Document:

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                                                                    EXHIBIT 10.3

                            STOCK PURCHASE AGREEMENT

                                  BY AND AMONG

                     MUTUAL INSURANCE CORPORATION OF AMERICA
                                    ("BUYER")

                                       AND

                              WILLIAM B. CHEESEMAN
                               WILLIAM J. GAUGIER
                                   ("SELLERS")

                                 AUGUST 31, 1999

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                                TABLE OF CONTENTS
<TABLE>
<S>                                                                                                                           <C>
ARTICLE I         SALE AND TRANSFER OF SHARES; CLOSING.........................................................................1
         1.1      Sale and Purchase of Shares..................................................................................1
         1.2      Purchase Price...............................................................................................1
         1.3      Payment of Purchase Price....................................................................................1
         1.4      Closing......................................................................................................3
         1.5      Closing Obligations..........................................................................................4
         1.6      Purchase Price Adjustment....................................................................................5

ARTICLE II        REPRESENTATIONS AND WARRANTIES OF SELLER.....................................................................5
         2.1      Organization and Good Standing...............................................................................5
         2.2      Authority/Enforceability.....................................................................................6
         2.3      No Conflict..................................................................................................6
         2.4      Capitalization...............................................................................................6
         2.5      Financial Statements.........................................................................................7
         2.6      Books and Records............................................................................................7
         2.7      Title to Properties; Encumbrances............................................................................7
         2.8      Real Property................................................................................................7
         2.9      Condition and Sufficiency of Assets..........................................................................7
         2.10     No Undisclosed Liabilities...................................................................................8
         2.11     Taxes........................................................................................................8
         2.12     No Material Adverse Change...................................................................................9
         2.13     Employee Benefits............................................................................................9
         2.14     Compliance with Legal Requirements..........................................................................10
         2.15     Governmental Authorizations.................................................................................11
         2.16     Legal Proceedings; Orders...................................................................................11
         2.17     Absence of Certain Changes and Events.......................................................................12
         2.18     Contracts; No Defaults......................................................................................13
         2.19     Insurance...................................................................................................15
         2.20     Environmental Matters.......................................................................................16
         2.21     Employees/Representatives...................................................................................16
         2.22     Labor Relations; Compliance.................................................................................17
         2.23     Subsidiaries................................................................................................17
         2.24     Finders or Broker Fees......................................................................................17
         2.25     Related Party Transactions..................................................................................17
         2.26     Assets of Cheeseman.........................................................................................18

ARTICLE III       REPRESENTATIONS AND WARRANTIES OF BUYER.....................................................................18
         3.1      Organization and Good Standing..............................................................................18
         3.2      Authority; No Conflict......................................................................................18
         3.3      Certain Proceedings.........................................................................................19
         3.4      Finders or Brokers Fees.....................................................................................19
         3.5      Purchase for Own Account....................................................................................19
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<TABLE>
<S>                                                                                                                           <C>
ARTICLE IV        COVENANTS OF SELLERS........................................................................................19
         4.1      Access and Investigation....................................................................................19
         4.2      Operation of the Business of the Company....................................................................19
         4.3      Requirement; Approvals......................................................................................20
         4.4      Notification................................................................................................20
         4.5      Payment of Indebtedness by Related Persons..................................................................21
         4.6      No Negotiation..............................................................................................21
         4.7      Best Efforts................................................................................................21
         4.9      Section 338(h)(10) Election.................................................................................22

ARTICLE V         COVENANTS OF BUYER PRIOR TO CLOSING DATE....................................................................23
         5.1      Approvals of Governmental Bodies............................................................................23
         5.2      Best Efforts................................................................................................23

ARTICLE VI        CONDITIONS PRECEDENT OF BUYER'S OBLIGATION TO CLOSE.........................................................24
         6.1      Accuracy of Representations.................................................................................24
         6.2      Satisfactory Due Diligence and Approval of the Board of Directors...........................................24
         6.3      Sellers' Performance........................................................................................24
         6.4      Consents....................................................................................................24
         6.5      Additional Documents........................................................................................24
         6.6      No Proceedings..............................................................................................25
         6.7      No Claim Regarding Stock Ownership of Sale Proceeds.........................................................25
         6.8      No Prohibition..............................................................................................25
         6.9      Resignation of Officers.....................................................................................25
         6.10     Financing...................................................................................................25
         6.11     Employment Agreements.......................................................................................25

ARTICLE VII       CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE........................................................25
         7.1      Accuracy of Representations.................................................................................26
         7.2      Buyer's Performance.........................................................................................26
         7.3      Additional Documents........................................................................................26
         7.4      No Injunction...............................................................................................26
         7.6      Opinion.....................................................................................................26
         7.8      Modification of Management Agreement........................................................................26

ARTICLE VIII      TERMINATION.................................................................................................26
         8.1      Termination Events..........................................................................................26
         8.2      Effect of Termination.......................................................................................27
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ARTICLE IX        INDEMNIFICATION, REMEDIES AND POST CLOSING COVENANTS........................................................27
         9.1      Indemnification and Payment of Damages by Cheeseman.........................................................27
         9.2      Indemnification by Gaugier..................................................................................28
         9.3      Indemnification and Payment of Damages by Buyer.............................................................28
         9.4      Limitations on Indemnity....................................................................................28
         9.5      Survival Representations, Warranties, Covenants and Agreements..............................................28
         9.6      Survival of Representations, Warranties, Covenants and Agreements by Buyer..................................29
         9.7      Exclusive Remedy............................................................................................29

