Document:

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                                                                    EXHIBIT 10.3

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                                     WARRANT

                       TO PURCHASE CLASS A COMMON STOCK OF

                               FFS HOLDINGS, INC.

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THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.

THIS WARRANT IS, AND THE SECURITIES REPRESENTED HEREBY ARE, ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND OBLIGATIONS SET FORTH IN THE
STOCKHOLDERS AGREEMENT (AS DEFINED BELOW).

Date of Issuance:        *
No. of Shares of Common Stock:  *

                                     WARRANT

                       TO PURCHASE CLASS A COMMON STOCK OF

                               FFS HOLDINGS, INC.

                  FOR VALUE RECEIVED, FFS HOLDINGS, INC., a Delaware corporation
(the "COMPANY"), hereby grants to Hillenbrand Industries, Inc. (the "HOLDER")
the right to purchase from the Company *(1) shares of the Company's class A
common stock, par value $0.01 per share ("COMMON STOCK") (subject to adjustment
as provided herein), pursuant to the provisions hereinafter set forth.

1.  DEFINITIONS

            1.1. Certain Definitions. In addition to other words and terms
      defined elsewhere in this Warrant, the following words and terms shall
      have the meanings set forth below (and such meanings shall be equally
      applicable to both the singular and plural form of the terms defined, as
      the context may require):

                  "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than shares
issued in connection with the exercise or conversion of any warrant, option or
convertible security.

                  "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or any other day on which commercial banks in New York, New York are
required to be closed for regular banking business.

---------------
(1) 5% of the total number of shares of Common Stock issued to investors and
outstanding as of the Closing Date under the Stock Purchase Agreement.

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                  "CASH CONSIDERATION PER SHARE" shall have the meaning
specified in Section 2.4.

                  "CASH CONSIDERATION TRANSACTION" shall have the meaning
specified in Section 2.4 hereof.

                  "CURRENT EXERCISE PRICE" shall mean, in respect of a share of
Common Stock at any date herein specified, the Exercise Price as adjusted
pursuant to Article 3.

                  "EXERCISE SHARES" shall have the meaning specified in Section
2.4.

                  "EXERCISE PRICE" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1 or Section 2.4, multiplied by (ii) $[THE COMMON STOCK INVESTOR
(INCLUDING THE PRINCIPALS OF THE DEVLIN GROUP) BUY-IN PRICE PER SHARE].

                  "EXPIRATION ACCELERATION EVENT" shall mean any of the
following: (i) the closing of an Initial Public Offering, (ii) the closing of a
merger or consolidation involving the Company in which shares of Common Stock
representing more than fifty percent (50%) of the outstanding voting power of
the Company are transferred in a bona fide transaction; (iii) the closing of the
sale of all or substantially all of the Company's assets (on a consolidated
basis) in a bona fide transaction; and (iv) a "Compulsory Holdco Sale" as that
term is defined in the Stockholders Agreement.

                  "EXPIRATION DATE" shall mean the earlier to occur of (i) any
Expiration Acceleration Event and (ii) the later to occur of (A) the tenth
(10th) anniversary of the date hereof and (B) the repayment in full by the
Company of all amounts owed by it to the Holder under the promissory note, of
even date herewith, issued by the Company to the Holder.

                  "INITIAL PUBLIC OFFERING" shall mean a public offering of the
capital stock of the Company pursuant to a registration statement filed under
the Securities Act of 1933, as amended, in which the net offering proceeds of
such public offering exceed $75,000,000.

                  "OTHER PROPERTY" shall have the meaning set forth in Section
3.2.

                  "PERSON" shall mean an individual, corporation, limited
liability company, partnership, association, trust, unincorporated organization
or other entity.

                  "REPRESENTATIVE" shall mean the Chief Executive Officer of the
Holder, from time to time, or any such person selected by the Chief Executive
Officer of the Holder and consented to by the Company, such consent not to be
unreasonably withheld.

                  "STOCKHOLDERS AGREEMENT" shall mean the Stockholders' and
Warrant Holder's Agreement, dated as of the date hereof, by and among the
Company, the Holder and certain holders of shares of the Company's common stock.

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                  "WARRANTS" shall mean this Warrant and any warrants issued
upon transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall be identical as to terms and conditions and date, except as
to the number of shares of Common Stock for which they may be exercised.

            1.2. Other Definitional Provisions; Construction. Whenever the
      context so requires, neuter gender includes the masculine and feminine,
      the singular number includes the plural and vice versa. The words
      "hereof", "herein" and "hereunder" and words of similar import when used
      in this Agreement shall refer to this Agreement as a whole and not in any
      particular provision of this agreement, and references to section,
      article, exhibit and like references are references to this Agreement
      unless otherwise specified. References in this Agreement to any Person
      shall include such Person's successors and permitted assigns.

2.  EXERCISE OF WARRANT

            2.1. Manner of Exercise. From and after the date hereof and until
      the Expiration Date, the Holder may exercise this Warrant, on any Business
      Day, for all or any part of the number of shares of Common Stock
      purchasable hereunder.

                  In order to exercise this Warrant, in whole or in part, the
      Holder shall deliver to the Company: (i) a written notice of the Holder's
      election to exercise this Warrant, which notice shall specify the number
      of shares of Common Stock to be purchased, (ii) payment of the Exercise
      Price and (iii) this Warrant. Such notice shall be substantially in the
      form of the subscription form attached hereto as Exhibit A, duly executed
      by the Holder. Upon receipt thereof, the Company shall, as promptly as
      practicable, and in any event within ten (10) Business Days thereafter,
      execute or cause to be executed and deliver or cause to be delivered to
      the Holder a certificate or certificates representing the aggregate number
      of full shares of Common Stock issuable upon such exercise. This Warrant
      shall be deemed to have been exercised and such certificate or
      certificates shall be deemed to have been issued, and the Holder shall be
      deemed to have become a holder of record of such shares for all purposes,
      as of the date the items listed in (i) through (iii) above have been
      received by the Company and all taxes required to be paid by the Holder,
      if any, pursuant to Section 2.3 prior to the issuance of such shares have
      been paid. If this Warrant shall have been exercised in part, the Company
      shall, at the time of delivery of the certificate or certificates
      representing the shares of Common Stock issuable upon such exercise,
      deliver to the Holder a new Warrant evidencing the rights of the Holder to
      purchase the unpurchased shares of Common Stock called for by this
      Warrant, which new Warrant shall in all other respects be identical with
      this Warrant, or, at the request of the Holder, appropriate notation may
      be made on this Warrant and the same returned to the Holder.

                  Payment of the Exercise Price shall be made by certified or
      official bank check payable to the Company.

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            2.2. Notice of Expiration Acceleration Event. The Company shall
      provide notice to the Holder at least ten (10) Business Days prior to the
      proposed occurrence of an Expiration Acceleration Event.

            2.3. Payment of Taxes. The Company shall pay all expenses in
      connection with, and all taxes and other governmental charges that may be
      imposed with respect to, the issuance or delivery of the shares of Common
      Stock issuable upon exercise of this Warrant, unless such tax or charge is
      imposed by law upon the Holder, in which case such taxes or charges shall
      be paid by the Holder.

            2.4. Cashless Exercise. This Section 2.4 shall apply with respect to
      transactions ("CASH CONSIDERATION TRANSACTIONS") whereby all holders of
      shares of Common Stock are entitled to receive (whether from the Company
      or another Person) an amount in cash as consideration for the transfer,
      redemption or surrender of such shares (such amount per share of Common
      Stock, the "CASH CONSIDERATION PER SHARE"). If the Holder wishes to
      participate in a Cash Consideration Transaction, then, as an alternative
      to exercise of this Warrant by payment in cash (or by certified or
      official bank check) as provided above in Section 2.1, it may elect to
      exercise this Warrant for all or any part of the number of shares of
      Common Stock purchasable hereunder (and with respect to which the Holder
      would otherwise be eligible to participate in the Cash Consideration
      Transaction if it were a holder thereof) (the "EXERCISE SHARES") on a net
      basis without the payment of any funds by the Holder, in which case the
      Holder shall be entitled to receive (at the same time and otherwise in the
      same manner as participating holders of shares of Common Stock are paid in
      connection with the Cash Consideration Transaction) an amount in cash with
      respect to each Exercise Share equal to the (x) the Cash Consideration Per
      Share less (y) the Current Exercise Price. Notwithstanding the foregoing,
      the Holder will only be entitled to exercise the Warrant pursuant to this
      Section 2.4 in connection with a Cash Consideration Transaction if (a) the
      Cash Consideration Per Share exceeds the Current Exercise Price and (b)
      the Holder delivers to the Company a written notice of the Holder's
      election to exercise this Warrant pursuant to this Section 2.4 (in the
      manner prescribed in Section 2.1) at least five (5) Business Days prior to
      the occurrence of the Cash Consideration Transaction. In the event that
      the Cash Consideration Transaction is not consummated, the exercise of
      this Warrant by the Holder in accordance with this Section 2.4 shall be
      deemed to be null and void.

3.  ADJUSTMENTS

                  The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Article 3.

            3.1. Stock Dividends, Subdivisions and Combinations. If at any time
      the Company shall:

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                  (a) take a record of the holders of its Common Stock for the
      purpose of entitling them to receive a dividend payable in, or other
      distribution of, Additional Shares of Common Stock,

                  (b) subdivide its outstanding shares of Common Stock into a
      larger number of shares of Common Stock, or

                  (c) combine its outstanding shares of Common Stock into a
      smaller number of shares of Common Stock,

                  then (i) the number of shares of Common Stock for which this
      Warrant is exercisable immediately after the occurrence of any such event
      shall be adjusted to equal the number of shares of Common Stock which a
      record holder of the same number of shares of Common Stock for which this
      Warrant is exercisable immediately prior to the occurrence of such event
      would own or be entitled to receive after the happening of such event, and
      (ii) the Current Exercise Price shall be adjusted to equal (A) the Current
      Exercise Price in effect prior to such adjustment multiplied by the number
      of shares of Common Stock for which this Warrant is exercisable
      immediately prior to the adjustment divided by (B) the number of shares
      for which this Warrant is exercisable immediately after such adjustment.

