PATRICK H. O'NEILL
                              EMPLOYMENT AGREEMENT

     This Agreement (this "Agreement"),  dated as of September 16, 2001, is made
by and  among  Ascent  Assurance,  Inc.,  a  Delaware  corporation,  having  its
principal offices at 110 West Seventh Street, Suite 300, Fort Worth, Texas 76102
("AAI"), Ascent Management,  Inc., a Delaware corporation,  having its principal
offices at 110 West  Seventh  Street,  Suite 300,  Fort Worth,  Texas 76102 (the
"Corporation"),  and Mr. Patrick H. O'Neill (the "Executive"),  residing at 4001
Briarhaven Court, Fort Worth, Texas 76109.

                                    RECITALS

     1. The  Corporation  and AAI each  desire to  retain  the  Executive  as an
employee  of the  Corporation  and AAI and to employ him as the  Executive  Vice
President,  General Counsel,  and Secretary of AAI and the  Corporation,  and to
enter into an agreement  embodying the terms of those  relationships  which upon
proper execution shall supercede all prior written employment agreements between
the parties.

     2. The  Executive  is willing  to serve as the  Executive  Vice  President,
General Counsel, and Secretary of AAI and the Corporation on the terms set forth
herein.
                                    AGREEMENT

     NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and other good and valuable consideration,  the Corporation, AAI, and
the Executive hereby agree as follows:

     1. Definitions.

     1.1  "Affiliate" means any person or entity  controlling,  controlled by or
          under common control with AAI or the Corporation.

     1.2  "Annual  Compensation"  means the Executive's  highest Base Salary and
          Annual Bonus during the Term of Employment.

     1.3  "Board" means the Board of Directors of AAI.


     1.4  "Cause" means (a) Executive's material breach of any term or condition
          of this Agreement;  (b) Executive's (i) personal  dishonesty,  willful
          misconduct or intentional  breach of fiduciary duty, in each such case
          involving AAI, the Corporation or any Affiliate's property,  personnel
          or business  operations,  in each case  materially  detrimental to the
          goodwill of AAI,  the  Corporation  or any  Affiliate,  or  materially
          damaging to AAI's, the Corporation's or any Affiliate's  relationships
          with  its  respective  customers,   clients  or  employees;   or  (ii)
          intentional  failure to perform  the  current  material  duties of his
          employment or his other material obligations  hereunder,  or any other
          intentional  act by  Executive  which  in  either  case is  materially
          detrimental to the goodwill of AAI, the  Corporation or any Affiliate,
          or materially  damaging to AAI's, the Corporation's or any Affiliate's
          relationships   with  its   customers,   clients  or  employees;   (c)
          Executive's conviction or entry of a no-contest plea with respect to a
          felony;  (d)  Executive's  material   misappropriation  (or  attempted
          material  misappropriation)  of any of AAI's, the Corporation's or any
          Affiliate's,  funds or property or of a business  opportunity  of AAI,
          the  Corporation or any Affiliate  (including  attempting to secure or
          securing  any  personal  profit  in  connection  with any  transaction
          entered  into on  behalf of AAI,  the  Corporation  or any  Affiliate)
          materially  detrimental to the goodwill of AAI, the Corporation or any
          Affiliate,  or materially  damaging to AAI's, the Corporation's or any
          Affiliate's  relationships with its respective  customers,  clients or
          employees;  or (e) Executive's gross negligence in connection with the
          performance of Executive's  obligations  hereunder which is materially
          detrimental  to  the  goodwill  of  AAI  and  the  Corporation  or any
          Affiliate,  or materially  damaging to AAI's, the Corporation's or any
          Affiliate's relationships with its customers, clients or employees.

     1.5  "Date of Termination" means (a) in the case of a termination for which
          a Notice of  Termination  is required,  the date of actual  receipt of
          such Notice of Termination  or, if later,  the date specified  therein
          (in no event,  however,  shall  such date be later than seven (7) days
          after the date of actual receipt of such notice),  as the case may be,
          and (b) in all other cases,  the actual date on which the  Executive's
          employment terminates during the Term of Employment.

     1.6  "Disability"  means  mental  or  physical   impairment  or  incapacity
          rendering  the  Executive  substantially  unable to perform his duties
          under  this  Agreement  for at least  than 180 days out of any 360 day
          period during the Term of Employment.

     1.7  "Good Reason" means and shall be deemed to exist if, without the prior
          express  written  consent  of the  Executive,  (a)  the  Executive  is
          assigned any duties or  responsibilities  inconsistent in any material
          respect  with the scope of the duties or  responsibilities  associated
          with the Executive's  titles or positions,  as set forth and described
          in Section 4 of this Agreement;  (b) the Executive suffers a reduction
          in the  duties,  responsibilities,  titles,  positions,  or  effective
          authority associated with such titles and positions,  as set forth and
          described  in Section 4 of this  Agreement;  (c) the  Executive is not
          appointed  to, or is removed from,  the offices or positions  provided
          for in Section 4 of this Agreement; (d) the Executive's Base Salary is
          decreased by AAI or the Corporation, or the Executive's benefits under
          employee  benefit or health or welfare plans or programs of AAI or the
          Corporation are decreased, except as provided in Section 5.1 hereof as
          a  result  of a  good  faith  change  in  benefits  applicable  to all
          employees of AAI and the Corporation, or the Executive fails to timely
          receive his Base Salary,  2001 Annual Bonus,  2002 Annual Bonus,  LTIP
          Award,  expense  reimbursement,  or any other  benefit  to which he is
          entitled under this  Agreement;  (e) AAI and the  Corporation  fail to
          maintain,  or cause to be maintained,  adequate directors and officers
          liability  insurance coverage for the Executive or fail to comply with
          Section 4.3 of this Agreement;  (f) AAI and the Corporation purport to
          terminate  the  Executive's  employment  for Cause and such  purported
          termination  of  employment  is not  effected in  accordance  with the
          requirements  of this  Agreement;  or (g)  there  occurs a  Change  in
          Control.

     1.8  "Term of Employment" has the meaning ascribed to it in Section 3.