ARTICLE X         DEFINITIONS.................................................................................................29
         10.1     "Acquired Companies.........................................................................................29
         10.2     "Acquired Company...........................................................................................29
         10.3     "Agreement".................................................................................................29
         10.4     "Best Efforts"..............................................................................................29
         10.5     "Breach"....................................................................................................29
         10.6     "Change in Control..........................................................................................29
         10.7     "Closing Date"..............................................................................................30
         10.8     "Consent"...................................................................................................30
         10.9     "Contemplated Transactions".................................................................................30
         10.10    "Contract"..................................................................................................30
         10.11    "Employee Benefit Plan".....................................................................................31
         10.12    "Encumbrance"...............................................................................................31
         10.13    "Employment Agreements".....................................................................................31
         10.14    "Environment"...............................................................................................31
         10.15    "Environmental, Health, and Safety Liabilities".............................................................31
         10.16    "Environmental Law".........................................................................................32
         10.17    "ERISA".....................................................................................................32
         10.18    "Fiduciary".................................................................................................32
         10.19    "Financial Statements"......................................................................................32
         10.20    "GAAP"......................................................................................................32
         10.21    "Governmental Authorization"................................................................................32
         10.22    "Governmental Body".........................................................................................33
         10.23    "Hazardous Activity"........................................................................................33
         10.24    "Hazardous Materials".......................................................................................33
         10.25    "IRC" ......................................................................................................33
         10.26    "IRS".......................................................................................................33
         10.27    "Knowledge".................................................................................................33
         10.28    "Legal Requirement".........................................................................................33
         10.29    "Liability".................................................................................................33
         10.30    "Management Agreement.......................................................................................34
         10.31    "Material Adverse Change (or Effect)".......................................................................34
         10.32    "Occupational Safety and Health Law"........................................................................34
         10.33    "Order".....................................................................................................34
         10.34    "Ordinary Course of Business"...............................................................................34
         10.35    "Organizational Documents"..................................................................................34
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<TABLE>
<S>                                                                                                                           <C>
         10.36    "Person"....................................................................................................34
         10.37    "Proceeding"................................................................................................34
         10.38    "Release"...................................................................................................34
         10.39    "Sellers....................................................................................................35
         10.40    "Tax".......................................................................................................35
         10.41    "Tax Return"................................................................................................35
         10.42    "Threat of Release".........................................................................................35
         10.43    "Threatened"................................................................................................35

ARTICLE XI        GENERAL PROVISIONS..........................................................................................35
         11.1     Confidentiality.............................................................................................35
         11.2     Expenses....................................................................................................36
         11.3     Schedules...................................................................................................36
         11.4     Public Announcements........................................................................................36
         11.5     Arbitration.................................................................................................36
         11.7     Notices.....................................................................................................37
         11.8     Certain Taxes...............................................................................................38
         11.9     Further Assurances..........................................................................................38
         11.10    Waiver......................................................................................................38
         11.11    Entire Agreement and Modification...........................................................................38
         11.12    Construction................................................................................................38
         11.13    Assignments; Successors; No Third Party Rights..............................................................39
         11.14    Severability................................................................................................39
         11.15    Section Headings............................................................................................39
         11.16    Time of Essence.............................................................................................39
         11.17    Governing Law...............................................................................................39
         11.18    Arm's Length Negotiations...................................................................................39
         11.19    Counterparts................................................................................................40

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                            STOCK PURCHASE AGREEMENT

         THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of August 31, 1999, by and among MUTUAL INSURANCE CORPORATION OF AMERICA, a
Michigan Mutual Insurance corporation ("Buyer"), and WILLIAM B. CHEESEMAN
("Cheeseman"), a Michigan resident and WILLIAM J. GAUGIER ("Gaugier"), a
Michigan resident (individually referred to herein as "Seller" and collectively
and jointly and severally referred to herein as "Sellers"). Certain other
capitalized terms used herein are defined in Article X and throughout this
Agreement.

                                R E C I T A L S :

         A. Sellers are the owners of all the issued and outstanding shares (the
"Shares") of the capital stock of Stratton-Cheeseman Management Company, a
Michigan corporation (the "Company").

         B. The Company is the owner of all the outstanding shares of
Stratton-Cheeseman Management Company of Kentucky, Inc., a Kentucky corporation
(the "Subsidiary").

         C. Sellers desire to sell and Buyer desires to purchase all of the
Shares on the terms and subject to the conditions, representation, warranties
and covenants contained in this Agreement.

                                    AGREEMENT

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

                                    ARTICLE I
                      SALE AND TRANSFER OF SHARES; CLOSING

         1.1 SALE AND PURCHASE OF SHARES. Subject to the terms and conditions of
this Agreement, at the Closing, Sellers will sell, convey, assign, deliver and
transfer the Shares to Buyer, and Buyer will purchase the Shares from Sellers
free and clear of any Encumbrances.

         1.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares will be Nineteen Million Five Hundred Thousand and No/100
($19,500,000.00) Dollars, subject to the adjustments set forth in Sections
1.3.10 and 1.6.

         1.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable, as
follows:

             1.3.1 At the Closing, the sum of Nine Million Five Hundred Thousand
         and No/100 Dollars ($9,500,000.00) by bank cashier's or certified
         checks or by inter-bank wire
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         transfer, in the amounts payable as to each Seller as set forth in
         Schedule 1.3.1 hereof ("Cash Payment"); and

                  1.3.2 Commencing eighteen (18) months after the Closing Date
         and annually thereafter, the Buyer shall pay to Cheeseman the annual
         payments ("Annual Payments"), subject to the adjustments set forth in
         Section 1.6 set forth below.

                           (a) The first, second, third, fourth and fifth Annual
                  Payments shall be One Million ($1,000,000.00) Dollars each.

                           (b) The sixth and seventh Annual Payments shall be
                  One Million Five Hundred Thousand ($1,500,000.00) Dollars
                  each.

                           (c) The eighth Annual Payment shall be Two Million
                  ($2,000,000.00) Dollars.