            3.2. Reorganization, Reclassification, Merger, Consolidation or
      Disposition of Assets. Except in the case of an Expiration Acceleration
      Event, if the Company shall reorganize its capital, reclassify its capital
      stock, recapitalize its capital structure, consolidate or merge with or
      into another Person (where the Company is not the surviving corporation or
      where there is a change in or distribution with respect to the Common
      Stock of the Company) and, pursuant to the terms of such reorganization,
      reclassification, merger or consolidation, shares of common stock of the
      successor or acquiring Person, or any cash, shares of stock or other
      securities or property of any nature whatsoever (including warrants or
      other subscription or purchase rights) in addition to or in lieu of common
      stock of the successor or acquiring Person ("OTHER PROPERTY"), are to be
      received by or distributed to the holders of Common Stock of the Company,
      then the Holder shall have the right thereafter to receive, upon exercise
      of such Warrant, the number of shares of common stock of the successor or
      acquiring Person or of the Company, if it is the surviving corporation,
      and Other Property receivable upon or as a result of such reorganization,
      reclassification, merger or consolidation by a holder of the number of
      shares of Common Stock for which this Warrant is exercisable immediately
      prior to such event. In case of any such reorganization, reclassification,
      merger or consolidation, the successor or acquiring Person (if other than
      the Company) shall expressly assume the due and punctual observance and
      performance of each and every covenant and condition of this Warrant to be
      performed and observed by the Company and all the obligations and
      liabilities hereunder, subject to such modifications as may be deemed
      appropriate (as determined by resolution of the Board of Directors of the
      Company) in order to provide for adjustments of shares of Common Stock for
      which this Warrant is exercisable which shall be as nearly equivalent as
      practicable to the adjustments provided for in this Article 3. For
      purposes of this Section 3.2, "common stock of the successor or

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      acquiring Person" shall include equity securities of such Person of any
      class which is not preferred as to dividends (or similar distributions of
      profit or surplus) or assets over any other class of equity security of
      such Person and which is not subject to redemption and shall also include
      any evidences of indebtedness, shares of stock or other securities which
      are convertible into or exchangeable for any such equity securities,
      either immediately or upon the arrival of a specified date or the
      happening of a specified event and any warrants or other rights to
      subscribe for or purchase any such equity securities. The foregoing
      provisions of this Section 3.2 shall similarly apply to successive
      reorganizations, reclassifications, mergers or consolidations.

            3.3. Other Provisions Applicable to Adjustments under this Section.
      The following provisions shall be applicable to the making of adjustments
      of the number of shares of Common Stock for which this Warrant is
      exercisable and the Current Exercise Price provided for in this Article 3:

                  (a) When Adjustments to Be Made. The adjustments required by
      this Article 3 shall be made whenever and as often as any specified event
      requiring an adjustment shall occur. For the purpose of any adjustment,
      any specified event shall be deemed to have occurred at the close of
      business on the date of its occurrence.

                  (b) No Fractional Interests. In computing adjustments under
      this Article 3, fractional interests in Common Stock shall be rounded up
      to the nearest whole number.

                  (c) When Adjustment Not Required. If the Company shall take a
      record of the holders of its Common Stock for the purpose of entitling
      them to receive a dividend or distribution and shall, thereafter and
      before the distribution to stockholders thereof, legally abandon its plan
      to pay such dividend or distribution, then thereafter no adjustment shall
      be required by reason of the taking of such record and any such adjustment
      previously made in respect thereof shall be rescinded and annulled.

4.  NOTICES TO WARRANT HOLDERS

            4.1. Notice of Adjustments. Whenever the number of shares of Common
      Stock for which this Warrant is exercisable, or whenever the price at
      which a share of such Common Stock may be purchased upon exercise of the
      Warrants, shall be adjusted pursuant to Article 3, the Company shall
      forthwith prepare a certificate to be executed by an officer of the
      Company setting forth, in reasonable detail, the event requiring the
      adjustment and the method by which such adjustment was calculated,
      specifying the number of shares of Common Stock for which this Warrant is
      exercisable and (if such adjustment was made pursuant to Section 3.2)
      describing the number and kind of any shares of stock or Other Property
      for which this Warrant is exercisable, and any change in the purchase
      price or prices thereof, after giving effect to such adjustment or change.

            4.2. Notice of Corporate Action. If at any time:

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                  (a) the Company shall take a record of the holders of its
      Common Stock for the purpose of entitling them to receive a dividend or
      other distribution; or

                  (b) there shall be any capital reorganization of the Company,
      any reclassification or recapitalization of the capital stock of the
      Company or any consolidation or merger of the Company with another Person;
      or

                  (c) there shall be a voluntary or involuntary dissolution,
      liquidation or winding up of the Company;

                  then the Company shall give to the Holder (i) at least 15
      Business Days' prior written notice of the record date for such dividend
      or distribution or for determining rights to vote in respect of any such
      reorganization, reclassification, merger, consolidation, dissolution,
      liquidation or winding up, and (ii) in the case of any such
      reorganization, reclassification, merger, consolidation, dissolution,
      liquidation or winding up, at least 10 Business Days' prior written notice
      of the date when the same shall take place. Such notice in accordance with
      the foregoing clause also shall specify (i) the date on which any such
      record is to be taken for the purpose of such dividend or distribution,
      the date on which the holders of Common Stock shall be entitled to any
      such dividend or distribution, and the amount and character thereof, and
      (ii) the date on which any such reorganization, reclassification, merger,
      consolidation, dissolution, liquidation or winding up is to take place and
      the time, if any such time is to be fixed, as of which the holders of
      Common Stock shall be entitled to exchange their shares of Common Stock
      for securities or other property deliverable upon such reorganization,
      reclassification, merger, consolidation, dissolution, liquidation or
      winding up.

5.  RESERVATION AND AUTHORIZATION OF COMMON STOCK

                  From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable.

6.  INFORMATION RIGHTS AND BOARD OBSERVER STATUS

                  The Representative shall (a) receive all notices and
information that the Company distributes to the Board of Directors and (b) have
the right to attend and observe in a nonvoting capacity, but not participate in
discussions at, all meetings of the Board of Directors; provided, however, that
the Company reserves the right to exclude the Representative from access to any
material meeting or portion thereof if the Board of Directors believes in good
faith that (i) the Representative would, if such Representative were a director,
be an "interested director" with respect to such matters within the meaning of
Section 144 of the Delaware General Corporation Law or otherwise have a conflict
of interest with respect to such matters or (ii) upon the advice of counsel,

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exclusion of the Representative is reasonably necessary to preserve the
attorney-client privilege. As a condition to the Representative's rights
hereunder, the Representative shall agree to maintain the confidentiality of all
Company information and all proceedings of the Board of Directors to the same
extent as the Representative would be required to do if the Representative were
a director of the Company.

7.  REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY

                  If any shares of Common Stock required to be reserved for
issuance upon exercise of Warrants pursuant to Article 5 require registration or
qualification with any governmental authority or other governmental approval or
filing under any federal or state law before such shares may be so issued, the
Company will in good faith and as expeditiously as possible and at its expense
endeavor to cause such shares to be duly registered.

8.  TAKING OF RECORD; STOCK BOOKS

                  In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Article 3 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock ledger or
other books so as to result in preventing or delaying the exercise of any
Warrant.

9.  LOSS OR MUTILATION

                  Upon receipt by the Company from the Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it, and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
the Holder; provided, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
cancellation.

10.  LIMITATION OF LIABILITY AND RIGHTS

                  No provision hereof, in the absence of affirmative action by
the Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of the Holder hereof, shall (i) give rise to any liability
of such the Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company or (ii) confer upon the Holder rights as a
stockholder of the Company.

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11.  WARRANT NoT TRANSFERABLE

                  Neither this Warrant, nor any of the Holder's rights
hereunder, may be transferred by the Holder to any Person without the prior
written consent of the Company, and any purported transfer in violation of this
Article 11 shall be null and void.

12.  "GOOD FAITH" DETERMINATIONS BY THE BOARD OF DIRECTORS

                  Whenever the Board of Directors of the Company is required to
make a determination in good faith of the fair value of any item under Article
3, such determination may be challenged in good faith by the Holder, and any
dispute shall be resolved by an accounting firm of recognized national standing
selected by the Company and reasonably acceptable to the Holder.

13.  PREEMPTIVE RIGHTs

                  [THE WARRANT IS TO CONTAIN THE SAME PREEMPTIVE RIGHTS AS THOSE
CONTAINED IN THE STOCKHOLDERS' AND WARRANT HOLDER'S AGREEMENT, AND THE HOLDER
WILL HAVE THE SAME PREEMPTIVE RIGHTS AS THE INITIAL COMMON STOCK INVESTORS
(INCLUDING THE PRINCIPALS OF THE DEVLIN GROUP).]

14.  MISCELLANEOUS

            14.1. Notice Generally. Any notice, demand, request, consent,
      approval, declaration, delivery or other communication hereunder to be
      made pursuant to the provisions of this Warrant shall be in writing and
      shall be delivered personally, by facsimile (which is confirmed as
      provided below) or by overnight courier (providing proof of delivery) to
      the applicable party at the following addresses (or at such other address
      for a party as shall be specified by like notice):

                        If to the Company:
                        *

                        If to the Holder:
                        *

      Notice given by personal delivery or overnight courier shall be effective
      upon actual receipt. Notice given by facsimile shall be confirmed by
      appropriate answer back and shall be effective upon actual receipt if
      received during the recipient's normal business hours, or at the beginning
      of the recipient's next Business Day if not received during the
      recipient's normal business hours.

            14.2. Successors. This Warrant and the rights evidenced hereby shall
      inure to the benefit of and be binding upon the successors of the Company
      and the Holder.

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            14.3. Amendment. This Warrant may only be modified or amended with
      the written consent of the Company and the Holder.

            14.4. Severability. Wherever possible, each provision of this
      Warrant shall be interpreted in such manner as to be effective and valid
      under applicable law, but if any provision of this Warrant shall be
      prohibited by or invalid under applicable law, such provision shall be
      ineffective to the extent of such prohibition or invalidity, without
      invalidating the remainder of such provision or the remaining provisions
      of this Warrant.

            14.5. Headings. The headings used in this Warrant are for the
      convenience of reference only and shall not, for any purpose, be deemed a
      part of this Warrant.

            14.6. Governing Law. This Warrant shall be governed by, and
      construed in accordance with, the laws of the State of Delaware, without
      giving effect to any conflicts of laws principles of such State that may
      refer the governance or construction of the Warrant to the laws of another
      jurisdiction.