     1.9  "Change in Control" means

          (a)  the acquisition, during the Term of Employment, by an individual,
               entity or group  (within  the  meaning  of  Section  13(d)(3)  or
               14(d)(2) of the Securities  Exchange Act of 1934, as amended (the
               "Exchange Act")) of beneficial  ownership  (within the meaning of
               Rule 13d-3  promulgated under the Exchange Act) of 34% or more of
               (A) the  outstanding  shares of common stock of AAI, (the "Common
               Stock"),   or  (B)  the  combined  voting  power  of  the  voting
               securities  of AAI entitled to vote  generally in the election of
               directors  (the  "Voting  Securities");  provided,  however,  the
               following  acquisitions shall not constitute a Change in Control:
               (x) any  acquisition  by any  employee  benefit  plan (or related
               trust)  sponsored  or  maintained  by the  Corporation  or AAI or
               Affiliate,   or  (y)  any  acquisition  by  any  corporation  if,
               immediately following such acquisition, more than 66% of the then
               outstanding  shares of common stock of such  corporation  and the
               combined voting power of the then outstanding  voting  securities
               of such  corporation  (entitled to vote generally in the election
               of directors) is beneficially owned,  directly or indirectly,  by
               all or  substantially  all of the  individuals  and entities who,
               immediately prior to such acquisition, were the beneficial owners
               of the Common Stock and the Voting  Securities  in  substantially
               the  same   proportions,   respectively,   as  their   ownership,
               immediately  prior to such  acquisition,  of the Common Stock and
               Voting Securities; or

          (b)  circumstances occurring,  during the Term of Employment,  whereby
               individuals  who  constitute  the Board (the  "Incumbent  Board")
               cease for any reason to  constitute  at least a  majority  of the
               Board; provided, however, that any individual becoming a director
               subsequent  to the  date of this  Agreement  whose  election,  or
               nomination for election by AAI's shareholders,  was approved by a
               vote of at least a majority  of the  directors  then  serving and
               comprising the Incumbent Board shall be considered as though such
               individual were a member of the Incumbent  Board,  but excluding,
               for this purpose, any such individual whose initial assumption of
               office  occurs as a result  of  either  an  actual or  threatened
               election  contest  (as  such  terms  are used in Rule  14a-11  of
               Regulation  14A  promulgated  under  the  Exchange  Act) or other
               actual or threatened solicitation of proxies or consents; or

          (c)  approval,  during the Term of Employment,  by the shareholders of
               AAI of a plan of reorganization,  merger or consolidation,  other
               than a reorganization,  merger, or consolidation  with respect to
               which all or  substantially  all of the  individuals and entities
               who were the  beneficial  owners of the  Common  Stock and Voting
               Securities  immediately prior to such  reorganization,  merger or
               consolidation  who continue to beneficially own immediately after
               such  reorganization,  merger or consolidation,  more than 66% of
               the then outstanding common stock and voting securities (entitled
               to  vote   generally  in  the  election  of   directors)  of  the
               corporation   resulting  from  such  reorganization,   merger  or
               consolidation  in  substantially  the same  proportions  as their
               respective  ownership,  immediately prior to such reorganization,
               merger  or   consolidation,   of  the  Common  Stock  and  Voting
               Securities, or

          (d)  approval,  during the Term of Employment,  by the shareholders of
               AAI of (i) a complete liquidation or dissolution AAI, or (ii) the
               sale or  other  disposition  of all or  substantially  all of the
               assets of AAI,  other than to a direct or  indirect  wholly-owned
               subsidiary  of AAI.  For purposes of this  Agreement  and without
               limiting the  generality of the preceding  sentence,  the sale or
               other  disposition of AAI of more than 50% of the common stock or
               Voting Securities  (entitled to vote generally in the election of
               directors)  of AAI shall be deemed to  constitute a sale or other
               disposition of substantially all of the assets of AAI.

     2.  Employment.  Subject  to the  terms  and  provisions  set forth in this
Agreement, AAI hereby agrees that the Executive shall be the chief legal officer
of AAI and the Corporation and report  exclusively to the Chairman of the Board,
President and Chief Executive  Officer of AAI and the Corporation with the title
of Executive Vice President,  General Counsel,  and Secretary during the Term of
Employment  and  each of AAI and  the  Corporation  agrees  during  the  Term of
Employment to employ the Executive as Executive Vice President, General Counsel,
and  Secretary  of each of AAI and the  Corporation,  and the  Executive  hereby
accepts such employment.

     3. Term of Employment.  The term of employment  under this Agreement  shall
commence on September 16, 2001,  (the  "Commencement  Date") and shall  continue
until the earlier to occur of March 15, 2003 (the "Expiration Date") or the date
on which the  Executive is  terminated  or resigns  pursuant to Section 6 hereof
(the "Term of Employment").

     4. Positions, Responsibilities and Duties.

     4.1  Positions.  During the Term of Employment,  the Executive (i) shall be
          employed and serve as Executive Vice President,  General Counsel,  and
          Secretary  of  each  of  AAI  and  the  Corporation,  as  well  as the
          equivalent or higher title and position of each of the subsidiaries of
          AAI;  and (ii)  shall  be  elected  and  serve  as a  director  of the
          Corporation. Notwithstanding the foregoing, Executive shall serve from
          time to time as a "loaned employee" or "borrowed employee" of National
          Foundation Life Insurance  Company,  Freedom Life Insurance Company of
          America,  American  Insurance Company of Texas and National  Financial
          Insurance  Company  in  accordance  with the  administrative  services
          agreement executed by such insurance companies and the Corporation. In
          such  positions  with  AAI,  the  Executive  shall  have  the  duties,
          responsibilities and authority normally associated with the office and
          position of executive vice president,  general counsel,  and secretary
          of a  publicly-traded  corporation.  The Executive shall report solely
          and  directly  to the  President  and  Chief  Executive  Officer.  The
          Executive shall perform his duties and  responsibilities  hereunder at
          his current  office  located at 110 West Seventh  Street,  Suite 1100,
          Fort Worth,  Texas 76102,  or at such other home office of AAI and the
          Corporation  situated  in or  reasonably  near the City of Fort Worth,
          Texas.  Notwithstanding the above, the Executive shall not be required
          to perform  any duties and  responsibilities  which would be likely to
          result in a non-compliance  with or violation of any applicable law or
          regulation.

