STOCK AND ASSET PURCHASE AGREEMENT

EXHIBIT 2.1

STOCK AND ASSET PURCHASE AGREEMENT

by and between

STANDARD MANAGEMENT CORPORATION

and

CAPITAL ASSURANCE CORPORATION

Dated as of February 9, 2005

TABLE OF CONTENTS

i

ii

iii

iv

INDEX OF SCHEDULES*

v

INDEX OF EXHIBITS

vi

STOCK AND ASSET PURCHASE AGREEMENT

          This STOCK AND ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of February 9, 2005, is entered into by and between Standard Management Corporation, an Indiana corporation (“Seller”) and Capital Assurance Corporation, a Delaware corporation (the “Buyer”).

W I T N E S S E T H:

          WHEREAS, Seller owns 897,033 shares (the “Shares”) of common stock, par value $3.00 per share (the “Company Common Stock”), of Standard Life Insurance Company of Indiana, an Indiana life insurance company (the “Company”), constituting all of the issued and outstanding shares of capital stock of the Company;

          WHEREAS, the Company owns 1,491,869 shares of common stock, par value $1.00 per share (the “Dixie Common Stock”), of Dixie National Life Insurance Company, an Indiana life insurance company (“Dixie”), constituting 99.5% of the issued and outstanding shares of capital stock of Dixie;

          WHEREAS, Seller is the holder of three Surplus Debentures (as defined below) issued by the Company;

          WHEREAS, Seller desires to sell, and Buyer desires to purchase, the Shares and the Surplus Debentures, upon the terms and subject to the conditions set forth herein;

          NOW, THEREFORE, in consideration of the premises, the mutual promises, representations, warranties, covenants and agreements set forth herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

     Section 1.01. Definitions . The following terms shall have the respective meanings set forth below throughout this Agreement:

          “ Action ” means any formal legal, administrative or arbitration proceeding, suit or governmental or regulatory investigation.

          “ Acquisition Proposal ” has the meaning set forth in Section 5.10(a).

          “ Administrative Services Agreements ” has the meaning set forth in Section 3.08(a)(viii).

          “ Affiliate ” means, with respect to any Person (other than any individual), at the time in question, any other Person controlling, controlled by or under common control with such Person. For purposes of the foregoing, “control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, direct or indirect, of the power to

direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

          “ Affiliate Plan ” has the meaning set forth in Section 3.13(d).

          “ Agreement ” has the meaning set forth in the first paragraph of this Agreement.

          “ Allocated Tax Losses ” has the meaning set forth in Section 11.08.

          “ Amended and Restated Trust Agreement of the Trust ” means the Amended and Restated Trust Agreement of the Trust dated as of August 9, 2001 among Standard Management Corporation, Bankers Trust Company and bankers Trust (Delaware).

          “ Ancillary Agreements ” means the Assumption Agreement, the Lease Agreement, the Shareholder Agreement, the Transfer Documents and the Pledge Agreement.

          “ Annuity Contract ” means any annuity contract, funding agreement, guaranteed investment contract or similar Contract, and forms with respect thereto, issued, assumed or reinsured by the Company or Dixie.

          “ Applicable Law ” means any domestic or foreign federal, state or local statute, law, ordinance or code, or any rules, regulations, administrative interpretations, or orders issued by any Governmental Entity pursuant to any of the foregoing, and any order, writ, injunction, directive, judgment or decree applicable to a Person or any such Person’s subsidiaries, properties, assets, officers, directors, employees or agents (with respect to officers, directors, employees or agents, solely in their respective capacities as such).

          “ Assets ” means all rights, titles, franchises and interests in and to every type of property, real, personal and mixed, and choses in action thereunto belonging to the Company or Dixie, as applicable, including, but not limited to, Books and Records, Investment Assets, Intellectual Property, Contracts, licenses, leaseholds, privileges and all other assets whatsoever, tangible or intangible, whether or not reflected in the SAP Statements.

          “ Assumption Agreement ” means the Assumption Agreement between Seller and Buyer substantially in the form of Exhibit E hereto.

          “ Audits ” has the meaning set forth in Section 3.12(a).

          “ Basket Amount ” has the meaning set forth Section 11.01(a).

          “ Benefit Plans ” has the meaning set forth in Section 3.13(b).

          “ Bill of Sale, General Assignment and Allonge ” means the Bill of Sale, General Assignment and Allonge between Seller and Buyer substantially in the form of Exhibit F hereto.

          “ Books and Records ” means, collectively, the Company Books and Records and the Dixie Books and Records.

-2-

          “ Business Day ” means any day other than a Saturday, Sunday or a day on which banking institutions in the States of New York or Indiana are permitted or obligated by law to be closed.

          “ Buyer ” has the meaning set forth in the first paragraph of this Agreement.

          “ Buyer Financing ” has the meaning set forth in Section 4.07.

          “ Buyer Indemnified Party or Parties ” has the meaning set forth in Section 11.01(a).

          “ Buyer Loss or Losses ” has the meaning set forth in Section 11.01(a).

          “ Buyer Preferred Shares ” has the meaning set forth in Section 2.02(b)(i).

          “ Calculation Date ” has the meaning set forth in Section 2.02(c).

          “ Cap ” has the meaning set forth in Section 11.01(a).

          “ Cash Consideration ” has the meaning set forth in Section 2.02(c).

          “ Change in Board Recommendation ” has the meaning set forth in Section 5.10(d).

          “ Change of Control ” means any (i) merger, consolidation or other business combination involving Seller or the Company to the extent that Seller or the Company, as applicable, does not continue to control at least a majority of the voting power of the resulting entity, (ii) the acquisition of at least a majority of the outstanding capital stock of Seller or Company or (iii) the issuance by Seller or the Company of debt or equity securities in a total amount in excess of $20 million in one or a series of transactions, provided that (A) a bona fide offer to purchase such securities has been either received by Seller or the Company or publicly announced prior to the date of the Seller’s Stockholder Meeting and (B) in the event of debt securities, such offer either (x) contemplates a pledge of the stock of the Company to secure such indebtedness or (y) contemplates an acceleration of such indebtedness in the event of a sale of the Company or, in the event of equity securities, such offer is conditioned on a retention of ownership of the Company by Seller.

          “ CIT Group ” means The CIT Group/Equipment Financing, Inc.

          “ Claims Notice ” has the meaning set forth in Section 11.02.

          “ Closing ” means the closing of the transactions contemplated by this Agreement.

          “ Closing Agreement ” means a written and legally binding agreement with a Governmental Entity with respect to Taxes.

          “ Closing Date ” means the earliest date practicable (but not later than the tenth Business Day) following the satisfaction of the last of the conditions to Closing set forth in this Agreement (other than those conditions that by their nature are to be satisfied at the Closing)

-3-

provided , however , the Closing Date shall be no earlier than 30 days following the date on which Buyer is allowed access to the Employees pursuant to Section 5.09 hereof; provided, further , that if such date is not a Business Day, the Closing Date shall be the immediately succeeding Business Day; provided, further, that the Closing may occur on such other day as the parties may agree to in writing.

          “ Code ” means the Internal Revenue Code of 1986, as amended.

          “ Common Securities ” has the meaning set forth in the Indenture.

          “ Company ” has the meaning set forth in the recitals to this Agreement.

          “ Company Books and Records ” means originals or copies of all of the Company’s books and records, documents, data and databases, administrative records, claim records, complaint logs, policy forms and files, sales records and files, records relating to regulatory matters, customer lists, policy information, correspondence with regulatory authorities, reinsurance records, underwriting records, financial, Tax and accounting records and all other records, data, databases and information (in whatever form maintained, including computer generated, recorded or stored) relating to the assets, properties, business, conduct and operations of the Company, including all Permits held by the Company and all such items relating to the Company’s legal existence, stock ownership, corporate management or other such corporate records, in each case, to the extent in the possession or under the control of Seller, the Company or any Affiliate of Seller.

          “ Company Common Stock ” has the meaning set forth in the recitals to this Agreement.

          “ Competing Business ” has the meaning set forth in Section 5.11(a).

          “ Consolidated Tax Returns ” has the meaning set forth in Section 6.02.

          “ Contract ” means a contract, policy, agreement, guarantee, commitment, undertaking, indenture, note, bond, mortgage, or assignment, whether written or oral.

          “ Controlling Party ” has the meaning set forth in Section 6.03(e).

          “ Confidentiality Agreement ” means the confidentiality agreement dated January 22, 2004 between Capital Prospects, LLC and Raymond James & Associates, Inc. on behalf of and for the benefit of Seller, the Company and Dixie.

          “ Continuing Employees ” means any Employees who become employees of Buyer.

          “ Covered Employees ” has the meaning set forth in Section 3.13(a).

          “ Credit Agreement ” has the meaning set forth in Section 2.05(a)(xvii).

          “ Direct Claim ” has the meaning set forth in Section 11.04.

-4-

          “ Dixie ” has the meaning set forth in the recitals to this Agreement.

          “ Dixie Books and Records ” means originals or copies of all of Dixie’s books and records, documents, data and databases, administrative records, claim records, complaint logs, policy forms and files, sales records and files, records relating to regulatory matters, customer lists, policy information, correspondence with regulatory authorities, reinsurance records, underwriting records, financial, Tax and accounting records and all other records, data, databases and information (in whatever form maintained, including computer generated, recorded or stored) relating to the assets, properties, business, conduct and operations of Dixie, including all Permits held by Dixie and all such items relating to Dixie’s legal existence, stock ownership, corporate management or other such corporate records, in each case, to the extent in the possession or under the control of Seller, Dixie or any Affiliate of Seller.

          “ Dixie Common Stock ” has the meaning set forth in the recitals to this Agreement.

          “ Dixie Shares ” has the meaning set forth in Section 3.04(b).

          “ Employees ” means the employees of the Company or Dixie.

          “ Enforceability Exceptions ” has the meaning set forth in Section 3.02.

          “ Environmental Laws ” means any and all local, state and federal laws, regulations, codes, decrees, orders, judgments, principles of common law and binding judicial or administrative interpretation thereof pertaining to: (a) the protection of the environment (including air quality, surface water, groundwater, soils, subsurface strata, drinking water, natural resources and biota); or (b) the presence, use, processing, generation, management, storage, treatment, recycling, disposal, discharge, release, threatened release, investigation or remediation of Hazardous Materials, including, without limitation, the Federal Resource Conservation and Recovery Act, the Federal Comprehensive Environmental Response, Compensation and Liability Act, the Federal Clean Water Act and the Federal Clean Air Act and their implementing regulations as well as state analogues, each as may be amended from time to time.

          “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

          “ ERISA Affiliate ” has the meaning set forth in Section 3.13(c).

          “ Estimated Cash Consideration ” has the meaning set forth in Section 2.04(a).

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

          “ Excluded Assets ” shall mean the assets set forth on Schedule 5.12

          “ Excluded Liabilities ” has the meaning set forth in Section 5.12.

          “ Filing Party ” has the meaning set forth in Section 6.02(a).

-5-

           Final Cash Consideration ” has the meaning set forth in Section 2.04(e).

          “ GAAP ” means generally accepted accounting principles as used in the United States of America as in effect at the time any applicable financial statements were prepared or any act requiring the application of GAAP was performed.

          “ Governmental Entity ” means any agency, administrative division or department (or administrative subdivision), commission, regulatory authority, Taxing or administrative authority, guaranty fund association, court or other judicial body or legislature of the government of the United States or of any state, city, municipality, county or town thereof, or of any foreign jurisdiction.

          “ Guarantee Agreement ” means the Guarantee Agreement dated as of August 9, 2001 between Seller and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company.

          “ Hazardous Materials ” means any substance, material or waste that is presently regulated, classified, or defined under or pursuant to any Environmental Law as “hazardous,” “toxic,” “pollutant,” “contaminant,” “radioactive” or words of similar meaning or regulatory effect, including petroleum and its by-products, asbestos, lead based paint, polychlorinated biphenyls, radon and urea-formaldehyde insulation.

          “ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.

          “ Indemnified Party or Parties ” has the meaning set forth in Section 11.01(c).

          “ Indemnifying Party ” means the party against whom indemnity is sought.

          “ Indenture ” means that certain Junior Subordinated Indenture dated as of August 9, 2001 by and between Seller and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company.

          “ Indiana Department ” means the Indiana Department of Insurance.

          “ Information ” has the meaning set forth in Section 5.06.

          “ Insurance Contract ” means any Contract of insurance or reinsurance (and any certificates thereunder) and forms with respect thereto, including any Life Insurance Contract or Annuity Contract, issued, assumed or reinsured by the Company or Dixie.

          “ Insurance Licenses ” has the meaning set forth in Section 3.07.

          “ Insurance Regulators ” means the Indiana Department and each other insurance regulatory authority that is a Governmental Entity that regulates the insurance operations of the Company or Dixie.

-6-

          “ Intellectual Property ” means all intellectual property rights including, but not limited to, patent and patent applications, inventions (whether or not patentable), designs, Trademarks, copyrights, copyright registrations and applications, technology, computer programs and software applications (including source code, object code, executables and utilities, patches, fixes and upgrades and all related documentation including operator and user manuals and training manuals), mask works, trade secrets, know-how, confidential information, proprietary processes and formulae, algorithms, methods, data, databases and documentation, forms, Internet and intranet content, moral rights (if any), and all similar intellectual and industrial property rights of any sort throughout the world along with any tangible embodiments of the foregoing.

          “ Intercompany Obligations ” has the meaning set forth in Section 5.07.

          “ Investment Assets ” means the investment assets of the Company and Dixie including, without limitation, bonds, notes, debentures, mortgage loans, collateral loans and all other instruments of indebtedness, stocks, partnership interests, caps, swaps, derivatives and other similar arrangements and all other equity interests (including, but not limited to, equity or other interests in Subsidiaries), real estate and interests therein, certificates issued by or interests in trusts, and cash on hand and on deposit.

          “ Knowledge ” means (i) with respect to the knowledge of Seller, (a) the actual knowledge of Ronald D. Hunter, P.B. Pheffer, Stephen M. Coons, Marc Novotney, Michael Kilkenny, Geoff Endris, Gerald R. Hochgesang, Bob Schnell, Michael Berry, Holbrook Hankinson, Michael Quaranta or Jim McWilliams; and (b) all facts any of such individuals (other than with respect to Jim McWilliams) could reasonably be expected to have known with respect to the matter at hand in the ordinary course of the Company’s business; and (ii) with respect to the knowledge of Buyer, (x) the actual knowledge of any of the officers of Buyer; and (y) all facts any such individuals could reasonably be expected to have known with respect to the matter at hand in the ordinary course of Buyer’s business.

          “ Lease Agreement ” means the Lease Agreement between Seller and the Company substantially in the form of Exhibit D , in respect of the property located at 10689 N Pennsylvania Street, Indianapolis, Indiana.

          “ Leases ” means all leases or subleases of space at the Leased Property, all other occupancy agreements affecting the Leased Property, and all amendments, renewals, replacements, extensions, substitutions and modifications of any of the foregoing, together with any guarantees executed in connection with any such leases or occupancy agreements.

          “ Leased Property ” means all real property leased or subleased by the Company or Dixie.

          “ Liability ” means any indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, absolute, contingent or otherwise, whether or not accrued, including but not limited to liabilities under Insurance Contracts.

-7-

          “ Licensed Computer Programs ” means computer programs, software tools, data and databases, licensed by either (or both of) the Company or Dixie and used primarily by, for or in support of, the business of the Company and/or Dixie.

          “ Lien ” means any lien, pledge, mortgage, security interest, encumbrance, claim, charge or defect of title of any kind or nature whatsoever, other than a Stock Restriction, or any agreement to give or grant or permit any of the foregoing. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

          “ Life Insurance Contract ” means any life insurance contract, and forms with respect thereto, issued, assumed or reinsured by the Company or Dixie.

          “ Losses ” and “ Loss ” have the meanings set forth in Section 11.01(c).

          “ Market Conduct Activities ” means the marketing, solicitation, application, underwriting, acceptance, sale, purchase, operation, retention, administration, or replacement by means of surrender, partial surrender, loans respecting, withdrawal and/or termination of any Insurance Contract, including without limitation any or all of the acts, omissions, facts, matters, transactions, occurrences, or any oral or written statements or representations made in connection with any of the foregoing, including without limitation those relating to: (A) the vanishing premium concept; (B) race based underwriting; (C) “modal” premium claims; (D) the nature, characteristics, terms, appropriateness, suitability, descriptions and operation of any Insurance Contract; (E) whether any Insurance Contract was, would operate or could function as a pension or retirement plan, investment or savings account, tuition-funding or mortgage-protection plan or other type of investment, savings or thrift vehicle; (F) the fact that a part of the premiums paid would not be credited toward an investment or savings account or the Insurance Contract’s cash value, but would be used to offset the insurer’s commission, sales, administration or mortality expenses; (G) the use of an existing Insurance Contract’s cash value or cash-surrender value by means of a surrender, withdrawal, partial surrender or loan to purchase or maintain a policy; (H) the insurer’s dividend, interest, crediting and cost of insurance and administrative charge policies; dividend scales, illustrations of dividend values, cash values or death benefits; or any other matters relating to dividends, interest crediting rates or cost of insurance and administrative charges; (I) the failure to disclose surrender charges; (J) the providing of tax advice or (K) the providing of Medicaid eligibility advice.