                  1.3.3 Within ninety (90) days of the death or Disability (as
         defined in Cheeseman's Employment Agreement with Buyer) of Cheeseman,
         the Buyer shall pay Cheeseman (or his heirs) in lieu of any remaining
         Annual Payments, an amount equal to the unpaid Annual Payments as of
         the date of his death or disability, using Buyer's A.M. Best Rating as
         of the date of Cheeseman's death or disability for purposes of
         calculating the Adjustment Amount (as hereinafter defined in Section
         1.6).

                  1.3.4 The Annual Payments will be fully insured against
         Cheeseman's death or disability by an insurance product(s) purchased by
         the Buyer or by a self insurance program established by the Buyer
         reasonably acceptable to Cheeseman.

                  1.3.5 In the event that Cheeseman's employment with the Buyer
         or an affiliate of the Buyer is terminated for "Cause" (as defined in
         Cheeseman's Employment Agreement with Buyer) which results in the Buyer
         suffering damages, or if it is voluntarily terminated by Cheeseman
         without Cause (as defined in Cheeseman's Employment Agreement with
         Buyer), Cheeseman shall forfeit any remaining Annual Payments to be
         paid him.

                  1.3.6 In the event that Cheeseman's employment with the Buyer
         or an affiliate of the Buyer is terminated by the Buyer (or an
         affiliate of Buyer) without Cause (as defined in Cheeseman's Employment
         Agreement with Buyer) or if Cheeseman terminates his employment with
         the Buyer or an affiliate with the Buyer for Cause (as defined in
         Cheeseman's Employment Agreement), Buyer shall pay to Cheeseman the
         unpaid Annual Payments as of the date his employment is terminated
         using Buyer's A.M. Best Rating as of the date Cheeseman's employment is
         terminated, for purposes of calculating the Adjustment Amount (as
         hereinafter defined in Section 1.6), except that where Cause on the
         part of Cheeseman is for extenuating personal reasons the Adjustment
         Amount shall be discounted at the rate of eight (8%) percent per annum.

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                  1.3.7 In the event there is a Change in Control of the Buyer,
         Cheeseman may, during the sixty (60) day period following the date on
         which a Change in Control occurs, accelerate the payment of the unpaid
         Annual Payments. If Cheeseman so elects, the amount due to a Change in
         Control shall be equal to the unpaid Annual Payments, using Buyer's
         A.M. Best Rating as of the date of Change in Control. If Cheeseman
         fails to elect to accelerate the payment of the Annual Payments within
         the time frame set forth herein, the Annual Payments shall continue to
         be made in accordance with the terms of this Agreement.

                  1.3.8 Except as set forth below, the Parties acknowledge that
         any outstanding Annual Payment will not accrue any interest and that
         Buyer will not owe to Cheeseman any interest in connection with the
         Annual Payments. In the event that Buyer shall fail to make any payment
         within thirty (30) days after Cheeseman gives written notice to Buyer
         of its failure to make any payment when due, in addition to any
         payment, Buyer shall pay Cheeseman interest on said payment at the rate
         of eight percent (8%) per annum from the date on which said payment was
         first due.

                  1.3.9 In the event that a dispute arises between Cheeseman and
         the Buyer relating to any matter contained in this Agreement, pending
         the resolution of the dispute, Buyer, in lieu of making Annual Payment,
         may deposit any Annual Payment then due to Cheeseman with an escrow
         agent and pursuant to an escrow agreement, mutually acceptable to both
         Buyer and Cheeseman pending the resolution of any and all disputes in
         conformance with Section 11.5 below. In the event that Cheeseman and
         the Buyer are unable to agree to a mutually acceptable escrow agent and
         escrow agreement, Buyer shall then deposit the Annual Payment in a
         separate interest bearing bank account for the benefit of Cheeseman.

                  1.3.10 As additional Purchase Price, Buyer shall pay to
         Sellers any incentive payments due under the Management Agreement which
         cannot be determined as of the Closing Date, in accordance with Section
         5.3.

                  1.3.11 Buyer and Sellers agree to allocate the Purchase Price
         as of the Closing among the Company Assets for all purposes in
         accordance with an allocation to be mutually agreed upon based on the
         Acquired Company's most recently prepared financial statement. Buyer
         and Sellers also agree to file all tax returns consistent with the
         allocation set forth on Exhibit 1.3.11.

         1.4 CLOSING. Unless this Agreement is terminated pursuant to Section
8.1, the purchase and sale (the "Closing") provided for in this Agreement will
take place at the offices of Kerr, Russell and Weber, PLC at Detroit Center, 500
Woodward Avenue, Suite 2500, Detroit, Michigan 48226, at 10:00 a.m. (local time)
on the last day of the month in which all conditions precedent have been
satisfied or waived, or at such other time and place as the parties may agree.
Provided, unless otherwise agreed, the Closing will not take place on December
31, 1999 if all conditions precedent have been either satisfied or waived in
December; however, the Closing will take place

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on January 31, 2000. Subject to the provisions of Article 8, failure to
consummate the purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section 1.4 will not result in
the termination of this Agreement and will not relieve any party of any
obligation under this Agreement.

         1.5 CLOSING OBLIGATIONS. At the Closing:

                  1.5.1 Sellers will deliver to Buyer (collectively the
         "Sellers' Closing Document"):

                           (a) Certificates representing the Shares, duly
                  endorsed (or accompanied by duly executed stock powers);

                           (b) Releases in the form of Exhibit 1.5.1(b) executed
                  by Sellers indicating each Seller shall release the Company
                  from certain claims, liabilities or obligations (collectively
                  "Sellers' Releases");

                           (c) Noncompetition agreements in the form of Exhibit
                  1.5.1(c), executed by Sellers (the "Noncompetition
                  Agreements");

                           (d) A certificate executed by Sellers representing
                  and warranting to Buyer that each of Sellers' representations
                  and warranties in this Agreement were accurate in all respects
                  as of the date of this Agreement and are accurate in all
                  respects as of the Closing Date as if made on the Closing
                  Date;

                           (e) The Consents;

                           (f) The resignations of those persons listed on
                  Schedule 1.5.1 as officers and/or directors of any Acquired
                  Company, if applicable; and

                           (g) The documents and instruments required by Article
                  VI hereof.