                  [Remainder of Page Intentionally Left Blank]

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                  IN WITNESS WHEREOF, Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.

Dated:  *, 2004

                                            FFS HOLDINGS, INC.

                                            By:___________________________
                                                Name:
                                                Title:

Attest:

By:______________________
   Name:
   Title:

<PAGE>

                                    EXHIBIT A

                                SUBSCRIPTION FORM

                 [To be executed only upon exercise of Warrant]

            Reference is made the warrant, dated as of * , 2004, issued by
FFS Holdings, Inc. to Hillenbrand Industries, Inc. (the "WARRANT"). Capitalized
terms used herein which are not otherwise defined shall have the respective
meanings ascribed to them in the Warrant.

            The undersigned hereby irrevocably exercises the Warrant for the
purchase of ______ shares of Common Stock of FFS Holdings, Inc. and [herewith
makes payment therefor in the amount of $__________][elects to purchase such
shares in accordance with the Cashless Exercise provisions of Section 2.4 of the
Warrant], all at the price and on the terms and conditions specified in the
Warrant, and, if such shares of Common Stock shall not include all of the shares
of Common Stock purchasable and issuable as provided in the Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
purchasable and issuable thereunder be delivered to the undersigned.

                          HILLENBRAND INDUSTRIES, INC.

                         By:___________________________
                            Name:
                            Title:<PAGE>

                                                                    EXHIBIT 10.4

                                    EXHIBIT D

                                 PROMISSORY NOTE

PRINCIPAL AMOUNT:  $80,000,000

ISSUE DATE:  [_________], 2004

MATURITY DATE (SUBJECT TO EXTENSION):  [_________], 2014

      FOR VALUE RECEIVED, FFS HOLDINGS, INC., a Delaware corporation (the
"Company") with its principal executive office at [ ], promises to pay
HILLENBRAND INDUSTRIES, INC. (the "Holder"), an Indiana corporation having its
principal executive office at 700 State Route 46 East, Batesville, IN
47006-8835, the principal amount of EIGHTY MILLION DOLLARS ($80,000,000.00),
together with interest on the unpaid balance of principal and interest accrued
thereon from time to time outstanding, determined and paid in the manner
hereinafter set forth in this Promissory Note (the "Note").

                                   ARTICLE I

                                   DEFINITIONS

      For purposes of this Note, the following terms shall have the respective
meanings set forth below (such definitions to be equally applicable to both
singular and plural forms of the terms herein defined):

      "Adjusted Equity" means, at any date, the amount determined in accordance
with the procedures set forth in Exhibit A attached hereto.

      "Adjusted Total Debt" means, at any date, without duplication, the
aggregate principal amount of all Indebtedness of the Company and its
Subsidiaries at such date, excluding Indebtedness of the Company to any
Subsidiary of the Company or Indebtedness of any Subsidiary of the Company to
the Company or to any other Subsidiary, provided, however, that any principal
amount of this Note in excess of $80,000,000, and any interest accrued on such
excess, due to an increase in the principal amount of the Note pursuant to
Section 2.2(e) of the Stock Purchase Agreement, shall not be considered
Indebtedness for the sole purpose of determining the Adjusted Total Debt.

      "Affiliate" has the meaning ascribed to such term in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.

      "Bankruptcy Event" means, with respect to a specified Person:

      1.    the entry of a decree or order by a court or governmental authority
            having jurisdiction in the premises judging such Person bankrupt or
            insolvent or ordering the winding up, liquidation, rehabilitation or
            conservation of such Person and the

<PAGE>

            continuance of any such decree or order unstayed and in effect for a
            period of 30 consecutive days; or

      2.    the institution by such Person or by a Governmental Entity on behalf
            of such Person of proceedings to be adjudicated a bankrupt or
            insolvent, or the consent by it to the institution of bankruptcy or
            insolvency proceedings against it, or the filing by it of a petition
            or consent seeking reorganization or relief under any applicable
            bankruptcy, insolvency, reorganization, liquidation, rehabilitation,
            conservation or other similar law, or the consent by it to the
            filing of any such petition or to the appointment of a receiver,
            liquidator, rehabilitator, conservator, assignee, trustee,
            sequestrator (or other similar official) of such Person or of any
            substantial part of its property, or the making by it of an
            assignment for the benefit of creditors, or the admission by it in
            writing of its inability to pay its debts generally as they become
            due, or the taking of corporate action by such Person in furtherance
            of any such action.

      "Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banks in New York City are required or authorized to be closed.

      "Capital Stock" means, as to any corporation, limited liability company,
partnership, association or other business entity, any and all shares,
partnership interests, limited liability company interests, participations or
other equity interests (however designated and whether or not voting or
non-voting), including without limitation common and preferred equity interests,
of such business entity.

      "Change of Control" means the first to occur of any of the following: (i)
the Company beneficially owns less than a majority of the outstanding common
stock of any of the Primary Subsidiaries; (ii) the Company (a) has sold or
otherwise transferred all or substantially all of its assets or (b) permits any
of the Primary Subsidiaries to transfer all or substantially all of its assets,
in either case to any Person (other than the Company or a Subsidiary of the
Company) as an entirety or substantially as an entirety in one transaction or
series of related transactions; (iii) the Initial Holders cease to be the direct
or indirect beneficial owners, collectively, of at least a majority of the total
outstanding Common Stock of the Company beneficially owned (directly or
indirectly) by such Initial Holders on the Issue Date; (iv) the Initial Holders,
collectively, are not legally entitled or empowered (by contract or otherwise)
to elect a majority of the Board of Directors of the Company; or (v) the Company
is not legally entitled or empowered (by contract or otherwise), directly or
indirectly, to elect, or cause to be elected, a majority of the board of
directors of each Primary Subsidiary.

      "Common Stock" means the Class A common stock, par value $0.01, of the
Company and the Class B common stock, par value $0.01 of the Company.

      "Company" has the meaning set forth in the introductory paragraph of this
Note.

      "Debt-Equity Ratio" means, at any date, the ratio of Adjusted Total Debt
to Adjusted Equity.

      "Deferred Amount" has the meaning set forth in Section 3.1(a).

                                      -2-
<PAGE>

      "Deferred DSCA Funds" has the meaning assigned to such term in the Stock
Purchase Agreement.

      "Excess Refinancing Proceeds" means an amount equal to the excess, if any,
of (x) the net proceeds (i.e., gross proceeds reduced by transaction fees and
expenses) of any Refinancing Transaction over (y) the aggregate principal amount
of any FLAC Holdings Notes repaid or retired in such Refinancing Transaction
plus any fees and expenses owing to XLCA in connection with such FLAC Holdings
Notes.

      "Extended Maturity Date" means the twelfth anniversary of the Issue Date.

      "Event of Default" has the meaning set forth in Section 6.1.

      "Fair Market Value" has the meaning set forth in Section 4.2(b)(i).

      "FFSB" means Forethought Federal Savings Bank.

      "FLAC Holdings Notes" means collectively, the Series A FLAC Holdings Notes
and the Series B FLAC Holdings Notes.

      "FLIC" means Forethought Life Insurance Company and its successors.

      "GAAP" means generally accepted accounting principles consistently
applied.

      "Governmental Entity" means each foreign, federal, state, local,
municipal, county or other governmental, administrative or regulatory authority,
body, agency, court, tribunal, commission or other similar entity (including any
branch, or department thereof).

      "Holder" has the meaning set forth in the introductory paragraph of this
Note.

      "Indebtedness" of any Person means any of the following without
duplication: (a) obligations created, issued or incurred by such Person for
borrowed money including without limitation, loans, notes, debentures, surplus
notes and capital notes; (b) obligations of such Person to pay the deferred
purchase or acquisition price of property or services determined in accordance
with GAAP or SAP, as applicable, other than (i) trade accounts payable arising,
and accrued expenses incurred, in the ordinary course of business and (ii)
compensation, pension obligations and other obligations arising from employee
benefit and other similar employee-related arrangements; (c) Indebtedness of
others secured by a lien on the property of such Person, whether or not the
respective Indebtedness so secured has been assumed by such Person; (d)
obligations (including fees and charges) of such Person in respect of letters of
credit or similar instruments or facilities issued or accepted by banks and
other financial institutions for account of such Person except to the extent
collateralized by cash or cash equivalents; (e) obligations of such Person to
pay rent or other amounts under a lease of (or other agreement conveying the
right to use) property to the extent such obligations are required to be
classified and accounted for as a capital lease on the balance sheet of such
Person under GAAP or SAP, as applicable, and, for purposes of this Agreement,
the amount of such obligations shall be the capitalized amount thereof,
determined in accordance with GAAP or SAP, as applicable; (f) Indebtedness of
others guaranteed by such Person; (g) obligations under Interest Swap and

                                      -3-
<PAGE>

Hedging Obligations to the extent that such obligations are treated as
Indebtedness under GAAP or SAP, as applicable; and (h) the liquidation value of
any outstanding shares of Capital Stock that has a payment or liquidation
preference ranking senior to the common equity interests of such Person, other
than Capital Stock that may only be redeemed, repurchased or otherwise acquired
by such Person after the Extended Maturity Date; provided, however, that such
Capital Stock shall not be treated as Indebtedness if, prior to the issuance
thereof, the Holder consents in writing to such treatment, such consent not to
be unreasonably withheld or delayed. Notwithstanding the foregoing, the
following shall not be treated as Indebtedness for purposes of this definition:
(i) any Indebtedness of Forethought Financial Services, Inc. and its
Subsidiaries (excluding FFSB) existing immediately prior to the First Closing,
or with respect to FFSB, immediately prior to the FFSB Closing (including any
refinancing of any such Indebtedness up to the principal amount thereof) and
(ii) the Deferred DSCA Funds.

      "Insurance Subsidiary" means any Subsidiary of the Company that is engaged
in the business of life insurance (including "pre-need" business).

      "Initial Holders" means the initial holders of Common Stock as of the
Issue Date and their Permitted Transferees. In the case of the initial
shareholder of the Class B Common Stock, the first transferee of such stock and
its Permitted Transferees will be deemed an Initial Holder.

      "Initial Public Offering" means the consummation of a public offering of
Capital Stock of the Company pursuant to a registration statement filed under
the Securities Act of 1933, as amended, in which the net offering proceeds of
such public offering exceed $75,000,000.