          “ Material Adverse Effect ” means (i) any event, change, condition, or occurrence which has or would be reasonably likely to have a material adverse effect on (A) the Assets, business, condition (financial or otherwise), or results of operations of the Company and Dixie taken as a whole, or (B) the ability of Seller, the Company or Dixie to timely perform their respective material obligations under this Agreement or any Ancillary Agreement to which Seller, the Company or Dixie is a party or to consummate the transactions contemplated hereby or thereby; or (ii) Seller shall be or shall have become insolvent or shall be the subject of any voluntary or involuntary bankruptcy, insolvency, liquidation, rehabilitation, conservation, supervision, dissolution or similar proceeding and such proceeding, if an involuntary proceeding, is not dismissed on or before the earlier of (A) the date which is 90 days from the

-8-

commencement of such proceeding or (B) the date on which the other conditions set forth in Articles VII and VIII (other than those conditions designating instruments, certificates or other documents to be delivered at Closing) shall be satisfied or waived in accordance with this Agreement. Without limiting the generality of the foregoing, the following shall be deemed to be a Material Adverse Effect: (y) a downgrade of the rating of the Company by A.M. Best Company, Inc. or an announcement that such rating is under review with negative implications, excluding , however , any such downgrade or announcement that occurs primarily as the result of any action taken by Buyer or any Affiliate of Buyer or (z) a reduction of five percent (5%) or more in the total admitted assets of the Company from the amount of such admitted assets as reflected on the SAP Statement of the Company for the quarter ended September 30, 2004.

          “ Material Contract ” has the meaning set forth in Section 3.08(a).

          “ 90-Day Treasury Rate ” means the annual yield rate, on the date to which the 90-Day Treasury Rate relates, of actively traded U.S. Treasury securities having a remaining duration to maturity of three months, as such rate is published under “Treasury Constant Maturities” in Federal Reserve Statistical Release H.15(519).

          “ Non-Controlling Party ” has the meaning set forth in Section 6.03(e)(i).

          “ Notice of Disagreement ” has the meaning set forth in Section 2.04(d).

          “ Owned Computer Programs ” means all computer programs, software tools, data and databases owned by the Company or Dixie and used by, for or in support of, the business of the Company and/or Dixie.

          “ Owned Property ” means the real property owned by the Company or Dixie.

          “ Payment Default ” has the meaning set forth in Section 3.16(b)(ii).

          “ Permits ” means any required licenses, permits, approvals, authorization or certificates of any Governmental Entity.

          “ Permitted Liens ” means each of the following: (a) Liens for current taxes and assessments not yet due and payable or which are being contested in good faith; (b) materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other statutory Liens arising in the ordinary course of business so long as the obligations to which such Liens relate are not delinquent and also so long as the amount of any such Liens, individually or in the aggregate, does not exceed $75,000; (c) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies of title insurance that have been made available to Buyer, provided the same do not materially interfere with the current use of the applicable Property, render title to any Property unmarketable or materially interfere with the present use of, any Property; (d) zoning, entitlement and other land use and environmental regulations promulgated by any Governmental Entity; (e) such other imperfections in title, charges, easements, restrictions and encumbrances that do not materially detract from the value of, render unmarketable or materially interfere with the present use of, any Leased Property or Owned Property subject thereto or affected thereby.

-9-

          “ Person ” means any individual, corporation, partnership, firm, joint venture, association, limited liability company, limited liability partnership, joint-stock company, trust, unincorporated organization, Governmental Entity or other entity.

          “ Plan ” and “ Plans ” have the meanings set forth in Section 3.13(a).

          “ Pledge Agreement ” means the Stock Pledge Agreement between Seller and Buyer substantially in the form of Exhibit H hereto.

          “ Post-Closing Tax Period ” has the meaning set forth in Section 6.01(a).

          “ Pre-Closing Tax Period ” has the meaning set forth in Section 6.01(a).

          “ Producers ” has the meaning set forth in Section 3.23.

          “ Proposed Cash Consideration ” has the meaning set forth in Section 2.04(b).

          “ Proxy Statements ” has the meaning set forth in Section 5.14.

          “ Purchase Price ” has the meaning set forth in Section 2.02(a).

          “ Qualified Plans ” has the meaning set forth in Section 3.12(n).

          “ SAP ” means statutory accounting practices prescribed or permitted by the National Association of Insurance Commissioners and the Indiana Department consistently applied for the period(s) covered thereby, including, without limitation, the accounting practices set forth on Exhibit A .

          “ SAP Statements ” has the meaning set forth in Section 3.11(c).

          “ SCOR Life Treaty ” means the reinsurance agreement between the Company and SCOR Life U.S. Insurance Company effective January 1, 1995.

          “ SEC ” means the Securities and Exchange Commission.

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

          “ Seller ” has the meaning set forth in the first paragraph of this Agreement.

          “ Seller’s Consolidated Group ” has the meaning set forth in Section 3.12(b).

          “ Seller Indemnified Party or Parties ” has the meaning set forth in Section 11.01(c).

          “ Seller Licensed Computer Programs ” means all computer programs, software tools, data and databases licensed by Seller or any Affiliate or Subsidiary of Seller (other than the Company or Dixie) and used primarily in the conduct of or in support of the business of the Company and/or Dixie, including without limitation, the Software Transfer and Royalty Agreement.

-10-

          “ Seller Losses ” has the meaning set forth in Section 11.01(c).

          “ Seller Reports ” has the meaning set forth in Section 3.11(a).

          “ Seller Stockholder Approval ” means the affirmative vote (in person or by proxy) of the holders of a majority of the outstanding shares of capital stock of Seller at the Seller’s Stockholder Meeting or any adjournment or postponement thereof in favor of the adoption of this Agreement and the transactions contemplated hereby.

          “ Seller’s Stockholder Meeting ” has the meaning set forth in Section 5.15.

          “ Series A Certificate of Designations ” means the Certificate of Designations, Voting Powers and Rights of Series A Preferred Stock filed with the Secretary of State of the State of Delaware on or prior to the Closing Date, providing for designation, voting power and other rights of the Buyer Preferred Shares in the form attached hereto as Exhibit C .

          “ Series A Preferred Stock ” means the Series A Preferred Stock, par value $100 per share, of Buyer created pursuant to and having the terms and conditions set forth in the Series A Certificate of Designations.

          “ Settlement Auditor ” has the meaning set forth in Section 2.04(e).

          “ Severance Payments ” has the meaning set forth in Section 5.09(c).

          “ Shareholders Agreement ” means a shareholders agreement entered into by and among Buyer, Seller and the holders of the common stock of Buyer with respect to the Buyer Preferred Shares substantially in the form attached hereto as Exhibit G .

          “ Software Transfer and Royalty Agreement ” means that agreement between Seller and Financial Marketing Environments, Inc. dated May 30, 2000 and June 4, 2000, respectively, and any amendments thereto.

          “ Shares ” has the meaning set forth in the recitals to this Agreement.

          “ Stock Restriction ” means, with respect to the capital stock or other equity securities of a Person, any option, right of first refusal or restriction of any kind, including any restriction on voting, transfer, alienation, receipt of income or exercise of any other attribute of ownership, but specifically excluding any restrictions imposed by Applicable Law.

          “ Subsidiary ” means, with respect to any Person on a given date, any other Person of which a majority of the voting power or the power to otherwise direct the management or policies is held directly or indirectly by such Person.

          “ Superior Proposal ” has the meaning set forth in Section 5.10(e).

          “ Surplus Debentures ” means the surplus debentures issued by the Company to Seller, consisting of (i) the $13,000,000 original principal amount surplus debenture dated November 8, 1996, (ii) the $8,000,000 original principal amount surplus debenture dated

-11-

December 31, 1998 and (iii) the $6,000,000 original principal amount surplus debenture dated December 31, 1998.

          “ Surplus Relief Treaties ” means the Third Party Reinsurance Agreements set forth on Schedule 1.01(b) hereto.

          “ Tax Attribute ” means any net operating loss, net capital loss, investment Tax credit, foreign Tax credit, charitable deduction or any other credit or Tax attribute, including additions to basis of property, which could reduce liability for Taxes including, without limitation, deductions, credits, or alternative minimum net operating loss carryforwards related to alternative minimum Taxes.

          “ Taxes ” (or “ Tax ” as the context may require) means (i) federal, state, county, local, foreign and other taxes, assessments, charges, duties, fees, levies, imposts or other similar charges imposed by a Governmental Entity, including all income, franchise, profits, capital gains, capital stock, transfer, gross receipts, production, customs, sales, use, transfer, service, occupation, ad valorem, property, excise, severance, windfall profits, premium, stamp, license, payroll, employment, social security, workers compensation, unemployment, disability, environmental (including, without limitation all taxes under Code Section 59A), alternative minimum, add-on, value-added, capital taxes, withholding and other taxes, assessments, deficiencies, charges, duties, fees, levies, imposts or other similar charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return), and all estimated taxes, deficiency assessments, additions to tax and penalties (civil or criminal), additional amounts imposed by any Governmental Entity and interest on or in respect of a failure to comply with any requirement relating to such taxes or any Tax Return and expenses incurred in connection with the determination, settlement or litigation of any tax liability and (ii) any liability of any Person for the payment of amounts with respect to payments of a type described in clause (i) above as a result of being a member of a consolidated group, or as a result of any obligation of such Person under any Tax sharing arrangement or Tax indemnity, in each case as described in clauses (i) and (ii), whether imposed or assessed directly on a Person (or the business, assets, operations or items of income, gain or losses of Person), or as a transferee, successor, by contract or otherwise.

          “ Tax Contest ” has the meaning set forth in Section 6.03(a).

          “ Tax Detriment ” means an increase in Liability for Taxes or a reduction of a refund for Taxes or other Tax attributes.

          “ Tax Loss ” has the meaning set forth in Section 6.01(a).

          “ Tax Indemnifying Party ” has the meaning set forth in Section 6.02(b).

          “ Tax Indemnitee ” has the meaning set forth in Section 6.03(a).

          “ Tax Return ” means any return, declaration, report, claim for refund, estimated payment return or information return or statement relating to Taxes, including any schedule or attachment thereto (and including any amendment thereof) and including, where permitted or required, combined, consolidated, unitary or any similar returns for any group of entities.

-12-

          “ Tax Ruling ” means a written ruling of a Governmental Entity relating to Taxes.

          “ Tax Sharing Agreement ” means any written or unwritten agreement, indemnity or other arrangement for the allocation or payment of Tax liabilities or payment for Tax benefits that may exist as of the Closing Date between the Company or Dixie and any Person (other than any indemnity provided pursuant to this Agreement).

          “ Third Party Claim ” has the meaning set forth in Section 11.02.

          “ Third Party Confidentiality Agreements ” has the meaning set forth in Section 5.08.

          “ Third Party Reinsurance Agreements ” has the meaning set forth in Section 3.25.

          “ Trademarks ” means all United States and foreign trademarks (including service marks, trademarks and trade names, whether registered or at common law), registrations and applications therefor, domain names, URLs and addresses (and registrations therefor), trade dress, logos and designs, together with the goodwill of the business associated therewith owned and used at any time in the last five (5) years, and any and all (i) renewals thereof and (ii) rights to sue for past, present and future infringement or misappropriation thereof.

          “ Transfer Documents ” means the Bill of Sale, General Assignment and Allonge, and such other documents and instruments as Buyer may reasonably request in order to transfer all of the right, title and interest of Seller in the Surplus Debentures to Buyer.

          “ Transfer Taxes ” has the meaning set forth in Section 6.05.

          “ Treasury Regulations ” means the Treasury Regulations (including temporary regulations) promulgated by the United States Treasury Department with respect to the Code or other federal tax statutes.

          “ Trust ” means SMAN Capital Trust I, a Delaware business trust.

          “ Trust Preferred Securities ” means the preferred securities issued by the Trust.

          “ Trust Preferred Securities Consent ” means the consent of the holders of a majority of the aggregate liquidation amount of the outstanding Trust Preferred Securities to amend the Indenture to permit the transactions contemplated by this Agreement.

          “ Trust Preferred Securities Consent Solicitation ” means the solicitation of the Trust Preferred Securities Consent from the holders of the Trust Preferred Securities.

          “ Wire Transfer ” means a payment in immediately available funds by wire transfer in lawful money of the United States of America to such account or accounts as shall have been designated by written notice to the paying party.

-13-

ARTICLE II.

TRANSFER AND ACQUISITION OF ASSETS AND STOCK

     Section 2.01. Transfer and Acquisition . Upon the terms and subject to the conditions of this Agreement, at the Closing:

     (i) Seller shall sell, assign and transfer to Buyer, and Buyer shall purchase from Seller, the Shares, free and clear of all Liens and Stock Restrictions.

     (ii) Seller shall sell, assign and transfer to Buyer, and Buyer shall purchase from Seller, all of Seller’s right, title and interest in the Surplus Debentures, free and clear of all Liens. All sales, assignments and transfers of the Surplus Debentures shall be effected by the Transfer Documents.

     Section 2.02. Consideration; Delivery of Shares .

          (a) The aggregate consideration (the “Purchase Price”) for the Shares and the Surplus Debentures shall consist of (i) the Cash Consideration (as defined in Section 2.02(c) below), (ii) the Buyer Preferred Shares, and (iii) assumption by Buyer of certain Intercompany Obligations;

          (b) At the Closing, Buyer shall pay an estimate of the Purchase Price as follows:

     (i) Buyer shall issue to Seller 5,000 shares of Series A Preferred Stock having an initial aggregate liquidation preference of $5,000,000 (the “Buyer Preferred Shares”), free from all Liens, together with all rights which may become attached to the Buyer Preferred Shares at or after the Closing;

     (ii) Buyer shall assume the obligations of Seller as of the Closing Date for amounts lent by the Company to Seller which, as of December 31, 2004, amounted to approximately $20,740,000 of principal, plus such other Intercompany Obligations as Buyer may choose to assume, in its sole discretion, upon written notice by Buyer to Seller delivered at least five Business Days prior to the Closing Date; and

     (iii) Buyer shall pay to Seller the Estimated Cash Consideration.

          (c) The “Cash Consideration” shall be an amount equal to the difference between (i) $79,500,000, as adjusted in accordance with Exhibit B hereto to reflect the items specified therein occurring from October 1, 2004 to the Closing Date or the last day of the month preceding the Closing Date if the Closing Date is not the last day of a month (the last day of such period shall be referred to herein as the “Calculation Date”) plus an amount equal to any accrued interest under the Surplus Debentures that is unpaid as of the Closing Date, and (ii) the sum of (A) $5,000,000 (the initial aggregate liquidation preference of the Buyer Preferred Shares) plus (B) the amount of indebtedness of Seller assumed by Buyer pursuant to Section 2.02(b)(ii);

-14-

provided however , there shall be no adjustment to the Purchase Price for any recapture of the SCOR Life Treaty pursuant to Section 5.13(b), the termination of the Surplus Relief Treaties pursuant to Section 5.13(a) or the closing of the sale of the life insurance business of the Company and Dixie pursuant to Section 5.13(c).

     Section 2.03. Place and Date of Closing . Unless this Agreement shall have been terminated and the transactions contemplated hereby abandoned pursuant to Article XII, and subject to satisfaction or waiver of all the conditions set forth in Articles VII and VIII hereof, the Closing shall take place at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York, on the Closing Date, or at such other location upon which the parties shall mutually agree.

     Section 2.04. Estimated Cash Consideration and Adjustment .

          (a) On or prior to the Closing Date, Seller will deliver to Buyer an estimate of the Cash Consideration as of the Closing Date or the Calculation Date, as applicable, prepared in accordance with the Books and Records and SAP and otherwise in accordance with the terms and conditions of this Agreement (the “Estimated Cash Consideration”), together with a calculation in reasonable detail of the Estimated Cash Consideration.

          (b) As soon as practicable (and in any event within 60 days) after the Closing Date, Buyer shall cause to be prepared (at its sole cost) and delivered to Seller a calculation in reasonable detail of the actual Cash Consideration as of the Closing Date or the Calculation Date, as applicable, prepared in accordance with the Books and Records and SAP and otherwise in accordance with the terms and conditions of this Agreement (the “Proposed Cash Consideration”).

          (c) Following the delivery of the Proposed Cash Consideration, Buyer will cooperate with, and be reasonably available to, Seller and Seller’s auditors for the purpose of providing such written or other information as Seller or Seller’s auditors may reasonably request concerning the preparation of the Proposed Cash Consideration, including making the Books and Records available to Seller and Seller’s auditors. Seller will pay (or cause to be paid) the fees and expenses of Seller’s auditors.

          (d) In the event that Seller has any disagreement with the Proposed Cash Consideration, Seller shall give written notice of all such disagreements (a “Notice of Disagreement”) to Buyer within 60 days after the Proposed Cash Consideration is delivered to Seller. Any Notice of Disagreement shall set forth each item in disagreement and shall provide reasonable specificity as to the basis for each disagreement and shall specify (to the extent possible) the total adjustment to the Proposed Cash Consideration as proposed by Seller as a result of such items in disagreement.

          (e) If Seller does not deliver a Notice of Disagreement to Buyer within such 60 day period, the Proposed Cash Consideration shall be final and binding upon the parties hereto and shall constitute the final calculation of the Cash Consideration. If Seller delivers a Notice of Disagreement to Buyer within such 60 day period, the parties shall (and shall cause their respective auditors to) negotiate in good faith to resolve all disagreements as promptly as

-15-

practicable. Any changes in the Proposed Cash Consideration that are agreed to by Buyer and Seller within 30 days of receipt by Buyer of the Notice of Disagreement shall be incorporated into a final calculation of the Cash Consideration. If the parties are unable to resolve all disagreements within 30 days of receipt by Buyer of the Notice of Disagreement, then all unresolved disagreements will be submitted to an independent certified public accounting firm of national standing and reputation as Seller and Buyer shall jointly select and retain (the “Settlement Auditor”) for resolution in accordance herewith. The parties shall, and shall cause their respective Affiliates and auditors to, cooperate in good faith with the Settlement Auditor and shall give the Settlement Auditor access to all Books and Records, work papers and other information requested by the Settlement Auditor for purposes of such resolution. The Settlement Auditor shall, within 60 days after its engagement, deliver to Seller and Buyer a conclusive written resolution of all disagreements submitted to it, which shall be in accordance with this Agreement and shall be final and binding upon the parties hereto and shall be so reflected in the calculation of the Cash Consideration. Seller and Buyer shall each pay one-half of the fees and expenses of the Settlement Auditor. The “Final Cash Consideration” shall mean, as applicable: (i) the Proposed Cash Consideration if Seller does not deliver a Notice of Disagreement within 30 days after the Proposed Cash Consideration is delivered to Buyer, (ii) the Proposed Cash Consideration as adjusted to incorporate any changes that are agreed to by Buyer and Seller within 30 days of receipt by Buyer of the Notice of Disagreement or (iii) the Proposed Cash Consideration as adjusted in accordance with the final report of the Settlement Auditor.