                  1.5.2 Buyer will deliver to Sellers:

                           (a) The Cash Payment;

                           (b) A certificate executed by Buyer representing and
                  warranting to Sellers that each of Buyer's representations and
                  warranties in this Agreement were accurate in all respects as
                  of the date of this Agreement and are accurate in all respects
                  as of the Closing Date as if made on the Closing Date; and

                           (c) The documents and instruments required by Article
                  VII hereof.

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                           (d) Releases in the form of Exhibit 1.5.2(d) executed
                  by Buyer, indicating that Buyer and the Company shall release
                  the Sellers from certain claims, liabilities or obligations
                  (collectively "Buyer's Releases").

                           (e) The Consents.

         1.6 PURCHASE PRICE ADJUSTMENT. Buyer and Sellers agree and acknowledge
that the Buyer's current A.M. Best Rating as of the Closing Date is A- ("Base
Rating"). In the event that the Buyer's A.M. Best Rating on each date on which
an Annual Payment is due is other than the Base Rating, such Annual Payment
shall be subject to the adjustments contained herein. In the event that Buyer's
A.M. Best Rating is improved, the Annual Payment then due shall be increased by
an amount equal to the product of (a) Two Hundred Thousand Dollars ($200,000.00)
("Adjustment Amount"), multiplied by (b) the number of grade levels by which the
Buyer's A.M. Best Rating has been improved over the Base Rating. In the event
that the Buyer's A.M. Best Rating has been downgraded, the Annual Payment then
due shall be decreased by an amount equal to the product of (a) the Adjustment
Amount multiplied by (b) the number of grade levels by which the Buyer's A.M.
Best Rating has been decreased below the Base Rating.

                                   ARTICLE II
                    REPRESENTATIONS AND WARRANTIES OF SELLER

         As a material inducement to Buyer entering into this Agreement and
knowing and acknowledging that Buyer is relying upon the same, each Seller
hereby makes, jointly and severally, as of the date hereof and as of the Closing
Date, the following representations and warranties to Buyer.

         2.1 ORGANIZATION AND GOOD STANDING. Each Acquired Company is a
corporation duly organized, validly existing, and in good standing under the
respective laws of the State of its incorporation as set forth on Schedule 2.1,
with full power and authority to conduct its business as it is now being
conducted, to own, lease and use the properties and assets that it purports to
own, lease or use, and to perform all its obligations under Contracts. Each
Acquired Company is, and has been, duly qualified to do business as a foreign
corporation and is and has been in good standing under the laws of each state or
other jurisdiction during all such times in which either the ownership, leasing
or use of the properties owned, leased or used by it, or the nature of the
activities conducted by it, required such qualification.

         2.2 AUTHORITY/ENFORCEABILITY. This Agreement constitutes the legal,
valid, and binding obligation of Sellers, enforceable against each of them in
accordance with its terms. Upon the execution and delivery by Sellers of the
Sellers' Closing Documents, the Sellers' Closing Documents will constitute the
legal, valid, and binding obligations of Sellers, enforceable against each of
them in accordance with their respective terms. Sellers have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Sellers'

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Closing Documents and to perform their obligations under this Agreement and the
Sellers' Closing Documents.

         2.3 NO CONFLICT. Except as set forth in Schedule 2.3, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time): (a) contravene, conflict with, result in a
violation of or have any adverse affect upon (i) any provision of the
Organizational Documents of any Acquired Company, or (ii) any resolution adopted
by the Board of Directors or the stockholders of the any Acquired Company; (b)
contravene, conflict with, or result in a violation of, or give any Governmental
Body or other Person the right to challenge any of the Contemplated Transactions
or to exercise any remedy or obtain any relief under any Legal Requirement, any
Order to which any Acquired Company or Sellers, or any of the assets owned or
used by any Acquired Company, may be subject; (c) contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any Governmental Authorization that is held by any Acquired Company or
that otherwise relates to the business of, or any of the assets owned or used
by, any Acquired Company; (d) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Contract; or (e) result
in the imposition or creation of any Encumbrance upon or with respect to any of
the assets owned or used by any Acquired Company. Except as set forth in
Schedule 2.3 neither Sellers nor any Acquired Company is or will be required to
give any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.

         2.4 CAPITALIZATION. The outstanding equity securities of each Acquired
Company are duly authorized, validly issued, fully paid and non-assessable,
consist solely of the equity security described in Schedule 2.4 and, in the case
of the Company, constitute the Shares for purposes of this Agreement. At the
Closing, the Shares shall represent all of the issued and outstanding shares of
capital stock of the Company. Sellers are and will be on the Closing Date, the
legal, record and beneficial owners and holders of the Shares, free and clear of
all Encumbrances, and shall transfer ownership and marketable title to the
Shares to the Buyer, free of all Encumbrances at the Closing. The Company is,
and will be on the Closing Date, the legal, record and beneficiary owners of all
the issued and outstanding stock of the Subsidiary, free of all Encumbrances.
There are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of any Acquired Company, no Person has any rights
to acquire any shares of the capital stock of any Acquired Company, and there
are no options, calls, warrants or other securities or rights outstanding which
relate to, are convertible into or exercisable for any securities of any
Acquired Company.

         2.5 FINANCIAL STATEMENTS. Sellers have delivered to Buyer the following
financial statements of the Companies ("Financial Statements"): (a) the audited
consolidated balance sheet of the Acquired Companies as of December 31 for 199_
through 1998, and the related consolidated statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended,
together with the accountant's report and opinion thereon and (b) a consolidated

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balance sheet of the Acquired Companies as of                , 1999 and the
related unaudited statements of income, changes in stockholders' equity, and
cash flow for the months then ended (collectively the "Interim Financial
Statements"). All Financial Statements are true, accurate, complete, and fully
and accurately present the properties, financial condition, results of
operations, changes in stockholders' equity, and cash flow of the Acquired
Companies as of the respective dates of and for the periods referred to in such
Financial Statements, all in accordance with and pursuant to GAAP consistently
applied.