      "Interest Swap and Hedging Obligations" means any obligation of any Person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against changes in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such Person calculated by applying a
fixed or floating rate of interest on the same notional amount.

      "Lien" has the meaning set forth in Section 4.2(c).

      "LifeCo" means a life insurance company domiciled in Texas and a wholly
owned Subsidiary of the Company.

      "Material Adverse Effect" means, with respect to any Person, a material
adverse effect on the business, assets, properties, financial condition or
results of operations of such Person and its Subsidiaries, taken as a whole.

      "Material Holders" means (a) each of the following Persons for so long as
he or she continues to beneficially own, directly or indirectly, any Common
Stock of the Company: Mr. Robert Devlin, Mr. Rodney A. Hawes, Jr., Mr. Douglas
Schair and Mr. Michael Poulos, and (b) any Person (other than Holder or any of
its Affiliates) that beneficially owns, directly or indirectly, more than 15% of
the total number of issued and outstanding shares of Common Stock of the Company
(other than Mr. William R. Berkley or W.R. Berkley Corporation);

                                      -4-
<PAGE>

provided, however, that any Person identified in clause (b) may, with the
consent of Holder (which consent shall not be unreasonably withheld or delayed),
make or continue to hold any Pre-Need Investment.

      "Material Subsidiaries" means FLAC Holdings, LLC, Forethought Life
Assurance Company, LifeCo, Forethought Life Insurance Company, Arkansas National
Life Insurance Company, Forethought Federal Savings Bank (from and after the
date acquired) and any successors thereto and, as of any date, any Subsidiary of
the Company whose total assets, as such total assets would appear on a balance
sheet of such Subsidiary prepared as of any such date in accordance with GAAP,
is at least $50,000,000.

      "Maturity Date" means the tenth anniversary of the Issue Date, subject to
extension as provided herein.

      "Note" has the meaning set forth in the introductory paragraph of this
Note.

      "notice" has the meaning set forth in Section 8.6.

      "Payment Restrictions" has the meaning set forth in Section 3.1(a).

      "Permitted Transferees" means (A) with respect to any Person who is an
individual (x) such Person's estate and any ancestor, descendant or spouse of
such Person, or trust, family limited partnership or family limited liability
company for the benefit of such Person or such Person's spouse, ancestors or
descendants, or (y) any entity in which such Person, or Persons which have a
relationship to such Person set forth in (x) above, directly or indirectly,
collectively controls and owns a majority of the voting Capital Stock of such
entity, (B) with respect to any Person that is a trust, any Person who has, or
any group of Persons who collectively have, a substantial beneficial interest in
such trust, and (C) with respect to any Person that is not an individual or a
trust, such Person's Affiliate.

      "Person" means any individual, corporation, limited liability company,
voluntary association, partnership, joint venture, trust, unincorporated
organization or governmental entity (or any agency, instrumentality or political
subdivision thereof).

      "Pre-Need Entity" has the meaning set forth in Section 6.1(k).

      "Pre-Need Investment" has the meaning set forth in Section 6.1(k).

      "Prepayment Date" has the meaning set forth in Section 2.3(d).

      "Primary Subsidiaries" means FLAC Holdings, LLC, Forethought Life
Assurance Company, LifeCo, Forethought Life Insurance Company, and their
successors.

      "Pro Forma Debt-Equity Ratio" means as of any date, the Debt Equity Ratio
at such date adjusted to reflect the proposed transaction required to give pro
forma effect hereunder determined by reference to the most recent month-end for
which a balance sheet of the Company is available, adjusted pro forma to give
effect to such transaction.

                                      -5-
<PAGE>

      "RBC Ratio" means the risk based capital ratio specified as the Company
Action Level Risk Based Capital Ratio by the applicable Governmental Entities
charged with the supervision of the Insurance Subsidiaries.

      "Refinancing Prepayment" has the meaning set forth in Section 2.3(c).

      "Refinancing Transaction" means (i) any issuance or incurrence by the
Company or any its Subsidiaries of Indebtedness or (ii) any issuance or sale of
Capital Stock by the Company or any of its Subsidiaries, in each of clauses (i)
or (ii) above, the net proceeds (i.e., gross proceeds reduced by transaction
fees and expenses) of which are used to repay or retire in whole or in part the
Series A FLAC Holdings Notes (to the extent outstanding) or Series B FLAC
Holdings Notes, in each case prior to the scheduled maturity date applicable
thereto.

      "Restricted Payment" means with respect to any Person (A) any dividend or
other distribution on or in respect of any shares of such Person's Capital Stock
(other than Seller Preferred Stock), excluding a distribution of such Person's
Capital Stock or rights to acquire such Person's Capital Stock to the holders of
such Person's Capital Stock, (B) any payment on account of the purchase,
redemption, retirement or other acquisition of (x) any shares of such Person's
Capital Stock (other than Seller Preferred Stock) or (y) any option, warrant or
other right to acquire shares of such Person's Capital Stock (other than Seller
Preferred Stock), (C) any payments to any holder of Capital Stock of such Person
or to any Affiliate of such holder in respect of management or consulting fees
or similar arrangements or investment banking advisory fees or similar
arrangements, except that any payment enumerated in Sections 4.2(e)(i),
4.2(e)(ii) and 4.2(e)(iii) shall not constitute a Restricted Payment or (D) any
payments to any Material Holder or his Permitted Transferees in respect of the
purchase or sale of property in excess of $10,000 in one transaction or series
of related transactions. Notwithstanding the foregoing, the declaration,
distribution or payment of a dividend by any Subsidiary of such Person that
provides for any payment of the Unpaid Amount, Deferred DSCA Funds or Seller
Preferred Stock shall not constitute a Restricted Payment.

      "SAP" means the applicable accounting practices prescribed or permitted by
the applicable insurance regulator for purposes of financial reporting
consistently applied.

      "Securitization Documents" means the agreements and documents under which
XLCA has any rights or interests in connection with the Securitization Financing
including, without limitation, the indenture related to the FLAC Holdings Notes,
the XLCA Policies, collateral agreements and swap agreements relating to
interest rate hedges.

      "Securitization Financing" means the transaction in which the Company has
issued the FLAC Holdings Notes.

      "Series A FLAC Holdings Notes" means the $[__________] principal amount of
secured notes due [____] of FLAC Holdings, LLC issued on [______], 2004.

      "Series B FLAC Holdings Notes" means the $[__________] principal amount of
secured notes due [____] of FLAC Holdings, LLC issued on [______], 2004.

                                      -6-
<PAGE>

      "Stock Pledge Agreement" means the Stock Pledge Agreement between the
Company and the Holder, dated [_____], 2004.

      "Seller Preferred Stock" means the Series A Cumulative Redeemable
Preferred Stock of the Company initially issued to the Holder.

      "Stock Purchase Agreement" means the Stock Purchase Agreement between FFS
Holdings, Inc. and Hillenbrand Industries, Inc., dated February 12, 2004.

      "Subsidiary" has the meaning ascribed to the term "Subsidiary" under Rule
12b-2 under the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.

      "Transaction Value" means the total proceeds and other consideration paid
or received or to be paid or received in connection with a merger, acquisition,
divestiture or similar transaction (including by means of a reinsurance
transaction) (which consideration shall be deemed to include amounts in escrow),
including, without limitation: (i) cash, (ii) notes, securities and other
property, (iii) indebtedness assumed, (iv) payments made in installments, (v)
contingent payments relating to future earnings or operations and (vi) if the
transaction involves the disposition of assets, the net value of current assets
sold. For the purpose of this definition, non-cash consideration shall be valued
as follows: (x) publicly traded securities shall be valued at the average of
their closing prices for the five trading days prior to the closing of the
transaction and (ii) any other non-cash consideration shall be valued at the
fair market thereof as determined in good faith by the Company's Board of
Directors.

      "Unpaid Amount" means, on any date, the unpaid principal amount of this
Note, together with any interest accrued hereon compounded as provided herein
(which for the avoidance of doubt includes interest on accrued interest).

      "Warrant" means the warrant, initially issued to the Holder, to purchase
the Common Stock.

      "XLCA" means XL Capital Assurance Inc.

      "XLCA Policies" mean the insurance policies issued by XLCA insuring (i)
the payment obligations of FLAC Holdings, LLC under the FLAC Holdings Notes and
the indenture governing the FLAC Holdings Notes and (ii) certain payments owing
by FLAC Holdings with respect to interest rate swaps or hedges.

                                   ARTICLE II

                                    PAYMENTS

      SECTION 2.1. Interest Payments. Interest on this Note shall accrue on the
Unpaid Amount from the date hereof at a rate per annum computed in accordance
with Section 2.2.

                                      -7-
<PAGE>

      SECTION 2.2. Computation of Interest.

      (a) Base Interest Rate. Interest on this Note shall accrue on the Unpaid
Amount at the following rates for the periods indicated:

            (i) 6% per annum from the Issue Date to but not including the fifth
      anniversary of the Issue Date;

            (ii) 8% per annum from the fifth anniversary of the Issue Date to
      but not including the seventh anniversary of the Issue Date;

            (iii) 10% per annum from the seventh anniversary of the Issue Date
      to but not including the Maturity Date; and

            (iv) 12% per annum from the Maturity Date to the date the Note is
      paid in full.

      (b) Notwithstanding the provisions of (a) above, the rate of interest for
the periods indicated in subsection (a) above is subject to increase in
accordance with Section 6.1.

      (c) Interest shall be calculated on the basis of a year consisting of 365
days, and shall be compounded semiannually.

      SECTION 2.3. Repayments.

      (a) The Unpaid Amount may be prepaid, in whole or in part, without
penalty, at the option of the Company, at any time upon five days' prior written
notice to the Holder.

      (b) Subject to Article III, the entire Unpaid Amount and all other
obligations under this Note shall become and be immediately due and payable on
the earliest to occur of the following: (i) the closing date of the Initial
Public Offering; (ii) the effective date of a Change of Control; (iii) the
Maturity Date; or (iv) the date on which the Holder declares the Unpaid Amount
due and payable or the Unpaid Amount becomes due and payable as provided in
Section 6.2 or Section 6.3.

