to secure all or any part of the Guaranteed Indebtedness or this Guaranty. Such waiver shall be without prejudice to Lender’s right, at its option, to proceed against Borrower, any other Obligor or any other Person, whether by separate action or by joinder.

(e) IN ADDITION TO ANY OTHER WAIVERS, AGREEMENTS AND COVENANTS OF GUARANTOR SET FORTH HEREIN, GUARANTOR HEREBY FURTHER WAIVES AND RELEASES ALL CLAIMS, CAUSES OF ACTION, DEFENSES AND OFFSETS FOR ANY ACT OR OMISSION OF LENDER, ITS DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES OR AGENTS IN CONNECTION WITH LENDER’S ADMINISTRATION OF THE GUARANTEED INDEBTEDNESS, EXCEPT FOR LENDER’S WILLFUL MISCONDUCT AND GROSS NEGLIGENCE.

7. Obligations Not Impaired.

(a) Guarantor agrees that its obligations hereunder shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (i) the death, disability or lack of corporate power of Borrower, Guarantor, any other Obligor or any other guarantor of all or any part of the Guaranteed Indebtedness, (ii) any receivership, insolvency, bankruptcy or other proceedings affecting Borrower, Guarantor, any other Obligor or any other guarantor of all or any part of the Guaranteed Indebtedness, or any of their respective property; (iii) the partial or total release or discharge of Borrower, any other Obligor or any other guarantor of all or any part of the Guaranteed Indebtedness, or any other Person from the performance of any obligation contained in any instrument or agreement evidencing, governing or securing all or any part of the Guaranteed Indebtedness, whether occurring by reason of law or otherwise (other than as a result of payment in full in cash of the Guaranteed Indebtedness after termination of all obligations of Lender to extend credit to Borrower); (iv) the taking or accepting of any collateral for all or any part of the Guaranteed Indebtedness or this Guaranty; (v) the taking or accepting of any other guaranty for all or any part of the Guaranteed Indebtedness; (vi) any failure by Lender to acquire, perfect or continue any lien or security interest on collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty; (vii) the impairment of any collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty; (viii) subject to the other Loan Documents, any failure by Lender to sell any collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty in a commercially reasonable manner or as otherwise required by law; (ix) any invalidity or unenforceability of or defect or deficiency in any of the Loan Documents; or (x) any other circumstance which might otherwise constitute a defense available to, or discharge of, Borrower, any other Obligor or any other guarantor of all or any part of the Guaranteed Indebtedness.

(b) This Guaranty shall be reinstated if at any time any payment of all or any part of the Guaranteed Indebtedness is rescinded or must otherwise be returned by Lender upon the insolvency, bankruptcy or reorganization of Borrower, Guarantor, or any other Obligor or other guarantor of all or any part of the Guaranteed Indebtedness, or otherwise, all as though such payment had not been made.

(c) None of the following shall affect Guarantor’s liability hereunder: (i) the unenforceability of all or any part of the Guaranteed Indebtedness against Borrower by reason of the fact that the Guaranteed Indebtedness exceeds the amount permitted by law; (ii) the act of creating all or any part of the Guaranteed Indebtedness is ultra vires; or (iii) the officers or partners creating all or any part of the Guaranteed Indebtedness acted in excess of their authority. Guarantor hereby acknowledges that withdrawal from, or termination of, any ownership interest in Borrower now or hereafter owned or held, directly or indirectly, by Guarantor shall not alter, affect or in any way limit the obligations of Guarantor hereunder.

8. Actions Against Guarantor. If an Event of Default exists (including the default in the payment or performance of all or any part of the Guaranteed Indebtedness when such Guaranteed Indebtedness becomes due, whether by its terms, by acceleration or otherwise), Guarantor shall, without notice or demand, promptly pay the amount due thereon to Lender, in lawful money of the United States, at Lender’s address set forth in Subparagraph 1(a) above. One or more successive or concurrent actions may be brought against Guarantor, either in the same action in which Borrower or any other Obligor is sued or in separate actions, as often as Lender deems advisable. The exercise by Lender of any right or remedy under this Guaranty, any other Loan Document or under any other agreement or instrument, at law, in equity or otherwise, shall not preclude concurrent or subsequent exercise of any other right or remedy. The books and records of Lender shall be admissible as evidence in any action or proceeding involving this Guaranty and shall be prima facie evidence of the payments made on, and the outstanding balance of, the Guaranteed Indebtedness.

9. Payment by Guarantor. Whenever Guarantor pays any sum which is or may become due under this Guaranty, written notice must be delivered to Lender contemporaneously with such payment. Such notice shall be effective for purposes of this paragraph when contemporaneously with such payment Lender receives such notice either by: (a) personal delivery to the address and designated department of Lender identified in Subparagraph 1(a) above, or (b) United States mail, certified or registered, return receipt requested, postage prepaid, addressed to Lender at the address shown in Subparagraph 1(a) above. In the absence of such notice to Lender by Guarantor in compliance with the provisions hereof, any sum received by Lender on account of the Guaranteed Indebtedness shall be conclusively deemed paid by Borrower.

10. Notice of Sale. In the event that Guarantor is entitled to receive any notice under the Uniform Commercial Code, as it exists in the state governing any such notice, of the sale or other disposition of any collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall be deemed given when such notice is deposited in the United States mail, postage prepaid, at the address for Guarantor set forth in Subparagraph 1(c) above, ten (10) Business Days prior to the date any public sale, or after which any private sale, of any such collateral is to be held; provided, however, that notice given in any other reasonable manner or at any other reasonable time shall be sufficient.

11. Waiver by Lender. No delay on the part of Lender in exercising any right hereunder or failure to exercise the same shall operate as a waiver of such right. In no event shall any waiver of the provisions of this Guaranty be effective unless the same be in writing and signed by an officer of Lender, and then only in the specific instance and for the purpose given.

12. Successors and Assigns. This Guaranty is for the benefit of Lender, its successors and assigns. This Guaranty is binding upon Guarantor and Guarantor’s heirs, executors, administrators, personal representatives and successors, including without limitation any Person obligated by operation of law upon the reorganization, merger, consolidation or other change in the organizational structure of Guarantor.

13. Costs and Expenses. Guarantor shall pay on demand by Lender all costs and expenses, including without limitation all reasonable attorneys’ fees, incurred by Lender in connection with the preparation (subject to Section 8.3(a) of the Credit Agreement), administration, enforcement and/or collection of this Guaranty. This covenant shall survive the payment of the Guaranteed Indebtedness.

14. Severability. If any provision of this Guaranty is held by a court of competent jurisdiction to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable, shall not impair or invalidate the remainder of this Guaranty and the effect thereof shall be confined to the provision held to be illegal, invalid or unenforceable.

15. No Obligation. Nothing contained herein shall be construed as an obligation on the part of Lender to extend or continue to extend credit to Borrower.

16. Amendment. No modification or amendment of any provision of this Guaranty, nor consent to any departure by Guarantor therefrom, shall be effective unless the same shall be in writing and signed by an officer of Lender, and then shall be effective only in the specific instance and for the purpose for which given.

17. Cumulative Rights. All rights and remedies of Lender hereunder are cumulative of each other and of every other right or remedy which Lender may otherwise have at law or in equity or under any instrument or agreement, and the exercise of one or more of such rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of any other rights or remedies. This Guaranty, whether general, specific and/or limited, shall be in addition to and cumulative of, and not in substitution, novation or discharge of, any and all prior or contemporaneous guaranty agreements by Guarantor in favor of Lender or assigned to Lender by others.

18. Governing Law, Venue. This Guaranty is intended to be performed in the State of Texas. Except to the extent that the laws of the United States may apply to the terms hereof, the substantive laws of the State of Texas shall govern the validity, construction, enforcement and interpretation of this Guaranty. In the event of a dispute involving this Guaranty, any other Loan Document or any other instruments executed in connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in Bexar County, Texas.

19. Compliance with Applicable Usury Laws. Notwithstanding any other provision of this Guaranty, any other Loan Document or of any instrument or agreement evidencing, governing or securing all or any part of the Guaranteed Indebtedness, Guarantor and Lender by its acceptance hereof agree that Guarantor shall never be required or obligated to pay interest in excess of the maximum non-usurious interest rate as may be authorized by applicable law for the written contracts which constitute the Guaranteed Indebtedness. It is the intention of Guarantor and Lender to conform strictly to the applicable laws which limit interest rates, and any of the aforesaid contracts for interest, if and to the extent payable by Guarantor, shall be held to be subject to reduction to the maximum non-usurious interest rate allowed under said law.

20. Gender. Within this Guaranty, words of any gender shall be held and construed to include the other gender.

21. Captions. The headings in this Guaranty are for convenience only and shall not define or limit the provisions hereof.

22. No Subrogation. Notwithstanding any payment or payments by Guarantor hereunder or any set-off or application of funds of Guarantor by Lender, Guarantor shall not be entitled to be subrogated to any of the rights of Lender against Borrower, any other Obligor or any other Person or guarantee or right of offset held by Lender of the payment of the Guaranteed Indebtedness, nor shall Guarantor seek or be entitled to any reimbursement or contribution from Borrower, any other Obligor, or any other Person in respect of payments made by Guarantor hereunder, until all amounts owing to Lender by Borrower on account of the Guaranteed Indebtedness are indefeasibly paid in full in cash. If any amount shall be paid to Guarantor on account of the subrogation rights at any time when all of the Guaranteed Indebtedness has not been indefeasibly paid in full in cash, such amount shall be held by Guarantor in trust for the Guaranteed Parties, segregated from other funds of Guarantor, and shall, immediately upon receipt by Guarantor, be turned over to Lender in the exact form received by Guarantor (duly endorsed by Guarantor to Lender, if required), to be applied against the Guaranteed Indebtedness, whether matured or unmatured, in such order as Lender may determine.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.

        EXECUTED as of the date first above written.

GUARANTOR:

AMERICARE BENEFITS, INC.

By:/s/ Cynthia B. Koenig
Print Name: Cynthia B. Koenig
Print Title: Sr. Vice President and Treasurer

FIRST RESTATED GUARANTY AGREEMENT

        THIS FIRST RESTATED GUARANTY AGREEMENT (“Guaranty”) is made as of July 6, 2004, by Guarantor (as hereinafter defined) for the benefit of Lender (as hereinafter defined).

1. Definitions. As used in this Guaranty, the following terms shall have the meanings indicated below:

(a) “Lender” means THE FROST NATIONAL BANK, a national banking association, whose address for notice purposes is the following:

P.O. Box 1600
San Antonio, Texas 78296
Attn: Adam Palmer

(b) “Borrower” means Ascent Funding, Inc., a Delaware corporation.

(c) “Guarantor” means NationalCare® Marketing, Inc., a Delaware corporation, whose address for notice purposes is the following:

3100 Burnett Plaza
801 Cherry Street
Fort Worth, Tarrant County, Texas 76102
Attn: Chief Financial Officer.

(d) “Guaranteed Indebtedness” means (i) all Obligations now or hereafter existing of Borrower and each other Obligor under the Credit Agreement, (ii) all obligations of Borrower and each other Obligor under each other Loan Document, (iii) all other indebtedness, obligations and liabilities of Borrower and each other Obligor to Lender of any kind or character, now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several (excluding only indebtedness originally payable to or in favor of a Person other than Lender and subsequently acquired by Lender), and all indebtedness, obligations and liabilities of Borrower and each other Obligor to Lender now existing or hereafter arising by note, draft, acceptance, guaranty, endorsement, letter of credit, assignment, purchase, overdraft, discount, indemnity agreement or otherwise, (iv) all accrued but unpaid interest (including all interest that would accrue but for the existence of a proceeding under any Debtor Relief Laws) on any of the indebtedness described in this definition of “Guaranteed Indebtedness”, (v) all costs and expenses incurred by Lender in connection with the collection and administration of all or any part of the indebtedness and obligations described in this definition of “Guaranteed Indebtedness” or the protection or preservation of, or realization upon, the Collateral securing all or any part of such indebtedness and obligations, including without limitation all reasonable attorneys’ fees, and (vi) all renewals, extensions, modifications and rearrangements of the indebtedness and obligations described in this definition of “Guaranteed Indebtedness.”

(e) “Credit Agreement” means the Credit Agreement dated as of December 31, 2003, among Borrower, each other Obligor, and Lender, together with all amendments and restatements thereto.

(f) “Loan Documents” means the Credit Agreement, each note executed pursuant to the Credit Agreement, each document securing or guaranteeing performance of the obligations of Borrower and each other Obligor under the Credit Agreement, each other document, instrument, financing statement, public notice and the like executed in connection with Liens in favor of Lender or collateral, and all other documents and instruments executed and delivered to Lender by any Obligor or any other Person in connection with the Credit Agreement, and each other document evidencing, securing, guaranteeing, governing and/or pertaining to all or any part of the indebtedness and obligations described in clause (iii) of “Guaranteed Indebtedness.”

        Capitalized terms not otherwise defined herein have the meaning specified in the Credit Agreement.

2. Obligations. As an inducement to Lender to extend or continue to extend credit and other financial accommodations to Borrower, Guarantor, for value received, does hereby unconditionally and absolutely guarantee the prompt and full payment and performance of the Guaranteed Indebtedness when due or declared to be due and at all times thereafter; provided, however, Guarantor’s obligations hereunder for that portion of the Guaranteed Indebtedness that represents principal shall be limited to the aggregate amount of the outstanding Loans (at any time demand is made for payment under this Guaranty) the proceeds of which were used by Borrower to purchase Agent Receivables from Guarantor pursuant to the Receivables Purchase Agreement between Borrower and Guarantor. Notwithstanding anything in this Guaranty to the contrary, the obligations of Guarantor under this Guaranty shall be limited to a maximum aggregate amount equal to the largest amount that would not render Guarantor’s obligations hereunder subject to avoidance as a fraudulent transfer or fraudulent conveyance under Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law (collectively, the “Fraudulent Transfer Laws”), in each case after giving effect to all other liabilities of Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, reimbursement or contribution of Guarantor pursuant to (a) applicable law, or (b) any agreement providing for rights of subrogation, reimbursement or contribution in favor of Guarantor, or for an equitable allocation among Guarantor, Borrower, any other Obligor, and any other Person of obligations arising under guaranties by such Persons.

3. Character of Obligations.

(a) This is an absolute, continuing and unconditional guaranty of payment and not of collection and if at any time or from time to time there is no outstanding Guaranteed Indebtedness, the obligations of Guarantor with respect to any and all Guaranteed Indebtedness incurred thereafter shall not be affected. This Guaranty and the Guarantor’s obligations hereunder are irrevocable. All of the Guaranteed Indebtedness shall be conclusively presumed to have been made or acquired in acceptance hereof. Guarantor shall be liable, jointly and severally, with Borrower and any other guarantor of all or any part of the Guaranteed Indebtedness.

(b) Lender may, at its sole discretion and without impairing its rights hereunder, (i) apply any payments on the Guaranteed Indebtedness that Lender receives from Borrower or any other source other than Guarantor to that portion of the Guaranteed Indebtedness, if any, not guaranteed hereunder, and (ii) apply any proceeds it receives as a result of the foreclosure or other realization on any collateral for the Guaranteed Indebtedness to that portion, if any, of the Guaranteed Indebtedness not guaranteed hereunder or to any other indebtedness secured by such collateral.