         2.6 BOOKS AND RECORDS. The books of account, business and accounting
records, minute books, stock record books, and other records of each Acquired
Company, all of which have been made available to Buyer, are complete, accurate
and correct and have been maintained in accordance with sound business
practices. The minute books of each Acquired Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Company, and no meeting of any such stockholders, Board of Directors or
committee has been held for which minutes have not been prepared and maintained
in such minute books. At the Closing, all of said books and records will be
delivered to the Buyer.

         2.7 TITLE TO PROPERTIES; ENCUMBRANCES. Except as indicated in Schedule
2.7 and for those properties provided to the Acquired Companies by the Buyer,
each Acquired Company owns and has absolute, good and marketable title to all of
the properties and assets (whether real, personal, or mixed and whether tangible
or intangible), used in the business or operations of such Acquired Company, or
reflected in the books, records or Financial Statements of such Acquired
Company, and all properties and assets purchased or otherwise acquired by such
Acquired Company since the date of the Interim Financial Statements including,
without limitations, all of the assets described in Schedule 2.7 (collectively
"Company Assets"). All Company Assets are free and clear of all Encumbrances,
except those Encumbrances described in Schedule 2.7.

         2.8 REAL PROPERTY. The Company does not own or lease any parcel of real
property.

         2.9 CONDITION AND SUFFICIENCY OF ASSETS. The Company Assets are
structurally sound, in good operating condition and repair, and are adequate for
the uses to which they are being put, and none of the Company Assets are in need
of maintenance or repairs except for ordinary, routine maintenance and repairs
that are not material in nature or cost. The Company Assets are sufficient for
the continued conduct of the Company's businesses after the Closing in
substantially the same manner as conducted prior to the Closing.

         2.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 2.10,
no Acquired Company has any Liabilities except for liabilities reflected in the
Interim Financial Statements and current liabilities for trade payables and
accrued operating expenses incurred in the Ordinary Course of Business since the
date of the Interim Financial Statements.

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         2.11 TAXES.

                  2.11.1 Each Acquired Company has filed or caused to be filed,
         on a timely basis, all Tax Returns that are or were required to be
         filed by or with respect to it. Each Acquired Company has paid all
         Taxes that have or may have become due pursuant to those Tax Returns,
         any Legal Requirement or otherwise, or pursuant to any assessment
         received by Sellers or the Company.

                  2.11.2 Schedule 2.11.2 contains a complete and accurate list
         of all audits of or adjustments to all Tax Returns of each Acquired
         Company (or their predecessors) ending within the ten (10) year period
         immediately preceding the date of the Interim Financial Statements,
         including a reasonably detailed description of the nature, proposed
         adjustments and outcome of each audit. Except as described in Schedule
         2.11.2, neither Sellers nor any Acquired Company has given or been
         requested to give waivers or extensions (or are or would be subject to
         a waiver or extension given by any other Person) of any statute of
         limitations relating to the payment of Taxes by any Acquired Company or
         for which any Acquired Company may be liable. All deficiencies proposed
         as a result of such audits have been paid.

                  2.11.3 The charges, accruals, and reserves with respect to
         Taxes in the Financial Statements of the Acquired Company are correctly
         determined in accordance with GAAP and are at least equal the Acquired
         Company's entire liability for Taxes for the periods indicated therein.
         All Taxes that the Acquired Companies are or were required by Legal
         Requirements to pay, withhold or collect have been duly paid, withheld
         or collected and, to the full extent required, have been timely paid to
         the proper Governmental Body or other Person. No Acquired Company has
         any Liability for Taxes, except for Taxes reserved in its Interim
         Financial Statement and accrued in the Ordinary Course of Business
         since the date thereof.

                  2.11.4 All Tax Returns filed by the Acquired Companies are
         true, correct, and complete and exact copies of all Tax Returns filed
         by the Acquired Companies during the six (6) year period preceding the
         date hereof have been delivered to the Buyer. There is no tax sharing
         agreement that will require any payment by the Company after the date
         of this Agreement.

                  2.11.5 Schedule 2.11.5 describes all tax elections and
         consents filed by the Acquired Companies with any Governmental Body.

         2.12 NO MATERIAL ADVERSE CHANGE. Since December 31, 1998, there has not
been any Material Adverse Change to any Acquired Company or its assets or
business, and no event has occurred or circumstance exists that may result in a
Material Adverse Change to the Company.

                                        8

<PAGE>   14

         2.13 EMPLOYEE BENEFITS.

                  2.13.1 Schedule 2.13.1 describes each Employee Benefit Plan
         that any Acquired Company maintains or to which any Acquired Company
         contributes and each Employee Benefit Plan that any Acquired Company
         formerly maintained or to which any Acquired Company ever contributed
         in the past.

                  2.13.2 Each Employee Benefit Plan (and each related trust,
         insurance contract or fund) complies in form and in operation in all
         respects with the applicable requirements of ERISA, the IRC and all
         other Legal Requirements.

                  2.13.3 All required filings, returns, reports and descriptions
         (including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's
         and Summary Plan Descriptions) have been timely filed or distributed
         appropriately with respect to each such Employee Benefit Plan as
         required by ERISA, the IRC and all Legal Requirements.

                  2.13.4 All required contributions (including all employer
         contributions and employee salary reduction contributions) have been
         paid to each Employee Benefit Plan and all required contributions for
         any period ending on or before the Closing Date which are not yet due
         have been and shall be accrued and reserved in each Acquired Company's
         Interim Financial Statements and books and records. All premiums or
         other payments for all periods ending on or before the Closing Date
         have been paid with respect to each such Employee Benefit Plan.