          (f) In the event that the Estimated Cash Consideration is less than the Final Cash Consideration, Buyer shall pay to Seller cash in the amount of such shortfall, together with interest thereon from and including the Closing Date to but not including the date of such transfer computed at an annual rate equal to the 90-Day Treasury Rate in effect on the Closing Date. In the event that the Estimated Cash Consideration is greater than the Final Cash Consideration, Seller shall pay to Buyer cash in the amount of such excess, together with interest thereon from and including the Closing Date to but not including the date of such transfer computed at the annual rate specified above. Any transfer of cash required under this Section 2.04(f) shall be made within 30 days of Buyer’s delivery of the Proposed Cash Consideration to Seller unless there is a disagreement as contemplated in Sections 2.04(d) and 2.04(e), in which event, such payments shall be made within three Business Days of the resolution of all such disagreements.

          (g) All cash transferred pursuant to Section 2.04 shall be transferred by Wire Transfer.

     Section 2.05. Closing Deliveries . At the Closing, the parties hereto shall take the following actions:

          (a) Seller shall deliver (or, with respect to Section 2.05(a)(xiv) make available) to Buyer:

     (i) a receipt evidencing receipt by Seller and payment by Buyer of the Estimated Cash Consideration;

     (ii) a receipt evidencing receipt by Seller of the Buyer Preferred Shares;

-16-

     (iii) certificates representing all of the Shares, duly executed in blank or accompanied by stock powers duly executed in blank, in proper form for transfer and accompanied by all requisite stock Transfer Tax stamps;

     (iv) good standing and compliance certificates (or their equivalent), dated as of a date not more than thirty days prior to the Closing Date, as to the Company’s good standing and licensing status in the State of Indiana and in each other state set forth on Schedule 2.05(a)(iv) , together with a copy, dated as of a date not more than ten Business Days prior to the Closing Date, of the Articles of Incorporation of the Company certified by the Indiana Secretary of State;

     (v) By-Laws of the Company, together with all amendments thereto or restatements thereof, certified by the Secretary or Assistant Secretary of the Company as of the Closing Date;

     (vi) good standing and compliance certificates (or their equivalent), dated as of a date not more than thirty days prior to the Closing Date, as to Dixie’s good standing and licensing status in the State of Indiana and each other state set forth on Schedule 2.05(a)(vi) , together with a copy, dated as of a date not more than ten Business Days prior to the Closing Date, of the Articles of Incorporation of Dixie certified by the Indiana Secretary of State;

     (vii) By-Laws of Dixie, together with all amendments thereto or restatements thereof, certified by the Secretary or Assistant Secretary of Dixie as of the Closing Date;

     (viii) resolutions of the Board of Directors of Seller, certified by the Secretary or Assistant Secretary of Seller, approving and authorizing the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby;

     (ix) a certificate of the Secretary or Assistant Secretary of Seller, as to the incumbency of the officers executing this Agreement, and the genuineness of their signatures;

     (x) the certificate contemplated in Section 7.01;

     (xi) copies of all regulatory approvals obtained by Seller in connection with the transactions contemplated by this Agreement;

     (xii) resignations, effective as of the Closing, of all of the directors and officers of the Company; other than Ronald D. Hunter;

     (xiii) resignations, effective as of the Closing, of all directors and officers of Dixie;

     (xiv) the Books and Records, in accordance with the provisions of Section 7.08;

-17-

     (xv) the Surplus Debentures, together with the Transfer Documents;

     (xvi) evidence of the termination of Intercompany Obligations pursuant to Section 5.07;

     (xvii) evidence of the termination and release of Seller’s debt obligations to CIT Group under that certain Credit Agreement by and between Seller and CIT Group dated November 13, 2003 (the “Credit Agreement”);

     (xviii) fully executed original copies of the Lease Agreement, the Assumption Agreement, the Bill of Sale, General Assignment and Allonge, the Shareholders Agreement and the Pledge Agreement; and

     (xix) such other documents, instruments or certificates as Buyer may reasonably request.

          (b) Buyer shall deliver to Seller:

     (i) a receipt evidencing receipt by Buyer of the Shares;

     (ii) a receipt evidencing receipt by Buyer of the Surplus Debentures;

     (iii) certificates representing all of the Buyer Preferred Shares;

     (iv) the Estimated Cash Consideration, by Wire Transfer payable as follows: (A) to an account designated not later than three Business Days prior to the Closing Date by CIT Group in the amount required to satisfy in full Seller’s debt obligations under the Credit Agreement with CIT Group and (B) to Seller in an amount equal to the difference between the Estimated Cash Consideration and the amount payable to CIT Group as provided in (A) above;

     (v) resolutions of the Board of Directors of Buyer, certified by the Secretary or Assistant Secretary of Buyer, approving and authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby;

     (vi) a certificate of the Secretary or Assistant Secretary of Buyer as to the incumbency of the officers executing this Agreement and the genuineness of their signatures;

     (vii) the certificate contemplated in Section 8.01;

     (viii) fully executed original copies of the Assumption Agreement, the Bill of Sale, General Assignment and Allonge, the Shareholders Agreement and the Pledge Agreement;

     (ix) copies of all regulatory approvals obtained by Buyer in connection with the transactions contemplated by this Agreement, including without

-18-

limitation any necessary approvals or non-disapprovals from the Indiana Commissioner of Insurance with respect to the acquisition of control of the Company and Dixie by Buyer;

     (x) a release executed by Buyer, the Company and Dixie as contemplated by Section 8.10 releasing Seller from any liability with respect to the indebtedness of Seller to be assumed by Buyer pursuant to Section 2.02(b)(ii); and

     (xi) such other documents, instruments or certificates as Seller may reasonably request.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF SELLER

          Seller hereby represents and warrants to Buyer as follows:

     Section 3.01. Organization and Standing; Corporate Power; Minute Books.

          (a) Each of Seller, the Company and Dixie is a corporation duly organized, validly existing and in good standing under the laws of the State of Indiana and has full corporate power and authority to conduct its business as currently conducted and to own, lease and operate all its properties and assets in the manner currently operated by it. Each of Seller, the Company and Dixie is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties or assets makes such qualification or licensing necessary, except to the extent that failure to be so qualified or licensed would not, individually or in the aggregate, result in a Material Adverse Effect.

          (b) The minute books of the Company and Dixie have previously been made available to Buyer and accurately reflect in all material respects all formal actions taken at all meetings and all consents in lieu of meetings of the stockholders and of the Board of Directors (including all committees thereof) of the Company and Dixie. The stock certificate books and the stock record books of the Company and Dixie that have previously been made available to Buyer constitute all of the stock ownership records of the Company and Dixie. The Company is not in default under or in violation of any provision of its Articles of Incorporation or By-Laws. Dixie is not in default under or in violation of any provision of its Articles of Incorporation or By-Laws. Seller has previously made available to Buyer true and complete copies of the Articles of Incorporation and By-Laws of the Company and Dixie.

     Section 3.02. Authorization . Seller has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Each of Seller, the Company and Dixie has full corporate power and authority to execute and deliver each of the Ancillary Agreements to which it is a party and to perform its obligations thereunder. Except as set forth on Schedule 3.02 , the execution and delivery of this Agreement by Seller and the performance by Seller of its obligations hereunder have been duly and validly authorized and approved by all requisite corporate action of Seller and no other acts or proceedings on its part are necessary to

-19-

authorize the execution, delivery and performance of this Agreement or the transactions contemplated hereby. Except as set forth on Schedule 3.02 , the execution and delivery by each of Seller, the Company and Dixie of the Ancillary Agreements to be executed by it and the consummation of the transactions contemplated thereby have been duly and validly authorized and approved by all requisite corporate action of Seller, the Company or Dixie, as applicable, and no other acts or proceedings on the part of Seller, the Company or Dixie, as applicable, are necessary to authorize the execution, delivery and performance of the Ancillary Agreements to which each of Seller, the Company and Dixie is a party or to consummate the transactions contemplated thereby. This Agreement constitutes a legal, valid and binding obligation of Seller, and is and will be enforceable against Seller in accordance with its terms, except (i) as enforcement may be limited by applicable bankruptcy, insolvency, rehabilitation, moratorium or similar laws affecting creditors’ rights generally, including, without limitation, the effect of statutory or other laws regarding fraudulent conveyances and preferential transfers and (ii) for the limitations imposed by general principles of equity. The foregoing exceptions set forth in clauses (i) and (ii) of this Section 3.02 are hereinafter referred to as the “Enforceability Exceptions.” As of the Closing Date, assuming the due authorization and execution of each of the Ancillary Agreements to which Seller, the Company or Dixie is a party, each such Ancillary Agreement will constitute a legal, valid and binding obligation of Seller, the Company or Dixie, as applicable, and will be enforceable against Seller, the Company or Dixie, as applicable, in accordance with its terms, subject to the Enforceability Exceptions.

     Section 3.03. Governmental Consents and Approvals . Except as set forth in Schedule 3.03 hereto, no consent, approval, non-disapproval, authorization, ruling, order of, notice to, or registration or filings with, any Governmental Entity, is required on the part of Seller, the Company or Dixie in connection with (i) the execution and delivery by Seller of this Agreement, (ii) the execution and delivery by each of Seller, the Company and Dixie of the Ancillary Agreements, or (iii) the consummation by Seller, the Company and Dixie of the transactions contemplated by this Agreement or the Ancillary Agreements.

     Section 3.04. Stock Ownership; Subsidiaries .

          (a) The authorized capital stock of the Company consists solely of 1,200,000 shares of Company Common Stock, of which 897,033 shares are issued and outstanding and constitute the Shares. Except as set forth on Schedule 3.04(a) , Seller owns beneficially and of record all of the Shares, free of any Lien or Stock Restriction of any kind or character whatsoever, and Seller has the full and unrestricted power to sell, assign, transfer and deliver the Shares to Buyer upon the terms and subject to the conditions of this Agreement free of any Liens or Stock Restrictions. The Shares are not subject to any restriction with respect to their transferability other than those regulatory approvals and consents referred to in Section 3.03. Upon the transfer and delivery of the Shares to Buyer at Closing, as contemplated herein, Buyer will acquire record and beneficial ownership of the Shares, free of any Lien or Stock Restriction of any kind or character whatsoever. All of the Shares are duly authorized, validly issued, fully paid, nonassessable and free of any preemptive rights. There is no outstanding option, warrant, right, subscription, call, convertible or exchangeable security or other agreement, instrument, commitment or right of any kind (other than this Agreement) pursuant to which Seller or the Company is obligated to issue, sell, purchase, return or redeem any shares of capital stock of, other securities of, or other ownership interests in, the Company, and there are no equity

-20-

securities of the Company reserved for issuance for any purpose, nor is there any agreement providing for an amendment to the Company’s Articles of Incorporation so as to increase the amount of authorized capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the Company. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of the capital stock of the Company. There are no restrictions on the ability of the Company after the Closing to declare and pay dividends, other than those imposed by applicable state laws and regulations.

          (b) The authorized capital stock of Dixie consists solely of 5,000,000 shares of Common Stock, of which 1,500,000 shares are issued and outstanding (the “Dixie Shares”). The Company owns beneficially and of record 1,491,869 of the Dixie Shares, free of any Lien or Stock Restriction of any kind or character whatsoever. The Dixie Shares are not subject to any restriction with respect to their transferability other than those regulatory approvals and consents referred to in Section 3.03. All of the Dixie Shares are duly authorized, validly issued, fully paid, nonassessable and free of any preemptive rights. There is no outstanding option, warrant, right, subscription, call, convertible or exchangeable security or other agreement, instrument, commitment or right of any kind (other than this Agreement) pursuant to which Seller, the Company or Dixie is obligated to issue, sell, purchase, return or redeem any shares of capital stock of, other securities of, or other ownership interests in, Dixie, and there are no equity securities of Dixie reserved for issuance for any purpose, nor is there any agreement providing for an amendment to Dixie’s Articles of Incorporation so as to increase the amount of authorized capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to Dixie, except for traditional participating policies and the charter policies. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of the capital stock of Dixie. There are no restrictions on the ability of Dixie after the Closing to declare and pay dividends, other than those imposed by applicable state laws and regulations.

          (c) Except for Dixie, the Company does not own, directly or indirectly, any Subsidiaries, and except for portfolio investments made in the ordinary course of business consistent with past practices or as otherwise set forth on Schedule 3.04(c) , there are no corporations, partnerships or other entities or Persons in which the Company or Dixie owns, of record or beneficially, any direct or indirect equity interest or any right (contingent or otherwise) to acquire the same.

     Section 3.05. Actions Pending . Except as set forth on Schedule 3.05 :

          (a) there are no Actions pending against the Company or Dixie, their respective businesses, properties or Assets (including Investment Assets), or, to the Knowledge of Seller, any current or former officer, Employee or director acting in his or her respective capacity as an officer, Employee or director of the Company or Dixie;

          (b) to the Knowledge of Seller, there are no Actions or series of related Actions threatened against the Company or Dixie, their respective businesses, properties or Assets (including Investment Assets), or, to the Knowledge of Seller, any current or former officer, Employee or director acting in his or her respective capacity as an officer, Employee or

-21-

director of the Company or Dixie that could reasonably be expected to have an effect or series of related effects on the business, Assets, liabilities, condition (financial or otherwise) or results of operations of the Company or Dixie, in excess of $100,000;

          (c) there is no injunction, order, judgment, decree, award or regulatory restriction imposed upon Seller, the Company, Dixie or any of their respective properties or Assets which (i) restricts the ability of the Company or Dixie to conduct its business in the ordinary course of business consistent with past practices or (ii) has had or reasonably could be expected to have, individually or in the aggregate, a Material Adverse Effect.

     Section 3.06. No Conflict or Violation . Except as set forth on Schedule 3.06 , the execution, delivery and performance by Seller of this Agreement do not, and the execution, delivery and performance by Seller, the Company and Dixie of the Ancillary Agreements to which it is a party will not, and the consummation by Seller, the Company and Dixie of the transactions contemplated by this Agreement and by such Ancillary Agreements in accordance with the terms and conditions hereof and thereof, will not (i) violate any provision of the Articles of Incorporation or By-Laws of Seller, the Company or Dixie; (ii) result in the creation of any Lien on any of the Shares or on any of the Assets or properties of the Company or Dixie; (iii) assuming that the consents and approvals referred to in Section 3.03 are duly obtained, result in the breach of the terms and conditions or cause an impairment of any Insurance License of the Company or Dixie; (iv) require the consent or other action by any Person under, violate or result in the breach of any of the terms of, result in any modification of or loss of a benefit under, accelerate or permit the acceleration of the performance required by, otherwise give any other contracting party the right to terminate or cancel, or constitute (with or without notice or lapse of time, or both) a default under, any Material Contract to which Seller, the Company or Dixie is a party or by or to which Seller, the Company or Dixie or any of their respective Assets or properties is subject; (v) violate any order, judgment, injunction, award or decree of any Governmental Entity or arbitrator against, or binding upon, or any agreement with, or condition imposed by, any Governmental Entity or arbitrator with respect to Seller, the Company or Dixie; or (vi) assuming that the consents and approvals referred to in Section 3.03 are duly obtained, violate any Applicable Law.

     Section 3.07. Licenses and Permits . Except as set forth on Schedule 3.07(b) , (i) each of the Company and Dixie has all Permits necessary to engage in the life insurance and annuities lines of business in each jurisdiction set forth on Schedule 3.07(a) (collectively, the “Insurances Licenses”), and (ii) each of the Company and Dixie has all other Permits necessary to conduct their businesses in the manner and in the areas in which it is conducting its businesses, which Permits are set forth on Schedule 3.07(a) . Seller has delivered to Buyer true, correct and complete copies of all Insurance Licenses and all other material Permits held by the Company and Dixie (and at the Closing Seller will deliver, as part of the Books and Records, the originals or certified copies of all Insurance Licenses and all other Permits held by the Company and Dixie). Neither the Company nor Dixie has transacted any insurance business in any jurisdiction requiring it to have an Insurance License or other Permit therefor in which it did not possess such Permit. All such Insurance Licenses and other Permits are in full force and effect without suspension, revocation, restriction, amendment or nonrenewal, and there are no pending or, to the Knowledge of Seller, threatened suits or proceedings with respect to the suspension, revocation, restriction, amendment or nonrenewal of any Insurance License or other Permit, and, to the Knowledge of

-22-

Seller, no event which (whether with notice or lapse of time or both) would result in a suspension, revocation, restriction, amendment or nonrenewal of any such Insurance License or other Permit has occurred.

     Section 3.08. Contracts .