     4.2  Duties.  During the Term of  Employment,  the Executive  shall use his
          best  efforts to perform  faithfully  and  efficiently  the duties and
          responsibilities  contemplated by this Agreement,  including,  without
          limitation,  the responsibilities normally associated with the highest
          ranking legal officer and secretary and shall devote substantially all
          of his business time, skill and attention to such services,  including
          the service as a "loaned employee" or "borrowed  employee" of National
          Foundation Life Insurance  Company,  Freedom Life Insurance Company of
          America,  American  Insurance Company of Texas and National  Financial
          Insurance  Company;  provided,  however,  that the Executive  shall be
          allowed, to the extent other activities do not substantially interfere
          with  the  full  performance  by  the  Executive  of  his  duties  and
          responsibilities  hereunder,  to (a) manage the Executive's  personal,
          financial and legal affairs, which may include non-competing,  passive
          business  activities  and (b) serve on civil or  charitable  boards or
          committees.  The  Executive  shall  at all  times  comply  with and be
          subject  to  AAI's  and  the   Corporation's   policies,   procedures,
          directives,  and  regulations as may be reasonably  established by the
          Board from time to time.

     4.3  Working Conditions. AAI and the Corporation will provide the Executive
          with a private office,  secretarial and stenographic services, and any
          other  facilities  and services as are currently in place or otherwise
          suitable to the  Executive's  position or required for the performance
          of his duties

     5.  Compensation,  Other  Benefits and Payment of Certain  Wages.

     5.1  Base  Salary.  During  the Term of  Employment,  the  Executive  shall
          receive a base  salary of no less than  $286,000.00  per annum  ("Base
          Salary") payable in equal semi-monthly installments.  Such Base Salary
          shall be reviewed  annually for increase in the sole discretion of the
          Board or the Executive  Committee  thereof.  Any such salary  increase
          shall then be the "Base Salary" for purposes of this Agreement.

     5.2  Short-Term Incentive.  For fiscal year 2001 of AAI (in addition to the
          Base  Salary),  the  Executive  shall be eligible to receive an annual
          cash bonus  ("2001  Annual  Bonus") in an amount,  if any,  reasonably
          determined by the Board or a committee thereof. Such 2001 Annual Bonus
          shall be payable to the Executive in February, 2002 or at such time as
          such bonuses or similar  bonuses are paid to other officers or members
          of the Corporation's or AAI's senior management.  For fiscal year 2002
          of AAI (in addition to Base Salary),  the Executive  shall be eligible
          to receive an annual cash bonus ("2002  Annual  Bonus") based upon AAI
          achieving  reasonable  consolidated  financial targets consistent with
          the October 2001 Business Plan as more  specifically  provided and set
          forth  in the  summary  attached  hereto  as  Exhibit  "A" and by this
          reference is incorporated  for all purposes  herein.  Such 2002 Annual
          Bonus shall be payable to the  Executive  in February  2003 or at such
          time as such bonuses or similar  bonuses are paid to other  members of
          the Corporation's or AAI's senior management.

     5.3  Retirement Plans.  During the Term of Employment,  the Executive shall
          be entitled to  participate  in all  incentive,  pension,  retirement,
          savings,  401(k) and other employee pension benefit plans and programs
          maintained  by AAI  and/or the  Corporation  from time to time for the
          benefit of senior executives and/or other employees.

     5.4  Welfare Benefit Plans.  During the Term of Employment,  the Executive,
          the Executive's spouse, if any, and their eligible dependents, if any,
          shall be  entitled  to  participate  in and be  covered  under all the
          welfare  benefit plans or programs  maintained by the  Corporation and
          AAI from  time to time  including,  without  limitation,  all  medical
          hospitalization,   dental,  disability,  life,  accidental  death  and
          dismemberment  and  travel  accident  insurance  plans  and  programs.
          Executive  shall  also earn and  receive  a minimum  of five (5) weeks
          vacation  each  year  with an  unlimited  year-end  accrual  of unused
          vacation.

     5.5  Long-Term   Incentive   Plan.  The  Executive  shall  be  entitled  to
          participate in any long-term  incentive plan or program adopted by the
          boards  of  AAI  and  the  Corporation  ("LTIP  Award")  based  on the
          achievement  of  reasonable  corporate  objectives  determined in good
          faith by AAI or the  Corporation.  An LTIP Award may be in the form of
          performance  shares,  performance  units,  stock  options,  restricted
          stock, or other types of awards deemed  appropriate by the Board,  the
          Executive Committee or such other committees of the Board.

     5.6  Expense  Reimbursement.  During the Term of Employment,  the Executive
          shall be entitled to receive prompt  reimbursement  for all reasonable
          expenses  incurred  by the  Executive  in  promoting  AAI  and/or  its
          Affiliates and in otherwise performing his duties and responsibilities
          hereunder.

     5.7  Payment of Deferred  Wages.  As of  September  15,  2001,  AAI and the
          Corporation  owed  Executive  wages  in  the  amount  of  $437,216.88.
          However,  a deferral of the  payment of such wages  would  enhance the
          financial  condition  of AAI  and  the  Corporation,  and  AAI and the
          Corporation  has  requested,  and  the  Executive  has  agreed  to the
          deferral of the payment of such wages.  Accordingly,  in consideration
          of the mutual promises and covenants  contained herein,  the Executive
          agrees that he shall accept the following  described deferred payments
          from AAI and the Corporation,  and AAI and the Corporation  agree that
          they  shall  make  such  deferred  payments  to the  Executive  in the
          principal amount of $437,216.88,  together with interest on any unpaid
          portion thereof at the rate of 10% per year of 360 days from September
          15, 2001 until the date paid,  as deferred  wages and not as severance
          (the "Deferred  Payment"),  in accordance with the following  schedule
          without the necessity of any further resolution or vote approving such
          payment  by  either  of their  respective  board of  directors  once a
          resolution  of  each  such  board  or  authorized   committee  thereof
          approving the execution of this Agreement has been made:

               The amount of such Deferred  Payment shall be paid by AAI and the
               Corporation  to the  Executive  in  four  equal  installments  of
               $109,304.22,  together  with  accrued  interest as of the date of
               such installment payment, as described below, unless prior to any
               such  installment  payment due date (i) Executive dies whether or
               not during the Term of Employment, (ii) Executive's employment is
               terminated   hereunder  due  to  Disability,   (iii)  Executive's
               employment  hereunder  is  terminated  by AAI or the  Corporation
               without  Cause,  or  (iv)  Executive's  employment  hereunder  is
               terminated  by the  Executive  for Good  Reason,  in any of which
               events the payment due date(s) of the remaining unpaid portion of
               the  Deferred  Payment  shall  accelerate  such  that the  unpaid
               portion of the Deferred Payment shall be then immediately due and
               payable. In the absence of the occurrence of the events described
               in clauses (i)  through  (iv)  above,  (a) the first  installment
               payment shall be due and paid on or before December 21, 2001, (b)
               the second installment payment shall be due and paid on March 15,
               2002, (c) the third installment  payment shall be due and paid on
               June 15, 2002, and (d) the final installment payment shall be due
               and paid on September 15, 2002.

     6. Termination.

     6.1  Termination Due to Death or Disability. A determination of whether the
          Executive  is Disabled  shall be made by AAI, the  Corporation  or any
          Affiliate  in its  sole,  but  good  faith,  discretion  upon  its own
          initiative  after  obtaining   certification   from  a  duly  licensed
          physician or upon request of the  Executive or a person  acting on his
          behalf.  The Executive  shall  cooperate  with any  necessary  medical
          examination in connection  with a  determination  of Disability.  Upon
          seven (7) days  prior  written  notice to the  Executive,  AAI and the
          Corporation may terminate the Executive's  employment hereunder due to
          Disability.  In the event of the Executive's death or a termination of
          the  Executive's   employment  by  AAI  and  the  Corporation  due  to
          Disability, the Executive, his estate or his legal representative,  as
          the  case  may be,  shall  be  entitled  to  receive  from AAI and the
          Corporation without duplication the following:

          (a)  a lump sum payment of the Base Salary continuation at the rate in
               effect (as provided for by Section 5.1 of this  Agreement) at the
               time of such termination through the Date of Termination;

          (b)  a lump sum payment of any Annual Bonus and LTIP Award awarded but
               not yet paid as of the Date of Termination;

          (c)  a lump sum  payment  on the  Date of  Termination  of the  unpaid
               portion of the Deferred Payment;

          (d)  a lump sum  payment of accrued  but unused  vacation  through the
               Date of Termination;

          (e)  reimbursement of all expenses incurred, but not yet paid prior to
               such death or Disability;

          (f)  in the  case of  death,  any  other  compensation  and  benefits,
               including life  insurance,  as may be provided in accordance with
               the terms and provisions of any applicable  plans and programs of
               AAI or the Corporation, except any other severance benefit of AAI
               or the Corporation; and

          (g)  in the case of Disability,  (i)  continuation  of the Executive's
               health and welfare  benefits (as described in Section 5.5 of this
               Agreement)  at the level in effect  (as  provided  for by Section
               5.5) on the Date of  Termination  through the end of the one year
               period  following the termination of the  Executive's  employment
               due to Disability  (or the  Corporation  and/or AAI shall provide
               the economic equivalent thereof), and (ii) any other compensation
               and benefits as may be provided in accordance  with the terms and
               provisions  of any  applicable  plans and programs of AAI and the
               Corporation,  except  any other  severance  benefit of AAI or the
               Corporation other than the Deferred Payment.

     6.2  Termination  by AAI  and  the  Corporation  for  Cause.  AAI  and  the
          Corporation  may terminate the  Executive's  employment  hereunder for
          Cause as provided  in this  Section  6.2.  If AAI and the  Corporation
          terminate  the  Executive's   employment   hereunder  for  Cause,  the
          Executive  shall be entitled to receive  from AAI and the  Corporation
          without duplication the following:

          (a)  a lump sum payment of the Base Salary continuation at the rate in
               effect (as provided for by Section 5.1 of this  Agreement) at the
               time of such termination  through the Date of Termination;

          (b)  a lump sum payment of any Annual Bonus and LTIP Award awarded but
               not yet paid as of the Date of Termination;

          (c)  a lump sum payment of the Deferred  Payment payable in accordance
               with  Section  5.7  on the  applicable  installment  payment  due
               date(s),   the  date  of  the   Executive's   death   after  such
               termination,  or the date on which the Executive becomes mentally
               or physically  impaired or  incapacitated to the extent rendering
               him unable to perform the type of duties  contemplated herein for
               any other  employer  for 180 days of any 360 day period after the
               date of such termination;

          (d)  a lump sum  payment of accrued  but unused  vacation  through the
               Date of Termination;

          (e)  reimbursement for all expenses  incurred,  but not yet paid prior
               to such termination of employment; and

          (f)  any  other  compensation  and  benefits  as  may be  provided  in
               accordance with the terms and provisions of any applicable  plans
               and  programs  of AAI  and  the  Corporation,  except  any  other
               severance benefit of AAI or the Corporation.

     In any case  described in this Section  6.2, the  Executive  shall be given
written notice authorized by a vote of at least a majority of the members of the
Board  that  AAI  and  the  Corporation  intend  to  terminate  the  Executive's
employment  hereunder for Cause.  Such written notice,  given in accordance with
Section 6.7 of this  Agreement,  shall  specify the  particular  act or acts, or
failure to act,  which is or are the basis for the decision to so terminate  the
Executive's  employment for Cause.  Except with respect to the grounds set forth
in Section  1.4(c),  as to which the  following  shall not apply,  the Executive
shall be given the  opportunity  within  thirty  (30)  calendar  days  after the
receipt  of such  notice to meet with the Board to defend  such act or acts,  or
failure to act, and the Executive shall be given thirty (30) business days after
such  meeting  to  correct  such act or  failure  to act.  Upon  failure  of the
Executive,  as fairly and reasonably determined by the Board, within such latter
thirty  (30) day  period,  to  correct  such act or  failure  to act,  or if the
Executive fails to meet with the Board after being provided an opportunity to do
so, the Executive's employment by AAI and the Corporation shall be automatically
terminated  under this  Section  6.2 for Cause as of the date  determined  under
Section 1.5 of this Agreement.