      (c) In the event that a Refinancing Transaction shall be consummated that
results in Excess Refinancing Proceeds equal to or greater than $20,000,000
then, subject to Article III, the Company shall make a prepayment in an amount
equal to 50% of such Excess Refinancing Proceeds (the "Refinancing Prepayment"),
which amount shall forthwith be due and payable to Holder. The Company shall
deliver to the Holder a certificate of its Chief Financial Officer within ten
days after a Refinancing Transaction and which certificate shall set forth the
amount, if any, of the Refinancing Prepayment.

      (d) Subject to Article III, there shall be due and payable the sum of
$10,000,000 per year commencing on the sixth anniversary of the Issue Date and
continuing on each anniversary of the Issue Date thereafter until the Maturity
Date (each such date, a "Prepayment Date").

                                      -8-
<PAGE>

      (e) Any payment hereunder shall be applied first, to accrued interest on
the Note and second, to the reduction of unpaid principal; provided, however,
that if there is any Deferred Amount outstanding, any payment hereunder shall be
applied first to such Deferred Amount.

      SECTION 2.4. Payment Procedure. All payments hereunder are to be made in
lawful money of the United States of America by wire transfer of immediately
available funds for credit (not later than 12:00 noon, New York City time, on
the date due) to the Holder's account or other account or accounts in the United
States as the Holder may designate in writing.

      SECTION 2.5. Payments Due on Non-Business Days. Anything in this Note to
the contrary notwithstanding, any payment of principal or interest on this Note
that is due on a date other than a Business Day shall be made on the next
succeeding Business Day. If the date for any payment is extended to the next
succeeding Business Day by reason of the preceding sentence, the period of such
extension shall not be included in the computation of the interest payable on
such Business Day.

      SECTION 2.6. Set-Off. (a) The Company shall have no right to set off or
recoupment or apply any amounts due to the Holder or its Affiliates under this
Note against any payment obligation of the Holder or its Affiliates to the
Company or its Affiliates arising under or based upon the Stock Purchase
Agreement or the transaction documents contemplated thereby.

      (b) With respect to any indemnification payment that the Holder is
entitled to elect to offset pursuant to Section 9.5 of the Stock Purchase
Agreement, the Holder may by notice to the Company, make such indemnification
payment to the Company or its Affiliates under Articles IX or X of the Stock
Purchase Agreement, by applying it on a dollar for dollar basis, first, against
any then-outstanding Deferred Amount and, next, against the next succeeding
payment to become due under this Note (including any prepayment).

                                  ARTICLE III

                    PAYMENT RESTRICTIONS AND DEFERRED AMOUNT

      SECTION 3.1. Payment Restrictions.

      (a) The Holder acknowledges and agrees that any payment due under Article
II (other than under Section 2.3(b)(i) and Section 2.3(b)(ii)) (except as
provided below)) may be deferred to a later date (but in no event beyond the
Extended Maturity Date) to the extent that, and only to the extent that, (i) the
Company does not have sufficient funds on hand (after payment of, or reasonable
provision for, the Company's liabilities (other than liabilities incurred in
violation of any provision in this Note or coming due after more than one year)
and ordinary course obligations (including ordinary course administrative,
management and similar expenses)) to provide for such payments (in whole or in
part) and (ii) the Company's Subsidiaries cannot declare or pay dividends or
distributions to the Company in an amount sufficient to provide for such payment
(or portion thereof) solely by reason of (w) restrictions imposed by applicable
laws (x) restrictive covenants or similar limitations or restrictions governing
the FLAC Holdings Notes on the date of the issuance thereof, (y) restrictive
covenants or similar limitations or restrictions applicable to assets acquired
after the Issue Date, the stock of entities acquired,

                                      -9-
<PAGE>

formed or organized after the Issue Date or organized to hold assets acquired
after the Issue Date (other than restrictive covenants or similar limitations or
restrictions applicable to the assets, revenues or other property directly held
by FLIC) or (z) in the case of an Insurance Subsidiary, payments due hereunder
would result in an RBC Ratio of less than 2.0 to 1.0 (clauses (i) and (ii) above
collectively referred to as the "Payment Restrictions"). Any Unpaid Amount, the
payment of which is deferred to a later date under this Section 3.1 (including,
for the avoidance of doubt, any previously deferred Unpaid Amount) is
collectively referred to herein as a "Deferred Amount." The foregoing
notwithstanding, any payment due under Article II hereof by reason of a Change
of Control caused by an event described in clause (ii)(b) of the definition of
Change of Control is subject to extension under this Article III.

      (b) The Company agrees that on or prior to the Maturity Date or any
Prepayment Date in which any payments or portions of payments due hereunder are
anticipated to be deferred in accordance with Section 3.1(a) above, the Company
will provide to the Holder (i) reasonably detailed financial information
evidencing the insufficiency of funds on hand to provide for such payments,
which calculations shall be reasonably satisfactory to the Holder and (ii) an
officer's certificate, duly executed by the Chief Financial Officer of the
Company, certifying that the Company has met the requirements to defer such
payments in accordance with this Section 3.1.

      (c) Subject to Section 3.1(a) hereof, the Company agrees that it will
cause its Subsidiaries to (i) declare and pay the maximum lawful ordinary
dividends and distributions (including causing such Subsidiaries to make timely
application to the proper state insurance departments) and (ii) repay all
intercompany accounts due and owing to the Company in accordance with their
terms, in each case as necessary to provide for the payment of the Unpaid Amount
when due or as deferred, subject only to Payment Restrictions. The Company
further acknowledges and agrees that in the event that a Payment Restriction
results in a Deferred Amount, the Company is not relieved from its obligations
to pay all sums due hereunder in full.

      SECTION 3.2. Payment of Deferred Amount. Not later than 10 days after the
last day of each quarter, the Company shall pay any portion of the Deferred
Amount outstanding as of the end of such quarter to the extent that Section
3.1(a) does not permit any such portion to continue to be deferred. The Company
shall also deliver on each such date an officer's certificate, executed by the
Chief Financial Officer of the Company, certifying that such payment constitutes
the maximum amount that is available for payment of the Deferred Amount on such
date in accordance with the terms of this Note. Notwithstanding the foregoing,
any unpaid Deferred Amount shall be paid in full not later than the Extended
Maturity Date.

                                   ARTICLE IV

                            COVENANTS OF THE COMPANY

      SECTION 4.1. Affirmative Covenants. In addition to the covenants and
agreements of the Company set forth in Article II and Article III hereof, the
Company covenants and agrees that, so long as this Note is outstanding, it will
perform and will cause each of its Subsidiaries to perform the obligations set
forth in this Section 4.1.

                                      -10-
<PAGE>

      (a) Taxes, Levies and Other Charges. The Company will, and will cause each
of its Subsidiaries to, promptly pay and discharge in the manner prescribed by
law all taxes, assessments, and governmental charges or levies (including
without limitation any such amounts that the Company or any such Subsidiary is
required to pay under contract) that may be assessed or levied against the
Company or any such Subsidiary or upon the Company's or such Subsidiary's income
and profits, or upon any of the Company's or such Subsidiary's property, before
the same shall become delinquent, as well as all claims for labor, materials and
supplies which, if unpaid, might become a lien or charge upon such properties or
any part thereof, except for such tax, assessment, charge, levy or claim that
would not result in a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. Notwithstanding the foregoing, the Company or
such Subsidiary will not be required to pay and discharge any such tax,
assessment, charge, levy or claim so long as (i) the validity thereof shall be
contested in good faith by appropriate proceedings, (ii) the Company or such
Subsidiary, as the case may be, shall set aside on its books adequate reserves
in accordance with GAAP with respect to any such tax, assessment, charge, levy
or claim so contested and (iii) the Company or such Subsidiary, as the case may
be, promptly pays all amounts due, if any, in the manner prescribed by law with
respect to such contested items.

      (b) Maintenance of Existence; Compliance with Law. The Company will, and
will cause each of its Subsidiaries to, do or cause to be done all things
reasonably necessary to preserve and keep in full force and effect the Company's
and each of its Subsidiaries' corporate existence, rights, licenses and
franchises and comply with all laws applicable to the Company or such
Subsidiary, except where the failure to preserve and keep in full force and
effect such corporate existence, rights, licenses and franchises would not
result in a Material Adverse Effect on the Company and its Subsidiaries, taken
as a whole.

      (c) Books and Records. The Company will at all times keep books, records
and accounts (which shall be true and correct in all material respects)
reflecting the Company's business affairs and transactions in accordance with
GAAP, (or in any other manner as reasonably determined by the Company). The
Company will cause each of its Subsidiaries to at all times keep books, records
and accounts (which shall be true and correct in all material respects)
reflecting such Subsidiary's business affairs and transactions in accordance
with GAAP (or in any other manner reasonably determined by the Company or such
Subsidiary), except if such Subsidiary is an insurance company, the books,
records and accounts shall be reflected in accordance with SAP. Such books and
records shall be open at reasonable times and upon reasonable notice to the
inspection of the Holder or its agents at Holder's expense.

      (d) Treatment of Note as Debt. The Company shall treat the Note as
indebtedness of the Company for all purposes including, without limitation,
federal, state, local or foreign tax purposes, all regulatory purposes and all
financial and statutory accounting purposes.

      (e) Certain Deliveries.

            (i) Following the Issue Date, the Company will deliver to the
      Holder, each year, on or prior to the date on which annual statutory
      financial statements are required to be submitted to applicable insurance
      regulatory authorities, a copy of such statements.

                                      -11-
<PAGE>

            (ii) Following the Issue Date, the Company will deliver to the
      Holder, each quarter, on or prior to the date on which quarterly statutory
      financial statements are required to be submitted to applicable insurance
      regulatory authorities, a copy of such statements.

            (iii) Prior to the Company or any Subsidiary of the Company, as
      applicable, making any Restricted Payment or incurring any Indebtedness,
      the Company will deliver to the Holder an officer's certificate, duly
      executed by the Chief Financial Officer of the Company, certifying that
      the payment of such Restricted Payment will not result in a breach of
      Section 4.2(b) and Section 4.2(h), as the case may be. Such certification
      shall set forth the computation in reasonable detail of the Pro Forma
      Debt-Equity Ratio.

            (iv) The Company will deliver to the Holder any and all other
      material financial information (including without limitation internal
      financial statements, net income and cash flow analysis and other
      financial reports) that is provided to the Company's board of directors in
      its capacity as such or that is required to be delivered to XLCA under the
      Securitization Documents. The Company shall also notify Holder immediately
      of the occurrence of any "Trigger Event" or "Event of Default" under the
      Securitization Documents.