          (a) Schedule 3.08(a) contains a true and complete list of all the following Contracts currently in force or terminated but pursuant to which the Company or Dixie continues to have Liabilities or receive certain benefits, in each case excluding Insurance Contracts, to which the Company or Dixie is a party or by which any Assets of the Company or Dixie are bound, as such Contracts may have been amended to the date hereof (collectively, the “Material Contracts”):

          (i) all Contracts with any present or former officer, director or trustee of the Company or Dixie (including, but not limited to, employment Contracts and Contracts evidencing loans or advances to any such Person or any Affiliate of such Person);

          (ii) all Contracts with any Person including, but not limited to, any Governmental Entity, containing any provision or covenant (A) limiting the ability of the Company or Dixie to engage in any line of business, to sell any products or services, to compete with any Person in any geographical area, to do business with any Person or in any location or to employ any Person or (B) limiting the ability of any Person to compete with, or obtain or provide products or services from or to, the Company or Dixie in any line of business or in any geographical area;

          (iii) (A) all Contracts relating to the borrowing of money by the Company or Dixie (other than the Surplus Debentures and any Intercompany Obligations created in the ordinary course of business) or the direct or indirect guarantee by the Company or Dixie of any obligation of any Person for borrowed money or other financial obligation of any Person or other liability of the Company or Dixie in respect of indebtedness for borrowed money or other financial obligations of any Person, including, but not limited to, lines of credit or similar facilities and (B) any Contract involving the deferred purchase price of property to the extent in excess of $25,000;

          (iv) all Contracts (other than Insurance Contracts) with any Person containing any provisions or covenant relating to the indemnification or holding harmless by the Company or Dixie which have had or reasonably could be expected to have, individually or in the aggregate, a Material Adverse Effect;

          (v) all Contracts relating to the future disposition (including, but not limited to, restrictions on transfer or rights of first refusal) of any Assets of the Company or Dixie other than in the ordinary course of business, or for the grant to any Person of any preferential rights to purchase or use any Assets of the Company or Dixie other than, in the case of each of the foregoing, any Contracts for the sale of Investment Assets in the ordinary course of business;

-23-

          (vi) any partnership, joint venture, joint marketing, strategic alliance or similar Contracts;

          (vii) any form of Contract that the Company or Dixie has entered into with a Producer, provided that all Contracts entered into with Producers are materially comparable to the forms of Producer Contracts set forth on Schedule 3.08(a) ;

          (viii) any Contract for the provision of any administrative services with respect to any Insurance Contract, including any such Contracts with third party administrators or managing general agents (the “Administrative Services Agreements”);

          (ix) all outstanding powers of attorney or similar delegations of authority of the Company or Dixie;

          (x) all Contracts relating to the acquisition by the Company or Dixie of any operating business or the capital stock of any other Person entered into on or after January 1, 2000;

          (xi) all Contracts under which the Company or Dixie has made advances or loans to any other Person other than Intercompany Obligations created in the ordinary course of business;

          (xii) all Contracts providing for severance, retention, change of control or other similar payments; and

          (xiii) all other Contracts (other than (i) Contracts regarding the purchase or sale of Investment Assets entered into in the ordinary course of business, (ii) Contracts otherwise required to be set forth on Schedules 3.13 (a), (b), (c), (e), (g), (i) and (k) or Schedule 3.24 and (iii) other Contracts which are expressly excluded under any other subsection of this Section 3.08) that (A) involve or are reasonably likely to involve the payment pursuant to the terms of such Contracts by or to the Company or Dixie of $50,000 or more within any 12 month period and are not terminable on 60 days or less notice without the payment of any penalty by, or any other material consequence to, the Company or Dixie, (B) between the Company or Dixie, on the one hand, and an Affiliate of the Company or Dixie, on the other hand, or (C) are otherwise material to the business of the Company or Dixie.

          (b) Except as set forth on Schedule 3.08(b) , each of the Material Contracts, is in full force and effect and constitutes a legal, valid and binding obligation of the Company or Dixie to the extent that it is party thereto, and, to the Knowledge of Seller, of each other Person that is a party thereto. Except as set forth on Schedule 3.08(b) , each of the Company and Dixie is not, and to the Knowledge of Seller, no other party to such Material Contract is, in material breach or default of any such Material Contract or, with or without notice or lapse of time or both, would be, in material breach or default of any such Material Contract. None of such Material Contracts have been terminated or, to the Knowledge of Seller, threatened in writing to be terminated, except for those Material Contracts that terminate in the ordinary course and except as described in Schedule 3.08(b) .

-24-

          (c) True and complete copies of each of the Material Contracts, including all amendments, supplements and modifications to each Material Contract, have been provided to Buyer. In the case of any Material Contract which is not written, Seller has provided to Buyer a written description of such Material Contract.

     Section 3.09. Compliance with Applicable Law . Except as set forth on Schedule 3.09 , each of the Company and Dixie has conducted its business in material compliance with all Applicable Law in each jurisdiction in which it has conducted its business and is in material compliance with the requirements of each applicable Governmental Entity to file reports, registrations, filings or submissions with respect to the conduct of its business in each such jurisdiction. Except as set forth on Schedule 3.09 , since January 1, 2000, neither Seller, the Company nor Dixie has received any written notice of, and Seller has no Knowledge of the occurrence of, any material violation of Applicable Law with respect to the Company’s or Dixie’s business.

     Section 3.10. Intellectual Property .

          (a) Schedule 3.10(a) contains a list of all patents and patent applications, registered trademarks and trademarks normally used by Seller, the Company or Dixie with a notice of trademark usage (whether federal, state, common law or otherwise), registered copyrights and software applications (other than commercially available off-the-shelf software applications which have not been modified as used in the business of the Company or Dixie except as permitted by the relevant license) (i) owned by the Company or Dixie, which list shall include all product names, specifying as to each, as applicable: (A) the owner of such Intellectual Property; (B) the jurisdictions, if any, by or in which such Intellectual Property right has been issued or registered by the Company or Dixie or in which an application for such issuance or registration has been filed and (C) the registration or application numbers, if any, and (ii) licensed or otherwise used by or for the benefits of the Company or Dixie, to the extent such licenses or use are material or necessary to carry on the business of the Company or Dixie, as currently conducted, which list shall include the product names and the licensor or grantors of use.

          (b) Schedule 3.10(b) sets forth a list of all licenses, sublicenses and other agreements granted by the Company or Dixie pursuant to which any Person other than the Company or Dixie is authorized to use any Intellectual Property owned or licensed by or licensed for use by the Company or Dixie.

          (c) Each of the Company and Dixie owns or, to the Knowledge of Seller, possesses or has enforceable rights and licenses to use all Intellectual Property that is necessary to carry on the business, respectively, of the Company and Dixie, as currently conducted.

          (d) Except as set forth on Schedule 3.10(d) , (i) neither Seller nor any Affiliate is a defendant in any Action relating to, and neither has been notified of, any alleged claim of infringement or contributory infringement of any Intellectual Property owned, licensed or used by, or used in support of, the business of the Company or Dixie, and the use of any Intellectual Property by the Company or Dixie in the conduct of its respective business does not breach, violate, infringe, or contribute to the infringement of any Intellectual Property of any third party and (ii) neither Seller nor any Affiliate has any outstanding claim or suit for, and Seller has no

-25-

Knowledge of, any continuing infringement by any other Person of any Intellectual Property used by or for the benefit of, owned or licensed by, the Company or Dixie. Except with respect to license agreements for the use of commercially available off-the-shelf software (which software has not been modified for use by the Company or Dixie except as permitted by the relevant license), data and forms, no Intellectual Property owned by the Company or Dixie is subject to any outstanding Lien, judgment, injunction, order, decree or agreement of any kind restricting or permitting the restriction (now or in the future) of the use by, or benefit to, the Company or Dixie, or restricting the licensing thereof by the Company or Dixie to any Person and no third party possess any right, title or interest in such Intellectual Property owned by the Company or Dixie. Except with respect to license agreements for the use of commercially available off-the-shelf software (which software has not been modified for use by the Company or Dixie except as permitted by the relevant license), data and forms, to the Knowledge of Seller no Intellectual Property licensed or otherwise used by the Company or Dixie is subject to any outstanding Lien, judgment, injunction, order, decree or agreement of any kind restricting or permitting the restriction (now or in the future) of the use by, or benefit to, the Company or Dixie. Neither the Company nor Dixie has entered into any agreement to indemnify any other Person (other than the relevant licensor with respect to particular Intellectual Property licensed by or on behalf of the Company or Dixie from such licensor) against any charge of infringement of any of the Intellectual Property owned, licensed or used by the Company or Dixie.

          (e) Each of the Seller, the Company and Dixie are subject to internal policies and practices regarding the protection of trade secrets and other confidential information and proprietary know-how, ideas and information used or necessary for the businesses of Seller and its Affiliates (including the Company and Dixie). Each Employee of the Seller, the Company and Dixie is notified of such policies and has agreed to be bound by them. To the Knowledge of Seller, no Employee is in breach of any such policies.

          (f) Within the six months prior to the date of this Agreement, none of Seller, the Company or Dixie has sold, assigned, leased, terminated, abandoned, transferred, authorized the encumbrance of or otherwise disposed of or granted any security interest or other interest in and to any item of Intellectual Property owned, licensed or otherwise used by the Company or Dixie, in whole or in part, provided that it shall not be a breach of this Section 3.10(f) if Seller, the Company or Dixie terminates or fails to renew a license for Intellectual Property so long as Seller, at its expense, licenses or otherwise obtains rights in other Intellectual Property (i) that provides a substantially similar benefit to the Company and Dixie as the Intellectual Property that was terminated or not renewed and (ii) that does not degrade or diminish the quality of the business of the Company or Dixie as conducted before the termination or failure to renew.

          (g) The business and operations of the Company and Dixie as currently conducted do not infringe upon any Intellectual Property rights of any third party. There are no present or, to the Knowledge of Seller, threatened infringements or violations by any third party with respect to any Intellectual Property that is owned by the Company or Dixie.

          (h) Except as set forth on Schedule 3.10(h), neither the Company nor Dixie is a party to or bound by any agreement pursuant to which the Company or Dixie has licensed or granted to a third party any Intellectual Property on an exclusive basis.

-26-

          (i) None of Seller, the Company or Dixie has received any written opinion of counsel regarding the infringement by the Company or Dixie of any third party patents or other third party Intellectual Property used by the Company or Dixie.

          (j) To the Knowledge of Seller, all software that is not owned by the Company or Dixie is free of all viruses, worms, Trojan horses, back doors, spyware, malware and other infections or harmful routines and contains no bugs, errors, or problems in each case that would be likely to disrupt its operation or have an adverse impact on the operation of other software programs or operating systems. To the Knowledge of Seller, all Owned Computer Programs are free of all viruses, worms, Trojan horses, back doors, spyware, malware and other infections or harmful routines and contains no bugs, errors or problems in each case that would be likely to disrupt its operation or have an adverse impact on the operation of other software programs or operating systems.

          (k) The Company and Dixie have established and are in compliance with a security program, including technology, practices and procedures generally consistent with common practice in their industry, that is designed to protect (i) the integrity of transactions executed through their computer systems, including encryption and/or other security protocols and techniques when appropriate; (ii) the security, confidentiality and integrity of data housed in their systems; (iii) the security, confidentiality and integrity of data as to which they have permitted access by third party service providers; and (iv) against unauthorized access to their systems and the systems of such third party service providers which have access to their data.

          (l) Except as set forth on Schedule 3.10(l), none of Seller, the Company or Dixie has disclosed or delivered, or permitted the disclosure or delivery, to any escrow holder or other third party, all or any part of the source code (including any algorithm or documentation contained in, or relating to, any source code) of any Intellectual Property owned by the Company or Dixie.

          (m) The Company and Dixie have complied with and are in compliance with the terms of all privacy policies adopted by the Company or Dixie and applicable to personal, customer and other information received, processed or maintained by the Company or Dixie.

          (n) All registrations, applications therefor, filings, issuances and other actions with respect to any Intellectual Property owned by or exclusively licensed to the Company or Dixie, including without limitation patents, Trademarks, service marks, copyrights and domain names are, and remain, in full force and effect at the United States Patent and Trademark Office, the United States Copyright Office, and applicable domain name registrar, or any other filing offices, domestic or foreign. No action (including without limitation payment of any registration, maintenance or renewal fees or the filing of any responses, documents, applications or certificates) must be taken within 180 days following the Closing which, if not taken, would result in the loss or prejudice of any right, or the incurrence of any incremental cost, with respect to any registrations, applications, issuances and other actions regarding any Intellectual Property (i) owned by or exclusively licensed to the Company or Dixie (including without limitation patents, Trademarks, service marks, copyrights and domain names) or (ii) owned by or exclusively licensed to Sellers and used by or for the benefit of the Company and/or Dixie, (including without limitation patents, Trademarks, service marks, copyrights and domain names.

-27-

          (o) The Software Transfer and Royalty Agreement (i) has not been terminated (by change of control or otherwise) and remains in full force and effect, including, without limitation, in its grant of rights to Seller for licenses to LIFEfit, the SMC Enhancements and the SMC Enhanced Software (as defined therein) and (ii) has not been transferred, assigned or amended by the parties thereto.

          (p) There are no computer programs, software tools, data or databases owned by Seller or any Affiliate or Subsidiary of Seller (other than the Company or Dixie) which is used by, for or in support of, the business of the Company and/or Dixie.

     Section 3.11. SEC Reports; Financial Statements; Liabilities .

          (a) Since December 31, 2001, Seller has filed all reports, registration statements, proxy statements or information statements and all other documents, together with any amendments required to be made thereto, required to be filed with the SEC under the Securities Act or the Exchange Act (collectively, the “Seller Reports”). Seller has heretofore made available to Buyer true copies of all the Seller Reports, together with all exhibits thereto, that Buyer has requested. Included in such Seller Reports are (i) audited consolidated balance sheets of Seller and its Subsidiaries at December 31, 2003, 2002 and 2001, and the related consolidated statements of income, stockholders’ equity and cash flows for the years then ended, and the notes thereto and (ii) the unaudited balance sheets of Seller and its Subsidiaries at September 30, 2004, and the related unaudited statements of income, stockholders’ equity and cash flows for the periods then ended and the notes thereto, each consolidated to the extent indicated therein.

          (b) All of the financial statements included in the Seller Reports since December 31, 2001, presented fairly in all material respects the consolidated financial position of Seller and its Subsidiaries as at the dates mentioned and the consolidated results of operations, changes in stockholders’ equity and cash flows for the periods then ended in conformity with GAAP applied on a consistent basis (subject, in the case of unaudited statements, to normal, recurring audit adjustments as may be permitted by Form 10-Q of the SEC). As of their respective dates, the Seller Reports complied in all material respects with all applicable rules and regulations promulgated by the SEC and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent reflected on the balance sheet included in Seller’s Annual Report on Form 10-K for the year ended December 31, 2003, or quarterly reports on Form 10-Q for the quarters ended March 31, 2004, June 30, 2004, and September 30, 2004 neither Seller nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) of the type required to be reflected in financial statements prepared in accordance with GAAP, except for liabilities or obligations which, individually or in the aggregate, have not had, or would not reasonably be expected to have, a Material Adverse Effect.

          (c) Seller has previously made available to Buyer true, complete and correct copies of the statutory financial statements and all amendments thereto of the Company and Dixie as filed with the Indiana Department and the Mississippi Department of Insurance (as applicable) for the years ended December 31, 2003, 2002 and 2001 and for the quarterly period ended

-28-

September 30, 2004, together with all exhibits and schedules thereto, and Seller will promptly furnish to Buyer the audited statutory financial statements of the Company and Dixie for the year ending December 31, 2004 and all other statutory financial statements filed with the Indiana Department after the date hereof but prior to the Closing Date (collectively, the “SAP Statements”). Except as set forth on Schedule 3.11(c) , each of the SAP Statements presents or will present fairly, in all material respects, the statutory financial condition of the Company and Dixie, at the respective dates thereof, and the statutory results of operations for the periods then ended in accordance with SAP, applied on a consistent basis throughout the periods indicated except as otherwise specifically noted therein.

          (d) There are no Liabilities (including, without limitation, any Liens other than Permitted Liens) of the Company or Dixie other than (i) Liabilities reflected or reserved against in the September 30, 2004 SAP Statements, not heretofore discharged, (ii) policyholder benefits payable or other Liabilities arising after September 30, 2004 in the ordinary course of business consistent with past practice and in amounts consistent with past practice, or (iii) Liabilities disclosed in Schedule 3.11(d) .

          (e) The Company and Dixie have paid in full or established reserves reflected in the SAP Statements for all guaranty or other similar state governmental fund assessments required by any Governmental Entity to be paid by them prior to the date of this Agreement. As of the date of this Agreement and except as and to the extent paid prior to September 30, 2004 or reserved against in the SAP Statements or set forth on Schedule 3.11(e) , the Company and Dixie have not received any guaranty fund assessments.