     6.3  Termination  without Cause or Termination for Good Reason.  Upon seven
          (7)  days  prior  written  notice  to  the  Executive,   AAI  and  the
          Corporation may terminate the Executive's employment hereunder without
          Cause,  and upon thirty  (30) days notice to AAI and the  Corporation,
          the Executive may terminate his employment  hereunder for Good Reason.
          If AAI  and  the  Corporation  terminate  the  Executive's  employment
          hereunder without Cause, other than due to death or Disability,  or if
          the Executive terminates his employment for Good Reason, the Executive
          shall be  entitled  to receive  from AAI and the  Corporation  without
          duplication the following:

          (a)  a lump sum payment  equal in amount to 117% of the sum of (i) the
               Executive's  Base Salary (as  provided for by Section 5.1 of this
               Agreement), and (ii) the highest of either the 2001 Annual Bonus,
               2002 Annual Bonus, or any other annual or incentive bonus awarded
               to the  Executive  within  five  (5)  years  prior to the Date of
               Termination;

          (b)  a lump sum payment of any Base Salary  accrued or any 2001 Annual
               Bonus, 2002 Annual Bonus, and LTIP Award awarded but not yet paid
               as of the Date of Termination;

          (c)  a lump sum  payment on the Date of  Termination  of the  Deferred
               Payment;

          (d)  a lump sum  payment of accrued  but unused  vacation  through the
               Date of Termination;

          (e)  reimbursement of all expenses incurred, but not yet paid prior to
               such termination of employment; and

          (f)  any  other  compensation  and  benefits  as  may be  provided  in
               accordance with the terms and provisions of any applicable  plans
               or  programs  of  the  Corporation  and  AAI,  except  any  other
               severance benefit of AAI or the Corporation.

     In the case of  termination  by Executive for Good Reason  pursuant to this
Section  6.3, AAI and the  Corporation  shall be given  written  notice that the
Executive  intends to terminate his employment  hereunder for Good Reason.  Such
written notice,  given in accordance  with Section 6.7 of this Agreement,  shall
specify the particular act or acts, or failure to act, which is or are the basis
for the decision to so terminate  the  Executive's  employment  for Good Reason.
Upon failure of AAI and the Corporation,  as fairly and reasonably determined by
the Executive,  within the thirty (30) day notice period  referred to above,  to
correct such act or failure to act, or if AAI and the  Corporation  fail to meet
with the Executive after being provided an opportunity to do so, the Executive's
employment by AAI and the Corporation  shall be  automatically  terminated under
this Section 6.3 for Good Reason as of the date determined  under Section 1.5 of
this Agreement.

     6.4  Voluntary  Termination.  The Executive may effect, upon seven (7) days
          prior  written  notice  to  AAI  and  the  Corporation,   a  Voluntary
          Termination of his  employment  hereunder.  A "Voluntary  Termination"
          shall mean a  termination  of  employment  by the Executive on his own
          initiative other than (a) a termination due to death or Disability, or
          (b) a termination for Good Reason. A Voluntary  Termination  shall not
          be a breach of this Agreement. If the Executive's employment hereunder
          is so terminated,  the Executive shall be entitled to receive from AAI
          and the Corporation the following:

          (a)  a lump sum  payment of any  accrued but unpaid Base Salary at the
               rate in effect (as provided for by Section 5.1 of this Agreement)
               at the time of such termination  through the Date of Termination;

          (b)  a lump sum payment on the applicable installment payment due date
               under Section 5.7 of the Deferred  Payment,  together with a lump
               sum payment on the Date of  Termination of any 2001 Annual Bonus,
               2002 Annual  Bonus,  or LTIP Award awarded but not yet paid as of
               the Date of Termination;

          (c)  reimbursement  for expenses  incurred,  but not yet paid prior to
               the Date of Termination; and

          (d)  any  other  compensation  and  benefits  as  may be  provided  in
               accordance  with  the  terms  and  provisions  of any  applicable
               employee  benefit  plans or  programs  maintained  by AAI and the
               Corporation,  except  any other  severance  benefit of AAI or the
               Corporation.

     6.5  Termination  of Agreement by  Expiration.  If this  Agreement  expires
          pursuant  to Section 3 hereof,  the  Executive  shall be  entitled  to
          receive  on the  Expiration  Date  from  AAI and the  Corporation  the
          following:

          (a)  a lump sum  payment of any  accrued but unpaid Base Salary at the
               rate in effect (as provided for by Section 5.1 of this Agreement)
               through the  Expiration  Date;

          (b)  a lump sum payment of any 2001 Annual  Bonus,  2002 Annual Bonus,
               and LTIP  Award  awarded  but not yet  paid as of the  Expiration
               Date;

          (c)  a lump sum  payment of accrued  but unused  vacation  through the
               Expiration Date;

          (d)  reimbursement of all expenses incurred, but not yet paid prior to
               such termination of employment;

          (e)  any  other  compensation  and  benefits  as  may be  provided  in
               accordance with the terms and provisions of any applicable  plans
               or  programs  of  the  Corporation  and  AAI,  except  any  other
               severance benefit of AAI or the Corporation.

     6.6  No  Mitigation;  No  Offset.  In  the  event  of  any  termination  of
          employment  under  this  Section  6, the  Executive  shall be under no
          obligation  to seek  other  employment  and  there  shall be no offset
          against any amounts due the Executive  under this Agreement on account
          of any remuneration attributable to any subsequent employment that the
          Executive  may obtain.  Any amounts due under this Section 6, with the
          exception  of the  Deferred  Payment,  are in the nature of  severance
          payments,  or liquidated  damages, or both, and in no event are either
          such severance payments, liquidated damages or the Deferred Payment in
          the nature of a penalty.