(c) Guarantor agrees that its obligations hereunder shall not be released, diminished, impaired, reduced or affected by the existence of any other guaranty or the payment by any other guarantor of all or any part of the Guaranteed Indebtedness and Guarantor’s payment obligations hereunder shall continue (except as provided in Paragraph 23) until Lender has received payment in full of the Guaranteed Indebtedness and all obligations of Lender to extend credit to Borrower under the Loan Documents are terminated.

(d) Guarantor’s obligations hereunder shall not be released, diminished, impaired, reduced or affected by, nor shall any provision contained herein be deemed to be a limitation upon, the amount of credit which Lender may extend to Borrower, the number of transactions between Lender and Borrower, payments by Borrower to Lender or Lender’s allocation of payments by Borrower.

(e) Without further authorization from or notice to Guarantor, Lender may compromise, accelerate, or otherwise alter the time or manner for the payment of the Guaranteed Indebtedness, increase or reduce the rate of interest thereon, or release or add any one or more guarantors or endorsers, or allow substitution of or withdrawal of collateral or other security and release collateral and other security or subordinate the same; provided that, the Commitment will not be increased to greater than $3,000,000 without the prior written consent of Guarantor.

4. Representations and Warranties. Guarantor hereby represents and warrants the following to Lender:

(a) This Guaranty may reasonably be expected to benefit, directly or indirectly, Guarantor, and the Board of Directors of Guarantor has determined that this Guaranty may reasonably be expected to benefit, directly or indirectly, Guarantor; and

(b) Guarantor is familiar with, and has independently reviewed the books and records regarding, the financial condition of Borrower and is familiar with the value of any and all collateral intended to be security for the payment of all or any part of the Guaranteed Indebtedness; provided, however, Guarantor is not relying on such financial condition or collateral as an inducement to enter into this Guaranty; and

(c) Guarantor has adequate means to obtain from Borrower on a continuing basis information concerning the financial condition of Borrower and Guarantor is not relying on Lender to provide such information to Guarantor either now or in the future; and

(d) Guarantor has the corporate power and authority to execute, deliver and perform this Guaranty and any other agreements executed by Guarantor contemporaneously herewith, and the execution, delivery and performance of this Guaranty and any other agreements executed by Guarantor contemporaneously herewith do not and will not violate (i) any material agreement or instrument to which Guarantor is a party and with respect to which Guarantor has not obtained a waiver or consent of each such violation, (ii) any material law, rule, regulation or order of any governmental authority to which Guarantor is subject, or (iii) its articles or certificate of incorporation or bylaws; and

(e) Neither Lender nor any other party has made any representation, warranty or statement to Guarantor in order to induce Guarantor to execute this Guaranty; and

(f) The financial statements regarding Guarantor heretofore and hereafter delivered to Lender pursuant to the Credit Agreement fairly present in all material respects the consolidated financial position of Guarantor and its consolidated Subsidiaries as of the dates thereof, and no material adverse change has occurred in the financial condition of Guarantor reflected in the financial statements regarding Guarantor heretofore delivered to Lender since the date of the last statement thereof; and

(g) As of the date hereof, and after giving effect to this Guaranty and the obligations evidenced hereby, Guarantor is and will be Solvent; and

(h) Guarantor has not entered into this Guaranty or any of the other Loan Documents to which it is a party or its property is subject with the intent to hinder, delay or defraud any creditor.

5. Covenants. Guarantor hereby covenants and agrees with Lender as follows:

(a) Guarantor shall not, so long as its obligations under this Guaranty continue, transfer or pledge any (i) material portion of its assets for less than full and adequate consideration (as reasonably determined by Guarantor’s Board of Directors), or (ii) of its assets subject or intended to be subject to a Lien in favor of Lender or its affiliates; and

(b) Guarantor shall comply with all terms and provisions of the Loan Documents to which it is a party; and

(c) Guarantor shall promptly inform Lender of (i) any litigation or governmental investigation against Guarantor or affecting any security for all or any part of the Guaranteed Indebtedness or this Guaranty which could reasonably be expected to have a material adverse effect upon the financial condition of Guarantor or upon such security or could reasonably be expected to cause a default under any of the Loan Documents, (ii) any claim or controversy which might become the subject of such litigation or governmental investigation, and (iii) any material adverse change in the financial condition of Guarantor.

6. Consent and Waiver.

(a) Guarantor waives (i) promptness, diligence and notice of acceptance of this Guaranty and notice of the incurring of any obligation (subject to the proviso of Section 3(e)), indebtedness or liability to which this Guaranty applies or may apply and waives presentment for payment, notice of nonpayment, protest, demand, notice of protest, notice of intent to accelerate, notice of acceleration, notice of dishonor, diligence in enforcement and indulgences of every kind, and (ii) the taking of any other action by Lender, including without limitation giving any notice of default or any other notice to, or making any demand on, Borrower, any other guarantor of all or any part of the Guaranteed Indebtedness, any other Obligor or any other party.

(b) Guarantor waives any rights Guarantor has under, or any requirements imposed by, Chapter 34 of the Texas Business and Commerce Code, as in effect on the date of this Guaranty or as it may be amended from time to time.

(c) Lender may at any time (subject to the other Loan Documents), without the consent of or notice to Guarantor, without incurring responsibility to Guarantor and without impairing, releasing, reducing or affecting the obligations of Guarantor hereunder: (i) change the manner, place or terms of payment of all or any part of the Guaranteed Indebtedness, or renew, extend, modify, rearrange or alter all or any part of the Guaranteed Indebtedness; (ii) change the interest rate accruing on any of the Guaranteed Indebtedness (including, without limitation, any periodic change in such interest rate that occurs because such Guaranteed Indebtedness accrues interest at a variable rate which may fluctuate from time to time); (iii) sell, exchange, release, surrender, subordinate, realize upon or otherwise deal with in any manner and in any order any collateral for all or any part of the Guaranteed Indebtedness or this Guaranty or setoff against all or any part of the Guaranteed Indebtedness; (iv) neglect, delay, omit, fail or refuse to take or prosecute any action for the collection of all or any part of the Guaranteed Indebtedness or this Guaranty or to take or prosecute any action in connection with any of the Loan Documents; (v) exercise or refrain from exercising any rights against Borrower, any other Obligor or others, or otherwise act or refrain from acting; (vi) settle or compromise all or any part of the Guaranteed Indebtedness and subordinate the payment of all or any part of the Guaranteed Indebtedness to the payment of any obligations, indebtedness or liabilities which may be due or become due to Lender or others; (vii) apply any deposit balance, fund, payment, collections through process of law or otherwise or other collateral of Borrower to the satisfaction and liquidation of the indebtedness or obligations of Borrower and each other Obligor to Lender not guaranteed under this Guaranty; and (viii) apply any sums paid to Lender by Guarantor, Borrower, any other Obligor or others to the Guaranteed Indebtedness in such order and manner as Lender, in its sole discretion, may determine.

(d) Should Lender seek to enforce the obligations of Guarantor hereunder by action in any court or otherwise, Guarantor waives any requirement, substantive or procedural, that (i) Lender first enforce any rights or remedies against Borrower, any other Obligor or any other Person liable to Lender for all or any part of the Guaranteed Indebtedness, including without limitation that a judgment first be rendered against Borrower, any other Obligor or any other Person, or that Borrower, any other Obligor or any other Person should be joined in such cause, or (ii) Lender first enforce rights against any collateral which shall ever have been given to secure all or any part of the Guaranteed Indebtedness or this Guaranty. Such waiver shall be without prejudice to Lender’s right, at its option, to proceed against Borrower, any other Obligor or any other Person, whether by separate action or by joinder.

(e) IN ADDITION TO ANY OTHER WAIVERS, AGREEMENTS AND COVENANTS OF GUARANTOR SET FORTH HEREIN, GUARANTOR HEREBY FURTHER WAIVES AND RELEASES ALL CLAIMS, CAUSES OF ACTION, DEFENSES AND OFFSETS FOR ANY ACT OR OMISSION OF LENDER, ITS DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES OR AGENTS IN CONNECTION WITH LENDER’S ADMINISTRATION OF THE GUARANTEED INDEBTEDNESS, EXCEPT FOR LENDER’S WILLFUL MISCONDUCT AND GROSS NEGLIGENCE.

7. Obligations Not Impaired.

(a) Guarantor agrees that its obligations hereunder shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (i) the death, disability or lack of corporate power of Borrower, Guarantor, any other Obligor or any other guarantor of all or any part of the Guaranteed Indebtedness, (ii) any receivership, insolvency, bankruptcy or other proceedings affecting Borrower, Guarantor, any other Obligor or any other guarantor of all or any part of the Guaranteed Indebtedness, or any of their respective property; (iii) the partial or total release or discharge of Borrower, any other Obligor or any other guarantor of all or any part of the Guaranteed Indebtedness, or any other Person from the performance of any obligation contained in any instrument or agreement evidencing, governing or securing all or any part of the Guaranteed Indebtedness, whether occurring by reason of law or otherwise (other than as a result of payment in full in cash of the Guaranteed Indebtedness after termination of all obligations of Lender to extend credit to Borrower); (iv) the taking or accepting of any collateral for all or any part of the Guaranteed Indebtedness or this Guaranty; (v) the taking or accepting of any other guaranty for all or any part of the Guaranteed Indebtedness; (vi) any failure by Lender to acquire, perfect or continue any lien or security interest on collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty; (vii) the impairment of any collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty; (viii) subject to the other Loan Documents, any failure by Lender to sell any collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty in a commercially reasonable manner or as otherwise required by law; (ix) any invalidity or unenforceability of or defect or deficiency in any of the Loan Documents; or (x) any other circumstance which might otherwise constitute a defense available to, or discharge of, Borrower, any other Obligor or any other guarantor of all or any part of the Guaranteed Indebtedness.

(b) This Guaranty shall be reinstated if at any time any payment of all or any part of the Guaranteed Indebtedness is rescinded or must otherwise be returned by Lender upon the insolvency, bankruptcy or reorganization of Borrower, Guarantor, or any other Obligor or other guarantor of all or any part of the Guaranteed Indebtedness, or otherwise, all as though such payment had not been made.

(c) None of the following shall affect Guarantor’s liability hereunder: (i) the unenforceability of all or any part of the Guaranteed Indebtedness against Borrower by reason of the fact that the Guaranteed Indebtedness exceeds the amount permitted by law; (ii) the act of creating all or any part of the Guaranteed Indebtedness is ultra vires; or (iii) the officers or partners creating all or any part of the Guaranteed Indebtedness acted in excess of their authority. Guarantor hereby acknowledges that withdrawal from, or termination of, any ownership interest in Borrower now or hereafter owned or held, directly or indirectly, by Guarantor shall not alter, affect or in any way limit the obligations of Guarantor hereunder.

8. Actions Against Guarantor. If an Event of Default exists (including the default in the payment or performance of all or any part of the Guaranteed Indebtedness when such Guaranteed Indebtedness becomes due, whether by its terms, by acceleration or otherwise), Guarantor shall, without notice or demand, promptly pay the amount due thereon to Lender, in lawful money of the United States, at Lender’s address set forth in Subparagraph 1(a) above. One or more successive or concurrent actions may be brought against Guarantor, either in the same action in which Borrower or any other Obligor is sued or in separate actions, as often as Lender deems advisable. The exercise by Lender of any right or remedy under this Guaranty, any other Loan Document or under any other agreement or instrument, at law, in equity or otherwise, shall not preclude concurrent or subsequent exercise of any other right or remedy. The books and records of Lender shall be admissible as evidence in any action or proceeding involving this Guaranty and shall be prima facie evidence of the payments made on, and the outstanding balance of, the Guaranteed Indebtedness.

9. Payment by Guarantor. Whenever Guarantor pays any sum which is or may become due under this Guaranty, written notice must be delivered to Lender contemporaneously with such payment. Such notice shall be effective for purposes of this paragraph when contemporaneously with such payment Lender receives such notice either by: (a) personal delivery to the address and designated department of Lender identified in Subparagraph 1(a) above, or (b) United States mail, certified or registered, return receipt requested, postage prepaid, addressed to Lender at the address shown in Subparagraph 1(a) above. In the absence of such notice to Lender by Guarantor in compliance with the provisions hereof, any sum received by Lender on account of the Guaranteed Indebtedness shall be conclusively deemed paid by Borrower.

10. Notice of Sale. In the event that Guarantor is entitled to receive any notice under the Uniform Commercial Code, as it exists in the state governing any such notice, of the sale or other disposition of any collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall be deemed given when such notice is deposited in the United States mail, postage prepaid, at the address for Guarantor set forth in Subparagraph 1(c) above, ten (10) Business Days prior to the date any public sale, or after which any private sale, of any such collateral is to be held; provided, however, that notice given in any other reasonable manner or at any other reasonable time shall be sufficient.

11. Waiver by Lender. No delay on the part of Lender in exercising any right hereunder or failure to exercise the same shall operate as a waiver of such right. In no event shall any waiver of the provisions of this Guaranty be effective unless the same be in writing and signed by an officer of Lender, and then only in the specific instance and for the purpose given.

12. Successors and Assigns. This Guaranty is for the benefit of Lender, its successors and assigns. This Guaranty is binding upon Guarantor and Guarantor’s heirs, executors, administrators, personal representatives and successors, including without limitation any Person obligated by operation of law upon the reorganization, merger, consolidation or other change in the organizational structure of Guarantor.

13. Costs and Expenses. Guarantor shall pay on demand by Lender all costs and expenses, including without limitation all reasonable attorneys’ fees, incurred by Lender in connection with the preparation (subject to Section 8.3(a) of the Credit Agreement), administration, enforcement and/or collection of this Guaranty. This covenant shall survive the payment of the Guaranteed Indebtedness.

14. Severability. If any provision of this Guaranty is held by a court of competent jurisdiction to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable, shall not impair or invalidate the remainder of this Guaranty and the effect thereof shall be confined to the provision held to be illegal, invalid or unenforceable.

15. No Obligation. Nothing contained herein shall be construed as an obligation on the part of Lender to extend or continue to extend credit to Borrower.

16. Amendment. No modification or amendment of any provision of this Guaranty, nor consent to any departure by Guarantor therefrom, shall be effective unless the same shall be in writing and signed by an officer of Lender, and then shall be effective only in the specific instance and for the purpose for which given.

17. Cumulative Rights. All rights and remedies of Lender hereunder are cumulative of each other and of every other right or remedy which Lender may otherwise have at law or in equity or under any instrument or agreement, and the exercise of one or more of such rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of any other rights or remedies. This Guaranty, whether general, specific and/or limited, shall be in addition to and cumulative of, and not in substitution, novation or discharge of, any and all prior or contemporaneous guaranty agreements by Guarantor in favor of Lender or assigned to Lender by others.

18. Governing Law, Venue. This Guaranty is intended to be performed in the State of Texas. Except to the extent that the laws of the United States may apply to the terms hereof, the substantive laws of the State of Texas shall govern the validity, construction, enforcement and interpretation of this Guaranty. In the event of a dispute involving this Guaranty, any other Loan Document or any other instruments executed in connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in Bexar County, Texas.