            (v) The Company will give prompt written notice (with a description
      in reasonable detail) to the Holder of the occurrence of any Event of
      Default or any event which, with the giving of notice or the lapse of
      time, would constitute an Event of Default.

      SECTION 4.2. Negative Covenants. The Company covenants and agrees that, so
long as this Note shall be outstanding, it will perform, and will cause each of
its Subsidiaries to perform, the obligations set forth in this Section 4.2.

      (a) Merger, etc. The Company may not consolidate with, or merge with or
into any other Person or sell, assign, convey, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets (as an entirety
or substantially as an entirety in one transaction or series of related
transactions) to any Person or group of affiliated Persons or permit any
Material Subsidiary of the Company to enter into any such transaction or
transactions if such transaction or transactions, in the aggregate, would result
in a transfer of all or substantially all of the assets of the Company on a
consolidated basis, to any other Person, except that:

            (i) any Material Subsidiary of the Company may merge with the
      Company (so long as the Company is the surviving entity in such merger) or
      with any other Material Subsidiary of the Company, provided that, in each
      case, no Event of Default exists hereunder or shall occur as a result of
      such merger;

            (ii) the Company may merge or consolidate with or into another
      Person (which Person shall become liable for this Note upon the
      consummation of such transaction) if (A) no Change of Control has occurred
      as a result of such transaction, (B) after giving pro forma effect to such
      merger, the Debt-Equity Ratio is less than 4.0 to 1.0

                                      -12-
<PAGE>

      as of the date that such transaction is consummated and (C) no Event of
      Default exists hereunder or would result from such transaction; and

            (iii) any Material Subsidiary of the Company may merge or
      consolidate with or into another Person if (A) no Change of Control has
      occurred as a result of such transaction, (B) after giving pro forma
      effect to such merger, the Debt-Equity Ratio is less than 4.0 to 1.0 as of
      the date that such transaction is consummated and (C) no Event of Default
      exists hereunder or would result from such transaction.

      (b) Limitation on Restricted Payments. (i) The Company will not, directly
or indirectly, (x) make any Restricted Payment or (y) permit any Subsidiary of
the Company, directly or indirectly, to make any Restricted Payment of the type
described in clause (C) or (D) of the definition of Restricted Payment, if: (A)
at the time of such Restricted Payment, there is any Deferred Amount
outstanding, (B) at the time of such Restricted Payment or after giving effect
thereto, an Event of Default, or an event that through the passage of time or
the giving of notice, or both, would become an Event of Default, shall have
occurred or be continuing or (C) if after giving effect to such Restricted
Payment, the Pro Forma Debt-Equity Ratio would be greater than 4.0 to 1.0. Where
a Restricted Payment is made in a form other than cash, the amount of such
Restricted Payment shall be the Fair Market Value thereof. For purposes of this
Note, "Fair Market Value" means the value of assets (other than cash) determined
by the majority of the Board of Directors of the Company that reflects a value
that would be obtained in a transaction made on an arm's length basis with
Persons who are not an Affiliate of the Company; provided, however, the Company
agrees that it will provide the Holder (x) reasonably detailed financial
information and calculations to enable the Holder to verify the determination of
the Fair Market Value of such asset or assets and (y) an officer's certificate,
duly executed by the Chief Financial Officer of the Company, certifying, to the
best of such officer's knowledge, that the Fair Market Value reflects a value
that would be obtained in a transaction made on an arm's length basis with
Persons who are not an Affiliate of the Company. In the event that the Holder
disagrees with the determination of the Fair Market Value of an asset or assets,
the parties shall refer such determination to an independent third party
appraiser with nationally recognized expertise in the valuation of such assets,
mutually agreeable to the Company and the Holder, whose determination shall be
final and binding.

      (ii) In connection with any Restricted Payment by the Company other than a
Restricted Payment of the type referred in clause (C) or (D) in the definition
of "Restricted Payment," the Company shall either (x) pay to Holder an amount
equal to 50% of the amount of such Restricted Payment (the "Holder RP Payment"),
to be paid on the date on which such Restricted Payment is made and which shall
be applied to the Unpaid Amount or (y) designate a Person that shall purchase
and acquire from Holder a participation in the Note in an amount equal to the
Holder RP Payment (the "Note Participation"). The Note Participation shall
represent the percentage of economic entitlement to amounts payable under the
Note determined by dividing the Holder RP Payment by the aggregate Unpaid Amount
outstanding under the Note on the date that the Restricted Payment is made. In
the event that the Company designates a Person pursuant to clause (y) to acquire
the Note Participation, it shall notify Holder in writing five business days in
advance of the date and time that the proposed Restricted Payment is to be made
and the identity of the proposed purchaser of the Note Participation (the
"Participant"), who shall be reasonably satisfactory to Holder. Holder agrees to
sell the Note Participation to

                                      -13-
<PAGE>

the Participant for an amount in cash equal to the Holder RP Payment in
accordance with the form of participation agreement attached hereto as Exhibit
B. The purchase and sale of the Note Participation shall take place
simultaneously with the Restricted Payment. In the event that the Participant
fails to consummate the purchase of the Note Participation for any reason, the
Company shall remain liable to Holder for the Holder RP Payment, which shall
thereupon be paid forthwith.

      (c) Limitation on Liens. The Company will not, and will not permit FLIC
to, create, incur, assume or suffer to exist any mortgage, pledge,
hypothecation, assignment of security, security interest, encumbrance, lien
(statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (each, a "Lien") upon
the assets, revenues or other property directly held by FLIC, whether now owned
or hereafter acquired, without the prior written consent of Holder (such consent
not to be unreasonably withheld or delayed) except for:

            (i) Liens arising pursuant to purchase money obligations securing
      Indebtedness of FLIC to any seller or any other person incurred or assumed
      to finance all or a portion of the purchase of real or personal property
      to be used in the business of such person that is recourse only to such
      real or personal property;

            (ii) Liens for taxes, assessments or other governmental charges or
      levies not at the time delinquent or thereafter payable without penalty or
      being contested in good faith by appropriate proceedings and for which
      adequate reserves in accordance with SAP shall have been set aside on
      FLIC's books;

            (iii) Liens of carriers, warehousemen, mechanics, materialmen and
      landlords incurred in the ordinary course of business for sums not overdue
      or being contested in good faith by appropriate proceedings and for which
      adequate reserves in accordance with SAP shall have been set aside on
      FLIC's books;

            (iv) Liens securing judgments which in the aggregate do not exceed
      $2,000,000 or which are discharged, bonded, or stayed pending appeal
      within 60 days of entry;

            (v) Liens arising from deposits made in connection with obtaining
      worker's compensation or other unemployment insurance;

            (vi) Easements, rights of way and zoning restrictions with respect
      to real property that do not materially interfere with the use or
      operation thereof; or

            (vii) Banker's liens and right of set off arising with respect to
      deposits made in the ordinary course of business.

      (d) Negative Pledge of Capital Stock. The Company will not, and will not
permit Lifeco or any subsidiary of Lifeco to which the Capital Stock of FLIC is
transferred, to create, incur, assume or suffer to exist any Lien upon the
Capital Stock of FLIC or the Capital Stock of any subsidiary of Lifeco to which
the Capital Stock of FLIC is transferred, whensoever issued, except for Liens
for taxes, assessments or other governmental charges or levies not at the time

                                      -14-
<PAGE>

delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on the Company's or such Subsidiary's books
and the pledge of the outstanding Capital Stock of Lifeco referred to in Section
8.8.

      (e) Limitation on Transactions with Affiliates. Neither the Company nor
any of its Subsidiaries will directly or indirectly enter into any transaction,
including, without limitation, the purchase, sale, lease or exchange of
property, real or personal, the purchase or sale of any security, the borrowing
or lending of any money, or the rendering of any service, with any Affiliate of
the Company or holder of any class of Capital Stock of the Company or any such
Affiliate (in any such cases, other than a wholly-owned Subsidiary of the
Company), except for transactions made in good faith, the terms of which are
fair and reasonable to the Company or such Subsidiary, as the case may be, and
are at least as favorable as the terms which could be obtained by the Company or
such Subsidiary, as the case may be, in a comparable transaction made on an
arm's length basis with Persons who are not such a holder or Affiliate as
determined in good faith by the board of directors of the Company or such
Subsidiary; provided, however, that if such transaction or series of related
transactions involves aggregate payments by the Company or such Subsidiary in
excess of $5,000,000, then the Company or such Subsidiary shall, prior to
entering into such transaction or transactions, obtain the opinion of a
nationally recognized independent valuation firm or investment bank to the
effect that the transaction or series of related transactions is fair to the
Company or such Subsidiary from a financial point of view; and provided,
further, that this Section 4.2(e) does not apply to the following payments by
the Company or a Subsidiary of the Company:

            (i) a transaction fee payable to one or more Affiliates of the
      Company or holders of any class of Capital Stock of the Company in an
      amount not to exceed $4,500,000 for financial advisory services rendered
      to the Company or one or more Affiliates of the Company in connection with
      the consummation of the transactions contemplated in the Stock Purchase
      Agreement (it being understood that the maximum amount of fees payable to
      one or more Affiliates of the Company for all services rendered in
      connection with the consummation of such transactions contemplated in the
      Stock Purchase Agreement is $4,500,000 in the aggregate).

            (ii) management fees payable to one or more Affiliates of the
      Company or holders of any class of Capital Stock of the Company in an
      amount initially not to exceed $3,000,000 in the aggregate during any one
      12-month period commencing on the Issue Date, which amount shall be
      subject to reasonable increase to reflect the growth and size of the
      Company's business; provided, however, that any increase greater than 25%
      over the previous twelve month period's management fee shall require prior
      written consent of Holder (such consent not to be unreasonably withheld).