     6.7  Notice of Termination.  Any termination by AAI and the Corporation for
          Cause or by the Executive for Good Reason shall be  communicated  by a
          notice of  termination  to the other party hereto given in  accordance
          with Section 13.3 of this Agreement (the "Notice of Termination"). The
          Notice of Termination shall be given, in the case of a termination for
          Cause,  within  ninety (90)  business  days after the Chief  Executive
          Officer,  President,  or a director of the Corporation  (excluding the
          Executive) knew or should have known of the events giving rise to such
          purported  termination,  and  in  the  case  of a  termination  by the
          Executive  for Good Reason,  within  ninety (90) days of the Executive
          having actual knowledge of the events giving rise to such termination,
          except in the case of  termination  for Good Reason  resulting  from a
          Change in Control  then  within one hundred  eighty  (180) days of the
          effective  date of such  Change  in  Control.  Such  notice  shall (a)
          indicate the specific  termination  provision in this Agreement relied
          upon, (b) set forth in reasonable  detail the facts and  circumstances
          claimed  to  provide  a  basis  for  termination  of  the  Executive's
          employment   under  the  provision  so  indicated,   and  (c)  if  the
          termination  date is other than the date of  receipt  of such  notice,
          specify  the  date  on  which  the  Executive's  employment  is  to be
          terminated  (which  date shall not be  earlier  than the date on which
          such notice is actually given).

     6.8  Certain Other Payments.  Notwithstanding  any other provisions of this
          Agreement,  in the event that any payment or benefit received or to be
          received by the  Executive in  connection  with a Change in Control or
          the termination of the Executive's employment, whether pursuant to the
          terms of this  Agreement or any other plan,  arrangement  or agreement
          with AAI and the  Corporation  or any of their  Affiliates  (all  such
          payments and benefits being  hereinafter  called the "Total Payments")
          would  subject the  Executive to the excise tax imposed  under Section
          4999 of the Internal  Revenue Code of 1986, as amended (the "Code") or
          any successor section thereto (the "Excise Tax"), and if, and only if,
          such  Total  Payments  less the  Excise  Tax is less than the  maximum
          amount of the Total  Payments  which could be payable to the Executive
          without the imposition of the Excise Tax, then and only then, and only
          to the extent  necessary to eliminate the imposition of the Excise Tax
          (and after  taking into account any  reduction  in the Total  Payments
          provided by reason of Section 280G of the Code in any such other plan,
          arrangement or agreement), (A) any cash payments hereunder shall first
          be  reduced  (if  necessary,  to  zero),  and (B) all  other  non-cash
          payments  hereunder  shall  next  be  reduced.  For  purposes  of this
          limitation  (i) no  portion  of the  Total  Payments  the  receipt  or
          enjoyment  of which the  Executive  shall have  effectively  waived in
          writing prior to the Date of Termination  shall be taken into account,
          (ii) no portion  of the Total  Payments  shall be taken  into  account
          which in the  opinion of tax  counsel  selected  by AAI's  independent
          auditors  and   reasonably   acceptable  to  the  Executive  does  not
          constitute  a  "parachute  payment"  within  the  meaning  of  Section
          280G(b)(2) of the Code,  including by reason of Section  280G(b)(4)(A)
          of the Code,  (iii) all  payments  shall be reduced only to the extent
          necessary so that the Total Payments  (other than those referred to in
          clauses  (i)  or  (ii))  in  their  entirety   constitute   reasonable
          compensation  for  services  actually  rendered  within the meaning of
          Section  280G(b)(4)(B)  of the Code or are  otherwise  not  subject to
          disallowance as deductions  under Code Section 280G, in the opinion of
          the tax counsel  referred to in clause (ii); and (iv) the value of any
          non-cash  benefit or any deferred  payment or benefit  included in the
          Total  Payments shall be determined by AAI's  independent  auditors in
          accordance  with the principles of Sections  280G(d)(3) and (4) of the
          Code.
     6.9  Payment. Except as otherwise provided in this Agreement,  any payments
          to which the  Executive  shall be  entitled  to under this  Section 6,
          including, without limitation, any economic equivalent of any benefit,
          shall be made immediately on the Date of Termination. If the amount of
          any payment due to the Executive cannot be finally  determined  within
          thirty (30) days after the Date of  Termination,  such amount shall be
          estimated on a good faith basis by AAI and the estimated  amount shall
          be paid no later than thirty (30) days after such Date of Termination.
          As soon as  practicable  thereafter,  the final  determination  of the
          amount due shall be made and any adjustment  requiring a payment to or
          from the Executive shall be made as promptly as practicable.

     7.  Non-Exclusivity  of Rights.  Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit,  bonus,
incentive  or other plan or program  provided  or  maintained  by AAI and/or the
Corporation for which the Executive may qualify, nor shall anything herein limit
or otherwise  prejudice  such rights as the  Executive  may have under any other
existing or future agreements with the Corporation, AAI, and/or any Affiliate of
either,  including,  without  limitation,  any stock option agreements or plans.
Amounts which are vested  benefits or which the Executive is otherwise  entitled
to  receive  under any plans or  programs  of the  Corporation,  AAI  and/or any
Affiliate of either at or subsequent to the Date of Termination shall be payable
in  accordance  with such  plans or  programs.  Notwithstanding  the  foregoing,
payments  to the  Executive  under  Section 6 hereof with the  exception  of the
Deferred Payment by AAI and the Corporation,  shall be in lieu of payments under
any severance plan or program.