     Section 3.12. Taxes . Except as provided in Schedule 3.12 :

          (a) (i) All Tax Returns required to be filed on or before the Closing Date by or with respect to the Company or Dixie have been or will be timely filed (taking into account permitted extensions) with the appropriate Governmental Entity in the manner prescribed by Applicable Law; (ii) such Tax Returns are true, correct and complete in all material respects and will be true, correct and complete in all material respects for the periods covered thereby; (iii) Seller, the Company and Dixie have timely paid (or there has been paid on their behalf) all Taxes shown as due and payable on any such Tax Return or that are otherwise due and payable, in each case, in the manner prescribed by Applicable Law; (iv) no Liens (other than Permitted Liens) for Taxes on the Shares, the Company’s Assets or Dixie’s Assets exist; (v) neither Seller, the Company nor Dixie has requested nor is any of them currently the beneficiary of any extension of time within which to file any Tax Return; (vi) as of the date of the SAP Statements, to the extent that any material Tax liabilities and assessments have accrued but not yet become payable, such Tax liabilities and assessments have been reflected as liabilities in accordance with SAP on the SAP Statements and adequate reserves have been established for the payment thereof and no difference exists between the amount recorded on the SAP Statements and the amount of such Tax liability as determined by the appropriate Governmental Entity; (vii) no written claim has ever been made by a Governmental Entity in a jurisdiction where the Company or Dixie does not file Tax Returns that the Company or Dixie is or may be subject to taxation by that jurisdiction; (viii) there is no action, suit, investigation, audit, claim, administrative or court proceeding, or assessment (“Audits”)

-29-

pending or proposed or, threatened with respect to Taxes of the Company, or Dixie or Seller’s Consolidated Group; (ix) all material deficiencies asserted or assessments made as a result of any examination of the Tax Returns of the Seller’s Consolidated Group, the Company or Dixie have been paid in full; (x) except as required by Applicable Law, since December 31, 2003, neither the Company nor Dixie has: (A) made or changed any election concerning any Taxes, (B) filed any amended Tax Return, (C) settled any Tax Claim or assessment, or (D) surrendered any right to claim a refund of any Taxes, in each case, to the extent such action would materially affect the Taxes or any Tax benefit of the Company or Dixie following the Closing Date; (xi) there are no Tax Rulings, request for Tax Rulings, or Closing Agreements relating to the Company, Dixie or Seller’s Consolidated Group which could affect Buyer’s (or any Affiliate thereof), Company’s or Dixie’s liability for Taxes for any period (or portion thereof) commencing after the Closing Date; (xii) neither the Company nor Dixie (or any Person on behalf of the Company or Dixie): (A) has agreed to or is required to make any adjustments pursuant to Sections 481(a) or 807(f) of the Code (or any predecessor provision) or any similar provision of foreign, state or local law by reason of a change in accounting method initiated by any such person, (B) has Knowledge that any Governmental Entity has proposed in writing any such adjustment or change in accounting method, or (C) has made any written application pending with any Governmental Entity requesting permission for any change in accounting method that relates to the business or operations of the Company or Dixie; (xiii) as a result of any agreement with a Governmental Entity, neither the Company nor Dixie will be required to include any material item of income in, or exclude any material Tax credit or item of deduction from, any taxable period beginning on or after the Closing Date; (xiv) other than with respect to the obligations assumed pursuant to Section 2.02(b)(ii), no intercompany obligation (as described in Treas. Reg. § 1.1502-13(g)) between the Company or Dixie, on the one hand, and any other member of Seller’s Consolidated Group (including either the Company or Dixie), on the other hand, will remain outstanding following the Closing and the Company and Dixie have not engaged in any transaction with Seller or any of its Affiliates which could result in the recognition of income by the Company or Dixie with respect to such transaction for any period ending on or after the Closing Date; (xv) no power of attorney currently in force has been granted with respect to any matter relating to the Taxes of the Company or Dixie; (xvi) no indebtedness of the Company or Dixie is “corporate acquisition indebtedness” within the meaning of Code Section 279(b); (xvii) no property of the Company or Dixie is property that the Company or Dixie or any party to this transaction is or will be required to treat as being owned by another person pursuant to the provisions of Code Section 168(f)(8) (as in effect prior to its amendment by the Tax Reform Act of 1986) or is tax-exempt use property within the meaning of Code Section 168; (xviii) neither the Company nor Dixie has (A) filed a consent pursuant to Code Section 341(f) or (B) agreed to have Code Section 341(f)(2) apply to any disposition of a subsection (f) asset (as such term is defined in Code Section 341(f)(4)) owned by the Company or Dixie and (xix) the Company or Dixie has not been at any time a partner or member of any entity that is classified as a partnership for U.S. Tax purposes, a joint venture or the holder of a beneficial interest in any trust for any period for which the statute of limitations for any Tax has not expired.

-30-

          (b) The Company and Dixie are members of an affiliated group of which Seller is the common parent, within the meaning of Section 1504(a) of the Code (the “Seller’s Consolidated Group”). The Company and Dixie became members of the Seller’s Consolidated Group beginning with the tax year beginning on January 1, 2001. Except with respect to any liability under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) that directly results from the Company and Dixie being a member of Seller’s Consolidated Group, the Company and Dixie will not have as of the Closing Date any liability for Taxes of any other Person (i) as a transferee or successor, (ii) by contract (including any Tax Sharing Agreements), (iii) by operation of Applicable Law, or (iv) otherwise.

          (c) The Company and Dixie have complied (and until Closing will comply) with all Applicable Law relating to the payment and withholding of Taxes and each of them has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, stockholder, foreign person, or other third party.

          (d) Seller has delivered or made available to Buyer correct and complete copies of all Tax Returns filed by or relating to the Seller’s Consolidated Group, the Company or Dixie and all examination reports and other relevant written materials with respect to Audits (whether proposed, threatened, pending or concluded) related to the three taxable years ending prior to the Closing Date.

          (e) Neither the Company nor Dixie has engaged in any transaction that may result in the recognition of income by the Company or Dixie in any Tax period (or portion thereof), other than potential gains and/or losses associated with derivatives provided to support the Equity Indexed Products, beginning after the Closing Date (including, but not limited to, transactions subject to Code section 355).

          (f) Neither the Company nor Dixie has executed any waiver or comparable consents regarding any statute of limitations in respect of Taxes or requested or agreed to any extension of time with respect to a Tax assessment or deficiency.

          (g) Neither the Company nor Dixie (or Seller with respect to the Company or Dixie) has participated, within the meaning of Treasury Regulation Section 1.6011-4(c), in (i) any “reportable transaction” within the meaning of Section 6011 of the Code and the Treasury Regulations thereunder (without regard to any cumulative or aggregate effect), (ii) any “confidential corporate tax shelter” within the meaning of Section 6111 of the Code and the Treasury Regulations thereunder, or (iii) any “potentially abusive tax shelter” within the meaning of Section 6112 of the Code and the Treasury Regulations thereunder.

          (h) The Company and Dixie each satisfy the definition of a “life insurance company” for purposes of the Code and all reinsurance contracts entered into by the Company or Dixie are insurance contracts for U.S. federal income tax purposes.

-31-

          (i) The insurance reserves set forth in the Tax Returns filed by or including the Company and Dixie have been determined in all respects in accordance with Section 807 or 846 of the Code, as applicable.

          (j) To the Knowledge of Seller, with respect to reinsurance contracts to which the Company or Dixie is a party, no facts, circumstances or basis exists under which the IRS could make any reallocation, recharacterization or other adjustment under Section 845(a) of the Code, or make any adjustment arising from a determination that any reinsurance contract had or has a significant tax avoidance effect under Section 845(b) of the Code.

          (k) Neither the Company nor Dixie has any existing policyholder surplus accounts as defined in Code Section 815.

          (l) All Life Insurance Contracts issued, assumed, modified, exchanged or sold by the Company or Dixie which are subject to Sections 101(f) or 7702 of the Code qualify (and have qualified since issuance) as “life insurance contracts” within the meaning of Sections 101(f) or 7702(a) of the Code, as applicable. No Life Insurance Contract issued, assumed, modified, exchanged or sold by the Company or Dixie is a “modified endowment contract” within the meaning of Section 7702A of the Code, except for those Life Insurance Contracts that the Company or Dixie is administering as modified endowment contracts and with respect to which the Company or Dixie has notified the policyholder, before the date hereof, that the contract constitutes a “modified endowment contract.”

          (m) All Annuity Contracts issued, assumed, modified, exchanged or sold by the Company or Dixie that are subject to Section 72(s) of the Code contain (and have contained since issuance) all of the necessary provisions of Section 72(s) of the Code and all Annuity Contracts that are represented as qualifying under Sections 130, 403(a), 403(b) or 408(b) of the Code contain (and have contained since issuance) all provisions required for qualification under such sections of the Code.

          (n) All Life Insurance Contracts and Annuity Contracts marketed by the Company or Dixie, its agents, or any Person from which the Company or Dixie acquired such Contract, as, or in connection with, plans that are intended to qualify under sections 401, 403, 408, or 457 of the Code (“Qualified Plans”) comply (and have complied since issuance) with the requirements of such sections. All Qualified Plans marketed or administered by the Company or Dixie are marketed and administered in compliance with relevant provisions of the Code.

          (o) In providing record keeping and administrative services in the ordinary course with respect to customers’ Insurance Contracts whether individual or group retirement or deferred compensation plans or arrangements, and with respect to any Life Insurance Contracts or Annuity Contracts issued, assumed, modified, exchanged or sold by the Company or Dixie as of the Closing Date, the Company and Dixie are in compliance with the applicable administrative requirements of the Code, including sections 72, 401(a), 401(k), 403(b), 408(k), 408(p), 457(b), 3405, 6047, 7702 and 7702A

-32-

of the Code and the rules and regulations hereunder, and, to the extent applicable, the requirements of Parts 2, 3 and 4 of Title I of ERISA.

          (p) Other than the Tax Sharing Agreement between the Company and Dixie, neither the Company nor Dixie is a party to any Tax Sharing Agreement.

     Section 3.13. Employee Benefit Matters .

          (a) Set forth in Schedule 3.13(a) is a complete and correct list of any retirement, pension, savings, profit-sharing, bonus, incentive compensation, deferred compensation, stock option or stock compensation, welfare benefit, severance or termination, retiree medical, dental, life or disability insurance, supplemental retirement, or other material employee benefit plans, programs, or arrangements, including but not limited to “employee benefit plans” within the meaning of Section 3(3) of ERISA (each, a “Plan,” and collectively, “Plans”) as to which Seller, the Company or Dixie has any Liability for current or former employees or directors of the Company or Dixie (the “Covered Employees”). Seller has previously provided to Buyer a true and correct list of the Covered Employees, along with their current compensation, dates of hire and dates of termination, if applicable.

          (b) Set forth on Schedule 3.13(b) is a complete and correct list of all Plans covering the Covered Employees that are currently in effect. With respect to all such Plans (the “Benefit Plans”), true and complete copies of the following items relating to each Benefit Plan, where applicable, have heretofore been provided to Buyer: (i) the Plan document and all amendments thereto (or a description of such Plan if there is no plan document); (ii) the most recent determination letter issued by the IRS; (iii) the most recent summary plan description and all summaries of material modifications to such summary plan description; (iv) the three most recent annual reports (Form 5500), including all schedules and audited financial statements; and (v) the most recent actuarial valuation report. No Benefit Plans are maintained or sponsored by the Company or Dixie.

          (c) No liability under Subtitle C or D of Title IV of ERISA has been incurred and not satisfied, and no condition exists that presents a material risk that Liability would be incurred by the Company or Dixie, with respect to any ongoing, frozen, or terminated Plan currently or formerly maintained or contributed to by the Company or Dixie, or any Person that would be now or at the applicable time considered a member of the Company’s or Dixie’s “controlled group” within the meaning of Section 414(b), 414(c), 414(m) or 414(o) of the Code or Section 4001(a)(14) of ERISA (an “ERISA Affiliate”), and no withdrawal liability has been incurred and not satisfied under Subtitle E of Title IV of ERISA or is anticipated that could result in a liability to the Company or Dixie. No Notice of Reportable Event (within the meaning of Section 4043 of ERISA) has been filed or required to be filed for any Plan within the six years preceding the date of this Agreement. Except as set forth on Schedule 3.13(c) , no Plan is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA. Neither Seller, the Company or Dixie are entering into the transactions contemplated by this Agreement for the principal purpose of evading liability within the meaning of Section 4069 of ERISA.

-33-

          (d) No Plan of an ERISA Affiliate (an “Affiliate Plan”) has an “accumulated funding deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code), and none of the Company, Dixie or any ERISA Affiliate has any outstanding funding waiver.

          (e) Except as set forth on Schedule 3.13(e) , neither Company nor Dixie has any formal plan or express or implied commitment to employ any Covered Employees or to create any Plan that would be maintained by them or to contribute to or participate in any Plan maintained by any ERISA Affiliate.

          (f) Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service, and to the Knowledge of Seller, no event or condition has occurred or will occur that would reasonably be expected to have an adverse effect on the qualified status of any such Benefit Plan. Each Benefit Plan complies in all material respects with its terms and with the requirements prescribed by any and all Applicable Law, including but not limited to the Code and ERISA.

          (g) Except as disclosed in Schedule 3.13(g) , no liability, claim, investigation, audit, action or litigation has been incurred, made, commenced or, to the Knowledge of Seller, threatened (other than routine claims for benefits) with respect to any Benefit Plan.

          (h) None of Seller, the Company, Dixie, any ERISA Affiliate, any of the Plans, any trust created thereunder, nor to Seller’s Knowledge, any trustee or administrator thereof has engaged in a transaction or has taken or failed to take any action in connection with which Seller, the Company, Dixie or any ERISA Affiliate could be subject to any material liability for either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975, 4976 or 4980B of the Code.

          (i) Except as set forth on Schedule 3.13(i) , no Plan provides medical, surgical, hospitalization, death or similar benefits (whether or not insured) for the Covered Employees for periods extending beyond their retirement or other termination of service, other than (i) coverage mandated by Applicable Law, (ii) death benefits under any “pension plan” or (iii) benefits the full cost of which is borne by the Employee or former employee or director of the Company or Dixie (or his beneficiary).

          (j) Neither the Company nor Dixie (i) has made any payments, (ii) is obligated to make any payments, or (iii) is a party to any agreement, contract or arrangement that under certain circumstances could obligate it to make any payments that have resulted or will result, separately or in the aggregate, in the payment of any “excess parachute payments” within the meaning of Section 280G of the Code.

          (k) Except as set forth on Schedule 3.13(k) , the consummation of the transactions contemplated by this Agreement will not (i) entitle any Covered Employee to severance pay, unemployment compensation, retention pay or any other payment from the Company or Dixie, except as expressly provided in this Agreement, or (ii) except to the extent, if any, required by law, with respect to any Benefit Plan that is intended to be qualified under Section 401(a) of the Code, accelerate the time of payment or vesting, or increase the amount of compensation from the Company or Dixie due to any such Covered Employee.

-34-

     Section 3.14. No Brokers . Other than Raymond James & Associates, Inc., all the fees and expenses of which will be paid by Seller, no investment banker, broker, finder or other intermediary has acted directly or indirectly for Seller, the Company, Dixie or their Affiliates, and the Company and Dixie have not and will not incur any obligation to pay any brokerage or finder’s fee or other commission, in connection with the transactions contemplated by this Agreement.

     Section 3.15. Insurance Issued by the Company or Dixie . Except as set forth on Schedule 3.15 :

          (a) Since January 1, 2002, all benefits claimed by any Person under any Insurance Contract have in all material respects been paid (or provision for payment thereof has been made) in accordance with the terms of the Contracts under which they arose and such payments were not materially delinquent and were paid (or will be paid) without fines or penalties, except for any such claim for benefits for which the Company or Dixie reasonably believes that there is a reasonable basis to contest payment and is taking such action;

          (b) Seller has made available to Buyer true, complete and correct copies of all underwriting manuals (including each amendment thereto) utilized by the Company and Dixie with respect to the Insurance Contracts. The underwriting standards utilized and rates and rating factors and criteria applied by the Company and Dixie with respect to the Insurance Contracts outstanding as of the date hereof conformed in all material respects to those contained in the Company’s or Dixie’s applicable underwriting manuals as in effect at the times such Insurance Contracts were underwritten and, with respect to any Insurance Contract reinsured in whole or in part, conform in all material respects to the standards and ratings required pursuant to the terms of the related reinsurance, coinsurance, modified coinsurance or other similar Contracts;

          (c) To the Knowledge of Seller, (i) each Producer, at the time such Producer solicited, negotiated, wrote, sold or produced business for the Company or Dixie, to the extent required by Applicable Law as then in effect, was duly and appropriately appointed by the Company or Dixie to act as a Producer for the Company or Dixie and was duly and appropriately licensed as a Producer (for the type of business solicited, negotiated, written, sold or produced by such Producer), in each case, in the particular jurisdiction in which such Producer solicited, negotiated, wrote, sold or produced such business for the Company or Dixie; (ii) no such Producer violated any material term or provision of any Applicable Law as then in effect applicable to any aspect (including, but not limited to, the soliciting, negotiating, marketing, sale or production) of the Company’s or Dixie’s products; (iii) no such Producer has materially breached the terms of any agency or broker Contract with or for the benefit of the Company or Dixie (excluding engaging in “twisting” activities); and (iv) no Producer designated by the Company as Regional General Agent 2 has engaged in “twisting” activities.

          (d) Seller has previously made available to Buyer true, correct and complete copies of all Insurance Contract forms applicable to in-force Insurance Contracts including, without limitation, any and all state variations, riders and other related forms. Each Insurance Contract policy or certificate form, as well as any related application form, written advertising material (including such material placed on the Company’s or Dixie’s website) and rate or rule currently or previously marketed, filed or otherwise utilized by the Company or Dixie, the use or

-35-

issuance of which requires filing or approval, has been appropriately filed and, if required, approved by the applicable Governmental Entities in each jurisdiction requiring such filing or approval. To the Knowledge of Seller, all such policies and certificates, forms, applications, advertising materials and rates or rules are or were, as applicable, in compliance with, and utilized in compliance with, Applicable Law and within the scope of the approvals received therefor;

          (e) No provision in any in-force Insurance Contract gives the holder thereof or any other Person the right to receive dividends, distributions or other benefits based on the revenue, earnings or profits of the Company or Dixie, except for traditional participating policies and charter policies. Except as set forth on Schedule 3.15 , neither the Company nor Dixie is a party to any agreement providing for the collection of insurance premiums payable to the Company or Dixie by any other Person other than agreements that allow the Producer to collect the initial premium payment in the form of a remittance made payable to the Company or Dixie;

          (f) Except as set forth on Schedule 3.15 , since December 31, 2002, no customer or related group of customers, and no Producer, in either case which accounted for (i) one percent or more of the aggregate annuity considerations or deposits collected by the Company or Dixie during the 10 month period ended October 31, 2004 or during the years ended December 31, 2003 or 2002, or (ii) one percent or more of the aggregate reserves of the Company and Dixie under Annuity Contracts as reflected on the SAP Statements for the years ended December 31, 2003 or 2002, has or have at its or their initiative, terminated or threatened in writing to terminate its or their relationship with the Company or Dixie;

          (g) All amounts to which the Company or Dixie is entitled under the Third Party Reinsurance Agreements (including without limitation amounts based on paid and unpaid losses) are collectible, except as otherwise reflected in the SAP Statements of the Company or Dixie previously delivered to Buyer;

          (h) As of January 31, 2005, there were 47,936 Life Insurance Contracts and 44,339 Annuity Contracts in force; and

          (i) The financial strength or claims-paying ability of (i) the Company is rated “B” or higher and (ii) Dixie is rated “B” or higher in each case by A.M. Best Company, Inc. as of the date hereof and, as of the date hereof, A.M. Best Company, Inc. has not informed Seller, the Company or Dixie that it has placed the Company or Dixie under surveillance or that it has placed the respective ratings of the Company or Dixie under review with negative implications.