19. Compliance with Applicable Usury Laws. Notwithstanding any other provision of this Guaranty, any other Loan Document or of any instrument or agreement evidencing, governing or securing all or any part of the Guaranteed Indebtedness, Guarantor and Lender by its acceptance hereof agree that Guarantor shall never be required or obligated to pay interest in excess of the maximum non-usurious interest rate as may be authorized by applicable law for the written contracts which constitute the Guaranteed Indebtedness. It is the intention of Guarantor and Lender to conform strictly to the applicable laws which limit interest rates, and any of the aforesaid contracts for interest, if and to the extent payable by Guarantor, shall be held to be subject to reduction to the maximum non-usurious interest rate allowed under said law.

20. Gender. Within this Guaranty, words of any gender shall be held and construed to include the other gender.

21. Captions. The headings in this Guaranty are for convenience only and shall not define or limit the provisions hereof.

22. No Subrogation. Notwithstanding any payment or payments by Guarantor hereunder or any set-off or application of funds of Guarantor by Lender, Guarantor shall not be entitled to be subrogated to any of the rights of Lender against Borrower, any other Obligor or any other Person or guarantee or right of offset held by Lender of the payment of the Guaranteed Indebtedness, nor shall Guarantor seek or be entitled to any reimbursement or contribution from Borrower, any other Obligor, or any other Person in respect of payments made by Guarantor hereunder, until all amounts owing to Lender by Borrower on account of the Guaranteed Indebtedness are indefeasibly paid in full in cash. If any amount shall be paid to Guarantor on account of the subrogation rights at any time when all of the Guaranteed Indebtedness has not been indefeasibly paid in full in cash, such amount shall be held by Guarantor in trust for the Guaranteed Parties, segregated from other funds of Guarantor, and shall, immediately upon receipt by Guarantor, be turned over to Lender in the exact form received by Guarantor (duly endorsed by Guarantor to Lender, if required), to be applied against the Guaranteed Indebtedness, whether matured or unmatured, in such order as Lender may determine.

23. Restatement. This Guaranty is a restatement of, but not a release or novation of, the Guaranty Agreement dated December 31, 2003, made by Guarantor in favor of Lender.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.

        EXECUTED as of the date first above written.

GUARANTOR:

NATIONALCARE® MARKETING, INC.

By:/s/ Cynthia B. Koenig
Print Name: Cynthia B. Koenig
Print Title: Sr. Vice President and Treasurer

FIRST AMENDMENT TO INTERCREDITOR AND SUBORDINATION AGREEMENT

        This FIRST AMENDMENT TO INTERCREDITOR AND SUBORDINATION AGREEMENT (this “Amendment”), dated as of July 6, 2004, is 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”), the subsidiaries of Holdings a party hereto (each a “Subsidiary”), and SPECIAL SITUATIONS HOLDINGS, INC. — WESTBRIDGE (“Westbridge”).

RECITALS:

        Bank, CSFBM, Administrative Agent, each Lender, Holdings, each Subsidiary and Westbridge have previously entered into the Intercreditor and Subordination Agreement dated as of December 31, 2003 (such agreement, together with all amendments and restatements, the “Intercreditor Subordination Agreement”). Bank and Funding are amending the Receivables Financing Agreements to, among other things, reflect the creation of AmeriCare Benefits, Inc., a Delaware corporation (“ABI”), as a new Subsidiary and the execution by ABI of a guaranty in favor of Bank.

        The parties hereto desire to amend the Intercreditor Subordination Agreement to acknowledge the guaranty of ABI in favor of Bank.

AGREEMENT:

        NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I

Definitions

1.1 Definitions. All capitalized terms not otherwise defined herein have the same meanings as in the Intercreditor Subordination Agreement.

ARTICLE II

Amendment

2.1 Amendment to Intercreditor Subordination Agreement.

Schedule 2 to the Intercreditor Subordination Agreement is deleted in its entirety and a new Schedule 2, in the form of Schedule 2 attached hereto, is substituted in lieu thereof.

ARTICLE III

Condition Precedent

        This Amendment shall be effective upon receipt by the Bank of a counterpart of this Amendment executed by all parties hereto.

ARTICLE IV

Ratification

        The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Intercreditor Subordination Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Intercreditor Subordination Agreement are ratified and confirmed and shall continue in full force and effect. Each party hereto agrees that the Intercreditor Subordination Agreement, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with its terms.

ARTICLE V

Miscellaneous

5.1 Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Amendment by signing any such counterpart.

5.2 INTEGRATION. THIS AMENDMENT, TOGETHER WITH THE INTERCREDITOR SUBORDINATION AGREEMENT, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES 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.

5.3 GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.

        Executed as of the date first written above.

THE FROST NATIONAL BANK

By:/s/ Adam Palmer
Print Name: Adam Palmer
Print Title: Senior Vice President

CREDIT SUISSE FIRST BOSTON
MANAGEMENT LLC, as
Administrative Agent

By:/s/ Alan Freudenstein
Print Name: Alan Freudenstein
Print Title: President        

CREDIT SUISSE FIRST BOSTON
MANAGEMENT LLC, as Lender

By:/s/ Alan Freudenstein
Print Name: Alan Freudenstein
Print Title: President        

CREDIT SUISSE FIRST BOSTON
MANAGEMENT LLC

By:/s/ Alan Freudenstein
Print Name: Alan Freudenstein
Print Title: President        

SPECIAL SITUATIONS HOLDINGS, INC. –
WESTBRIDGE

By:/s/ Alan Freudenstein
Print Name: Alan Freudenstein
Print Title: President        

ASCENT ASSURANCE, INC.

By:/s/ Patrick J. Mitchell
Print Name: Patrick J. Mitchell
Print Title: President        

FOUNDATION FINANCIAL SERVICES, INC.

By:/s/ Patrick J. Mitchell
Print Name: Patrick J. Mitchell
Print Title: President        

NATIONALCARE^® MARKETING, INC.

By:/s/ Patrick J. Mitchell
Print Name: Patrick J. Mitchell
Print Title: President        

AMERICARE BENEFITS, INC.

By:/s/ Cynthia B. Koenig
Print Name: Cynthia B. Koenig
Print Title: Vice President

PRECISION DIALING SERVICES, INC.

By:/s/ Patrick J. Mitchell
Print Name: Patrick J. Mitchell
Print Title: President        

SENIOR BENEFITS, L.L.C.

By:/s/ Patrick J. Mitchell
Print Name: Patrick J. Mitchell
Print Title: President        

WESTBRIDGE PRINTING SERVICES, INC.

By:/s/ Cynthia B. Koenig
Print Name: Cynthia B. Koenig
Print Title: Chief Financial Officer

ASCENT FUNDING, INC.

By:/s/ Patrick J. Mitchell
Print Name: Patrick J. Mitchell
Print Title: President        

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, as amended by First Amendment to Credit Agreement and Security Agreement dated July 6, 2004.

2.     Security Agreement by Ascent Funding, Inc. for the benefit of The Frost National Bank dated as of December 31, 2003, as amended by First Amendment to Credit Agreement and Security Agreement dated July 6, 2004.

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.     First Restated Guaranty Agreement by NationalCare® Marketing, Inc. in favor of The Frost National Bank dated as of July 6, 2004.

7.     Guaranty Agreement by AmeriCare Benefits, Inc. in favor of The Frost National Bank dated as of July 6, 2004.

WAIVER OF JURY TRIAL AND NOTICE OF FINAL AGREEMENT

To: ASCENT FUNDING, INC.
(collectively, whether one or more, “Borrower”)

As of the effective date of this Notice, Borrower and THE FROST NATIONAL BANK, a national banking association (“Lender”) have amended the Credit Agreement pursuant to which Lender has agreed to make a loan or loans to Borrower, and/or to otherwise extend credit or make financial accommodations to or for the benefit of Borrower, in an aggregate amount at any time outstanding of up to $3,000,000.00 (collectively, whether one or more, the “Loan”).

FACSIMILE DOCUMENTS AND SIGNATURES

For purposes of negotiating and finalizing the Written Loan Agreement (as hereinafter defined), if this document or any document executed in connection with the Loan is transmitted by facsimile machine (“fax”), it shall be treated for all purposes as an original document. Additionally, the signature of any party on this document transmitted by way of a facsimile machine shall be considered for all purposes as an original signature. Any such faxed document shall be considered to have the same binding legal effect as an original document. At the request of any party, any faxed document shall be re-executed by each signatory party in an original form.

WAIVER OF RIGHT TO TRIAL BY JURY

THE PARTIES TO THIS AGREEMENT HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER TO ENFORCE THIS AGREEMENT, TO COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A JURY.

NOTICE OF FINAL AGREEMENT

In connection with the Loan, Borrower and Lender and the undersigned guarantors (collectively, whether one or more, “Other Obligors”) have executed and delivered and may hereafter execute and deliver certain agreements, instruments and documents (collectively herein referred to as the “Written Loan Agreement”).

It is the intention of Borrower, Lender and Other Obligors that this Notice be incorporated by reference into each of the written agreements, instruments and documents comprising the Written Loan Agreement.

THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.

Executed effective as of July 6, 2004.

THE FROST NATIONAL BANK,
a national banking association

By:/s/ Adam Palmer
Print Name: Adam Palmer
Print Title: Senior Vice President

ACKNOWLEDGED AND AGREED:

BORROWER:

ASCENT FUNDING, INC.

By:/s/ Patrick J. Mitchell
Print Name: Patrick J. Mitchell
Print Title: Chairman of the Board, President, and Dir.

OTHER OBLIGORS:

ASCENT ASSURANCE, INC.

By:/s/ Patrick J. Mitchell
Print Name: Patrick J. Mitchell
Print Title: CEO, President

NATIONALCARE® MARKETING, INC.

By:/s/ Patrick J. Mitchell
Print Name: Patrick J. Mitchell
Print Title: Chairman of the Board, President,CEO and Dir.

AMERICARE BENEFITS, INC.

By:/s/ Patrick J. Mitchell
Print Name: Patrick J. Mitchell
Print Title: Chariman of the Board

EX-10.42

Exhibit 10.42

EMPLOYMENT AGREEMENT

This Employment Agreement (this "Employment Agreement"), dated as of September 1, 2004, is between Ascent Assurance, Inc., a Delaware corporation (the Company"), and Mr. Ben Cutler (the "Employee").

Whereas, the Company desires to enter into an employment relationship with the Employee and the Employee wishes to accept such employment, under the terms and conditions set forth in this Employment Agreement.

Now, therefore, in consideration of and in reliance upon the foregoing and the covenants, obligations and agreements contained herein, the Company and the Employee hereby agree as follows:

1        Employment Period

The Company will employ the Employee, and the Employee will serve the Company, under the terms of this Employment Agreement for a term of five years commencing on September 1, 2004 (hereinafter, the “Start Date”). Notwithstanding the foregoing, this Employment Agreement and the Employee’s employment hereunder may be earlier terminated, as provided in Section 4 hereof. The period of time between the commencement and the termination of the Employee’s employment hereunder shall be referred to herein as the “Employment Period.”

2        Duties and Status

During the Employment Period, the Employee shall serve as the President and Chief Executive Officer (“CEO”) of the Company and be responsible and report to the Board of Directors of the Company (the “Board”). Further, so long as he shall be a director of the Company, the Employee shall be appointed as Chairman of the Board. During the Employment Period, the Employee shall have such authority and perform such duties which are consistent with the Employee’s title and position as the President and CEO of the Company, as well as such other duties as may be assigned by the Board from time to time. The Employee’s duties shall include, without limitation, responsibilities with respect to strategic development and all business operations of the Company and hiring and firing authority within guidelines as may be set by the Board or with the advice and consent of the Board or otherwise as the Board may from time to time prescribe. The Employee agrees to devote all of his time, efforts and skills exclusively to the performance of his duties and responsibilities under this Employment Agreement and will not provide his services to any other person or entity without the prior consent of the Board; provided, however, that nothing in this Employment Agreement shall preclude the Employee from devoting reasonable periods required for participating in professional and appropriate industry associations, educational, philanthropic, public interest, charitable, social or community activities so long as such activities do not interfere in any material respect with the Employee’s duties hereunder or involve any manner of activity that is competitive with or adverse to the best interests of the Company; provided, further, that if during any regular business day these activities require the Employee to be off-premises more than four hours during normal business hours, that day shall be allocated to vacation time.

3        Compensation

3.1 Base Salary During the Employment Period, the Company shall pay the Employee an annualized base salary of $250,000 payable twice monthly in arrears and in accordance with the standard payroll practices of the Company; provided, however, that such amount shall be reviewed by the Board annually, and may, in the sole discretion of the Board, be increased. The base salary paid to the Employee by the Company shall be referred to herein as the “Base Salary”.

3.2 Performance Bonus In addition to the compensation otherwise payable pursuant to this Employment Agreement, the Employee shall be eligible to receive an annual performance bonus (“Annual Bonus”) for each fiscal year based upon the attainment of performance criteria hereinafter described. For each fiscal year during the Employment Period, annual performance criteria shall be developed by management and presented to the Board (or a designated committee thereof) for approval and/or modification pursuant to or in connection with the development of a five-year strategic plan. The Employee’s minimum Annual Bonus in the event the target performance is attained shall be 200% of the Base Salary in effect on the last day of the applicable fiscal year. Any Annual Bonus of less than 200% of such Base Salary (upon partial attainment of targeted performance criteria) or in excess of 200% of such Base Salary (upon exceeding targeted performance criteria) shall be as set forth in the annual performance criteria. Notwithstanding the foregoing, a minimum Annual Bonus for the partial calendar year 2004 period shall be paid in an amount equal to $166,666 and a minimum Annual Bonus for an entire calendar year 2005 period shall be paid in an amount equal to $500,000, regardless of the attainment of the targeted performance criteria; provided, however, that such minimum Annual Bonus shall be payable only if (a) the Employment Period continues in effect through the last day of 2004 and 2005, respectively, or (b) the Employee is terminated by the Company other than for Cause.

3.3 Equity Award The Employee shall receive options (the “Initial Options”) to purchase 9.9% of the common stock of the Company (on a fully-diluted basis as of the Start Date), at an exercise price equal to the fair market value of such shares on the Early Exercise Date (as defined below), as determined by the Board in good faith based on generally accepted industry valuation methodologies. The Initial Options shall vest in five equal installments on each of the first five anniversaries of the Start Date, provided the Employee is still an employee of the Company on each applicable vesting date. Notwithstanding the foregoing, the Initial Options shall be exercisable before the applicable vesting dates, on or after June 30, 2005, or such earlier date as the Company may specify (in either case the “Early Exercise Date”), in which case the shares issuable upon any such earlier exercise shall be restricted shares which shall be subject to the same vesting schedule as applicable under the Initial Options and shall not be transferable unless and until such shares become vested. The parties agree that the obligation to grant the Initial Options may be partially satisfied by an option granted with respect to up to 10% of the fully-diluted shares of common stock of the Company beneficially owned by Credit Suisse Boston Management LLC and its affiliates (excluding such affiliation solely by virtue of ownership and involvement with the Company or its subsidiaries, the “CSFB Entities”), with the remainder being granted with respect to reserved shares of the Company; provided, however, that any Initial Option granted by the CSFB Entities shall also be honorable by the Company. Upon exercise of any Initial Options within one week of the Early Exercise Date, the Company shall pay to the Employee an amount equal to 57.36% of the excess, if any, of the fair market value of the shares on the exercise date, as determined for federal income tax purposes, over the exercise price. An additional equity pool of 20.1% (subject to adjustment to 20% in the event of certain transactions) of the fully-diluted shares of the Company as of the Start Date shall be reserved for options and/or other equity awards to be granted to other employees as recommended by management and approved by the Board (or a designated committee thereof). In the event that such additional pool is not entirely allocated to grants made to other employees, the Employee shall be eligible to receive additional options and/or other equity awards with respect to such unallocated shares available in such pool, up to a maximum level of 15% (including the shares subject to the Initial Options) of the fully-diluted shares of common stock of the Company as of the Start Date. If such additional pool is allocated to grants made to other employees, then the Employee shall not receive any options or other equity awards in addition to the Initial Options.