                  2.13.5 The market value of assets under each such Employee
         Benefit Plan equals or exceeds the present value of all vested and
         nonvested Liabilities thereunder determined in accordance with
         applicable PBGC methods, factors and assumptions and GAAP, and no
         funding deficiency of any kind exists under any Employee Benefit Plan.

                  2.13.6 Sellers have delivered to Buyer correct and complete
         copies of all Employee Benefit Plans, including without limitation, all
         agreements, plan documents and summary plan descriptions, the most
         recent determination letter received from the IRS, the five (5) most
         recent Form 5500 Annual Reports, and all related trust agreements,
         insurance contracts and other funding agreements which implement or
         relate to each Employee Benefit Plan.

                  2.13.7 No such Employee Benefit Plan has been completely or
         partially terminated or been the subject of a reportable event as to
         which notices would be required to be filed with the PBGC. No
         proceeding by the PBGC to terminate any such Employee Benefit Plan has
         been instituted or threatened.

                                        9

<PAGE>   15

                  2.13.8 There have been no prohibited transactions with respect
         to any such Employee Benefit Plan. No Fiduciary has any Liability for
         breach of fiduciary duty or any other failure to act or comply in
         connection with the administration or investment of the assets of any
         such Employee Benefit Plan. No action, suit, proceeding, complaint,
         grievance, hearing or investigation with respect to the administration
         or the investment of the assets of any such Employee Benefit Plan
         (other than routine claims for benefits) is pending or threatened.
         Neither any Acquired Company (or employees with responsibility for
         employee benefits matters) nor the Sellers have any Knowledge of any
         basis for any such action, suit, grievance, complaint, proceeding,
         hearing or investigation.

                  2.13.9 No Acquired Company has incurred, and neither the
         Seller nor the directors and officers (and employees with
         responsibility for employee benefits matters) of any Acquired Company
         has any reason to expect that any Acquired Company will incur any
         Liability to the PBGC (other than PBGC premium payments) or otherwise
         under Title IV of ERISA (including any withdrawal Liability) or under
         the Code with respect to any such Employee Benefit Plan which is an
         Employee Benefit Plan.

                  2.13.10 No Acquired Company contributes to, ever has
         contributed to, or ever has been required to contribute to any
         Multi-Employer Plan or has any Liability (including withdrawal
         Liability) under any Multi-Employer Plan.

                  2.13.11 Except as set forth in Schedule 2.13.11, no Acquired
         Company maintains, ever has maintained, ever has contributed, or never
         has been required to contribute to any Employee Benefit Plan or other
         arrangement providing medical, health or life insurance or other
         welfare-type benefits for current or future retired or terminated
         employees, their spouses or their dependents.

                  2.13.12 No Acquired Company has any Liability arising from any
         Employee Plan, except for any liability reflected in the Interim
         Financial Statement or as accrued in the Ordinary Course of Business
         since the date of such Interim Financial Statement.

         2.14 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in
Schedule 2.14:

                  2.14.1 Each Acquired Company is, and at all times has been, in
         full compliance with each Legal Requirement that is or was applicable
         to it or to the conduct or operation of its business or the ownership
         or use of any of its assets;

                  2.14.2 No event has occurred or circumstance exists that (with
         or without notice or lapse of time) (i) may constitute or result in a
         violation by any Acquired Company under, or a failure on the part of
         any Acquired Company to comply with, any Legal Requirement, or (ii) may
         give rise to any obligation on the part of any Acquired Company to
         undertake, or to bear all or any portion of the cost of, any remedial
         action of any nature; and

                                       10

<PAGE>   16

                  2.14.3 No Company has received any notice nor other
         communication (whether oral or written) from any Governmental Body or
         any other Person regarding (i) any actual, alleged, possible, or
         potential violation of, or failure to comply with, any Legal
         Requirement, or (ii) any actual, alleged, possible, or potential
         obligation on the part of any Acquired Company to undertake, or to bear
         all or any portion of the cost of, any remedial action of any nature.

         2.15 GOVERNMENTAL AUTHORIZATIONS.

                  2.15.1 Schedule 2.15.1 contains a complete and accurate list
         of each Governmental Authorization that is held by the Acquired
         Companies or that otherwise relates to the business of, or to any of
         the assets owned or used by, any Acquired Company. Each Governmental
         Authorization listed or required to be listed in Schedule 2.15.1 is
         valid and in full force and effect. Each Acquired Company has fully
         complied with all conditions and requirements for, or relating to, all
         Governmental Authorizations.

                  2.15.2 The Governmental Authorizations listed in Schedule
         2.15.1 collectively constitute all of the Governmental Authorizations
         necessary to permit each Acquired Company to lawfully conduct and
         operate its business in the manner as currently conducted and as
         conducted during the previous five (5) years, and to permit each
         Acquired Company to own and use its assets in the manner in which it
         currently owns and uses such assets.

                  2.15.3 No Acquired Company has received any notice or other
         communication regarding any actual, alleged or potential (i) violation
         or failure to comply with any Governmental Authorization or (ii)
         revocation, withdrawal, suspension, cancellation, termination or
         modification of any Governmental Authorization.

         2.16 LEGAL PROCEEDINGS; ORDERS.

                  2.16.1 There is no pending Proceeding: (a) that has been
         commenced by or against any Acquired Company or that otherwise relates
         to or may affect the business of, or any of the assets owned, leased or
         used by any Acquired Company; or (b) that challenges, or that may have
         the effect of preventing, delaying, making illegal, or otherwise
         interfering with, any of the Contemplated Transactions. No such
         Proceeding has been Threatened and no Proceeding has been terminated
         (by adjudication, settlement or otherwise) within the last five (5)
         years. No event has occurred or circumstance exists that may give rise
         to or serve as a basis for the commencement of any such Proceeding; and

                  2.16.2 There is currently no Order to which any Acquired
         Company, Seller, any Acquired Company's business or any of the assets
         owned, leased or used by any Acquired Company, is subject. Each
         Acquired Company has complied with all Orders to which its, or any of
         the assets owned or used by it has been subject.