     Section 3.16. Assets .

          (a) Except as set forth on Schedule 3.16(a) and except for Assets disposed of since September 30, 2004 in the ordinary course of business or otherwise in accordance with the terms of this Agreement, the Company and Dixie have good and marketable title to all Assets that are disclosed or otherwise reflected in the September 30, 2004 SAP Statements and all Assets acquired thereafter, and except as set forth on Schedule 3.16(a) , all such Assets are owned by the Company or Dixie free and clear of all Liens, other than Permitted Liens.

-36-

          (b) Except as set forth on Schedule 3.16(b) , with respect to Investment Assets disclosed or otherwise reflected in the September 30, 2004 SAP Statements or acquired thereafter:

     (i) to the Knowledge of Seller, all are realizable in accordance with their terms except to the extent otherwise appropriately reflected as an impairment or an investment reserve in such SAP Statements;

     (ii) there are no Payment Defaults, or to the Knowledge of Seller, any other defaults with respect to which the prospect of a Payment Default is more than remote (as used herein, “Payment Default” shall mean a default (or an event which, with notice or lapse of time or both, would constitute a default) in the payment on any of the bonds, notes, mortgages, debentures and other evidences of indebtedness that constitute Investment Assets);

     (iii) Seller does not have any Knowledge of any pending or threatened bankruptcy, reorganization, insolvency, moratorium or similar event or proceeding by any issuer, guarantor or other Person responsible for making payment with respect to any such Investment Asset as of the date hereof; and

     (iv) neither Seller, the Company, Dixie nor any Person on its or their behalf, has taken, or omitted to take, any action which would cause any such Investment Asset to be subject to any valid offset, defense or counterclaim against the right of the Company or Dixie to enforce the terms of such Investment Asset.

          (c) Since September 30, 2004, the Investment Assets, in the aggregate, have retained the following characteristics: (i) a credit quality of not less than “Aa3” (ii) portfolio duration between 4 and 5 years and (iii) convexity of not more negative than negative 0.6.

          (d) Except as set forth on Schedule 3.16(d), the Company and Dixie own, have a valid leasehold interest in or have a valid right under Contract to use, all tangible personal property that is material to the conduct of their respective businesses, free and clear of all Liens, other than Permitted Liens.

          (e) The Assets (other than Intellectual Property which is covered by Section 3.10) owned or leased by the Company and Dixie are sufficient for the Company and Dixie to conduct their business from and after the Closing without interruption and in the ordinary course of business as they are being conducted on the date hereof.

     Section 3.17. Environmental Matters . Except as set forth on Schedule 3.17 : (i) the Company and Dixie have operated their current and former businesses in compliance, in all material respects, with all applicable Environmental Laws and Permits required thereunder; (ii) to the Knowledge of Seller, there are no events, conditions or circumstances that would result in any action, claim or allegation by any Person against the Company or Dixie under applicable Environmental Laws or related to Hazardous Materials nor has Seller, the Company or Dixie received any notice that any of the Company’s or Dixie’s businesses or Assets is in violation of any Environmental Laws or that the Company or Dixie is responsible (or potentially responsible) for the investigation, cleanup, monitoring or other remediation of any Hazardous Materials on, at

-37-

or under any property; (iii) the Company and Dixie have not assumed or retained, contractually or by operation of law, from any Person any liability under Environmental Laws or related to Hazardous Materials; and (iv) Seller has made available to Buyer all environmental reports, assessments, audits or studies of the Company and Dixie in their possession or control.

     Section 3.18. Regulatory Filings . Seller has made available for inspection by Buyer all reports, statements, documents, registrations, filings and submissions made by or with respect to the Company or Dixie with any Governmental Entity, and reports of examinations issued by any such Governmental Entity, since December 31, 2001, including but not limited to correspondence with the Florida Insurance Department regarding the suspension of new writings in the State of Florida. Except as set forth on Schedule 3.18 , the Company and Dixie have timely filed, or caused to be timely filed, all material reports, statements, documents, registrations, filings, applications or submissions required to be filed by or on behalf of the Company or Dixie with any Governmental Entity in connection with the business conducted by the Company or Dixie, the Company and Dixie are acting in compliance in all material respects with all such reports, statements, documents, registrations, filings, applications and submissions, and all required regulatory approvals in respect thereof are in full force and effect. Except as disclosed in Schedule 3.18 , (i) all such reports, statements, documents, registrations, filings, applications and submissions were in compliance in all material respects with Applicable Law when filed or as amended or supplemented and there were no material omissions therefrom, and (ii) no material deficiencies have been asserted by any Governmental Entity with respect to such reports, statements, documents, registrations, filings, applications or submissions that have not been satisfied.

     Section 3.19. Real Property; Leases . (a) Schedule 3.19(a) hereto sets forth a summary description of the Owned Property. The Owned Property is presently in material compliance with all Applicable Law relating to the use and operation of the Owned Property (including but not limited to building codes and zoning laws). All material Permits required by any Governmental Entity in order to own and operate the Owned Property have been obtained and are in full force and effect and the certificates of occupancy for the Owned Property permit its current uses in all material respects. The Company or Dixie have good and marketable fee title to all Owned Property, free and clear of all Liens, other than Permitted Liens.

          (b) Schedule 3.19(b) hereto sets forth a true and complete list and summary description of all Leased Property, including whether any consent of the lessor or other third party is required to maintain the effectiveness of the Leases in connection with the transactions contemplated hereby. Seller has delivered to Buyer true, correct and complete copies of the Leases. All of such Leases are valid and in full force and effect in all material respects and all rents and additional rents and other material assessments due to date on each such Lease have been paid. Neither of the Company or Dixie is in default in any material respect under any of such Leases and, to the Knowledge of Seller, no lessor is in default under any of such Leases. No material waiver, indulgence or postponement of the obligations of any of the Company or Dixie under such Leases has been granted by the lessor, and no event has occurred which, with the passage of time or the giving of notice, or both, would constitute a default thereunder by any of the Company or Dixie. To the Knowledge of Seller, no event has occurred which, with the passage of time or the giving of notice or both, would constitute a default thereunder by any lessor. The Owned Property together with the Leased Property constitutes all interests in real

-38-

property currently used or currently held for use in connection with the business of the Company and Dixie and which are necessary for the continued operation of the business of the Company and Dixie as it is now being conducted.

          (c) The Company and Dixie enjoy peaceful and undisturbed possession in all material respects under all Leases, none of which contain any provisions that will materially impair or adversely affect its ability to continue to use the premises leased thereunder as it currently does. To the Knowledge of Seller, (i) no notice of violation of any law, ordinance or administrative regulation (including any zoning or building law) has been received by Seller, the Company or Dixie with respect to any Leased Property or Owned Property and (ii) neither the Company nor Dixie has received notice that any Lease will not be renewed upon its expiration date, or notice that such Lease will be renewed but upon terms and conditions which, taken as a whole, will differ in a material adverse manner from existing terms under such Lease. To the Knowledge of Seller, if the consents specified in Schedule 3.19(b) are obtained, the continuation, validity and effectiveness of such Leases under the current terms thereof will not be materially affected by the consummation of the transactions contemplated herein. The property leased or subleased by the Company and Dixie in respect of their respective businesses is in a state of reasonable maintenance and repair. To the Knowledge of Seller, neither the whole nor any portion of any real property leased or subleased by the Company or Dixie in respect of their respective businesses is being condemned or otherwise taken by any public authority, nor is any such condemnation or taking threatened or contemplated. Neither the whole nor any portion of any real property leased or subleased by the Company or Dixie in respect of their respective businesses has been damaged in any material respect or destroyed by fire or other casualty. All work required to be performed by the lessor at any premises leased or subleased by the Company or Dixie is materially complete.

     Section 3.20. Conduct of Business; Absence of Certain Changes . Except as set forth on Schedule 3.20 or as permitted or contemplated by this Agreement, since September 30, 2004, (i) the Company and Dixie have conducted their respective businesses in the ordinary course of business consistent with past practices and the Company and Dixie have not taken any action that would have constituted a violation of Section 5.02, if Section 5.02 had applied since September 30, 2004 and (ii) the Company and Dixie have not experienced any change, event or condition which has had or could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

     Section 3.21. Insurance Coverage . Schedule 3.21 sets forth a true, complete and correct list of insurance policies and fidelity bonds covering the Company and Dixie, including the amounts and coverages. All such policies and fidelity bonds are in full force and effect as of the date of this Agreement. Neither Seller, the Company, Dixie nor any of their Affiliates are in default under any such policy or bond and, to the Knowledge of Seller, no other party to such policy or bond is in default thereof. To the Knowledge of Seller, there are no material claims under such insurance policies as to which the insurers have denied liability.

     Section 3.22. Market Conduct . Except as set forth on Schedule 3.22 ; neither Seller, the Company, Dixie, Seller’s Affiliates nor, to the Knowledge of Seller, the Producers have engaged in any Market Conduct Activities which violate Applicable Law or otherwise enables any third party to recover damages from the Company or Dixie.

-39-

     Section 3.23. Producers . Except as set forth on Schedule 3.23 , the Company and Dixie enjoy good relations, and are not involved in any material dispute, with any of their respective agents, general agents, brokers, reinsurance intermediaries, consultants, producers, financial institutions or other Persons which market its products (collectively, “Producers”). Schedule 3.23 contains a list of the standard forms of contract or contracts with such Producers and contains a true and correct description of the compensation arrangements of the Company and Dixie with such Producers, including any Contract or arrangement with any Person that provides for compensation outside the prevailing industry practice.

     Section 3.24. Labor Matters . (a) Except as set forth on Schedule 3.24(a) , with respect to the Employees (i) there is no labor strike, dispute, slowdown, stoppage or lockout actually pending or, to the Knowledge of Seller, threatened against the Company or Dixie, (ii) no union claims to represent the Employees and to the Knowledge of Seller, there are no current union organizing activities among such Employees, and (iii) none of Seller, the Company or Dixie is a party to or bound by any collective bargaining, labor union contract or similar agreement with any labor organization applicable to any Employees.

          (b) To the Knowledge of Seller, with respect to the Employees, each of Seller, the Company and Dixie is and has been, in material compliance with all Applicable Law respecting employment and employment practices, terms and conditions of employment, age and sex discrimination, wages and hours, and neither the Company nor Dixie has engaged in or is engaged in any unfair labor practices. Except as set forth on Schedule 3.24(b) hereto, with respect to the Employees, no unfair labor practice complaints have been filed against the Company or Dixie with any Governmental Entity and neither the Company nor Dixie has received any notice or communication reflecting an intention or threat to file any such complaint. No Person has made any claim, against the Company or Dixie arising out of any statute, ordinance or regulation relating to discrimination with respect to the Employees, or employment practices with respect to the Employees.

          (c) To the Knowledge of Seller, and except as set forth on Schedule 3.24(c) , the Company and Dixie have at all times properly classified each of their respective Employees as employees and as exempt or non-exempt for overtime pay, and have properly classified each of their independent contractors as independent contractors, as applicable, and have treated each person classified by them consistently with such status.

     Section 3.25. Third Party Reinsurance . Schedule 3.25 sets forth a true, complete and correct list of (a) all reinsurance and retrocession treaties and agreements in force as of the date of this Agreement to which the Company or Dixie is either a ceding or an assuming party, and (b) any such treaty or agreement that is terminated or expired but under which the Company or Dixie may be either obligated to make payments or eligible to continue to receive benefits (collectively, the “Third Party Reinsurance Agreements”), and for each such treaty or agreement described in (a) or (b), Schedule 3.25 indicates (i) the effective date of such treaty or agreement and the termination date of any such treaty or agreement which has a definite termination date and (ii) whether such agreement or treaty relates to Annuity Contracts or Life Insurance Contracts. Each Third Party Reinsurance Agreement is in full force and effect to the respective dates noted on the Schedule and is a valid and binding obligation of the Company or Dixie and, to the Knowledge of Seller, each other party thereto, subject to the Enforceability Exceptions. The Company and Dixie

-40-

are not in default in any material respect as to any provision of any Third Party Reinsurance Agreement, and have not failed to meet in any material respect the underwriting standards required for any business reinsured thereunder, and there are no material outstanding disputes with regard to any Third Party Reinsurance Agreement. No Third Party Reinsurance Agreement contains any provision providing that the other party thereto may terminate such treaty or agreement by reason of the transactions contemplated by this Agreement or the Ancillary Agreements.

     Section 3.26. Improper Payments . Since December 31, 2001:

          (a) no funds or Assets of the Company or Dixie have been used for any illegal purpose;

          (b) except as set forth on Schedule 3.26 , no unrecorded fund of the Company or Dixie has been established for any purpose and no unrecorded material Asset of the Company or Dixie exists;

          (c) no accumulation or use of the corporate funds of the Company or Dixie has been made without being properly accounted for on the Books and Records of the Company or Dixie;

          (d) all payments by or on behalf of the Company and Dixie have been duly and properly recorded and accounted for on the Books and Records of the Company and Dixie;

          (e) no false or artificial entry has been made on the Books and Records of the Company or Dixie for any purpose or reason whatsoever;

          (f) no payment has been made by or on behalf of the Company or Dixie with the understanding that all or any part of such payment is to be used for a purpose other than as described in the documents supporting such payment;

          (g) neither the Company nor Dixie has made, directly or indirectly, any illegal contribution to a political party or candidate, either domestic or foreign; and

          (h) neither the Company nor Dixie has made any improper foreign payment as that term is defined in the Foreign Corrupt Practices Act.

     Section 3.27. Security Deposits . Schedule 3.27 sets forth a true, complete and correct list of all securities deposited by the Company and Dixie with Governmental Entities as of the date hereof.

     Section 3.28. Bank Accounts . Schedule 3.28 sets forth a true, complete and correct list of bank accounts and investment accounts maintained by the Company and Dixie, including the name of each bank or other institution, account numbers and a list of signatories to such account. Neither the Company nor Dixie has commingled any such account with Seller or any Affiliate of Seller.

-41-

     Section 3.29. Books and Records . The Books and Records are true, complete and correct in all material respects, have been maintained in accordance with sound business practices and accurately present and reflect in all material respects all of the transactions and actions therein described.

     Section 3.30. Investment Representations . Seller represents and warrants to Buyer as of the Closing Date as follows:

          (a) It is acquiring the Buyer Preferred Shares for its own account for investment purposes only and not for purposes of, with a view to, or for offer or sale in connection with, any distribution. It agrees that the certificates representing the Buyer Preferred Shares may bear legends to the effect that the Buyer Preferred Shares have not been registered under the Securities Act or such other state securities laws, and that no interest therein may be transferred or otherwise disposed of in violation of the provisions thereof.

          (b) It has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in Buyer as contemplated by this Agreement, and is able to bear the economic risk of such investment for an indefinite period of time. It has been furnished access to such information and documents as it has requested and has been afforded an opportunity to ask questions of and receive answers from representatives of Buyer concerning the terms and conditions of this Agreement and the purchase of the Buyer Preferred Shares contemplated hereby.

          (c) It understands the Buyer Preferred Shares have not been registered under the Securities Act by reason of their issuance in a transaction exempt from registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof, and that it may have to hold the Buyer Preferred Shares, and bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Securities Act or exempt from registration.

          (d) It is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

          (e) Neither Seller, the Company nor Dixie is a “registered investment company” or a company “controlled” by a “registered investment company” (in each case, as defined in the Investment Company Act of 1940, as amended).

     Section 3.31. Proxy Statement . None of the information supplied or to be supplied by Seller for inclusion in the Proxy Statements will cause the Proxy Statements, when first mailed to the holders of the Trust Preferred Securities and the stockholders of Seller and at the time of the Seller’s Stockholder Meeting, to contain any untrue statement of a material fact, or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

     Section 3.32. Indenture . The Indenture is in full force and effect in all material respects and constitutes a legal, valid and binding obligation of Seller and is enforceable against Seller in accordance with its terms. No Event of Default has occurred under the Indenture and Seller has not exercised its rights under the Indenture to defer the payment of interest under the Securities (as

-42-

defined in the Indenture). All junior subordinated debentures issued pursuant to the terms of the Indenture are held by the Trust. Seller has delivered to Buyer a true and complete copy of the Indenture and each junior subordinated debenture issued pursuant thereto.

     Section 3.33. Common Securities . Seller owns beneficially and of record all Common Securities issued by the Trust, free of any Lien or Stock Restriction of any kind or character whatsoever (except for the restrictions on transfer set forth in the Amended and Restated Trust Agreement of the Trust), and Seller has the full and unrestricted power to sell, assign, transfer and deliver the Common Securities to Buyer upon the terms and subject to the conditions of this Agreement free of any Lien or Stock Restrictions (except for the restrictions on transfer set forth in the Amended and Restated Trust Agreement of the Trust).