The Initial Options and any other stock options granted to the Employee (collectively, with the Initial Options, hereinafter referred to as the “Options”) shall have a duration of ten years, except that (i) if the Employee’s employment with the Company terminates for any reason other than for Cause (as defined in Section 4.1 hereof), Disability (as defined in Section 4.2 hereof) or death, any then vested but unexercised Options shall be exercisable for three months following such termination, (ii) if the Employee’s employment with the Company terminates due to Disability or death, any then vested but unexercised Options shall be exercisable for six months following such termination, and (iii) if the Employee’s employment with the Company terminates for Cause, all unexercised Options (including any vested Options) shall terminate immediately upon such termination. In no event shall any Options continue to be exercisable for a period of more than ten years following the date of grant. The exercise price payable for the purchase of shares under all Options shall be paid in cash, at the time of exercise of the respective Option. All shares issued pursuant to the exercise of any Options shall be subject to a right of first refusal from and after such time as they become transferable, and to repurchase rights (but not obligations) in the event of a termination of the Employee’s employment with the Company. The purchase price payable to repurchase shares from the Employee shall be (i) with respect to vested shares, the greater of the fair market value (as determined by the Board in good faith based on generally accepted industry valuation methodologies) of the shares on the date of repurchase or the purchase price paid by the Employee, or (ii) with respect to non-vested shares, the purchase price paid by the Employee. Repurchase rights shall extend for the longer of (i) seven months after the issuance of the applicable shares, (ii) seven months after the Employee is terminated by the Company other than for Cause or (iii) three months after a termination of the Employee’s employment with the Company due to any other reason. The right of first refusal shall extend until the shares of the Company’s common stock issued under such Options are publicly traded. All Options and any other equity awards granted to the Employee shall be evidenced by a separate agreement entered into with the Employee, in such form as shall be provided by the Company or the CSFB Entities, as applicable.

3.4 Liquidity Performance Bonus In the event of the consummation of a Qualifying Liquidity Event (as defined below) while the Employee is still employed by the Company, the Employee shall be eligible to receive a one-time liquidity performance bonus, calculated as the sum of the following: (i) 10% of the dollar amount of consideration allocable to the CSFB Entities in respect of debt obligations and/or securities of the Company and its subsidiaries (before giving effect to payment of such liquidity performance bonus) in the Qualifying Liquidity Event in excess of the amount required for the CSFB Entities to achieve a 25% Rate of Return (as defined below) up to a 32.5% Rate of Return; (ii) 25% of the dollar amount of consideration allocable to the CSFB Entities in respect of debt obligations and/or securities of the Company and its subsidiaries (before giving effect to payment of such liquidity performance bonus) in the Qualifying Liquidity Event in excess of the amount required for the CSFB Entities to achieve a 32.5% Rate of Return up to a 40% Rate of Return; and (iii) 50% of the dollar amount of consideration allocable to the CSFB Entities in respect of debt obligations and/or securities of the Company and its subsidiaries (before giving effect to payment of such liquidity performance bonus) in a Qualifying Liquidity Event in excess of the amount required for the CSFB Entities to achieve a 40% Rate of Return. Any liquidity performance bonus payable hereunder shall be paid in-kind, in the same form of consideration as received by the CSFB Entities in respect of debt obligations and/or securities of the Company and its subsidiaries (before giving effect to payment of such liquidity performance bonus) in the Qualifying Liquidity Event, and shall be paid at the same time as such consideration is received by the CSFB Entities; provided, however, that any portion of such liquidity performance bonus may be payable in cash, in the sole discretion of the Board. In the event (i) that the Rate of Return achieved by the CSFB Entities does not exceed 25%, or (ii) if as of the date of the consummation of a Qualifying Liquidity Event the Employee is not employed by the Company due to either (a) the Employee having been terminated by the Company for Cause or (b) the Employee having terminated his employment on his own initiative, then no liquidity performance bonus shall be payable to the Employee hereunder. Notwithstanding the foregoing, in the event that the Employee is terminated by the Company other than for Cause, the right of the Employee to receive such liquidity performance bonus shall continue with respect to a Qualifying Liquidity Event that is the subject of a definitive written agreement subject only to customary closing conditions entered into before July 1, 2010; provided, however, that the Company shall retain the option to purchase such right from the Employee at fair market value (such option exercisable by written notice to the Employee at any time after the termination and before September 2009), as determined by the Board assuming the consummation of a Qualifying Liquidity Event as of the date of purchase. Any valuation to be conducted hereunder shall be performed by the Board in good faith based on generally accepted industry valuation methodologies, whose determination shall be final.

For purposes of this Employment Agreement, a “Qualifying Liquidity Event” 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 (other than subsidiaries of the Company), 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 the election of directors or persons performing a similar function of the surviving or successor corporation or other entity.

For purposes of this Employment Agreement, “Rate of Return” shall mean the return, calculated on a one-time basis upon the occurrence of a Qualifying Liquidity Event, on a base value equal to the principal amount outstanding as of the Start Date of the loans made under that certain Credit Agreement, dated as of April 27, 2001, as amended or relieved from time to time, between the Company, as borrower, and Credit Suisse First Boston Management LLC, as administrative agent, arranger and lender (the “CSFB Debt”); provided, however, that the Rate of Return shall not include any interest paid or payable on the CSFB Debt.

3.5 Liquidation Sharing Plan In the event of the consummation of (i) a Qualifying Liquidity Event or (ii) any paydown of the CSFB Debt, the Employee shall be eligible to receive a one-time liquidation sharing amount of either $2,000,000 or a pro-rata share of any such paydown of the CSFB Debt, respectively, in either case ranking pari passu to the amounts which are able to be retained by the CSFB Entities in respect of the CSFB Debt, including after giving effect to the subordination of such debt. Any such amount shall be payable in-kind, in the same form of consideration as received by the CSFB Entities, and shall be paid at the same time as such consideration is received by the CSFB Entities (including pursuant to distributions on escrows or similar arrangements); provided, however, that any portion of such liquidation sharing amount may be payable in cash, in the sole discretion of the Board. If the Employee is not still employed by the Company on the date of the consummation of a Qualifying Liquidity Event or such paydown of the CSFB Debt, then the liquidation sharing amount shall continue to be payable to the Employee as provided above. Any amounts due and payable to the Employee under this Section 3.5 shall also include an additional amount equal to the proportionate amount of interest which would be paid relative to a notional principal amount of $2,000,000, if the CSFB Debt were increased by $2,000,000 as of the Start Date, such additional amount to be paid to the Employee at the same time as interest is paid on the CSFB Debt. Notwithstanding the foregoing, and without prejudice with respect to the conditions set out in Section 7.3, the terms set out in this Section 3.5 shall not be effective before the Company shall have procured the consents necessary to obtain waivers of certain negative covenants contained in certain credit agreements to which the Company is a party. The Company hereby agrees that it will use its best efforts to procure all such consents.

3.6 Benefits During the Employment Period, the Employee shall be invited to participate, to the extent permitted by applicable law and the terms and eligibility requirements of any such plan or program, in all employee benefit plans and programs that are maintained by the Company from time to time generally for the Company’s similarly situated senior executives. The Employee’s participation in or entitlement to benefits under any such benefit plan or program shall at all times be subject to the terms and conditions of the applicable plan documents, as amended from time to time, or the Company policies governing such employee benefits. The Company will not, however, by reason of this Section 3.6, be obligated either (i) to institute, maintain, or refrain from modifying or terminating any employee benefit plans or programs, or fringe benefits, that it may adopt from time to time or (ii) to provide the Employee with all benefits provided to any other person or individual employed by the Company. During the Employment Period, the Employee shall be eligible to receive 20 days of paid vacation per calendar year, pro rated for 2004 from the Start Date through December 31, 2004, in accordance with the Company’s vacation policies (as maybe revised from time to time). All vacation and other time off must be scheduled for the mutual convenience of the Employee and the Company and so as not to interfere with the operation of the Company.

3.7 Expense Reimbursement The Company shall reimburse the Employee for all reasonable business expenses incurred by the Employee during the Employment Period for promoting the Company’s business, upon the Employee’s periodic presentation of an itemized account of such expenditures, in accordance with the Company’s business expense reimbursement policy. In addition, the Employee will receive a monthly allowance for reasonable personal living expenses as agreed to by the Board.

4        Termination

Either the Company or the Employee may terminate this Employment Agreement and the Employee’s employment at any time for any reason upon 7 days’ prior written notice to the other. Upon any termination of this Employment Agreement, the Employment Period and all rights and entitlements of the Employee pursuant to this Employment Agreement shall forthwith cease and terminate, and the Company shall have no liability or obligations whatsoever to the Employee, except as provided for in Sections 3.5 and 4.4 hereof.

4.1 Termination For Cause The Company may terminate this Employment Agreement and the Employee’s employment at any time for “Cause,” as determined by the Board For purposes of this Employment Agreement, “Cause” shall mean the occurrence of any of the following: (i) the Employee for any reason, other than by reason of his death or Disability (as defined below in Section 4.2 hereof), fails to perform the Employee’s duties for the Company to the reasonable satisfaction of the Company, and the Employee fails to correct his performance to the satisfaction of the Company after written notice by the Company and a reasonable opportunity to cure; (ii) the Employee materially breaches any of his obligations under this Employment Agreement, and the Employee fails to correct such breach (if correctable) after notice by the Company and a reasonable opportunity to cure; (iii) the Employee materially violates the policies or procedures of the Company as such policies and procedures are adopted or modified from time to time, or fails to follow directives of the Board, after notice by the Company and a reasonable opportunity to cure or to follow such a directive to the satisfaction of the Company; (iv) the Employee engages in gross negligence, a breach of fiduciary duty and/or duty of loyalty, or misconduct in connection with the performance of the Employee’s duties for the Company; (v) the Employee engages in improper conduct or misconduct or any act that violates any law, rule, or regulation, and that, in the view of the Board, would adversely affect the business, reputation or public image of the Company, including but not limited to any act of fraud, theft, embezzlement, or any act involving moral turpitude; or (vi) the Employee pleas to, or is convicted of, any misdemeanor involving moral turpitude or any felony.

4.2 Termination on Account of Disability In the event of a physical or mental infirmity which renders the Employee unable to perform his duties, services and responsibilities hereunder for a total of 120 calendar days in any 12-month period (a “Disability”), Employee’s employment and this Employment Agreement shall automatically terminate on such 120th calendar day, without any further or additional action on the part of the Company.

4.3 Termination on Account of Death In the event of the Employee’s death during the Employment Period, the Employee’s employment and this Employment Agreement shall automatically terminate on the date of the Employee’s death.

4.4 Accrued Obligations Upon any termination of the Employee’s employment with the Company, the Company shall pay the Employee as soon as practicable, a lump sum cash payment equal to the sum of: (i) the Employee’s accrued but unused vacation as of the effective date of his termination of employment; (ii) any accrued but unpaid Base Salary for the period prior to the effective date of the Employee’s termination of employment; (iii) the amount of any earned but unpaid Annual Bonus earned for the calendar year prior to the calendar year in which the Employee’s termination of employment occurs; (iv) any unreimbursed business expenses incurred by the Employee that are reimbursable in accordance with Section 3.3 hereof; or (v), in the event of termination of the Employment Agreement and the Employee’s employment for reasons other than Cause, any amounts payable under Section 3.3 and 3.4 hereof (collectively, the “Accrued Obligations”). Upon payment in full of the Accrued Obligations, and except as provided under Section 3.5 hereof, the Company shall have no further obligations or liabilities whatsoever to the Employee pursuant to this Employment Agreement (except that the treatment of Options, including, without limitation, the Company’s repurchase rights, shall be as provided in Section 3.3 hereof and, if applicable, Section 5 hereof).

4.5 Resignation from Board In the event the Employee’s employment with the Company is terminated for any reason, the Employee agrees to tender his resignation from the Board and any other board or officer positions held with the Company and its affiliates, effective no later than the date of termination, or at such other mutually agreeable time.

5        Change of Control

In the event of a Change of Control (as defined below) that (i) occurs earlier than the fifth anniversary of the Start Date and while the Employee is still employed by the Company or (ii) results from a Qualifying Liquidity Event that is the subject of a definitive written agreement subject only to customary closing conditions entered into within nine months after the Employee is terminated by the Company other than for Cause, then all Options and/or restricted stock then held by the Employee shall become fully vested, unless comparable positions in the successor entity have been offered to the Employee or the Employee becomes engaged or rehired by the successor entity in a comparable capacity upon the consummation of the Change of Control or at any reasonable period of time thereafter. The determination of whether comparable positions have been offered, or whether the Employee becomes engaged or rehired by the successor entity in a comparable capacity upon or at a reasonable period of time after the Change of Control, shall be made by the Board in its sole discretion, whose determination shall be final. For purposes of this Employment Agreement, a Change of Control shall mean the occurrence of (i) a Qualifying Liquidity Event, or (ii) the liquidation or dissolution of the Company; provided, however, that a Change of Control shall not include any leveraged buy-out transaction which is sponsored by the Employee or in which the Employee acquires an equity interest materially in excess of his equity interest in the Company immediately prior to such transaction.

6        Confidentiality, Non-Solicitation and Non-Competition

6.1 During the Employment Period and thereafter, Employee shall not, except as may be required to perform his duties hereunder or as required by applicable law, disclose to others or use, whether directly or indirectly, any Confidential Information. For purposes of this Employment Agreement, “Confidential Information” shall mean information about any of the Company, or its respective subsidiaries and affiliates (collectively, the “Group”), and their respective clients, suppliers, customers and employees that is not available to the general public and that was learned by Employee in the course of his employment by the Company, including (without limitation) any proprietary knowledge, trade secrets, data, formulae, information, client, and customer lists, pricing lists or information, former or existing suppliers, contractors, purchasing information, distribution methods, marketing research, information regarding other employees of the Group, and all papers, resumes, records (including computer records) and the documents containing such Confidential Information. Employee acknowledges that such Confidential Information is specialized, unique in nature and of great value to the Company, and that such information gives the Company a competitive advantage. Upon the termination of his employment for any reason whatsoever, Employee shall promptly deliver to the Company all documents, computer tapes and disks (and all copies thereof) containing any Confidential Information.