                                       11

<PAGE>   17

         2.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 2.17, since December 31, 1998, each Acquired Company has conducted its
business only in the Ordinary Course of Business and there has not been any:

                  2.17.1 Change in any Acquired Company's authorized or issued
         capital stock; grant of any stock option or right to purchase shares of
         capital stock of any Acquired Company; issuance of any security
         convertible into such capital stock; grant of any registration rights;
         or declaration or payment of any dividend or other distribution or
         payment in respect of shares of capital stock;

                  2.17.2 Amendment to the Organizational Documents of any
         Acquired Company;

                  2.17.3 Payment or increase by any Acquired Company of any
         bonuses, salaries, or other compensation to any stockholder, director,
         officer, or employee or entry into any employment, severance, or
         similar Contract with any director, officer, or employee;

                  2.17.4 Adoption of, or increase in the payments to or benefits
         under, any profit sharing, bonus, deferred compensation, savings,
         insurance, pension, retirement, or other Employee Benefit Plan;

                  2.17.5 Damage to or destruction or loss of any asset or
         property of any Acquired Company, whether or not covered by insurance,
         in excess of $10,000;

                  2.17.6 Entry into, termination of, or receipt of notice of
         termination of any Contract or transaction outside the Ordinary Course
         of Business or which involves a total remaining commitment by or to the
         Company of at least $10,000;

                  2.17.7 Sale (other than sales of inventory in the Ordinary
         Course of Business), license, lease, or other disposition of any asset
         or property of the Company in excess of $10,000 or imposition of any
         Encumbrance on any asset or property of any Acquired Company;

                  2.17.8 Cancellation, settlement, or waiver of any claims or
         rights of or against any Acquired Company in excess of $10,000;

                  2.17.9 Change in any of the accounting methods or principles
         used by any Acquired Company; or

                  2.17.10 The entry into any Contract by any Acquired Company to
         do any of the foregoing.

                                       12

<PAGE>   18

         2.18 CONTRACTS; NO DEFAULTS.

                  2.18.1 Schedule 2.18.1 contains a complete and accurate list,
         and Buyer acknowledges that it has had an opportunity to review true
         and complete copies of the following Contracts other than those
         Agreements with the Buyer or affiliates of the Buyer:

                           (a) Each Contract that involves the furnishing or
                  performance of services, or the delivery, sale, lease or
                  transfer of goods, materials or products, by any Acquired
                  Company in an amount or value in excess of $10,000, including,
                  but not limited to, purchase orders received by any Acquired
                  Company;

                           (b) Each Contract that involves the furnishing or
                  performance of services, or the purchase, lease or receipt of
                  goods, materials, inventory, supplies, products or other
                  personal property by any Acquired Company in an amount or
                  value in excess of $10,000, including, but not limited to,
                  purchase orders issued by any Acquired Company;

                           (c) Each lease, rental or occupancy agreement,
                  license, installment and conditional sale agreement, and other
                  Contract affecting the ownership of, leasing of, title to, use
                  of, or any leasehold or other interest in, any real or
                  personal property;

                           (d) Each Contract under which any Acquired Company
                  has created, incurred, assumed or guaranteed any indebtedness
                  for borrowed money, has incurred any capitalized lease
                  obligation, or under which any of its tangible or intangible
                  assets, are Encumbered;

                           (e) Each collective bargaining agreement and other
                  Contract to or with any labor union or other employee
                  representative of a group of employees or which involves any
                  Acquired Company or any former or present employees, agents or
                  representatives of any Acquired Company;

                           (f) Each profit sharing, stock option, stock
                  purchase, stock appreciation, deferred compensation,
                  severance, or other plan, arrangement, contract or Employee
                  Benefit Plan for the benefit of its current or former
                  directors, officers, and employees;

                           (g) Each offer or agreement for the employment of or
                  receipt of any services from any Person on a full-time,
                  part-time, consulting, commission or any other basis;

                           (h) Each Contract containing covenants that in any
                  way purport to restrict the business activity of any Acquired
                  Company or limit the freedom of any

                                       13

<PAGE>   19

                  Acquired Company to engage in any line of business or to
                  compete with any Person;

                           (i) Each Contract for capital expenditures;

                           (j) Each Contract under which any Acquired Company
                  has advanced, guaranteed or loaned any amount to or for the
                  benefit of any of its directors, officers, employees or
                  Representatives;

                           (k) Each Contract with any employee, officer,
                  director, shareholder, sale representative, consultant,
                  distributor, Representative or agent of any Acquired Company;

                           (l) Each Contract providing for a payment or
                  involving an aggregate consideration or value in excess of
                  $10,000;

                           (m) Each Contract not entered into in the Ordinary
                  Course of Business;

                           (n) Each power of attorney granted by, on behalf of,
                  or to any Acquired Company;

                           (o) Each Contract relating to confidentiality or
                  noncompetition except those Contracts by which Buyer is also
                  bound;

                           (p) Each Contract for the performance of services by
                  an Acquired Company having a term or period of performance in
                  excess of 90 days; and

                           (q) Each proposed or actual amendment, supplement, or
                  modification (whether oral or written) in respect of any of
                  the foregoing.

                  2.18.2 Except as set forth in Schedule 2.18.2:

                           (a) The Sellers do not have any fixed or contingent
                  rights or obligations under any Contract that relates to the
                  business of, or any of the assets owned or used by, any
                  Acquired Company; and

                           (b) No Person listed on Schedule 2.18.2 is bound by
                  any Contract that purports to limit the ability of such Person
                  to (i) engage in or continue any conduct, activity, practice
                  or business related to the operations of any Acquired Company,
                  or (ii) assign to any Acquired Company or to any other Person
                  any rights to any invention, improvement, or discovery of
                  Intellectual Property Asset related to the operations of the
                  Acquired Companies.

