Exhibit 10.12

RIGHTS MODIFICATION AGREEMENT

This Rights Modification Agreement (this “Agreement”), by and between
Independence Holding Company, a Delaware corporation (the “Company”), and Mr.
Scott M. Wood, an individual resident in the State of Arizona (“Scott M. Wood”),
is made as of January 28, 2008.

Recitals

A.

The Company and Scott M. Wood are parties to that certain Stock Purchase
Agreement, dated as of January 23, 2006, by and among Scott M. Wood, Stephen A.
Wood, an individual resident in the State of New York, IAC Holding Corp. and the
Company (the “Stock Purchase Agreement”).

B.

Scott M. Wood is an executive officer of the Company.  

C.

Scott M. Wood has certain repurchase rights under the Stock Purchase Agreement
that expire on January 31, 2008.  The parties hereto intend that those rights be
cancelled and superseded by the rights set forth herein.

Terms and Conditions

In consideration of the mutual covenants contained herein, along with other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:

1.

Termination of Rights.  Section 2.1(a) of the Stock Purchase Agreement (“IHC
Shares Price Protection”), and the rights created thereunder with respect to the
parties hereto, are hereby terminated and of no further force or effect.

2.

Price Protection

2.1.

Until January 31, 2009, upon the request (a “Request”) of Scott M. Wood, the
Company shall repurchase from Scott M. Wood or SAW Trust, an Arizona trust of
which Scott M. Wood is co-trustee as of the date hereof (the “Trust”), up to one
hundred thousand (100,000) of the shares of common stock of the Company that
were issued to Scott M. Wood, or to the Trust, directly by the Company in
connection with the transactions effected under the Stock Purchase Agreement,
such repurchase by the Company to be made at a price per share of seventeen
dollars ($17.00).  

2.2.

Upon receiving a Request, the Company may, in its sole and absolute discretion,
in satisfaction of the Company’s obligations hereunder in connection therewith,
and in lieu of paying Scott M. Wood or the Trust the entire purchase price in
respect of the Request entirely in cash, require, as a condition to any
obligation of the Company hereunder, that Scott M. Wood or the Trust (as the
case may be) sell such shares with respect to which the Request was made in the
open market in one or more transactions, following which IHC will pay to Scott
M. Wood or to the Trust (as the case may be) in cash the difference between the
aggregate net proceeds received in such sale(s) and what the aggregate gross
proceeds from such sales would have been had the sales price per share in
respect thereof been, in each and every case, seventeen dollars ($17.00) per
share.

2.3.

The rights created under this Section 2 shall be equitably adjusted to take into
consideration any stock split, conversion or modification in respect of the
shares covered hereby.

1 of 3

Exhibit 10.12

3.

General Provisions

3.1.

Governing Law.  The laws of the State of Delaware (without giving effect to its
conflict of laws principles) will govern all matters arising out of or relating
to this Agreement and the transactions it contemplates, including, without
limitation, its interpretation, construction, performance and enforcement.

3.2.

Amendments.  The parties hereto may amend this Agreement only by a written
agreement of all the parties hereto that identifies itself as an amendment to
this Agreement.

3.3.

Severability.  If any provision of this Agreement is determined to be invalid,
illegal or unenforceable, the remaining provisions of this Agreement shall
remain in full force and effect, so long as the essential terms and conditions
of this Agreement for each party hereto remain valid, binding and enforceable.

3.4.

Entire Agreement.  Except as expressly stated in this Agreement: (i) this
Agreement constitutes the final agreement among the parties hereto; (ii) it is
the complete and exclusive expression of the parties’ agreement on the matters
contained in this Agreement; (iii) all prior and contemporaneous negotiations
and agreements among and between the parties on the matters contained in this
Agreement are hereby expressly merged into and superseded by this Agreement;
(iv) the provisions of this Agreement may not be explained, supplemented or
qualified through evidence of trade usage or a prior course of dealings; (v) in
entering into this Agreement, neither party hereto has relied upon any
statement, representation, warranty or agreement of the other party; and (vi)
there are no conditions precedent to the effectiveness of this Agreement.

3.5.

Counterparts.  The parties hereto may execute this Agreement in multiple
counterparts, each of which constitutes an original, and all of which,
collectively, constitute only one agreement.  The signatures of all of the
parties need not appear on the same counterpart, and delivery of an executed
counterpart signature page by facsimile is as effective as executing and
delivering this Agreement in the presence of the other parties to this
Agreement.  This Agreement is effective upon delivery of one executed
counterpart from each party hereto to each other party.

3.6.

Third-Party Beneficiaries.   Except as expressly stated herein, this Agreement
does not, and is not intended to, confer any rights or remedies upon any person
other than the signatories.

[Signature page follows.]

2 of 3

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of
the date first written above.

Independence Holding Company,

Mr. Scott M. Wood,

a Delaware corporation

an individual resident in the State of Arizona

 

 

 

 

By:/s/ David T. Kettig

Name: David T. Kettig

/s/ Mr. Scott M. Wood

Title: Senior Vice President

 

 

 

 

 

 

 

 

 

 

 

 

 

3 of 3