6.2 During the Employment Period and for one year thereafter, Employee shall not, directly or indirectly in any manner or capacity (e.g., as an advisor, principal, agent, partner, officer, director, shareholder, employee, member of any association or otherwise) engage in, work for, consult, provide advice or assistance or otherwise participate in any activity that competes with the Group in the business of insurance in the United States, unless as otherwise set forth in a written waiver provided by the Board. Employee further agrees that during such period he will not assist or encourage any other person in carrying out any activity that would be prohibited by the foregoing provisions of this Section 6 if such activity were carried out by Employee and, in particular, Employee agrees that he will not induce any employee of the Group to carry out any such activity; provided, however, that the “beneficial ownership” by Employee, either individually or as a member of a “group”, as such terms are used in Sections 13(d) and 14(d)(2) and Rule 13d-3, respectively, under the Exchange Act, of less than 2% of the voting stock of any publicly held corporation shall not be a violation of this Employment Agreement. The foregoing provisions of this Section 6.2 shall not apply if the Employee is terminated by the Company other than for Cause. It is further expressly agreed that the Company will or would suffer irreparable injury if Employee were to compete with the Group in violation of this Employment Agreement and that the Company would by reason of such competition be entitled to injunctive relief in a court of appropriate jurisdiction, and Employee further consents and stipulates to the entry of such injunctive relief in such a court prohibiting Employee from competing with the Group in violation of this Employment Agreement.

6.3 During the Employment Period and for one year thereafter, Employee shall not, directly or indirectly, either as principal, agent, independent contractor, consultant, director, officer, employee, employer, advisor (whether paid or unpaid), stockholder, partner, member or in any other individual or representative capacity whatsoever, either for his own benefit or for the benefit of any other Person, solicit, divert or take away or accept as a customer or client any Person that is or has been a customer or client of the Group as of the date hereof or at any time during the Employment Period.

6.4 Employee recognizes that he will possess confidential information about other employees of the Company relating to their education, experience, skills, abilities, compensation and benefits, and interpersonal relationships with customers of the Company. Employee recognizes that the information he will possess about these other employees is not generally known, is of substantial value to the Company in developing its business and in securing and retaining customers, and will be acquired by him because of his business position with the Company. Employee agrees that, during the Employment Period, and for a period of one year thereafter, he will not, (i) solicit, raid, entice or induce any Person that is or has been an employee, officer, consultant or agent of the Group as of the date hereof or at any time during the Employment Period, to become employed by him or any Person, (ii) approach any such employee, officer or agent for such purpose or authorize or participate in the taking of such actions by any other Person, or assist or participate with any such Person in taking such action or (iii) in any way interfere with any relationship between the Group and any of their customers, suppliers or distributors; provided, however, that, in the event the Employee is terminated by the Company other than for Cause, the foregoing provisions of this Section 6.4 shall apply only in respect of Persons who have been an employee, officer, consultant or agent of the Group for a period of at least three years prior to the date of termination. As used in Section 6.3 and 6.4, “Person” shall be construed broadly to include an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

6.5 Employee acknowledges that he was informed of the time, territory, scope and other essential requirements of the restrictions in this Section 6 when he agreed to become employed with the Company under the terms set forth in this Agreement, and Employee further acknowledges that he has received sufficient and valuable consideration for his agreement to such restrictions.

6.6 The provisions of this Section 6 shall remain in full force and effect notwithstanding the termination of the Employee’s employment regardless of the circumstances, which result in such termination. This provision shall not be construed to limit the survival of any other provisions that also survive the termination of this Employment Agreement by the express or implied terms of such provisions. The existence of any claim or cause of action that the Employee may have against the Company shall not constitute a defense or a reason to invalidate any of the provisions of this Section 6.

7        Miscellaneous

7.1 Withholding Tax All payments required to be made by the Company to the Employee under this Employment Agreement shall be subject to the withholding of such amounts relating to tax (including federal and state income tax and withholdings, employment tax and withholdings, and excise tax) and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation.

7.2 Waiver Failure of the Company at any time to enforce any provision of this Employment Agreement or to require performance by the Employee of any provisions hereof shall in no way affect the validity of this Employment Agreement or any part hereof or the right of the Company thereafter to enforce its rights hereunder; nor shall it be taken to constitute a condonation or waiver by the Company of that default or any other or subsequent default or breach.

7.3 Shareholder Consent Notwithstanding any other provisions of this Employment Agreement, the Company and the Employee hereby acknowledge and agree that the provisions of Section 3.4, Section 3.5 and Section 5 shall only take effect upon their due ratification and approval by the shareholders of the Company in accordance with the requirements of Section 1.280G-1 of the Income Tax Regulations. The Company hereby further agrees that it will use its best efforts in order to secure such approval of the shareholders of the Company.

7.4 Notices All notices or other communications hereunder shall not be binding on either party hereto unless in writing (including facsimile or similar writing), and delivered to the other party thereto at the following address:

If to the Company:	Ascent Assurance, Inc. Attention: Board of Directors 3100 Burnett Plaza 801 Cherry Street, Unit 33 Fort Worth, TX 76102
If to the Employee:	Mr.Ben Cutler 6600 East Bluebird Lane Paradise Valley, AZ 85253 (480) 922-3716

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 and receipt is confirmed, (b) if given by mail, three 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 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. Either party may change its address for notice by delivery of written notice thereof in the manner provided.

7.5 Assignment Except as set forth herein, no rights of any kind under this Employment Agreement shall, without the prior consent of the Company, be transferable to or assignable by the Employee or any other person, or, except as provided by applicable law, be subject to alienation, encumbrance, garnishment, attachment, execution or levy of any kind, voluntary or involuntary. This Employment Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns.

7.6 Governing Law; Jurisdiction; No Jury Trial This Employment Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York without regard to the conflicts of law principles thereof. Each party hereby irrevocably submits to the jurisdiction of the state and federal courts sitting in the State of New York, for the adjudication of any dispute hereunder (except as hereinafter provided). EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY FOR THE ADJUDICATION OF ANY DISPUTE ARISING OUT OF OR RELATING TO THIS EMPLOYMENT AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE OR 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 EMPLOYMENT AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS IN THIS SECTION. If, for any reason, the foregoing jury trial waiver is not enforceable at the time of any dispute hereunder, then such dispute shall be resolved by binding arbitration in accordance with the then current National Rules for the Resolution of Employment Disputes of the American Arbitration Association. Such arbitration, if necessary, shall be convened in the Borough of Manhattan of the City of New York, State of New York. Notwithstanding any other provision hereof, the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Section 7 of this Employment Agreement, and Employee consents that such restraining order or injunction may be granted without the necessity of the Company’s posting any bond, except to the extent otherwise required by applicable law.

7.7 Counterparts This Employment Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same document.

7.8 Headings The headings in this Employment Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Employment Agreement.

7.9 Entire Agreement THE PARTIES HERETO ACKNOWLEDGE THAT THEY HAVE READ THIS EMPLOYMENT AGREEMENT, UNDERSTAND IT, AND AGREE TO BE BOUND BY ITS TERMS. This Employment Agreement constitutes the entire understanding and agreement between the parties hereto concerning the subject matter hereof and fully supersedes all prior agreements, understandings, representations and warranties both written and oral, among the parties with respect to the subject matter hereof. All negotiations by the parties hereto concerning the subject matter hereof are merged into this Employment Agreement, and there are no representations, warranties, covenants, understandings or agreements, oral or otherwise, in relation thereto by the parties hereto other than those incorporated herein. No supplement, modification or amendment of this Employment Agreement shall be binding unless executed in writing by the parties hereto.

In Witness Whereof, each of the parties hereto has executed this Employment Agreement as of the date first above written.

ASCENT ASSURANCE, INC.

By: /Patrick H. O’Neill
       Name: Patrick H. O’Neill
       Title: Executive Vice President, General Counsel and Secretary

EMPLOYEE

By: Benjamin M. Cutler
       Name: Benjamin M. Cutler
       Title: President and Chief Executive Officer

EX-10.43

Exhibit 10.43

      THIRD AMENDMENT TO CREDIT AGREEMENT

        This Third Amendment to Credit Agreement (this “Third Amendment to Credit Agreement”) is made as of this 1^st day of September, 2004, 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 eliminate certain financial covenants and to amend the definition of “Indebtedness”;

        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 Third 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 4 of this Third 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 definition:

        “Cutler Employment Agreement” means the employment agreement dates as of September 1, 2004 between Borrower and Mr. Ben Cutler, as the same may be amended from time to time.

        (b)  Section 1.1 of the Credit Agreement shall be amended by deleting the definition of “Indebtedness” and replacing it in its entirely with the following definition:

        “Indebtedness” means with respect to any Person at any date, (a) Debt for Borrowed Money of that Person, (b) all indebtedness of that Person for the deferred purchase price of property or services (other than current trade liabilities and accrued expenses incurred in the ordinary course of that Person’s business and payable in accordance with customary practices), (c) all outstanding reimbursement obligations of that Person in respect to of outstanding letters of credit, acceptances and similar obligations issued or created for the account of that Person, (d) all liabilities secured by any Lien on any property owned by that Person even if that Person has not assumed ot otherwise become liable for the payment thereof, (e) liabilities arising under Hedging Agreements of that person (other than interest rate caps purchased by it), (f) all Guaranties of that person and (g) all Capital Lease Obligations of that Person; provided that, notwithstanding the foregoing, no present or future payment obligation of Borrower under the Cutler Employment Agreement shall constitute “Indebtedness” for purposes of this Agreement.

        2.3 Minimum Net Worth. Section 6.1(a) of the Credit Agreement shall be deleted in its entirety and designated as "Reserved".

        Section 3. 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.

        Section 4. Conditions Precedent. The effectiveness of this Third Amendment to Credit Agreement is expressly conditioned upon CSFBM having received one or more counterparts of this Third Amendment to Credit Agreement duly executed by the Borrower.

        Section 5. Miscellaneous. Except as herein provided, the Credit Agreement and each other Loan Document shall remain unchanged and in full force and effect. This Third Amendment and each other Loan Document shall remain unchanged and in full force and effect. This Third 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 Third Amendment to Credit Agreement shall be governed by, and construed in accordance with, the law of the state of New York.

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

BORROWER:

ASCENT ASSURANCE, INC.

By /Cynthia B. Koenig/
Name: Cynthia B. Koenig
Title: Senior VP, CFO & Treasurer

ADMINISTRATIVE AGENT AND ARRANGER:

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC

By /Alan Freudenstein/
Name: Alan Freudenstein
Title: President

LENDERS:

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC

By /Alan Freudenstein/
Name: Alan Freudenstein
Title: President

EX-10.44

Exhibit 10.44

First Amendment to Pledge Agreement

This First Amendment to Pledge Agreement (the “First Amendment”) is made as of this 28^th day of October, 2004 by and among Ascent Assurance, Inc. (the “Pledgor”) and Credit Suisse First Boston LLC (formerly known as Credit Suisse First Boston Management Corporation) (the “Pledgee”).

WITNESSETH

WHEREAS, the Pledgor and the Pledgee are parties to that certain pledge agreement dated as of April 17, 2001 (the “Pledge Agreement”);

WHEREAS, the Pledgor desires to sell 100% of the capital stock of Westbridge Printing Services, Inc., a wholly owned subsidiary of Pledgor;

NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Pledgor and Pledgee hereby agree as follows:

ANEX 1 to the Pledge Agreement is deleted in its entirety and replaced with the following:

	Pledged Stock
Company	No. of Shares	Class of Stock	Certificate Nos.
Foundation Financial Services, Inc.	1	common	2
Pacific Casualty
Company, Inc.	1,000	common	1

Section 2. ConditionsThe effectiveness of this First Amendment is expressly conditioned upon receipt by Pledgee of one or more copies of this First Amendment executed by the Pledgor.

Section 3.  Release

(a) The Pledgee shall deliver to the Pledgor all certificates (or, in the event that such certificates have been lost, stolen or destroyed, an affidavit of that fact) evidencing the Pledged Collateral solely with respect to Westbridge Printing Services, Inc. (the “WPS Collateral”).

(b) The Pledgee shall execute and deliver such additional documents as may be necessary to evidence the release of any obligations of Pledgor solely with respect to the WPS Collateral.

(c) The Pledgor is hereby released and discharged from its obligations under the Pledge Agreement with respect to the WPS Collateral.

(d) Solely with respect to the WPS Collateral, the Pledgor hereby forever releases the Pledgee from all claims it may have against the Pledgee arising out of the Pledge Agreement and acknowledges that the Pledgee has no further obligations or liabilities owing to the Pledgor.

Section 4. Ratification. Except as modified above, all other terms and provisions of the Pledge Agreement, and any other related agreements shall continue in full force and effect and are hereby ratified and confirmed by the Pledgor and the Pledgee.

Section 5.  Binding Effect. This First Amendment shall be binding upon the Pledgor and its successors and assigns and inure to the benefit of Pledgee and its successors and assigns.

Section 6.  Entire Agreement. This First Amendment contains the entire agreement between the parties relating to the subject matter hereof and supercedes all oral statements and prior writings with respect thereto.

Section 7.  Counterparts. This First Amendment may be executed in multiple counterparts, all of which taken together shall constitute one instrument.

Section 8.  Governing Law. THIS FIRST AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF THE LAWS PRINCIPLES THEREOF.

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

PLEDGOR:

ASCENT ASSURANCE, INC.

By /Cynthia B. Koenig/
Name: Cynthia B. Koenig
Title: SVP, CFO & Treasurer

PLEDGEE:

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC

By /Alan Freudenstein/
Name: Alan Freudenstein
Title: President

EX-10.45

Exhibit 10.45

Second Amendment and Consent to Guaranty and Security Agreement

This Second Amendment and Consent to Guaranty and Security Agreement (the “Second Amendment”) is made as of this 28^th day of October, 2004 by and among Foundation Financial Services, Inc., NationalCare® Marketing, Inc., Lifestyles Marketing Group, Inc., Precision Dialing Services, Inc., Senior Benefits LLC and Westbridge Printing Services, Inc. (“WPS”) each as a “Grantor” and Credit Suisse First Boston LLC (formerly known as Credit Suisse First Boston Management Corporation) as “Secured Party”.

WITNESSETH

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

WHEREAS, Ascent Assurance, Inc. (the “Borrower”) and Secured Party are parties to that certain credit agreement dated as of April 17, 2001 (the “Credit Agreement”);

WHEREAS, the Borrower desires to sell 100% of the capital stock of WPS;

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

Section 1. Amendments. Upon satisfaction of the conditions set forth in Section 2 of this Second Amendment, effective as of the date hereof, the Guaranty Agreement shall be amended as follows:

WPS is eliminated from the definition of Grantor in the first paragraph of the Guaranty Agreement and all of its obligations as a Grantor under the Guaranty Agreement are terminated.

Section 2. Conditions. The effectiveness of this Second Amendment is expressly conditioned upon receipt by Secured Party of one or more copies of this Second Amendment executed by the Grantors.

Section 3. Ratification. Except as modified above, all other terms and provisions of the Guaranty Agreement, and any other related agreements shall continue in full force and effect and are hereby ratified and confirmed by each of the Grantors and the Secured Party. This Second Amendment amends and shall be in addition to any previous amendments to the Guaranty Agreement executed by Secured Party.

Section 5. Binding Effect. This Second Amendment shall be binding upon each of the Grantors and its successors and assigns and inure to the benefit of Secured Party and its successors and assigns.

Section 6. Entire Agreement. This Second Amendment contains the entire agreement between the parties relating to the subject matter hereof and supercedes all oral statements and prior writings with respect thereto.

Section 7. Counterparts. This Second Amendment may be executed in multiple counterparts, all of which taken together shall constitute one instrument.

Section 8. Governing Law. THIS SECOND AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF THE LAWS PRINCIPLES THEREOF.

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

GRANTORS:

FOUNDATION FINANCIAL SERVICES, INC.

By /Benjamin M. Cutler/
Name: Benjamin M. Cutler
Title: President

NATIONALCARE^®MARKETING, INC.