     8. Settlement.  AAI's and the Corporation's obligation to make the payments
provided  for in  this  Agreement  and  otherwise  to  perform  its  obligations
hereunder  shall  not be  affected  by  any  circumstances,  including,  without
limitation,  any set-off (except set-off for a fixed and liquidated obligation),
counterclaim,   recoupment,   defense  or  other  right  which  AAI  and/or  the
Corporation  and/or any  Affiliates  may have  against the  Executive or others.
Notwithstanding  anything  contained herein to the contrary,  the obligations of
AAI and the Corporation hereunder for the payment of severance under Section 6.3
(a) shall be subject to Executive having executed and delivered an instrument to
AAI and the  Corporation  on the date of the receipt of such  severance  payment
irrevocably waiving and releasing AAI, the Corporation,  and each Affiliate from
any and all  obligations  or  liabilities to Executive and his heirs and assigns
(i) for the  specific  severance  payments  called for in Section 6.3 (a),  (ii)
arising  from or in  connection  with  Executive's  employment  with AAI and the
Corporation or (iii) the  termination of such  employment and any and all claims
Executive  may have  under  federal,  state or local  statutes,  regulations  or
ordinances  or under any  common law  principles  or breach of  contract  or the
covenant  of good  faith  and  fair  dealing,  defamation,  wrongful  discharge,
intentional  infliction of emotional distress or promissory estoppel;  provided,
however, such instrument of waiver and release to be executed by Executive shall
not be applicable to, reduce or otherwise  diminish or release either AAI or the
Corporation  from  their  obligation  to make  the  Deferred  Payment.  Further,
notwithstanding  anything  contained herein to the contrary,  the obligations of
AAI and the  Corporation  for the  timely and  proper  payment  of the  Deferred
Payment  shall  be  subject  to  Executive  having  executed  and  delivered  an
instrument  to AAI and  the  Corporation  on the  date  of the  receipt  of such
Deferred Payment  irrevocably  waiving and releasing AAI, the  Corporation,  and
each Affiliate from any and all  obligations or liabilities to Executive and his
heirs and assigns for such Deferred Payment.

     9. Legal Fees and Other Expenses.  In the event that a claim for payment or
benefits under this Agreement is disputed, the Executive shall be reimbursed for
all attorney fees and expenses incurred by the Executive in pursuing such claim,
provided  that the  Executive is  successful as to at least part of the disputed
claim by reason of  litigation,  arbitration  or  settlement.  In addition,  the
Executive  shall be paid or reimbursed for all legal fees and expenses  incurred
by the Executive in connection  with the review,  preparation and negotiation of
this  Agreement  and/or any other  agreements or plans  referenced  herein.  The
Executive shall also be entitled to recover pre-judgment interest at the rate of
10% per annum on the amount of any past due payment  obligations  under Sections
5.1,  5.2, 6.1 (a),  (b),  (d),  (e), 6.2 (a), (b), (d), (e), 6.3 (a), (b), (d),
(e), 6.4 (a),  (b),  (c), (d) and 6.5 (a),  (b), (c), (d) from the date any such
payment  was due  until  the  earlier  of the  date of  payment  in full of such
obligation  or the date of entry of a final  judgment  against  AAI  and/or  the
Corporation.

     10. Confidential Information and Nonsolicitation.

     10.1 Confidential Information.  The Executive shall not, during the Term of
          Employment and  thereafter,  without the prior express written consent
          of AAI and/or the Corporation,  disclose any confidential information,
          knowledge or data relating to AAI, the  Corporation,  or any Affiliate
          of either and their respective  businesses,  which (a) was obtained by
          the Executive in the course of the Executive's employment with AAI and
          the Corporation,  and (b) which is not information,  knowledge or data
          otherwise  in the public  domain  (other than by reason of a breach of
          this provision by the Executive),  unless required to do so by a court
          of law or equity or by any governmental agency or other authority.

     10.2 No  Solicitation.  The Executive hereby agrees that, if his employment
          hereunder is terminated by AAI and the Corporation for Cause or by the
          Executive  under  Section  6.4 of this  Agreement,  he shall not,  for
          twelve  (12)  months  after  the  Date  of  Termination,  directly  or
          indirectly,  divert,  solicit  or take away the  patronage  of (a) any
          customers or agents of the Corporation, AAI or any Affiliate of either
          as of  the  relevant  Date  of  Termination,  or (b)  any  prospective
          customers or agents of the  Corporation,  AAI or any  Affiliate  whose
          business the  Corporation  and/or AAI was actively  soliciting  on the
          relevant  Date of  Termination,  and  with  which  the  Executive  had
          business  contact  while  employed  by the  Corporation  and AAI.  The
          Executive  agrees  that,  under  the   circumstances   and  conditions
          described  above and for the same period of time, the Executive  shall
          not, directly or indirectly, induce or solicit any employees or agents
          of the  Corporation,  AAI or any  Affiliate  of  either  to  leave  or
          terminate their employment or agency relationship with the Corporation
          or AAI. The Corporation and AAI agrees that (i) any announcement  made
          by the Executive,  at any press  conference or in any press release or
          through individual notices, shall not, in and of itself, constitute an
          attempt directly or indirectly to induce, divert, solicit or take away
          customers  or  employees,   (ii)  any  such  announcement  creates  no
          presumption   with   respect  to  any  such   inducement,   diversion,
          solicitation  or  taking,  and (iii) in all cases  both the  burden of
          production  of evidence and the  ultimate  burden of  persuasion  with
          respect to any  allegations  or claims that this Section 10.2 has been
          breached or violated  by the  Executive  shall be borne by AAI and the
          Corporation.  Executive  agrees that all  restrictions  and agreements
          contained  in this Section 10,  including  without  limitation,  those
          relating to duration  and  restricted  territory,  are  necessary  and
          fundamental to the protection of the business of AAI, the  Corporation
          or any Affiliate,  and are  reasonable and valid,  and all defenses to
          the  strict  enforcement  thereof  by  Executive  are  hereby  waived.
          Executive  agrees  that  the  remedy  at law for such  breach  of this
          Agreement  will be  inadequate,  and that the damages from such breach
          are not readily  susceptible  to being  measured  in  monetary  terms.
          Accordingly,  Executive  agrees that upon  breach of this  Section 10,
          AAI, the  Corporation or any Affiliate  shall be entitled to immediate
          injunctive  relief and may obtain a temporary  order  restraining  any
          threatened  further breach.  Nothing in this Agreement shall be deemed
          to limit AAI's, the  Corporation's or any Affiliate's  remedies at law
          or in equity for any breach by Executive or any of the  provisions  of
          this  Agreement  that  may  be  pursued  or  availed  of by  AAI,  the
          Corporation or any Affiliate.

     11. Successors.

     11.1 The  Executive.  This  Agreement  is  personal to the  Executive  and,
          without the prior express written consent of AAI and the  Corporation,
          shall not be assignable by the Executive,  except that the Executive's
          rights to receive any  compensation  or benefits  under this Agreement
          may  be   transferred   or  disposed   of  pursuant  to   testamentary
          disposition,  intestate succession or pursuant to a domestic relations
          order. This Agreement shall inure to the benefit of and be enforceable
          by the Executive's heirs, beneficiaries and/or legal representatives.