     Section 3.34. Opinion of Raymond James & Associates, Inc. The Board of Directors of Seller has received a final opinion of Raymond James & Associates, Inc. dated as of the date of this Agreement, to the effect that, as of such date, the consideration to be received by Seller in connection with the transactions contemplated by this Agreement is fair, from a financial point of view, to Seller’s stockholders. A true, correct and signed copy of such final opinion has been delivered to Buyer and such opinion has not been withdrawn.

     Section 3.35. Surplus Debentures . Except as set forth on Schedule 3.34 , Seller owns the Surplus Debentures free and clear of all Liens. Each Surplus Debenture is in full force and effect in all respects and constitutes a legal, valid and binding obligation of the Company and is enforceable against the Company in accordance with its terms. Seller has delivered to Buyer a true and complete copy of each of the Surplus Debentures.

     Section 3.36. Solvency . Seller is not insolvent, as such term is defined in Title 11 of the United States Code, and will not be insolvent at any time during the 90 days immediately preceding the Closing Date.

     Section 3.37. Full Disclosure . Neither the representations or warranties made by Seller in this Agreement or in any Schedule hereto, nor any certificate, report, statement, memorandum or other document furnished or required to be furnished to Buyer pursuant hereto contains any untrue statement of a material fact or, omits to state a material fact necessary in order to make the statements contained therein or herein not misleading in light of the circumstances in which they were made.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF BUYER

          Buyer hereby makes the following representations and warranties to Seller as of the date hereof and as of the Closing Date.

     Section 4.01. Organization and Standing . Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has full corporate power and authority to conduct its business as currently conducted and to own, lease and operate all its properties and assets.

-43-

     Section 4.02. Authorization . Buyer has full corporate power and authority to execute and deliver this Agreement and each of the Ancillary Agreements and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the Ancillary Agreements by Buyer and the performance by Buyer of its obligations hereunder and thereunder have been duly and validly authorized and approved by all requisite corporate action of Buyer, and no other acts or proceedings on its part are necessary to authorize the execution, delivery and performance of this Agreement and each of the Ancillary Agreements or the transactions contemplated hereby and thereby. Assuming due authorization and execution of the Agreement by Seller, this Agreement constitutes a legal, valid and binding obligation of Buyer, and is enforceable against Buyer in accordance with its terms, subject to the Enforceability Exceptions. Assuming due authorization and execution of the Ancillary Agreements by Seller, the Company and Dixie, as applicable, each of the Ancillary Agreements will constitute a legal, valid and binding obligation of Buyer, and will be enforceable against Buyer in accordance with its terms, subject to the Enforceability Exceptions.

     Section 4.03. Governmental Consents and Approvals . Except as set forth on Schedule 4.03 hereto, no consent, approval, non-disapproval, authorization, ruling, order of, notice to, or registration with, any Governmental Entity, is required on the part of Buyer in connection with the execution and delivery by Buyer of this Agreement or the consummation by Buyer of the transactions contemplated hereby and thereby.

     Section 4.04. No Conflict or Violation . The execution, delivery and performance by Buyer of this Agreement does not, and the consummation by Buyer of the transactions contemplated by this Agreement in accordance with the terms and conditions hereof will not (i) violate any provision of Buyer’s Articles of Incorporation, By-Laws or other charter or organizational documents; (ii) except as disclosed in Schedule 4.04 , require the consent or other action by any Person under, violate, conflict with or result in the breach of any of the terms of, result in any modification of or loss of a benefit under, accelerate or permit the acceleration of the performance required by, otherwise give any other contracting party the right to terminate or cancel, or constitute (with or without notice or lapse of time, or both) a default under, any Contract to which Buyer is a party or by or to which its assets or properties may be subject; (iii) violate any order, judgment, injunction, award or decree of any Governmental Entity or arbitrator against, or binding upon, or any agreement with, or condition imposed by, any Governmental Entity or arbitrator with respect to Buyer; or (iv) assuming that the consents and approvals referred to in Section 4.03 are duly obtained, violate any Applicable Law, except, in the case of clause (ii) of this Section 4.04, as could not impair the ability of Buyer to perform its obligations under this Agreement.

     Section 4.05. Actions Pending . There are no Actions pending against or, to the Knowledge of Buyer, threatened against Buyer or any businesses, properties or assets of Buyer, and there is no injunction, order, judgment, decree, award or regulatory restriction imposed upon Buyer or any properties or assets of Buyer, which could impair the ability of Buyer to perform its obligations under this Agreement, or which has had or is reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. There is no Action currently pending to which Buyer is a party and, as of the date hereof, Buyer has no intention of initiating an Action.

-44-

     Section 4.06. Brokers . No broker, investment banker, financial advisor or other Person, other than Fletcher Financial, Inc., the fees and expenses of which will be paid by Buyer, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer.

     Section 4.07. Commitments . Buyer has previously provided to Seller a true, correct and complete copy of the financing commitments to Buyer described on Schedule 4.07 (the “Buyer Financing”). The Buyer Financing will be sufficient, subject to the satisfaction of the conditions of the Buyer Financing, to provide the funds required by Buyer to pay the Purchase Price hereunder, including payment of all of the Intercompany Obligations to be assumed by Buyer pursuant to Section 2.02(b)(ii), and to pay all fees and expenses required to be paid by Buyer in connection with the transactions contemplated by this Agreement.

     Section 4.08. Investment Intent . The Shares to be acquired under this Agreement will be acquired by Buyer for its own account and not with a view to, or for sale in connection with, any distribution thereof. Buyer will refrain from transferring or otherwise disposing of any of the Shares acquired by it, or any interest therein, in such manner as to violate any registration provision of the Securities Act or any applicable state securities law regulating the disposition thereof.

     Section 4.09. Capitalization .

          (a) On the Closing Date, the authorized share capital of Buyer will consist solely of 65,000 shares of common stock par value $0.01 per share and 5,000 shares of Preferred Stock, par value $1,000 per share.

          (b) On the Closing Date, the issued and outstanding capital stock of Buyer will consist of not more than 65,000 shares of common stock and 5,000 shares of Series A Preferred Stock; and all of the issued and outstanding Preferred Stock will be owned by Seller.

          (c) Upon issuance, sale and delivery as contemplated by this Agreement, the Buyer Preferred Shares will constitute duly authorized, validly issued, fully paid and non-assessable shares of capital stock of Buyer, free of all preemptive or similar rights, and entitled to the rights described in the Series A Certificate of Designations. The shares of Buyer’s stock into which the Buyer Preferred Shares are exchangeable have been duly and validly reserved for issuance.

     Section 4.10. Operations of Buyer . Buyer was formed on February 8, 2005 for the purpose of engaging in the transactions contemplated by this Agreement and has not engaged in any other activities.

     Section 4.11. Proxy Statement . None of the information supplied or to be supplied by Buyer for inclusion in the Proxy Statements will cause the Proxy Statements, when first mailed to the holders of the Trust Preferred Securities and the stockholders of Seller and at the time of the Seller’s Stockholder Meeting, to contain any untrue statement of a material fact, or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

-45-

     Section 4.12. Compliance with Laws . Buyer has conducted its business in material compliance with all Applicable Law and is in material compliance with the requirements of each applicable Governmental Entity to file reports, registrations, filings or submissions with respect to the conduct of its business in each jurisdiction in which it has conducted its business. Buyer has not received any written notice of, and Buyer has no Knowledge of the occurrence of, any material violation of Applicable Law with respect to the operation of its business.

     Section 4.13. List of Assets and Liabilities . Schedule 4.13 sets forth a true and complete list of all of Buyers Assets and Liabilities as of the date of this Agreement.

ARTICLE V.

COVENANTS

     Section 5.01. Right of Access and Inspection . Buyer shall have the right, through its officers, employees, consultants, accountants, actuaries, attorneys and other designated agents and representatives, upon reasonable advance notice to Seller, during normal business hours and in a manner so as not to disrupt the orderly conduct of business of the Company, to (i) inspect (and make copies of) such of the Books and Records as Buyer may reasonably request and (ii) make such reasonable investigation of the Assets, liabilities, financial condition, business and operations of the Company and Dixie as Buyer may reasonably deem necessary or appropriate, and solely for such purposes to have access to the Contracts and facilities of the Company and Dixie, and solely for such purposes (excluding, in all events, the purposes set forth in Section 5.09(a)) to have access to the personnel of the Company, Dixie, Seller and Seller’s Affiliates that perform work for, or have knowledge of facts relating to the Company and Dixie, provided , that Buyer will maintain the confidentiality of all Books and Records in accordance with Section 5.06. Seller shall, and shall cause the Company, Dixie and Seller’s Affiliates, and their respective officers, employees, agents and representatives, including their respective counsel and independent public accountants (both current and former), to cooperate fully with Buyer in connection with such investigation, access and examination, including, without limitation, making available relevant accountant work papers. Seller agrees that Buyer may also discuss the business and operations of the Company with such regulators, rating agencies, lenders and Producers as determined by Buyer upon reasonable advance notice to Seller and the right of Seller to participate in any such discussions. Seller shall furnish promptly to Buyer (i) each written report on examination of financial condition, market conduct or similar matters (whether in draft or final form) of the Company and Dixie issued by any applicable Governmental Entity, (ii) all material filings with state insurance regulators made by the Company or Dixie under the insurance holding company statutes and regulations of the State of Indiana, (iii) all material correspondence or communications with state insurance regulatory authorities concerning the Company or Dixie, including without limitation such items relating to rehabilitation, insolvency, liquidation, supervision, or other comparable state proceedings, (iv) all reports prepared by or provided to Seller, the Company or Dixie regarding the Investment Assets and (v) all other material information and documents concerning the Assets, business, properties, management, Books and Records and personnel of (or who perform work for) the Company or Dixie as Buyer may reasonably request.

-46-

     Section 5.02. Conduct of Business .

          (a) From the date hereof until the Closing Date, except as otherwise permitted by this Agreement, Seller shall cause the Company and Dixie to conduct their respective businesses in the ordinary course of business consistent with past practice, and to use commercially reasonable efforts to (i) preserve intact its present organization, business and franchise; (ii) preserve and maintain in effect all of its Permits and other licenses, approvals, qualifications, registrations and authorizations; (iii) preserve the rights, franchises, goodwill and relationships with personnel of Seller’s Affiliates who perform work for the Company and Dixie, its Producers, other distribution sources, customers, lenders, suppliers, regulators, rating agencies and others having business relationships with it; (iv) continue its advertising and promotional activities, pricing and purchasing policies, operations and business plan implementation consistent with past practice; (v) continue in full force and effect without modification all existing policies or binders of insurance currently maintained in respect of its Assets, properties, business, operations, employees, officers or directors except as required by Applicable Law; (vi) not engage in any business initiatives, other than those involving the underwriting of retail annuity business of the Company, unless such initiatives can be terminated by the Company within 30 days following the Closing Date without material cost to the Company or any of its Affiliates; (vii) keep available the services of its or its Affiliates’ (as applicable) present officers, employees, consultants and agents that perform work for the Company and Dixie; (viii) defend and protect its Assets from infringement or usurpation; (ix) perform all of its obligations under all Contracts relating to or affecting its Assets or its business; (x) maintain its Books and Records in the usual manner consistent with past practice; (xi) comply in all material respects with all Applicable Law; and (xii) operate and maintain the Owned Property and Leased Property in the manner currently operated (including, but not limited to, maintaining in full force and effect, all insurance relating to the Owned Property and Leased Property currently maintained or required to be maintained under any lease or mortgage).

          (b) Without limiting the generality of Section 5.02(a), except as set forth on Schedule 5.02(b) and except as otherwise expressly permitted in this Agreement, without the prior written consent of Buyer, from the date hereof until the Closing Date the Company and Dixie shall not, and Seller shall cause the Company and Dixie not to:

     (i) create, incur, assume, guarantee, or otherwise become liable for any Liability other than in the ordinary course of business and consistent with past practice but in no event (other than the issuance of Insurance Contracts in the ordinary course of business) in excess of $25,000;

     (ii) sell, transfer, convey or otherwise dispose of Assets of the Company or Dixie, other than in the ordinary course of business in accordance with past practices;

     (iii) waive any right to receive any direct or indirect payment or other benefit under any Liability owing to it other than in the ordinary course of business consistent with past practice;

-47-

     (iv) split, combine or reclassify any of its capital stock, authorize or issue any shares of or change the number of authorized shares of its capital stock (or any interest therein) or enter into any Contract or grant any option, warrant, call, commitment, or right calling for the authorization or issuance of any shares of capital stock of the Company or Dixie (or any interest therein) or any securities convertible into such shares, or enter into any other agreement of any kind or character relating to its capital stock or any securities convertible into such shares, or create or issue any securities directly or indirectly convertible into or exchangeable for any such shares (or any interest therein), issue any options, warrants, or rights to purchase any such convertible securities (or any interest therein), purchase, redeem or otherwise acquire any shares of outstanding capital stock of the Company or Dixie or any rights, warrants or options to acquire any such shares, or amend any terms of any outstanding security of the Company or Dixie;

     (v) amend their respective Articles of Incorporation, By-Laws or other comparable charter or organizational documents;

     (vi) make any material change in any marketing relationship between the Company or Dixie and any Person through which the Company or Dixie sells Insurance Contracts;

     (vii) make any loans, advances or capital contributions to, or investments in, any Person or pay any fees or expenses to Seller or any director, officer, partner, stockholder or Affiliate of Seller other than the payment of fees and expenses to Seller and loans and advances to Seller, in either event in the ordinary course of business consistent with past practices;

     (viii) acquire, dispose, lease, assign, transfer, convey, mortgage, pledge, subject to any Lien or otherwise encumber any Asset, other than acquisitions or dispositions in accordance with the provisions of Section 5.14 or make or commit to make any capital expenditure in excess of $25,000, in the aggregate;

     (ix) change any of the accounting, hedging, investing, underwriting, pricing actuarial, tax, administrative, marketing or agency principles, practices, methods or policies (including but not limited to any reserving methods, methods of calculating and bad debt, contingency insurance or other reserve for financial reporting purposes or for any other accounting or Tax purposes) employed with respect to the Company or Dixie, except as may be required to comply with Applicable Law, including SAP; provided, however , that Seller shall make such changes as are required to comply with the accounting practices set forth on Exhibit A.

     (x) enter into any new or amend any existing employment contracts, severance arrangements or consulting contracts, or establish, adopt, enter into, alter, amend or increase, award or pay any employee bonus, insurance, severance or similar agreement, termination, deferred compensation, pension, retirement,

-48-

profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards or restricted stock awards), stock purchase or other employee benefit plans, or otherwise increase the compensation payable to or to become payable to any of the Employees or any directors, or officers, agents or representatives of the Company or Dixie, except salary increases as may be required by Applicable Law, and salary increases and bonus payments in the ordinary course of business consistent with past practice;

     (xi) enter into, modify, terminate or amend any agreement, Permit, concession, franchise, license or similar instrument to which the Company or Dixie is a party or which is used or held for use by the Company or Dixie or in connection with the Company’s or Dixie’s business, except in any case to the extent entered into, modified, terminated or amended in the ordinary course of business consistent with past practice, or enter into any Contract (other than any Contract with a Producer or any Insurance Contract, in either case entered into in the ordinary course of business) that contemplates the payment pursuant to the terms of such Contract, by or to the Company or Dixie of more than $25,000 in any 12 month period and which is not terminable within 90 days by the Company or Dixie without premium or penalty;

     (xii) change the commission rates or structures, salary, wages or benefits of any of the Producers of the Company or Dixie except, in any case (A) as may be required under the terms of the contractual relationships between such Persons and the Company or Dixie (copies of which have been provided to Buyer), or (B) in the ordinary course of business consistent with past practice;

     (xiii) establish, adopt, enter into or assume any labor or collective bargaining agreement or establish, adopt, assume or amend any Plan, except as may be required by Applicable Law;

     (xiv) pay, declare or set aside any dividend or make any other distribution of any kind (whether in cash, stock or property, or any combination thereof) to stockholders or in respect of its capital stock or otherwise, except with respect to the payment of interest on the Surplus Debentures;

     (xv) permit any merger of or consolidation of the Company or Dixie with any other Person or permit the Company or Dixie to acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the Assets of, or by any other manner (including by way of reinsurance), any business or any Person or division thereof or otherwise agree to acquire any Assets which would be material, individually or in the aggregate, to the Company or Dixie;

     (xvi) enter into any Contract with any Producer that provides for exclusivity (including, without limitation, by territory, product or distribution) or enter into any non-competition or other agreement which restricts the Company’s

-49-

or Dixie’s ability to compete with any Person or to engage in any type of business or to operate in any geographic territory;

     (xvii) (A) make or rescind any express or deemed election relating to Taxes, (B) settle or compromise any claim relating to Taxes, (C) make a request for a Tax Ruling or enter into a Closing Agreement, or settle or compromise any Audit or other controversy relating to Taxes, to the extent such action results in a Tax Detriment to the Company or Dixie for any Post Closing Tax Period, (D) change any of its methods of reporting income, deductions or accounting for federal income tax purposes from those employed in the preparation of its federal income Tax Return for the taxable year ending December 31, 2003, except as may be required by Applicable Law or (E) file any Tax Return in a manner that is inconsistent with past custom and practice, except as may be required by Applicable Law;

     (xviii) enter into, amend or terminate any reinsurance, coinsurance, modified coinsurance Contract (including without limitation, any surplus relief or financial reinsurance contract), whether as reinsurer or reinsured, except as provided under Section 5.13;

     (xix) enter into any joint venture, joint marketing, strategic alliance or partnership Contracts of any kind; provided , however , that Seller may proceed with the Marketing Initiatives set forth in Section 5.18.

     (xx) fail to maintain the credit quality, duration and convexity characteristics of the Investment Assets set forth in Section 3.16(c);

     (xxi) agree in writing or otherwise to take any of the actions described above in this Section 5.02.