By /Cynthia B. Koenig/
Name: Cynthia B. Koenig
Title: SVP & Treasurer

LIFESTYLES MARKETING GROUP, INC.

By /Benjamin M. Cutler/
Name: Benjamin M. Cutler
Title: President

PRECISION DIALING SERVICES, INC.

By /Cynthia B. Koenig/
Name: Cynthia B. Koenig
Title: SVP, Treasurer

SENIOR BENEFITS, LLC

By /Benjamin M. Cutler/
Name: Benjamin M. Cutler
Title: President and Chief Executive Officer

WESTBRIDGE PRINTING SERVICES, INC.

By /Cynthia B. Koenig/
Name: Cynthia B. Koenig
Title: Chief Financial Officer

SECURED PARTY:

CREDIT SUISSE FIRST BOSTON MANAGEMENT LLC

By /Alan Freudenstein/
Name: Alan Freudenstein
Title: President

EX-10.46

Exhibit 10.46

SALE AND PURCHASE AGREEMENT

        This Sale and Purchase Agreement (“Agreement”) is entered into of this 29^th day of October, 2004, by and between Printers Alliance, Inc., a Delaware corporation whose principal place of business is 6060 N. Central Expressway, Suite 560, Dallas, Dallas County, Texas 75206 (“Purchaser”); Executive Auto Services, Inc., a Texas corporation whose principal place of business is located at 15950 North Dallas Parkway, Suite 400, Dallas, Dallas County, Texas 75248 and Summit Travel, Inc., a Texas corporation whose principal place of business is located at 3100 Premier Drive, Suite 232, Irving, Dallas County, Texas 75063 (collectively, “Guarantors”); and Ascent Assurance Inc., a Delaware corporation whose principal place of business is 3100 Burnett Plaza, Unit 33, 801 Cherry Street, Fort Worth, Tarrant County, Texas 76102 (“Seller”), owner of all of the issued and outstanding capital stock of Westbridge Printing Services, Inc., a Delaware corporation (“Company”).

INTRODUCTION

        Seller desires to sell and Purchaser desires to purchase all of the issued and outstanding capital stock of Company on the terms and conditions set forth in this Agreement.

        In consideration of the mutual promises of the parties; in reliance on the representations, warranties, covenants and conditions contained in this Agreement; and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and confessed, the parties agree as follows:

ARTICLE 1

Sale

        1.01.   Seller agrees to sell, convey, transfer, assign and deliver to Purchaser all of the issued and outstanding capital stock of Company, and Purchaser agrees to purchase such stock and all of the assets of the Company except certain accounts receivable as described in Section 1.02. Further, Guarantors agree to guarantee the timely and proper performance by the Company and Purchaser of certain future payment and other obligations of the Company, as provided herein pursuant to their respective Guarantee Agreements attached hereto as Exhibits 1 and 2, respectively, and by this reference incorporated for all purposes herein.

Consideration for Sale

        1.02.   In consideration of the sale and transfer of the shares of capital stock of Company and the representations, warranties, and covenants of Seller set forth in this Agreement, Purchaser shall assume, jointly and severally with Company, certain obligations of Company, which obligations are fully described in Exhibit 3, which is attached hereto and by this reference incorporated for all purposes herein, and no other. The parties expressly agree that the present and fixed obligations of Company not fully described in Exhibit 3 shall be retained by Seller and shall be fully and timely paid by Seller as a part of the consideration due Purchaser from Seller under this Agreement. As additional consideration for its purchase of Company, Purchaser shall cause the Company to use its best efforts to timely and properly collect the accounts receivable due the Company on the Closing Date, and to timely and properly pay the accounts payable of the Company as of the Closing Date when such accounts are due. Seller and Purchaser agree that the net amount of any sums the Company recovers from accounts receivable as of the Closing Date which exceed the sum of (a) all accounts payable, as of the Closing date and (b) the lesser of twenty thousand dollars ($20,000.00) and the sum of all severance payments made by the Company to individuals that were employees of the Company on the Closing Date, and who are terminated by the Company within forty five (45) days of the Closing Date shall be divided between Seller and Purchaser as follows: Seller shall receive sixty percent (60%) of such excess and Purchaser shall receive forty percent (40 %) of such excess. Seller and Purchaser agree to follow the procedures set forth in Exhibit 4 with respect to (a) the timely determination of the amount of the accounts receivable and the accounts payable as of the Closing Date, (b) the timely collection after the Closing Date of the accounts receivable as of the Closing Date, and (c) the timely payment after the Closing Date of the accounts payable as of the Closing Date. The pro forma impact of the foregoing provisions on the Company’s unaudited balance sheet as of September 30, 2004 is set forth at Exhibit 6, which is attached hereto and by this reference incorporated for all purposes herein.

Closing

        1.03.   The parties agree to use their best efforts to consummate this transaction (the “Closing”). The Closing shall take place at the office of Seller or at such other place as is mutually agreed upon by Seller and Purchaser on or before October 29, 2004, (“the Closing Date”). In either event, all terms and conditions to the Closing of this Agreement shall have been met on or before the Closing Date.

Termination of 401k Participation

        1.04.   The parties understand, agree and acknowledge that as of the Closing Date the employees of the Company will no longer have the right or option to participate in the 401k plan sponsored by an affiliate of Seller.

Proration of Taxes

        1.05.   Seller shall be solely responsible for and shall promptly pay all Taxes which accrued in connection with the Company, its assets, employees, sales or any other matter or thing connected with Company prior to 2004. All such Taxes which accrued during 2004 shall be prorated as follows: Seller shall be responsible for and shall pay when due, five sixths (5/6s) of all such Taxes and Purchaser shall cause Company to pay or shall itself pay one sixth (1/6) of all such Taxes when due.

ARTICLE 2

SELLER’S REPRESENTATIONS AND WARRANTIES

        Seller hereby represents and warrants to Purchaser that the following facts and circumstances are and at all times up to the Closing Date will be true and correct.

Organization

        2.01.   The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business in Texas. The Company has all requisite power and authority (corporate and, when applicable, government) to own, operate, and carry on its business as now being conducted. The Company’s certificate of incorporation, certificate of good standing in the State of Delaware dated October 18, 2004, articles of incorporation and bylaws as currently in effect are contained in Exhibit 7 which is attached hereto and by this reference incorporated for all purposes herein.

Capital Stock

        2.02.   The amount of authorized capital stock and the number of shares issued and outstanding of Company is set forth in Exhibit 8, which is attached hereto and by this reference incorporated for all purposes herein. The issued and outstanding shares of capital stock of Company have been validly issued, are fully paid and non-assessable, and were issued in compliance with applicable federal and state laws regulating the offer and sale of securities. There are no outstanding options, warrants or similar rights to purchase or convert any obligation into the capital stock or other securities of Company. A Waiver and Consent Agreement, as well as Lost Stock Affidavit have been executed by Credit Suisse First Boston Management Corporation, a copy of each of which is attached hereto as Exhibits 24 and 25, respectively, and by this reference both are incorporated for all purposes herein. As a result, the capital stock of the Company is owned, of record and beneficially, by Seller free and clear of all liens, claims and encumbrances.

Good Standing

        2.03.   The Company is a corporation in good standing with the State of Texas as well as, Delaware, its state of incorporation, and has filed all reports, tax returns, public information reports and other documents and has paid all taxes, fees and other sums necessary for it to remain in good standing for the current year.

Taxes Paid

        2.04.   The Company has paid all federal income taxes, social security taxes, Medicare taxes, FICA, FUTA, sums withheld from employees’ wages and other sums due the Internal Revenue Service, the United States Department of the Treasury and other governmental entities for all periods up to and including the payroll period ended on June 30, 2004. Such taxes for payroll periods in the quarter ended September 30, 2004 will be paid, when due, by October 31, 2004. Such taxes for the payroll period ended October 15, 2004 and the “cut-off” payroll period ended as of the Closing Date, will be paid by Seller, when due, by January 31, 2004.

Texas Workforce Commission

        2.05.   The Company has paid all sums due the Texas Workforce Commission and other governmental agencies.

Employee Benefit Plan Payments

        2.06.   The Company has paid all sums due in connection with any employee pension plan, employee insurance plan and other employee benefit plan, including (without limitation) all sums withheld from its employees’ wages.

Company a Worker’s Compensation Non-Subscriber

        2.07.   The Company is not a subscriber under the worker's compensation insurance for its employees.

Sales by Customer

        2.08.   The Company has successfully made the sales described in Exhibit 9, entitled “Sales by Customer,” which is attached hereto and by this reference incorporated for all purposes herein.

Company Owns Inventory

        2.09.   The Company owns and is in possession of the paper, ink and prepress material described in Exhibits 10, 11 and 12, except the Company does not own or have possession of the paper, ink and prepress material described therein which has been consumed by the Company in the ordinary course of its business since September 30, 2004, which Exhibits are attached hereto and by this reference incorporated for all purposes herein.

Business Relationships

        2.10.   The Company has past or current business relationships with the customers named in Exhibit 9.

Accounts Receivable

        2.11.   As of the date set forth in Exhibit 13, which is attached hereto and by this reference incorporated for all purposes herein, the Company owned the accounts receivable described in Exhibit 13.

Accounts Payable

        2.12.   As of the date set forth in Exhibit 14, which is attached hereto and by this reference incorporated for all purposes herein, the Company was liable for the accounts payable described in Exhibit 14.

Accuracy of Information

        2.13.   All of the information set out in this Agreement and in each of the attached Exhibits was true and complete as of the date(s) indicated therein and includes all information necessary to make all such Exhibits not misleading.

Civil Actions and Administrative Proceedings

        2.14.   Except as described in Exhibit 15, which is attached hereto and by this reference incorporated for all purposes herein, no lawsuit, civil action, criminal action, administrative proceeding or other liability or potential liability of Company is pending or threatened and, to the best of Seller’s knowledge and belief formed after reasonable inquiry, Company has neither engaged in nor suffered to be done any act, omission or both which has or may reasonably be expected to give rise to any claim against it by any person or organization..

Stock and Assets Encumbered

        2.15.   The stock of the Company is not encumbered by any debt. The assets of the Company are encumbered only by the leases contained in Exhibit 3 and the obligations thereunder.

Ownership in Other Companies

        2.16.   The Company has no interest in any other corporation, firm, business or partnership, nor any subsidiaries.

Officers and Directors

        2.17.   Exhibit 16, which is attached hereto and by this reference incorporated for all purposes herein contains a true and correct list of all officers and directors of the Company.

Employees and Borrowed Employees

        2.18.   Exhibit 17, which is attached hereto and by this reference incorporated for all purposes herein contains a true and correct list of all sales employees of the Company, as well as all management employees of a subsidiary of Seller who have been the borrowed employees of and assigned principally to the Company, their annual rate of compensation, and any bonuses paid during 2004.

Financial Statements

        2.19.   Exhibit 18 is attached hereto and by this reference incorporated for all purposes herein and contains the unaudited financial statements of the Company, as follows:(a) unaudited pro forma statements of operations for the years ended December 31, 2001 through December 31 2003 and the nine months ended September 30, 2004; and (b) unaudited pro forma balance sheets as of December 31, 2001, 2002 and 2003 and September 30, 2004. Except as disclosed in Exhibit 18, the unaudited financial statements present fairly and accurately the financial position and results of operation of the Company at the dates and for the periods covered, in each case in conformity with generally accepted and consistently applied accounting principles. There are no liabilities or obligations of Company, accrued, absolute, contingent, inchoate, or otherwise that arose out of or relate to any matter, act, or omission occurring from September 30, 2004, to the date of this Agreement, other than liabilities or obligations incurred in the normal course of business. Since September 30, 2004, to the best of Seller’s knowledge and belief there have not been:

                    (a)   Any material adverse change in financial condition, operations, sales or net loss of the Company;

                    (b)   Any loss, damage or destruction to Company’s properties or assets, tangible or intangible (whether or not covered by insurance);

                    (c)   Any change in policy regarding compensation payable to or to become payable to any of Company’s officers, directors, employees or agents;

                    (d)   Any labor dispute, disturbance, or attempt to organize a union;

                    (e)   Any proposed law or regulation or any actual event or condition of any character that is known to Company or Seller that materially adversely affects the business or future prospects of Company;

                    (f)   Any claim, litigation, event or condition of any character that materially adversely affects the business or future prospects of Company;

                    (g)   Any issuance, purchase of, or agreement to issue or purchase shares of capital stock or other securities of Company, except as contemplated in this Agreement;

                    (h)   Any mortgage, pledge, lien or encumbrance made or agreed to be made on any of Company’s assets or properties, tangible or intangible;

                    (i)   Any sale, transfer, other disposition of or agreement to sell, transfer or dispose of Company’s properties or assets, tangible or intangible, except as contemplated in this Agreement and except in the normal course of business and then only for full and fair value received;

                    (j)   Any loans, advances, or agreements with respect to any loans or advances, other than to customers in the normal course of business and that have been properly reflected as accounts receivable on Company’s books;

                    (k)   Any transaction outside the ordinary course of business; and

                    (l)   Any agreement by Seller or Company to do any of the items described in Subparagraphs (a) through (k), above.

Taxes

        2.20.   All federal, state, local and foreign income, ad valorem, excise, sales, use, payroll, unemployment and other taxes and assessments (“Taxes”) that are due and payable by Company or by Seller on behalf of Company have been properly computed, duly reported, fully paid and discharged. There are no unpaid Taxes that are or could become a lien on the property or assets of Company or require payment by Company, except for current Taxes not yet due and payable. All current Taxes not yet due and payable by Company, if any, have been properly accrued on the balance sheets of Company and all records of the same have been furnished to Purchaser. Company has not incurred any liability for penalties, assessments or interest under the Internal Revenue Code, the Texas Tax Code or any other applicable statute, regulation or law. Seller warrants to Purchaser that no unexpired waiver executed by or on behalf of Company with respect to any Taxes is in effect.

Real Property

        2.21.   Exhibit 3, which is attached hereto and by this reference incorporated for all purposes herein, includes a complete and accurate legal description of each parcel of real property owned by, leased to, or leased by Company together with true, correct, and complete copies of all real property leases. Exhibit 19, which is attached hereto and by this reference incorporated for all purposes herein, contains a description of all leasehold improvements located on the real property that have not been fully depreciated. All of the material real property leases are valid and in full force. There does not exist any default or event that with notice, lapse of time, or both will constitute a default under any of these lease agreements. All of the buildings, fixtures, and leasehold improvements used by Company in its business are located on the real property. The zoning of each parcel of property described in Exhibit 1 permits the presently existing improvements and the continuation of Company’s business presently being conducted on such parcel. Neither Company nor Seller is aware of any enacted or proposed changes to such zoning.

Other Tangible Personal Property

        2.22.   The equipment, furniture, fixtures, and other personal property described in Exhibit 19 which attached hereto and by this reference incorporated for all purposes herein and all of the equipment, furniture, fixtures, and other personal property located at the Company’s facilities in its subleased portion of the premises located at 7333 Jack Newell Blvd. North, Fort Worth, Texas 76118 constitute most all the items of tangible personal property owned by, in the possession of, or used by Company in connection with Company’s business except Inventories. Except as stated in Exhibit 3, no personal property used by Company in connection with its business is held under any lease, security agreement, conditional sales contract, or other title retention or security agreement or is located any place other than in the possession of Company.