            (iii) transaction advisory fees payable (A) in connection with the
      consummation of mergers, acquisitions, divestures or similar transactions
      including by means of reinsurance, or (B) in connection with the
      consummation of financing or refinancing transactions by the Company or
      its Subsidiaries with one or more Affiliates of the Company or holders of
      any class of Capital Stock of the Company, in an amount with respect to
      each such transaction not to exceed in the aggregate 1.5% of the total

                                      -15-
<PAGE>

      Transaction Value; provided, that, if such Affiliates of the Company or
      holders of any class of Capital Stock of the Company provide investment
      banking services in connection with any such transaction then upon the
      consummation of such transactions such Affiliates shall be entitled to
      receive additional fees, which, together with the 1.5% transaction
      advisory fee, are no greater than fees customarily received by investment
      banking firms for the same or similar services but only to the extent the
      investment banking services so performed are not duplicative with other
      investment banking services rendered to the Company or its Subsidiaries in
      connection with such transaction.

      provided, however, that until the expiration of the second year after the
      Issue Date, the payments described in (i), (ii), and (iii) above shall not
      be made, if after giving effect thereto, such payment would cause the
      Debt-Equity Ratio to be greater than 4.0 to 1.0, unless, in the case of
      payments described in (iii) above, such payment is made in connection with
      a transaction that decreases the Debt-Equity Ratio; provided, further, if
      and to the extent that the maximum amount of payments otherwise
      permissible are not made within such two year period, such shortfall may
      be paid subsequent to such two year period and shall not be taken into
      account in determining (nor shall they be subject to) any limitation
      hereunder.

      (f) Limitation on Capital Stock of the Company. The Company will not
redeem, repurchase or otherwise acquire any preferred stock of the Company at
any time on or before the date that the Note is repaid in full. The Company will
not redeem, repurchase or otherwise acquire any Series A Common Stock of the
Company until five years after the Issue Date and Series B Common Stock of the
Company until three years after the Issue Date.

      (g) Notice in the Event of any Modifications to the FLAC Holdings Notes.
The Company will provide written notice to the Holder of any modification of any
material terms or conditions under the FLAC Holdings Notes on or prior to the
date that such modification becomes effective.

      (h) Limitation on Indebtedness. The Company will not, and will not permit
any of its Subsidiaries to, create, issue, assume, guarantee, incur, or become
liable with respect to, or otherwise become responsible for, contingently or
otherwise, any Indebtedness, unless at the time of such proposed action, giving
effect to such incurrence of Indebtedness, the Pro Forma Debt-Equity Ratio is
less than 4.0 to 1.0.

                                   ARTICLE V

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      The Company represents and warrants to the Holder as of the Issue Date as
follows:

      SECTION 5.1. Organization.

      (a) Exhibit C sets forth a true, complete and correct list of all
Subsidiaries of the Company.

                                      -16-
<PAGE>

      (b) Each of the Company and LifeCo is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corporate power and authority to
carry on its business as now being conducted. Each of the Company and LifeCo is
duly qualified to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such qualification necessary (other than in such jurisdictions where the
failure to be so qualified would not have a material adverse effect).

      (c) FLAC Holdings, LLC is a limited liability company duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the requisite power and authority to carry on its
business as now being conducted. FLAC Holdings, LLC is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary (other than in such jurisdictions where the failure to be so qualified
would not have a material adverse effect).

      SECTION 5.2. Subsidiaries. All of the outstanding shares of capital stock
of each Subsidiary of the Company were duly authorized and validly issued and
are fully paid and nonassessable, and are owned of record and beneficially by
the Company, by one or more of the Subsidiaries of the Company or by the Company
and one or more of the Company's Subsidiaries, free and clear of all Liens other
than those granted in connection with the issuance of the FLAC Holdings Notes.

      SECTION 5.3. Authorization. The Company has taken all necessary corporate
action to authorize it to execute, deliver and perform this Note and to
consummate the transactions contemplated hereby. This Note has been duly
executed and delivered by the Company, and is a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms.

      SECTION 5.4. Capitalization; Corporate Structure. The total consolidated
capitalization of the Company and its Subsidiaries (both debt and equity), after
giving effect to the transactions contemplated to be performed on and prior to
such date in the Stock Purchase Agreement or the transaction documents
contemplated thereby, is attached hereto as Exhibit D. Exhibit D also sets forth
the corporate structure of the Company and its Subsidiaries, identifies the
ownership interest of each Subsidiary of the Company and sets forth the
authorized capital stock and shares issued and outstanding of the Company and
the Material Subsidiaries.

      SECTION 5.5. Consents, etc. The execution, delivery or performance in
accordance with its terms of this Note by the Company does not (i) conflict with
any of the provisions of the Articles of Incorporation or By-laws of the
Company, (ii) conflict with, result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of any
benefit under, or give rise to any obligation of the Company or any of its
Subsidiaries to make any payment under, or to the increased, additional,
accelerated or guaranteed rights or entitlements of any Person under, or result
in the creation of any Liens (other than as contemplated hereunder) upon any of
the properties or assets of the Company or any Subsidiary of the Company under
any agreement, arrangement, lease, understanding, contract, instrument, loan,
note, bond, mortgage, indenture,

                                      -17-
<PAGE>

promise, undertaking or other commitment or obligation or Permit under which the
Company or any Subsidiary of the Company is a party or by which any of their
respective assets or properties owned and used are bound, that would,
individually or in the aggregate, have a Material Adverse Effect on the Company
or its Subsidiaries, taken as a whole or (iii) subject to the matters referred
to in the next sentence, violate or give rise to the loss of a right or benefit,
or create any obligation or liability under any statute, law, rule, regulation,
order, judgment, injunction or award applicable to the Company or any Subsidiary
of the Company, that would, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any Governmental Entity which has not been obtained or made is required by
or with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery by the Company of this Note.

      SECTION 5.6. Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.

      SECTION 5.7. Survival. All representations and warranties made in this
Note shall survive the execution and delivery of this Note.

                                   ARTICLE VI

                                EVENTS OF DEFAULT

      SECTION 6.1. Event of Default. The term "Event of Default" shall mean any
of the events set forth below:

      (a) Non-Payment of Obligations. The Company shall fail to make any payment
of all or any portion of the Unpaid Amount as and when the same shall become due
and payable, whether by acceleration or otherwise, which default shall continue
uncured for 20 days.

      (b) Non-Performance of Certain Affirmative Covenants. The Company shall
default in the due observance or performance of any covenant set forth in
Section 4.1, which default shall continue uncured for (x) 60 days with respect
to a default under Sections 4.1(a), (b), (c) and (d) and (y) 10 days with
respect to a default under Section 4.1(e).

      (c) Failure to Comply with Section 3.1(c). The Company shall fail to
comply with the provisions of Section 3.1(c), which default shall continue
uncured for 60 days.

      (d) Non-Performance of Section 4.2(d) and Section 4.2(h). The Company
shall default in the due observance or performance of (i) the covenants set
forth in Section 4.2(d) or (ii) the covenants set forth in Section 4.2(h).

      (e) Non-Performance of Certain Other Negative Covenants. The Company shall
default in the due observance or performance of the covenants set forth in
Section 4.2 (other than Section 4.2(d) and Section 4.2(h)), which default shall
continue uncured for 60 days.

                                      -18-
<PAGE>

      (f) Warranties and Representations. Any warranty and representation of the
Company contained herein, when made, shall have been false or misleading in any
material respect.

      (g) Reports and Information. Any report or information required to be
delivered to the Holder under Article III or Article IV, when delivered, shall
contain any material misstatement of fact or omit to state any material fact
necessary, in light of the circumstances under which it is made, in order to
make the statements therein not misleading in any material respect.

      (h) Cross-acceleration of the FLAC Holdings Notes. There is a default or
event of default under the FLAC Holdings Notes which results in the acceleration
of such Indebtedness prior to its maturity.

      (i) Cross-default There is a default or event of default under any other
Indebtedness of the Company or any of its Subsidiaries in excess of $5,000,000,
(x) which default is caused by a failure to pay principal or interest thereon
when due, after the expiration of any grace period provided for in the
instrument evidencing such Indebtedness on the date of such default or (y) which
results in the acceleration of such Indebtedness prior to its maturity, which
default is not waived or shall continue uncured for 60 days.

      (j) Bankruptcy, Insolvency, etc. The occurrence of a Bankruptcy Event with
respect to the Company or any Material Subsidiary.

      (k) Pre-Need Investments of Material Holders. Except as provided below,
any of the Material Holders or their Affiliates (other than the Company or its
Subsidiaries) shall make or hold any investment (other than through the Company
or its Subsidiaries) (a "Pre-Need Investment") in another Person (a "Pre-Need
Entity") that shall have in force pre-need insurance with an aggregate "funeral
value" in excess of $20,000,000, except (and the term "Pre-Need Investment"
shall not include) (x) investments in publicly traded entities in which such
Material Holder or Affiliate thereof owns less than 5% of the outstanding common
stock and (y) the investments currently owned by the Material Holders and their
respective Affiliates as set forth on Exhibit E; provided, however, that the
occurrence of the foregoing shall not constitute an Event of Default under this
Section 6.1(k) unless and until: (A) during the period of one year following the
making or acquiring of such Pre-Need Investment, the pre-need life insurance
business conducted by the relevant Pre-Need Entity has not been (a) disposed of,
(b) discontinued or (c) reinsured in its entirety (except as set forth in the
proviso below) with the Company or one or more of the Company's Subsidiaries on
terms that are no less favorable to the Company or such Subsidiary of the
Company than would be available on an arms-length basis, provided, however, that
the Pre-Need Entity may retain any portion of such pre-need business which is
commercially impracticable to reinsure and still satisfy the exception set forth
in this clause (c), and (B) within 90 days following the expiration of any such
one-year period, the applicable Material Holder has failed either to divest
herself or himself of such Pre-Need Investment or cease to be a Material Holder.

      Immediately upon the occurrence of any Event of Default, in addition to
the remedies set forth in Section 6.2 and Section 6.3, the applicable rate of
interest on the Unpaid Amount for the periods indicated in Section 2.2 will be
increased by an additional 2% per annum, provided, however, that the maximum
rate of interest payable on this Note shall not exceed the lesser of

                                      -19-
<PAGE>

12% per annum or the maximum rate allowed by applicable law and; provided,
further, that from and after such date and time an Event of Default is no longer
continuing, the rate of interest hereon shall thereupon revert for subsequent
periods (until the occurrence of any subsequent Event of Default described in
this paragraph upon which the interest rate shall again increase in accordance
with this paragraph) to the rate of interest otherwise then applicable under
Section 2.2.