          (c) Without limiting the generality of Section 5.02(a), except as otherwise expressly permitted in this Agreement or required by Applicable Law or a Governmental Entity or to the extent of any loans or advances made by the Company to Seller in accordance with Section 5.02(b)(vii), without the prior written consent of Buyer, from the date hereof until the Closing Date Seller shall not make any payments to the Company or Dixie with respect to the obligations of Seller to be assumed by Buyer pursuant to Section 2.02(b)(ii).

          (d) Seller shall cause the Company and Dixie to not purchase any Investment Asset whose rating is at the time of purchase lower than NAIC -2.

          (e) Prior to Closing, Seller shall notify Buyer promptly of any event or occurrence which could reasonably be expected to have a Material Adverse Effect.

          (f) Without the prior written consent of Buyer (which consent shall not be unreasonably withheld or delayed), Seller will not, and will not permit the Company or Dixie to (i) take or omit to take any action that, individually or in the aggregate, would or would be reasonably likely to result in a Material Adverse Effect; or (ii) take any action that would prevent or materially impair the ability of Seller to consummate the transactions contemplated by this

-50-

Agreement or any Ancillary Agreement, including, without limitation, actions that would be reasonably likely to prevent the receipt of any consent, registration, approval, permit or authorization, that is necessary in connection with the execution and delivery of this Agreement or any Ancillary Agreement and the consummation of the transactions contemplated hereby or thereby.

     Section 5.03. Cooperation . Upon the terms and subject to the conditions and other agreements set forth in this Agreement, each of Seller and Buyer shall, and shall cause their respective Affiliates to, use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assert and cooperate with each other in doing, all things necessary, proper or advisable to, satisfy all conditions precedent to, and to, consummate the transactions contemplated by this Agreement.

     Section 5.04. Consents and Approvals .

          (a) Without limiting the generality of Section 5.03, each of Seller and Buyer shall, and shall cause their respective Affiliates to, use commercially reasonable efforts to obtain promptly all Governmental Entity and third party approvals required to be obtained by Seller, the Company, Dixie, or Buyer or by any Affiliate of Seller, the Company, Dixie or Buyer in order to consummate or permit the transactions contemplated by this Agreement or any Ancillary Agreement, including without limitation, the necessary approvals from the Indiana Commissioner of Insurance with respect to the acquisition of control of the Company and Dixie by Buyer and the other consents and approvals required under Sections 3.03, 3.06, 4.03 and 4.04. Seller and Buyer shall make, and shall cause their respective Affiliates to make, all necessary filings, applications and submissions as soon as practicable, including, without limitation, those required by the HSR Act and applicable insurance laws including, without limitation, the filing of Form A with the Indiana Department, in order to facilitate prompt consummation of the transactions contemplated by this Agreement and the Ancillary Agreements. Seller and Buyer shall each pay one-half of the filing fee with respect to the filings required by Seller and Buyer under the HSR Act and Buyer shall pay all costs and expenses of the parties, including without limitation, attorneys’ fees, relating to or arising out of the preparation, review and filing of Form A. Seller and Buyer shall use, and shall cause their respective Affiliates to use, commercially reasonable efforts to provide such information and communications to Governmental Entities and third parties as such Governmental Entities or third parties may reasonably request. Seller and Buyer shall, and shall cause their respective Affiliates to, furnish to each other all necessary information and reasonable assistance as any of them may request in connection with its preparation of any filing, application or submission to be made in accordance with this Section 5.04. Each of Seller and Buyer shall keep the other parties apprised of the status of all applications to, and proceedings before, Governmental Entities in connection with the transactions contemplated by this Agreement.

     Section 5.05. Notification of Changes . From the date hereof through the Closing Date, each party shall give each other prompt notice after it has obtained Knowledge of (i) any fact or circumstance which renders untrue, incorrect or misleading in any material respect any of the representations and warranties made by it in this Agreement (or, with respect to any such representation or warranty qualified as to materiality, in any respect), whether as of the date such representation and warranty was made or as of the date such Knowledge was obtained, (ii) any

-51-

failure on its part to comply with or satisfy in any material respect any covenant, condition or agreement which it is to comply with or satisfy under this Agreement (or, with respect to any such covenant, condition or agreement qualified by materiality, in any respect), (iii) any event, condition or change affecting its ability to perform its obligations under this Agreement or any Ancillary Agreement, (iv) any Action pending and known to it or, to its Knowledge, threatened which challenges or seeks to restrain or enjoin the consummation of the transactions contemplated by this Agreement or any Ancillary Agreement, (v) any notice or other communication from any Governmental Entity that if made prior to the date of this Agreement would be required to be disclosed pursuant to this Agreement and (vi) any Action pending or threatened that if pending or threatened prior to the date of this Agreement would be required to be disclosed pursuant to this Agreement; provided , however , that for purposes of determining the rights and obligations of the parties under this Agreement, any such supplemental or amended disclosure by any party shall be deemed to update the representation or warranty to which it relates; provided , further , that no such supplemental or amended disclosure shall cure any breach or inaccuracy of a representation, warranty, covenant, condition or agreement that existed as of the date of this Agreement.

     Section 5.06. Confidentiality of Information . All books, records, data and information (collectively, the “Information”) furnished by Seller, the Company or Dixie, on the one hand, or Buyer, on the other hand, to each other in connection with the transactions contemplated by this Agreement shall (i) remain and be deemed to be the exclusive property of the party furnishing the Information unless and until the Closing occurs and (ii) be held in strict confidence by the other party to the extent such Information is not publicly available and shall not be used by such other party for any purpose other than consideration of the transactions contemplated by this Agreement and obtaining Governmental Entity and third party consents and approvals for such transactions. In the event that the transactions contemplated by this Agreement are not consummated, each party shall return all Information in its possession which is deemed to be the exclusive property of the other party, together with all copies thereof, and shall continue to hold such Information in strict confidence and not use such Information for any purpose whatsoever. All Information shall be deemed to be covered by, and shall be treated in accordance with, the Confidentiality Agreement. Information provided by or on behalf of Buyer to Seller, the Company or any of their Affiliates, shall be treated by Seller, the Company or such Affiliates, as if it were the recipient under the Confidentiality Agreement.

     Section 5.07. Intercompany Obligations and Agreements . Subject to the provisions of Article VI with respect to the matters covered thereby, except with respect to the obligations of Seller to be assumed by Buyer pursuant to Section 2.02(b)(ii) and as set forth on Schedule 5.07 , all intercompany accounts, loans, advances, payables (including any payable accounts with negative balance), and receivables whether or not currently due and payable between the Company or Dixie, on the one hand, and Seller and its Affiliates (other than the Company or Dixie), on the other hand (collectively, the “Intercompany Obligations”), shall be settled in full at or prior to the Closing Date in accordance with past practices and all commitments with respect thereto shall have been terminated at or prior to the Closing Date and in each case, the Company and Dixie shall be fully released from all Liability with respect thereto. Except as otherwise contemplated in this Agreement and the Ancillary Agreements, and except as set forth on Schedule 5.07 , Seller, the Company and Dixie shall, and shall cause their respective Affiliates to, cause any agreements or arrangements between the Company or Dixie, on the one hand, and Seller or any of its respective Affiliates, on the other hand, to be terminated and cancelled as of

-52-

the Closing, and the Company and Dixie to be fully released from all Liability with respect thereto.

     Section 5.08. Third Party Confidentiality Agreements . Seller shall use commercially reasonable efforts to assign or cause the assignment to Buyer, effective upon the Closing, of (to the extent permitted under the terms thereof but solely to the extent such terms affect the Company or Dixie) Seller’s or Seller’s Affiliates’ rights under any confidentiality agreement or similar agreement pursuant to which information or due diligence items that relate to the Company or Dixie were provided to any Person (collectively the “Third Party Confidentiality Agreements”). Seller has previously provided to Buyer copies of all such Third Party Confidentiality Agreements. To the extent any such rights cannot be assigned to Buyer, Seller shall use commercially reasonable efforts to, or shall cause its Affiliates to, provide to Buyer the benefits of such rights.

     Section 5.09. Employee-Related Matters .

          (a) Subsequent to approval of the Indiana Department of the Form A filing, or otherwise with the prior written consent of Seller, Seller shall allow Buyer reasonable access to the Employees to enable Buyer to communicate the terms of employment and employee benefits to be offered by Buyer and to conduct enrollment of the Employees of the Company and Dixie into the employee benefit plans of Buyer such that the Continuing Employees become participants in the employee benefit plans of Buyer at the time of employment by Buyer. Buyer shall have the right, but not the obligation, to offer continued employment to any or all of the Employees at wage or salary levels, as applicable, and with employee benefits, that are determined by Buyer.

          (b) Seller shall remain solely responsible for any and all liabilities relating to or arising in connection with the requirements of Section 4980B of the Code to provide continuation of health care coverage under any Plan in respect of Employees to the extent related to a qualifying event occurring on or before the Closing Date. Buyer shall be responsible for any and all liabilities relating to or arising in connection with the requirements of Section 4980B of the Code to provide continuation of health care coverage under a group health plan (as defined in section 4980B(g)(2) of the Code) in respect of Covered Employees or their beneficiaries who become covered under a group health plan sponsored by or contributed to by Buyer after the Closing Date.

          (c) Except to the extent assumed by Buyer pursuant to Section 2.02(b)(ii) or not accrued for in the calculation of the Final Cash Consideration, Seller shall pay any severance payment, termination payment, sale or transaction bonus, success or change of control payment, “stay-around” or similar bonus, non-competition payments and other similar expenses, bonuses or payments (the “Severance Payments”), which become payable to any senior vice president or executive officer of the Company or Dixie whose employment is terminated within three months following the Closing ( provided , in such latter event, that Buyer notified Seller in writing prior to the Closing of Buyer’s intention to so terminate the employment of such officer following the Closing). Seller shall indemnify and hold Buyer and its Affiliates (including the Company and Dixie) harmless with respect to such Severance Payments and any third party claims with respect thereto.

-53-

          (d) Buyer shall waive all pre-existing condition exclusions, actively at work exclusions and waiting periods in its health and welfare plans for all Covered Employees. For the calendar year during which the Closing Date occurs, all health care expenses incurred by the Covered Employees that were qualified to be taken into account for purposes of satisfying any deductible or out-of-pocket limit under the health care plans in effect prior to the Closing Date shall be taken into account for purposes of satisfying any deductible or out-of-pocket limits under Buyer’s health care plans for such calendar year.

     Section 5.10. Exclusivity . From the date hereof through the Closing Date, except with respect to those matters set forth in Section 5.13:

          (a) Seller shall, and shall cause each of its Affiliates to, cease any discussions or negotiations with any third party regarding (i) any merger, sale of Assets not in the ordinary course of business, acquisition, business combination, Change of Control, bulk reinsurance transaction or other similar transaction involving the Company or Dixie, (ii) any purchase or other acquisition by any Person of any shares of the capital stock of the Company or Dixie or (iii) any sale or issuance by the Company or Dixie of any shares of its capital stock, (any such proposal, offer or transaction being hereinafter referred to as an “Acquisition Proposal”);

          (b) None of Seller, the Company or Dixie shall, nor shall any of them authorize or permit any of their respective directors, officers, employees, representatives, agents or Affiliates to, directly or indirectly, solicit, initiate, encourage, respond favorably to, permit or condone inquiries or proposals from, or provide any confidential information to, or participate in any discussions or negotiations with, any Person (other than Buyer and its directors, officers, employees, representatives and agents) concerning an Acquisition Proposal; and

          (c) Seller shall promptly advise Buyer of, and communicate to Buyer the terms and conditions of (including the identity of the Person making), any bona fide inquiry or proposal received concerning an Acquisition Proposal.

          (d) Notwithstanding the foregoing, but subject to the provisions of subsections (i) and (ii) below, Seller and its Board of Directors, shall be permitted to (i) comply with Rules 14a-9, 14d-9 and 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal and make any disclosures that are required by Applicable Law (it being understood that if any such statements or disclosures pursuant to this clause (i) constitute a withdrawal by the Board of Directors of its recommendation in favor of Seller Stockholder Approval (a “Change in Board Recommendation”), Seller shall comply with all applicable provisions of this Section 5.10 with respect thereto), (ii) effect a Change in Board Recommendation, (iii) provide nonpublic information or data to any Person in response to an unsolicited bona fide written Acquisition Proposal by any such Person made after the date of this Agreement, (iv) enter into or participate in discussions or negotiations with any Person in response to an unsolicited bona fide Acquisition Proposal made after the date of this Agreement or (v) recommend to Seller’s stockholders or otherwise publicly recommend or enter into an agreement with respect to an Acquisition Proposal, if:

(A) in the case of clause (ii), (iii) or (iv) above, (1) the Seller Stockholder Approval has not been obtained and (2) Seller’s Board of Directors, after

-54-

consultation with outside legal counsel, has determined in good faith that failure to take such action would result in a breach of its fiduciary duties under Applicable Law; and

(B) in the case of clause (ii) or (v) above, prior to effecting a Change in Board Recommendation in respect of an Acquisition Proposal or taking any action referred to in clause (v), (1) Seller shall have complied with the provisions of Section 5.10(c); (2) the Board of Directors of Seller shall have concluded in good faith by a majority vote that such Acquisition Proposal constitutes a Superior Proposal after giving effect to all of the adjustments which may be offered by Buyer pursuant to clause (4) below; (3) it shall have notified Buyer, at least five Business Days in advance of effecting such Change in Board Recommendation or taking such action, or both, that it is considering effecting a Change in Board Recommendation or taking such other action and specifying any revisions to the terms and conditions of such Acquisition Proposal and (4) during such five Business Day period it shall have negotiated, and shall have made its financial and legal advisors reasonably available to negotiate, with Buyer should Buyer elect to make such adjustments in the terms and conditions of this Agreement such that, after giving effect thereto, such Acquisition Proposal no longer constitutes a Superior Proposal.

          (e) For the purposes of this Section 5.10, a “Superior Proposal” means a bona fide written offer, obtained not in breach of this Agreement, (i) to effect a Change of Control of Seller or (ii) to acquire, directly or indirectly, for consideration consisting of cash, securities and/or assumption of indebtedness, all or substantially all of the assets of Seller on a consolidated basis, made by a third party, in either event which is not subject to a financing contingency and which is otherwise on terms and conditions which the Board of Directors of Seller determines in good faith and its reasonable judgment (after consultation with a financial advisor of national reputation) to be more favorable to Seller’s stockholders from a financial point of view than the transaction contemplated by this Agreement, taking into account at the time of determination the ability of the Person making such proposal to consummate the transactions contemplated by such proposal (based upon, among other things, the availability of financing and the expectation of obtaining required approvals). Any transaction involving all of the Company Common Stock and all of the Dixie Common Stock or all or substantially all of the assets of the Company and Dixie shall be deemed to involve substantially all of the assets of Seller. No transaction involving Seller or its assets which solely relates to Seller’s healthcare business and not the business of the Company and Dixie shall be deemed to be a Superior Proposal.

     Section 5.11. Seller’s Non-Compete .

          (a) For a period of three years following the Closing Date, none of Seller or any of Seller’s Affiliates shall: (i) directly or indirectly (including by way of reinsurance, stock or asset acquisition, merger or otherwise), engage anywhere in the United States in marketing, selling, distributing, issuing, reinsuring, assuming or administering life insurance or annuity products (a “Competing Business”), and (ii) except if and to the extent required by law or legal process, use or transfer or otherwise disclose to any third party any non-public information included in the Books and Records or any other non-public information about or relating to the

-55-

Company; provided that Seller and Seller’s Affiliates may, without violating this covenant, collectively own as a passive investment not in excess of ten percent (10%) of the outstanding capital stock of a corporation which engages in a Competing Business if such capital stock is a security which is actively traded on an established national securities exchange or national over-the-counter trading system; provided , further , that marketing, selling, distributing and administering health care products in connection with existing health service segments or future acquisitions, including the run-off by Premier Life (Bermuda) Limited of its existing business shall not constitute a violation of this Section 5.11(a).

          (b) For a period of two years following the Closing Date, none of Seller or any of Seller’s Affiliates shall, for itself or on behalf of any Person, without the prior written consent of Buyer, directly or indirectly, solicit for employment or hire any employee of Buyer or any of its Affiliates, including any Continuing Employee; provided that nothing in this Section 5.11(b) shall prohibit Seller or any of Seller’s Affiliates from publishing a general solicitation of employment in any newspaper, magazine, trade publication or any other medium or from soliciting or hiring any individual who terminated his or her own employment with Buyer or whose employment was terminated by Buyer or its Affiliates prior to such solicitation or hiring.

          (c) None of Seller or any of Seller’s Affiliates shall, for a period of three years from the Closing Date, directly or indirectly, for itself or on behalf of any other Person, take any action the principal purpose of which is to disrupt or attempt to disrupt or interfere with any relationships between the Company and any of its respective customers, brokers, general agents or other Producers.

          (d) If, at any time, the provisions of this Section 5.11 shall be determined to be invalid or unenforceable by reason of being vague or unreasonable as to area, duration or scope of activity, this Section 5.11 shall be considered severable and shall become and shall be immediately amended solely with respect to such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter, and the parties agree that this Section 5.11 as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein.

          (e) Seller acknowledges that, in view of the nature of the business of the Company and the business objectives of Buyer in acquiring the Company and the consideration paid to Seller therefor as a stockholder of the Company, the restrictions contained in this Section 5.11 are reasonably necessary to protect the legitimate business interests of Buyer and the Company and that any violation of such restrictions will result in irreparable injury to Buyer and the Company and the business Buyer has acquired for which damages will not be an adequate remedy. Seller therefore acknowledges that, if any such restrictions are violated, Buyer and the Company shall be entitl