Title to Assets and Properties

        2.23.   The Company has good and marketable title to all of its assets and properties, tangible and intangible, which is material to Company’s business and future prospects. These assets and properties constitute all of the assets and interests in assets that are used in Company’s business. All of these assets are free and clear of mortgages, liens, pledges, charges, encumbrances, equities, claims, easements, rights of way, covenants, conditions, and restrictions, except for the following:

                    (a)   Those disclosed in Company’s balance sheets as of September 30, 2004, included in Exhibit 18 to this Agreement;

                    (b)   The lien of current Taxes not yet due and payable; and

                    (c)   Possible minor matters that, in the aggregate, are not substantial in amount and do not materially detract from or interfere with the present or intended use of any of the assets and properties nor materially impair business operations.

Customers and Sales

        2.24.   Exhibit 9 is a correct list for the nine (9) months ended September 30, 2004 of all customers of Company that are not affiliated with the Seller, together with summaries of the sales made to each customer during the period described therein. Except as indicated in Exhibit 9, neither Company nor Seller has information or is aware of any facts indicating that any of these customers intend to cease doing business with Company or to materially alter the amount of the business that they are presently doing with Company. Neither Company nor Seller has information or is aware of any facts indicating that any of the Company’s sales staff intend to cease doing business with Company or to materially alter the amount of the business that they are presently doing with Company.

Laws and Regulations

        2.25.   Company is not in default or in violation of any law; regulation, court order, or order of any federal, state, municipal, foreign, or other government department, board, bureau, agency or instrumentality, wherever located, that would adversely affect its business or future prospects.

Fringe Benefit Plans; Employment Contracts

        2.26.   There are no employment agreements (in effect with) to which Company is a party. There are no unfunded pension or similar liabilities regarding any employee of Company.

Reserves

        2.27.   The Company maintains no reserves for contingent liabilities.

Bank Accounts

        2.28.   Exhibit 20 which is attached hereto and by this reference incorporated for all purposes herein contains a true and correct list of the names and addresses of all banks or other financial institutions in which the Company has an account, deposit or safe deposit box. Also included are the names of all persons authorized to draw on these accounts or deposits or who have access to them and the account numbers of each account.

Business Operations

        2.29.   The business operations of the Company for the past five years have been in material compliance with all laws, treaties, rulings, directives, and similar regulations of all government authorities having jurisdiction over such business insofar as failure to comply could adversely affect the Company’s business and future prospects.

Authority

        2.30.   Seller and the Company each has full power and authority to execute, deliver and consummate this Agreement, subject to the conditions to Closing set forth in this Agreement. All reports and returns required to be filed by each with any government and regulatory agency with respect to this transaction, if any, have been properly filed. Except as otherwise disclosed in this Agreement, no notice to or approval by any other person, firm or entity, including governmental authorities, is required of Seller or Company to consummate the transaction contemplated by this Agreement.

Full Disclosure

        2.31.   No representation, warranty or covenant made to the Purchaser in this Agreement nor any document, certificate, exhibit or other information given or delivered to Purchaser pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit a material fact necessary to make the statements contained in this Agreement or the matters disclosed in the related documents, certificates, information or exhibits not misleading.

Brokers

        2.32.   Neither Seller nor the Company, nor any of the Company’s officers, directors, employees or stockholders, has retained, consented to, or authorized any broker, investment banker or third party to act on Company’s behalf, directly or indirectly, as a broker or finder in connection with the transactions contemplated by this Agreement.

Authority

        2.33.   Seller’s agent executing this Agreement on behalf of Seller has all requisite authority, including (without limitation) all corporate authority of Seller to execute this Agreement on Seller’s behalf. Exhibits 21 and 22 are attached hereto and by this reference incorporated for all purposes herein true copies of resolutions of the shareholders and directors of Seller certified by Seller’s corporate Secretary authorizing Seller’s agent whose signature appears below to execute this Agreement on Seller’s behalf.

Phone System

        2.34.   Seller will surrender its right, title and interest in and to the phone system currently used by the Company, including telephones in the subleased premises of the Company (as depicted in the Sublease Agreement) on the Closing Date.

ARTICLE 3

PURCHASER’S REPRESENTATIONS, WARRANTIES AND WAIVERS

        Purchaser represents and warrants to Seller that:

Authority

        3.01.   Purchaser has full power and authority to execute, deliver and consummate this Agreement subject to the conditions to Closing set forth in this Agreement. All corporate acts, reports and returns required to be filed by Purchaser with any government or regulatory agency, if any, with respect to the transaction contemplated herein have been or will be properly filed prior to the Closing Date. No provisions exist in any contract, document or other instrument to which Purchaser is a party or by which Purchaser is bound that would be violated by consummation of the transaction contemplated in this Agreement. Moreover, the execution, delivery and performance by Purchaser of the duties and obligations contained herein are duly authorized by all necessary corporate or other action and will not (a) violate any provisions of its certificate of incorporation or by-laws (or comparable charter or governance documents); (b) violate an provision of, or require any filing, registration, consent or approval under, any material law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to and binding upon Purchaser, or (c) result in a breach of, or constitute a default or event of default or require any consent under any indenture, mortgage or loan or credit agreement or any other material agreement, lease or instrument to which Purchaser is a party or by which its properties may be bound.

Broker

        3.02.   Neither Purchaser, nor any of Purchaser’s officers, directors, or employees, has retained, consented to, or authorized any broker, investment banker, or third party to act on its behalf, directly or indirectly, as a broker or finder in connection with the transactions contemplated by this Agreement.

Organization and Standing of Purchaser

        3.03.   Purchaser is a corporation that has been duly and properly formed, validly exists, and is in good standing under the laws of the State of Delaware. Purchaser possesses corporate power to own property and carry on its business as it is now being conducted. Purchaser has timely and properly filed all reports, tax returns, public information reports and other documents and has paid all taxes, fees and other sums necessary for Purchaser to remain in good standing for the current year.

Solvency

        3.04.   As of the Closing Date Purchaser is not “insolvent” as that term is defined in Section 101 of the Bankruptcy Reform Act of Act of 1978, as amended from time to time and any successor statute. Purchaser does not believe it will, incur liabilities and obligations as a result of this transaction beyond its ability to pay as such obligations and liabilities mature.

Insurance

        3.05.   Purchaser has secured and purchased all reasonable and necessary property and casualty insurance coverage for and on behalf of the Company, effective on the date of Closing, fully insuring and protecting the Company and all of its assets from all forms of loss including, but not limited to fire, theft, wind, electrical, and mechanical caused property losses, as well as liability coverage for bodily injury and property damage allegedly caused by the acts and/or omissions of Purchaser or the Company.

Payments by the Company

        3.06.   Purchaser shall cause the Company to pay, or shall itself pay, the obligations set forth in Exhibit 3 in accordance with the terms of those obligations or in accordance with such other terms as are acceptable to those creditors of the Company to whom those obligations are owed. With respect to the Komori Lithrone Model L640-III Series 45 Six Color Offset Press and the payment obligations under the Sublease, both of which are set forth in Exhibit 3, Purchaser shall cause the Company to pay, or shall itself pay, the sums reflected in Exhibit 3 in the following fashion: (i) Purchaser shall cause the Company to timely and properly generate checks made payable to the creditor of the Company listed in Exhibit 3; (ii) Such checks shall be timely and properly delivered by Purchaser to an agent of Seller designated by Seller within sufficient time for the dispatch, as applicable, of such checks by Seller to those creditors of the Company in time for receipt by such creditors on the due date of each applicable obligation of the Company; and (iii) Seller agrees to use such due and proper care as is necessary to ensure that each such check is timely mailed or otherwise transmitted in order to be timely received by the applicable creditor of the Company.

Joint and Several Liability

        3.07.   Purchaser understands and agrees that it is jointly and severally liable with the Company to the Seller for the liabilities of the Company described in Exhibit 3.

Timely and Proper Maintenance of Press and Equipment

        3.08.   Purchaser understands and agrees that the failure to perform timely and proper maintenance on the presses and printing equipment will lead to a deteriorization of such equipment and a diminution of market value. Accordingly, Purchaser shall cause the Company to timely and properly perform all recommended maintenance on all of the presses and printing equipment of the Company and maintain proper records regarding such maintenance, and if the Company fails to timely and properly perform such maintenance and maintain such maintenance records, then Purchaser shall immediately do so. In addition, Seller shall be permitted access to all maintenance records and maintenance personnel in order to verify Purchaser’s and the Company’s compliance with this representation and warranty.

Performance by the Company

        3.09.   On and after the Closing Date, Purchaser shall cause the Company to timely and properly perform all duties and obligations (i) owed by the Company as the Subtenant under the Sublease Agreement between the Company and Seller, which is attached hereto as Exhibit 26 and by this reference incorporated for all purposes herein, and (ii) owed by the lessee under any of the equipment leases identified in Exhibit 3, and if the Company fails to timely and properly perform all such duties and obligations, then Purchaser shall immediately do so; and with respect thereto, Seller shall have the same rights against Purchaser and the Company as the lessor under each such equipment lease.

Phone System

        3.10.   On the first business day following the Closing Date, Purchaser shall effect a termination of the current local and long distance telephone service from the subsidiary of Seller in whose name such service is currently provided to the Company and transfer such service to the Company.

Maintain Insurance

        3.11.   After the Closing Date, Purchaser shall cause the Company to keep in force all policies of insurance covering the Company’s business, properties and assets, including all insurance listed in this Agreement.

Company to Remain in Good Standing

        3.12.   After the Closing Date, Purchaser shall cause the Company to file all reports, tax returns, public information reports and other documents and timely and properly pay all taxes, fees and other sums necessary for the Company to remain in good standing.

Maintain Compliance With Laws and Regulations

        3.13.   After the Closing Date, Purchaser shall cause the Company to not be in default or in violation of any law; regulation, court order, or order of any federal, state, municipal, foreign, or other government department, board, bureau, agency or instrumentality, wherever located, that would adversely affect its business or future prospects.

Non-Removal of Komori Printing Equipment

        3.14.   After the Closing Date and prior to October 31, 2005, Purchaser shall cause the Company to keep the Komori printing equipment, described in Exhibit 3, housed and properly safe guarded at its current location at 7333 Jack Newell Boulevard North, Fort Worth, Texas unless Company first obtains the prior written approval of Seller, which written approval shall not be unreasonably withheld.

ARTICLE 4

COVENANTS

        Seller covenants with Purchaser that from and after the date of this Agreement until the Closing Date, Seller will and will cause the Company to:

Business Operations

        4.01.   Operate its business and conduct its activities in the normal course of business and not introduce any material new method of management, operation or accounting.

Maintenance of Assets and Properties

        4.02.   Maintain all tangible assets and properties of the Company in as good a state of operating condition and repair, as they are on the date of this Agreement, except for ordinary depreciation, wear and tear.

Absence of Liens

        4.03.   Not sell, pledge, lease, mortgage, encumber, dispose of or agree to do any of these acts regarding any of the assets or properties of the Company, other than in the ordinary course of business, without the prior written approval of Purchaser.

Preservation of Business

        4.04.   Use its best efforts to preserve intact its organization and personnel and to keep available the services of all of its employees, agents, independent contractors and consultants commensurate with the Company’s business requirements.

Preservation of Customer Relations

        4.05.   Use its best efforts to preserve intact the present customers of Company and the goodwill of all customers with respect to the Company and its business.

Maintain Insurance

        4.06.   Keep in force all policies of insurance covering the Company’s business, properties and assets, including all insurance listed in this Agreement.

Absence of Contractual Obligations

        4.07.   Not become obligated on any contract or commitment or incur or agree to incur any liability beyond a period of thirty (30) days or for any amount in excess of $5,000.00 or make any capital expenditures without the prior written consent of Purchaser.

Performance of Obligations

        4.08.   Perform all of its obligations and not make any material amendment to its obligations under all agreements relating to or affecting the Company’s customers, business, properties and assets.

Notification of Litigation

        4.09.   Promptly notify Purchaser in writing of any outstanding or threatened claims; legal, administrative or other proceedings, suits, investigations, inquires, complaints, notices of violations or other process; or other judgments, orders, directives, injunctions or restrictions against or involving the Company or its personnel that could adversely affect the Company.

Access to Books and Records

        4.10.   Make available to Purchaser and its authorized agents, accountants and attorneys for inspection at reasonable times and under reasonable circumstances the following items with respect to Company: assets; properties; business and financial records; tax returns. Seller will use its best efforts to cause Company’s officers and employees to cooperate fully with Purchaser’s examination(s) and to make a full and complete disclosure to Purchaser of all facts regarding the financial condition and business operations of Company.

Employee Compensation

        4.12.   Not increase the compensation payable to or to become payable to any executive officer, key employee or agent; make any bonus payment to any such person; and permit Purchaser to contact such employees, agents, and officers at all reasonable times for the purpose of discussing with them prospective employment by Purchaser on or after the Closing Date. Seller shall use its best efforts to encourage all such persons to accept any employment offered by Purchaser.

Not Solicit

        4.13.   Not negotiate with any person or entity, or solicit or entertain any proposal concerning any acquisition in any form of Company.

Resist Brokers

        4.14.   Assist and cooperate with Purchaser in resisting any claim of any broker, investment banker, or third party for any brokerage fee, finder’s fee, or commission against Purchaser or Company in connection with the transaction_ contemplated by this Agreement.

Maintain Employee Benefit Plans

        4.15.   Not add or discontinue any pension, welfare, or other employee benefit plans, or make any alteration in any existing pension, welfare, or other employee benefit plans.

Payment of Liabilities and Waiver of Claims

        4.16.   Not do, or agree to do, any of the following acts:

a.	Pay any obligation or liability, fixed or contingent, other than current liabilities;
b.	Waive or compromise any right or claim; and/or
c.	Without full payment, cancel any note, loan or other obligation owing to the Company.

Maintain Existing Agreements

        4.17.   Not modify, amend, cancel or terminate any of the Company’s existing contracts or agreements or agree to do so.

Provide Sales and Use Tax Certificates

        4.18.   Deliver to Purchaser clearance certificates from the appropriate agencies in Texas (where Company is qualified to do business) and any other state where Company is qualified to do business as well as any related certificates that Purchaser may reasonably request as evidence that all sales, use and other tax liabilities of Company (other than income tax liabilities) accruing on or before September 30, 2004 and on or before the Closing Date have been fully satisfied or provided for by Company.

ARTICLE 5

CONDITIONS TO PURCHASER’S OBLIGATION TO CLOSE

        The obligation of Purchaser to Close under this Agreement is subject to each of the following conditions (any one of which may, at the option of Purchaser, be waived in writing by Purchaser) existing on the Closing Date, or such earlier date as the context may require.

Representations and Warranties

        5.01.   Each of the representations and warranties of Seller in this Agreement, the disclosures contained in the exhibits to this Agreement, and all other information delivered under this Agreement shall be true in all material respects at and as of the Closing Date as though each representation, warranty, and disclosure were made and delivered at and as of the Closing Date.

Opinion of Counsel

        5.02.   Seller shall deliver to Purchaser an opinion of counsel addressed to Purchaser and dated as of the Closing Date in substantially the form set forth in Exhibit 23, which is attached hereto and by this reference incorporated for all purposes herein.

Compliance With Conditions

        5.03.   The Company and Seller shall each comply with and perform all agreements, covenants and conditions in this Agreement required to be performed and complied with by each of them. All requisite action (corporate and otherwise) in order to consummate this Agreement shall be properly taken by Company and Seller.