      SECTION 6.2. Action if Certain Event of Default. If any Event of Default
described in Section 6.1, other than an Event of Default described in Section
6.1(h) or Section 6.1(j), shall occur at any time for any reason, whether
voluntary or involuntary, then only after the FLAC Holding Notes have been
repaid or retired, all obligations owing to XLCA have been satisfied in full in
connection with the Securitization Financing and the XLCA Policies shall have
terminated in accordance with their terms in connection with the Securitization
Financing, the Holder may, upon notice to the Company, declare all or any
portion of the Unpaid Amount to be due and payable and any or all other
obligations hereunder to be due and payable, whereupon the full Unpaid Amount
and all other such obligations which shall be so declared due and payable shall
be and become immediately due and payable, without further notice, demand,
presentment or any other act on the part of the Holder.

      SECTION 6.3. Action if Other Event of Default. (a) If any Event of Default
under Section 6.1(h) shall occur at any time, whether voluntary or involuntary,
the Holder may, upon notice to the Company, declare all or any portion of the
Unpaid Amount to be due and payable and any or all other obligations hereunder
to be due and payable, whereupon the full Unpaid Amount and all other such
obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand, presentment or any
other act on the part of the Holder.

      (b) If any Event of Default under Section 6.1(j) shall occur at any time,
whether voluntary or involuntary, the full Unpaid Amount and all other such
obligations under this Note shall be and become immediately due and payable,
without further notice, demand, presentment or any other act on the part of the
Holder.

      SECTION 6.4. Issuance of Common Stock to Holder. If an Event of Default
shall occur under (x) Section 6.1(a), (y) Section 6.1(e) (solely by reason of a
default in the observance of Section 4.2(b)), or (z) under Section 6.1(d)(ii),
then, in each such case, the Company shall forthwith issue to the Holder the
number shares of Common Stock equal to the number of shares that would be
issuable under the Warrant on such date (assuming, for purposes of this
calculation only, that the Warrant is outstanding and has not been exercised in
whole or in part on such date).

                                  ARTICLE VII

                             AMENDMENTS AND WAIVERS

      SECTION 7.1. Amendments. The provisions of this Note may from time to time
be amended, modified or waived, if such amendment, modification or waiver is in
writing and consented to in writing by the Company and the Holder.

                                      -20-
<PAGE>

      SECTION 7.2. Waiver. No failure or delay on the part of the Holder in
exercising any power or right under this Note shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No notice to or demand on the Company in any case shall entitle it to any notice
or demand in similar or other circumstances. No waiver or approval by the Holder
shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.

      SECTION 7.3. Payments. To the extent that the Company makes a payment or
payments to the Holder, and such payment or payments or any part thereof are
subsequently for any reason invalidated, set aside and/or required to be repaid
to a trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.

                                  ARTICLE VIII

                                  MISCELLANEOUS

      SECTION 8.1. Parties in Interest. All covenants, agreements and
undertakings in this Note binding upon the Company or the Holder shall bind and
inure to the benefit of the successors and permitted assigns of the Company and
the Holder, respectively, whether so expressed or not.

      SECTION 8.2. Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of New York. Sections 5-1401 and 5-1402
of the General Obligations Law of the State of New York shall apply to this Note
and the Company hereby waives any right to stay or dismiss on the basis of forum
non conveniens any action or proceeding brought before the courts of the State
of New York sitting in New York County or of the United States of America for
the Southern District of New York and hereby submits to the jurisdiction of such
courts. Each party (and each permitted assignee of any party) irrevocably
submits to the jurisdiction of the courts of (and service of process in) the
State of New York and agrees that any action or proceeding arising out of or
relating to this Note may be brought and/or defended in such courts. In
connection with any legal proceeding initiated by a party hereto against any
other party hereto and arising out of this Note, the prevailing party shall be
entitled to recover the reasonable attorney's fees and charges and other
expenses of litigation incurred in connection with such legal proceeding from
the other party. The provisions of this section shall survive the termination of
this Note.

      SECTION 8.3. Specific Performance. The Company acknowledges and agrees
that the remedy available at law for any breach of any covenant or obligation
contained in this Note will or may be inadequate to compensate Holder for its
damages and consequently, that Holder, in addition to any other relief available
to it, shall be entitled to specific performance and other equitable relief
against the Company without the necessity of proving actual damage or posting
any bond whatsoever.

                                      -21-
<PAGE>

      SECTION 8.4. Entire Agreement. This Note, and any other documents,
agreements or instruments which are specifically stated to form a part of this
Note or to relate thereto, constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings of the parties relating thereto. Except as otherwise provided in
this Note, the rights and remedies of each party under this Note are cumulative
and are not exclusive of any rights or remedies which the party may otherwise
have at law or in equity.

      SECTION 8.5. Severability. If any term, covenant, condition or provision
of this Note is determined by a final judgment to be invalid or unenforceable,
the remaining terms, covenants, conditions and provisions of this Note shall not
be affected thereby; and each other term, covenant, condition and provision of
this Note shall be valid and enforceable to the fullest extent permitted by law.
This Note shall be construed without regard to any presumption requiring
construction against the party drafting this Note. The captions of this
instrument are for convenience and do not define or limit the provisions of this
Note.

      SECTION 8.6. Notices. Any and all notices, demands or other communications
(any such communication, a "notice") given or to be given under this Note shall
be in writing and may be sent by registered or certified mail, return receipt
requested, postage prepaid; by express mail; by hand delivery; or by national
overnight courier service. All notices shall be addressed to the Holder at the
below address or at such other address as the Holder may designate. Notices will
be deemed given within 5 days after mailing, or upon receipt, whichever is
earlier. Notwithstanding the forgoing, the Company (1) waives presentment,
demand, protest or notice of any kind in connection with this Note and (2)
agrees, in the event of an Event of Default (as defined above), to pay to the
Holder, on demand, all reasonable costs and expenses (including reasonable legal
fees) incurred in connection with the enforcement and collection of this Note.

                        If to the Company, to:

                        FFS Holdings, Inc.
                        c/o The Devlin Group
                        Falmouth, ME 04105
                        Fax:  (201) 781-7709
                        Attention:  Douglas Schair

                        with a copy to:

                        Weil, Gotshal & Manges LLP
                        767 Fifth Avenue
                        New York, NY  10153
                        Fax:  (212) 310-8007
                        Attention: Thomas A. Roberts and Michael Nissan

                                      -22-
<PAGE>

                        If to the Holder, to:

                        Hillenbrand Industries, Inc.
                        700 State Route 46 East
                        Batesville, IN 47006-8835
                        Fax:  (812) 934-8258
                        Attention:  Patrick DeMaynadier

                        with a copy to:

                        LeBoeuf, Lamb, Greene & MacRae, L.L.P.
                        125 West 55th Street
                        New York, NY  10019
                        Fax: (212) 424-8500
                        Attention: Alexander M. Dye and Theodore LaPier

      SECTION 8.7. Waiver of Jury Trial. THE HOLDER AND THE COMPANY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT
EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE HOLDER OR
THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER'S PURCHASING
THIS NOTE.

      SECTION 8.8. Pledge. This Note has the benefit of and is secured by a
pledge of all of the outstanding Capital Stock of LifeCo pursuant to a Stock
Pledge Agreement.

      SECTION 8.9. Transfer Restrictions. Subject to Section 4.2(b)(ii), this
Note is non-transferable, other than to wholly-owned subsidiaries of Holder.

      SECTION 8.10. Interpretation. When a reference is made in this Note to an
Article, a Section or Exhibit, such reference shall be to an Article of, Section
of, or an Exhibit to, this Note unless otherwise indicated.

      IN WITNESS WHEREOF, this Note has been executed and delivered as of the
date specified above by the duly authorized representative of the Company.

                                             FFS HOLDINGS, INC.

                                             By:
                                             Name:
                                             Title:

                                      -23-
<PAGE>

                                    EXHIBIT A

                   PROCEDURES FOR CALCULATING ADJUSTED EQUITY

      As of the Issue Date, the Adjusted Equity shall be $70,000,000 (the
"Initial Equity").

      On any date occurring after the Issue Date (the "Computation Date"), the
Adjusted Equity shall equal:

      i.    the Initial Equity;

      ii.   plus or minus the difference between:

            1.    the sum of the Statutory Surplus of the Insurance Subsidiaries
                  in accordance with SAP ("Aggregate Statutory Surplus") as of
                  the Issue Date; and

            2.    the Aggregate Statutory Surplus as of any Computation Date;

      iii.  plus (or minus) the cumulative GAAP net income (loss) of the Company
            on an unconsolidated basis for the period from the Issue Date to the
            Computation Date, but only to the extent that such net income or
            loss is not already included in ii. or iv.;

      iv.   plus (or minus) the cumulative GAAP net income (loss) of the
            Subsidiaries of the Company that are not Insurance Subsidiaries for
            the period from the Issue Date to the Computation Date;

      v.    plus the total value of consideration received by the Company from
            the issuance of shares of its Capital Stock for the period from the
            Issue Date to the Computation Date;

      vi.   plus the total value of consideration received by all Subsidiaries
            of the Company that are not Insurance Subsidiaries from the issuance
            of shares of Capital Stock or contributions to capital for the
            period from the Issue Date to the Computation Date;

      vii.  minus the total value of consideration paid by the Company to
            acquire or redeem shares of its Capital Stock for the period from
            the Issue Date to the Computation Date;

      viii. minus the total value of consideration paid by all Subsidiaries of
            the Company that are not Insurance Subsidiaries to acquire or redeem
            shares of Capital Stock (other than to the Company or another
            Subsidiary) for the period from the Issue Date to the Computation
            Date;

      ix.   plus the aggregate amount of dividends paid by an Insurance
            Subsidiary to a Subsidiary of the Company that is not an Insurance
            Subsidiary, but only to the extent that such dividends are not
            included in Adjusted Equity by operation of i. through viii. above.

                                      -24-
<PAGE>

                                    EXHIBIT B

                         FORM OF PARTICIPATION AGREEMENT

                                      -25-
<PAGE>

                                    EXHIBIT C

                           SUBSIDIARIES OF THE COMPANY

                                      -26-
<PAGE>

                                    EXHIBIT D

               CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES

             CORPORATE STRUCTURE OF THE COMPANY AND ITS SUBSIDIARIES

                                      -27-
<PAGE>

                                    EXHIBIT E

      INVESTMENTS OWNED BY MATERIAL HOLDERS AND THEIR RESPECTIVE AFFILIATES

                                      -28-

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