     11.2 AAI and the Corporation.  This Agreement shall inure to the benefit of
          and be  binding  upon  AAI,  the  Corporation,  and  their  respective
          successors  and  assigns.  AAI shall  require any  successor to all or
          substantially all of the  Corporation's  and its Affiliates'  business
          and/or  assets,  whether  direct or  indirect,  by  purchase,  merger,
          consolidation,  acquisition of stock, or otherwise, by an agreement in
          form and substance satisfactory to the Executive,  expressly to assume
          and agree to perform this Agreement in the same manner and to the same
          extent as AAI and the  Corporation  would be required to perform if no
          such succession had taken place.

     12. Indemnification. AAI and the Corporation agree that if the Executive is
made a  party  or is  threatened  to be  made a  party  to any  action,  suit or
proceeding,   whether  civil,  criminal,   administrative  or  investigative  (a
"Proceeding"),  by reason of the fact that he is or was a director or officer of
AAI, the Corporation, and/or any Affiliate of either or is or was serving at the
request of the  Corporation,  AAI and/or any  Affiliate as a director,  officer,
member,  employee or agent of another  corporation  or of a  partnership,  joint
venture, trust or other enterprise,  including, without limitation, service with
respect to employee  benefit plans,  whether or not the basis of such Proceeding
is alleged  action in an  official  capacity  as a  director,  officer,  member,
employee or agent  while  serving as a director,  officer,  member,  employee or
agent,  he shall be indemnified  and held harmless by AAI and the Corporation to
the  fullest  extent  authorized  by  applicable  law, as the same exists or may
hereafter be amended, against all Expenses incurred or suffered by the Executive
in  connection  therewith,  and such  indemnification  shall  continue as to the
Executive even if the Executive has ceased to be an officer,  director or agent,
or is no longer  employed  by AAI and the  Corporation  and  shall  inure to the
benefit of his heirs,  executors and  administrators;  provided,  however,  that
Executive  shall not be  indemnified  for any act or omission  that  constitutes
gross negligence or willful misconduct.

     13. Miscellaneous.

     13.1 Applicable  Law. This Agreement  shall be governed by and construed in
          accordance  with  the  laws of the  State of  Texas,  applied  without
          reference to the principles of conflict of laws.

     13.2 Amendments.  This  Agreement may not be amended or modified  otherwise
          than by a written  agreement  executed by the parties  hereto or their
          respective successors and legal representatives.

     13.3 Notices.  All notices and other  communications  hereunder shall be in
          writing and shall be given by hand-delivery to the other parties or by
          registered  or  certified  mail,  return  receipt  requested,  postage
          prepaid, addressed as follows:

         If to the Executive:       Mr. Patrick H. O'Neill
                                    4001 Briarhaven Court
                                    Fort Worth, Texas 76109

         If to the Corporation:     Ascent Management, Inc.
                                    110 West Seventh Street, Suite 300
                                    Fort Worth, Texas 76102
                                Attention: President and Chief Operating Officer

         If to AAI:                 Ascent Assurance, Inc.
                                    110 West Seventh Street, Suite 300
                                    Fort Worth, Texas 76102
                                Attention: President and Chief Operating Officer

or to such other address as any party hereto shall have  furnished to the others
in writing in accordance herewith. Notices and communications shall be effective
when  actually  received  by  the  addressee.

     13.4 Withholding.  AAI and the  Corporation  may withhold  from any amounts
          payable under this Agreement such federal, state or local income taxes
          as shall be required to be withheld  pursuant to any applicable law or
          regulation.

     13.5 Severability.  The invalidity or  unenforceability of any provision of
          this Agreement shall not affect the validity or  enforceability of any
          other provision of this Agreement.

     13.6 Captions.  The  captions  of  this  Agreement  are  not  part  of  the
          provisions hereof and shall have no force or effect.

     13.7 Beneficiaries/References.  The  Executive  shall be entitled to select
          (and  change)  a   beneficiary   or   beneficiaries   to  receive  any
          compensation  or benefit payable  hereunder  following the Executive's
          death,  and may change such election,  in either case by giving AAI or
          the  Corporation   written  notice  thereof.   In  the  event  of  the
          Executive's  death or a judicial  determination  of his  incompetence,
          reference in this  Agreement to the Executive  shall be deemed,  where
          appropriate,  to refer to his beneficiary(ies),  estate or other legal
          representative(s).

     13.8 Entire Agreement. This Agreement contains the entire agreement between
          the parties  concerning  the subject  matter hereof and supersedes all
          prior  agreements,   understandings,   discussions,  negotiations  and
          undertakings,  whether  written  or oral,  between  the  parties  with
          respect thereto.

     13.9 Representations.  AAI and the Corporation each represents and warrants
          that  it  is  fully  authorized  and  empowered  to  enter  into  this
          Agreement.  The Executive represents and warrants that the performance
          of the  Executive's  duties under this  Agreement will not violate any
          agreement   between  the  Executive   and  any  other  person,   firm,
          partnership, corporation, or organization.

     13.10Survivorship.  The  respective  rights and  obligations of the parties
          hereunder  shall  survive any  termination  of this  Agreement  or the
          Executive's Term of Employment  hereunder for any reason to the extent
          necessary  to the  intended  provision of such rights and the intended
          performance of such obligations.


<PAGE>


     IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and
AAI, as well as the  Corporation  have each caused this Agreement to be executed
in its name on its behalf, and attested to by their respective Secretaries,  all
as of the day and year first above written.

                              Ascent Management, Inc.


Attest:                       By:  /s/ Patrick J. Mitchell
                                   Patrick J. Mitchell
/s/ Patrick H. O'Neill             Title: President and Chief Executive Officer



                              Ascent Assurance, Inc.

Attest:                       By:  /s/ Patrick J. Mitchell
                                   Patrick J. Mitchell
/s/ Patrick H. O'Neill             Title: President and Chief Executive Officer



                                   /s/ Patrick H. O'Neill
                                   Patrick H. O'Neill