Suit or Proceeding

        5.04.   No suit or proceeding, legal or administrative, relating to any of the transactions contemplated by this Agreement shall be overtly threatened or commenced that, in the sole discretion of Purchaser and its counsel, would make it inadvisable for Purchaser to Close this transaction.

Government Approvals and Filings

        5.05.   All necessary government approvals and filings regarding this transaction shall be received or made prior to the Closing Date in substantially the form applied for to the reasonable satisfaction of Purchaser and its counsel. Any applicable waiting period for the approvals and filings shall have expired.

Corporate and Stockholder Action

        5.06.   All corporate and stockholder action necessary to consummate the transactions contemplated in this Agreement shall be properly taken by Seller and the Company. Purchaser shall receive copies of all appropriate resolutions of the Company’s and Seller’s boards of directors and shareholders relating to this Agreement. The resolutions shall be certified by the Company’s and Seller’s respective corporate secretaries.

Board of Directors Resignations

        5.10.   On or before the Closing Date, Seller shall secure the resignations of all directors currently serving on the board of directors of Company, and present a letter from the applicable director(s) confirming such resignation.

ARTICLE 6

CONDITIONS TO SELLER’S OBLIGATION TO CLOSE

        The obligation of Seller to Close under this Agreement is subject to each of the following conditions (any one of which at the option of Seller may be waived in writing by Seller) existing on the Closing Date.

Corporate Action

        6.01.   Purchaser shall take appropriate corporate action regarding this transaction, which shall be evidenced by resolutions of its board of directors and shareholders and certified to Purchaser’s corporate secretary, authorizing Purchaser to enter into and complete this transaction.

Government Approvals

        6.02.   All necessary government approvals regarding this transaction shall be received prior to the Closing Date in substantially the form applied for and to the reasonable satisfaction of Seller and its counsel.

Opinion of Counsel

        6.03.   Purchaser shall deliver to Seller the opinion of outside counsel dated as of the Closing Date in substantially the form set forth in Exhibit 23A.

Guaranties

        6.04.   Executive Auto Services, Inc., a Texas corporation whose principal place of business is 15950 North Dallas Parkway, Suite 400, Dallas, Dallas County, Texas 75248 and Summit Travel, Inc., a Texas corporation whose principal place of business is 3100 Premier Drive, Suite 232, Irving, Dallas County, Texas 75063 (collectively “Guarantors”) shall have timely and properly executed and delivered to Seller their respective written guaranties in the form as set forth in Exhibits 1and 2, which are attached hereto and by this reference incorporated for all purposes herein.

ARTICLE 7

PARTIES’ OBLIGATIONS AT THE CLOSING

Seller’s Obligations at Closing

        7.01.   At the Closing, Seller shall deliver or cause to be delivered to Purchaser instruments of assignment and transfer of all of the issued and outstanding capital stock of Company, free and clear of all liens, claims and encumbrances in form and substance reasonably satisfactory to Purchaser’s counsel. Simultaneously with the consummation of the transfer, Seller shall put Purchaser in full possession and enjoyment of all properties and assets of Company.

        7.02.   Seller, at any time before or after the Closing Date, shall execute, acknowledge and deliver to Purchaser any further deeds, assignments, conveyances, other assurances, documents and instruments of transfer reasonably requested by Purchaser, including a copy of Sublease Agreement between Seller and the Company regarding the space currently occupied by the Company, which has been previously approved and consented to by the landlord of the original lease. Seller shall also take any other action consistent with the terms of this Agreement that may be reasonably requested by Purchaser for the purpose of assigning, transferring, granting, conveying and confirming to Purchaser or reducing to possession any or all property and assets to be conveyed and transferred by this Agreement.

Purchaser’s Obligation at Closing

        7.03.   At the Closing, Purchaser shall deliver to Seller against delivery of the items specified in Paragraph 7.01, above. Purchaser shall also deliver the properly executed guaranties of Guarantors in the form of Exhibits 1 and 2, as well as the properly executed opinion of counsel contained in Exhibit 23A.

ARTICLE 8

SELLER’S OBLIGATIONS AFTER THE CLOSING

Preservation of Goodwill

        8.01.   Following the Closing Date, Seller will restrict its activities so that Purchaser’s reasonable expectations with respect to the goodwill, business reputation, employee relations, and prospects connected with the assets and properties purchased under this Agreement will not be materially impaired.

Change of Name

        8.02.   Seller agrees that, after the Closing Date, it will not use or employ in any manner, directly or indirectly, the name of the Company or any variation of the name. Seller also agrees that, in order to comply with this covenant, it will take and cause to be taken all necessary action, including filing a withdrawal notice for any assumed name certificate bearing the Company’s name or any variant of the name that Seller has previously filed.

Nonsolicitation of Employees

        8.03.   Prior to the third anniversary of the Closing Date, Seller shall not specifically target, directly solicit or hire any individual who is employed by the Company on the Closing Date.

Non-Competition — Printing

        8.04.   Prior to the third anniversary of the Closing Date, Seller shall not engage by itself or through any subsidiary in providing printing services to any entity that is not a subsidiary of Seller at the time such service is provided.

No Acquisition of Conventional 4 Color Offset Printing Press

        8.05.   Prior to the third anniversary of the Closing Date, neither Seller nor any of Seller’s subsidiaries shall purchase, lease, or otherwise acquire a Conventional Four (4) Color Offset Printing Press. Notwithstanding the immediately foregoing sentence, nothing contained herein shall prevent or otherwise restrict Seller and/or any of its subsidiaries from purchasing, leasing, or otherwise acquiring any and all types of black and white or color digital printers or digital presses, including, but not limited to (i) digitally based xerographic color printers such as Xerox Corporation’s DocuColor® 6060 Digital Color Press, DocuColor® 8000 Digital Color Press, or similar product (ii) wet or dry toner based printers, and (iii) Konica Minolta’s ColorFORCE™ 8050 Color Imaging System, or similar product.

Non-Disclosure and Limited Confidentiality

Seller shall not disclose and shall keep confidential the specific details of this transaction and parties involved, except to the extent that such disclosure is required under the securities laws of the United States that govern Seller as a public company.

ARTICLE 9

INDEMNIFICATION

Limited Covenant to Indemnify and Hold Harmless

        9.01.   Seller covenants and agrees to indemnify, defend and hold harmless the Company from and against any and all claims, suits, losses, judgments, damages and liabilities including any investigation, legal and other expenses incurred in connection with and any amount paid in settlement of any tax, claim, action, suit or proceeding (collectively called “Losses”), other than those Losses or potential Losses disclosed in this Agreement or any Exhibit delivered pursuant to this Agreement, to which the Company may become subject, if such Losses arise out of or are based upon any facts and circumstances that constitute a material misrepresentation, breach of warranty, or breach of a material covenant by Seller to Purchaser in this Agreement. This right to indemnification to the Company is in addition to any other right available to Purchaser, including the right of Purchaser to sue Seller for a misrepresentation, breach of warranty, or breach of covenant under this Agreement.

Income Taxes

        9.02.   Without limiting the provisions of the above paragraph 9.01, Seller shall indemnify, defend and hold harmless Purchaser and Company from and against any losses to which the Company may become subject insofar as such losses arise out of or are based on any tax on or measured by the net income of Company during any period on or before the Closing Date.

Notification and Defense of Claims or Actions

        9.04.   When the Company proposes to assert the right to be indemnified under this Article 9 with respect to third-party claims, actions, suits, or proceedings, Purchaser shall cause the Company, within thirty (30) days after receipt of notice of the commencement of the claim, action, suit, or proceeding, to notify Seller in writing, enclosing a copy of all papers served or received. On receipt of the notice, Seller shall have the right to direct the defense of the matter, but the Company shall be entitled to participate in the defense and, to the extent that the Company desires, to jointly direct the defense with Seller with counsel mutually satisfactory to the Company and Seller, at Seller’s expense. The Company shall also have the right to employ its own separate counsel in any such action, at its own expense. The fees and expenses of the Company’s counsel in such circumstance shall be paid by the Company unless: (a) the employment of the counsel has been authorized by Seller; (b) the Company has reasonably concluded that there is a conflict of interest between Seller and the Company in the conduct of the defense of any action in which both are parties and being defended by Seller through one counsel; or (c) Seller has not, in fact, employed counsel that is reasonably satisfactory to Purchaser to assume the defense of the Company in the action. In each of these cases, the reasonable and necessary fees and expenses of the Company’s separate counsel that are actually incurred and paid by the Company shall be reimbursed by Seller. Neither Seller nor the Company shall be liable for any settlement of any action or claim described in this Article 9 that is effected without their consent.

Interest

        9.05.   Any indemnification required of Seller under this Article 9 shall include interest on the amount of the indemnity from the time the indemnified obligation is actually and finally incurred and paid to the date of payment by the indemnitor at the rate of six percent (6%) simple interest per annum.

ARTICLE 10

GENERAL PROVISIONS

Survival of Representations, Warranties and Covenants

        10.01.   The representations, warranties, covenants and agreements of the parties contained in this Agreement or contained in any writing delivered pursuant to this Agreement shall survive the Closing Date for five (5) years.

Notices

        10.02.   All notices that are required or that may be given pursuant to the terms of this Agreement shall be in writing and shall be sufficient in all respects if given in writing and delivered personally or by registered or certified mail, return receipt requested, postage prepaid as follows:

        If to Seller: Ascent Assurance Inc., 3100 Burnett Plaza, Unit 33, 801 Cherry Street, Fort Worth, Texas 76102

        If to Purchaser: Printers Alliance, Inc., 3100 Premier Dr, Suite 232, Irving, Texas 75063.

        Seller and Purchaser may each change the address to which the notices contemplated in this Agreement may be delivered or mailed by delivering or mailing written notice of the new address to which such notices may be delivered or mailed, in the manner contemplated in this part 9.02, to the other. Such written notices change the address to which written notices might be sent pursuant to this Agreement shall be effective ten (10) days after dispatch of the same.

Assignment of Agreement

        10.03.   This Agreement shall be binding on and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. However, Purchaser may not assign the rights, duties and obligations it has under the terms of this Agreement to any third party without the prior written consent of Seller, which consent shall not be unreasonably withheld. Any attempt to make such an assignment without such written consent is void.

Governing Law

        10.04.   This Agreement shall be construed in accordance with and governed by the laws of the State of Texas.

Choice of Form

        10.05.   This Agreement is solely performable in Tarrant County, Texas and any action brought to enforce or construe the same or any part thereof shall be brought in a state court of competent jurisdiction sitting in Tarrant County, Texas.

Amendments — Waiver

        10.06.   This Agreement may be amended only in writing by the mutual consent of the parties, evidenced by all necessary and proper corporate authority. No waiver of any provision of this Agreement shall arise from any action or inaction of any party, except an instrument in writing expressly waiving the provision executed by the party entitled to the benefit of the provision.

Entire Agreement

        10.07.   This Agreement, together with any documents and Exhibits attached and incorporated herein or required to be delivered pursuant to the express terms of this Agreement constitutes the entire agreement between the parties to this Agreement. No party shall be bound by any communications between them regarding the subject matter of this Agreement unless the communication is (a) in writing, and (b) is agreed to by all Parties to this Agreement. On execution of this Agreement, all prior agreements or understandings, if any, between the parties shall be null and void.

Reliance on Representations and Warranties

        10.08.   The parties mutually agree that, notwithstanding any right of Purchaser to fully investigate the affairs of the Company and notwithstanding any knowledge of facts determined or determinable by Purchaser pursuant to the investigation or right to investigate, Purchaser may fully rely upon the expressed representations, warranties and covenants made to Purchaser in this Agreement and on the accuracy of any document, certificate or Exhibit given or required to be delivered to Purchaser pursuant to the express terms of this Agreement.

Termination of Agreement

        10.09.   In the event this Agreement is not Closed by October , 2004 then this Agreement shall terminate on and as of that date. Any termination shall not affect in any manner any rights and remedies that any party to this Agreement may have at the time of termination.

Severability

        10.10.   In the event any provision of this Agreement is deemed to be invalid, unenforceable or both, each such provision shall be severable from the remainder of this Agreement.

Counterparts

        10.11.   The parties to this Agreement agree that this Agreement may be executed in one or more identical counterparts, each of which shall be deemed an original, but all of which together shall constitute one agreement.

Rule of Construction

        10.12.   The signatories hereto and their counsel have reviewed this Agreement and agree that the rule of construction providing that any ambiguities in this Agreement are to be construed against the drafter shall not be employed in the interpretation of this Agreement.

        SIGNED on the dates indicated below by the individuals indicated below, each of whom represents and warrants that he or she is fully authorized and empowered by his or her principal to execute this Agreement on behalf of that principal.

ASCENT ASSURANCE INC.,
Seller

by: /Patrick H. O'Neill/           
       Patrick H. O'Neill
       Executive Vice President 10-29-04
Date

PRINTERS ALLIANCE, INC.
Purchaser

by: Marti Shelton                                      
       Marti Shelton, its authorized agent 10-29-04
Date

EXECUTIVE AUTO SERVICES, INC.,
Guarantor

by: Marti Shelton                                      
       Marti Shelton, its authorized agent 10-29-04
Date

SUMMIT TRAVEL, INC.,
Guarantor

by: Marti Shelton                                      
       Marti Shelton, its authorized agent 10-29-04
Date

ACKNOWLEDGMENT

STATE OF TEXAS

COUNTY OF TARRANT

        BEFORE ME, the undersigned Notary Public, personally appeared Patrick H. O’Neill, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed that instrument in the capacity indicated and for the purposes and consideration expressed therein.

        GIVEN UNDER MY HAND AND SEAL OF OFFICE on this 29th day of October 2004.

Patti Bunch  
Notary Public in and for
The State of Texas
My Commission Expires:9-15-2006

ACKNOWLEDGMENT

STATE OF TEXAS

COUNTY OF TARRANT

        BEFORE ME, the undersigned Notary Public, personally appeared Marti Shelton, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed that instrument in the capacities indicated and for the purposes and consideration expressed therein on behalf of each of the entities indicated.

        GIVEN UNDER MY HAND AND SEAL OF OFFICE on this 29th day of October 2004.

Patti Bunch  
Notary Public in and for
The State of Texas
My Commission Expires:9-15-2006

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Benjamin M. Cutler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ascent Assurance, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Reserved]

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2004

/s/ Benjamin M. Cutler            
Benjamin M. Cutler
Chairman of the Board and
Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Cynthia B. Koenig, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Ascent Assurance, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Reserved]

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2004

/s/ Cynthia B. Koenig           
Cynthia B. Koenig
Senior Vice President,
Chief Financial Officer and
Treasurer

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)

          Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certify as follows:

1. Benjamin M. Cutler is the Chairman of the Board and Chief Executive Officer of Ascent Assurance, Inc. (the “Company”).

2. Cynthia B. Koenig is the Senior Vice President and Chief Financial Officer of the Company.

3. To the best of our knowledge:

(A) The Company’s Form 10-Q for the quarterly period ended September 30, 2004 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(B) The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 5, 2004

/s/Benjamin M. Cutler         

Benjamin M. Cutler

Chairman of the Board and

Chief Executive Officer

/s/Cynthia B. Koenig          

Cynthia B. Koenig

Senior Vice President and

Chief Financial Officer