                                       14

<PAGE>   20

                  2.18.3 Except as set forth in Schedule 2.18.3, each Contract
         is in full force and effect and is valid and enforceable in accordance
         with its terms.

                  2.18.4 Except as set forth in Schedule 2.18.4 with respect to
         each Contract (including, without limitation, those Contracts and
         agreements disclosed or required to be disclosed in Schedule 2.18.1):

                           (a) Each Acquired Company is, and at all times has
                  been, in full compliance with all applicable terms and
                  requirements of each Contract;

                           (b) Each other Person that has or had any obligation
                  or liability under any Contract is, and at all times has been,
                  in full compliance with all applicable terms and requirements
                  of such Contract;

                           (c) No event has occurred or circumstance exists that
                  (with or without notice or lapse of time) may contravene,
                  conflict with, or result in a violation or breach of, or give
                  any Acquired Company or other Person the right to declare a
                  default or exercise any remedy under, or to accelerate the
                  maturity or performance of, or to cancel, terminate, or
                  modify, any Contract; and

                           (d) No Acquired Company has given to nor received
                  from any other Person any notice or other communication
                  (whether oral or written) regarding any actual, alleged,
                  possible, or potential violation or breach of, default under
                  or termination or cancellation of, any Contract.

                  2.19 INSURANCE. Schedule 2.19 sets forth a description with
         respect to each insurance policy (including policies providing
         property, casualty, liability and workers' compensation coverage and
         bond and surety arrangements) to which any Acquired Company has been a
         party, a named insured or otherwise the beneficiary of coverage at any
         time within the past six (6) years, including (a) the name, address and
         telephone number of the agent; (b) the name of the insurer, the name of
         the policyholder, and the name of each covered insured;(c) the policy
         number and the period of coverage; (d) the scope (including an
         indication of whether the coverage was on a claims made, occurrence or
         other basis) and amount (including a description of how deductibles and
         ceilings are calculated and operate) of coverage; and (e) a description
         of any retroactive premium adjustments or other loss-sharing
         arrangements. With respect to each such insurance policy: (i) the
         policy is legal, valid, binding, enforceable and in full force and
         effect; (ii) the policy will continue to be legal, valid, binding,
         enforceable and in full force and effect on identical terms following
         the consummation of the transaction contemplated hereby; (iii) no
         Acquired Company or any other Person is in breach or default (including
         with respect to the payment of premiums or the giving of notices), and
         no event has occurred which, with notice or the lapse of time, would
         constitute such a breach or default, or permit termination,
         modification or acceleration, under the policy; and (iv) no Person has
         repudiated any provision thereof. Each Acquired Company has been
         covered during the

                                       15

<PAGE>   21

         past six years by insurance in scope and amount customary and
         reasonable for the business in which they have engaged during the
         aforementioned period. Schedule 2.19 describes any self-insurance
         arrangements affecting the Company.

         2.20 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 2.20, the
Acquired Companies are, and at all times have been, in full compliance with, and
have not been and are not in violation of or liable under, any Environmental Law
and do not engage in any Hazardous Activity. Neither Sellers, nor any Acquired
Company, has any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held to be responsible, received, any actual or
Threatened Order, notice, or other communication from any Governmental Body or
Person, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities.

         2.21 EMPLOYEES/REPRESENTATIVES.

                  2.21.1 Schedule 2.21.1 contains a complete and accurate list
         of the following information for each employee or director of each
         Acquired Company, including each employee on leave of absence or layoff
         status: (a) name; (b) job title; (c) current compensation and bonus
         paid or payable; (d) vacation accrued; (e) service credited for
         purposes of vesting and eligibility to participate under any Employee
         Benefit Plan and (f) all other compensation, bonus and overtime pay, as
         applicable for the year ended on the date of the Interim Financial
         Statement.

                  2.21.2 Except for Contracts executed on behalf of Buyer and
         except as set forth on Schedule 2.21.2, no Person listed on Schedule
         2.21.2 is a party to, or is otherwise bound by, any agreement or
         arrangement, such as any confidentiality, noncompetition, or
         proprietary rights agreement, between such employee, officer or
         director and any other Person which limits their ability to perform
         services for any Acquired Company.

                  2.21.3 Schedule 2.21.3 also contains a complete and accurate
         list of the following information for each retired employee or director
         of any Acquired Company, or their dependents, receiving benefits or
         eligible to receive benefits in the future: (a) name, (b) benefit, (c)
         payment option election, (d) retiree medical insurance coverage, (e)
         retiree life insurance coverage, and (f) other benefits.

         2.22 LABOR RELATIONS; COMPLIANCE. Except as set forth in Schedule 2.22,
no Acquired Company has been nor is a party to any collective bargaining or
other labor Contract. There has not been, there is not presently pending or
existing, and there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or affecting
any Acquired Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other

                                       16

<PAGE>   22

labor or employment dispute against or affecting the Company or its premises, or
(c) any application for certification of a collective bargaining agent. No event
has occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by any
Acquired Company, and no such action is contemplated by any Acquired Company.
Each Acquired Company has complied in all respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing. No Acquired Company is liable for the payment of any compensation,
damages, taxes, fines, penalties, or other amounts, however designated, for
failure to comply with any of the foregoing or other Legal Requirements.

         2.23 SUBSIDIARIES. Except for the (i) Subsidiary, (ii) the
Stratton-Cheeseman Charitable Foundation, which has been dissolved, and (iii)
stock in a publicly traded company which does not exceed one (1%) percent of the
outstanding equity interest of such publicly traded company, the Company does
not own nor has ever owned, directly or indirectly, any equity, profit or other
interest in any subsidiary, or other Person which may result in any Liability to
the Company.

         2.24 FINDERS OR BROKER FEES. There are no broker commissions, finders
fees or other payments of like nature payable to any Person in connection with
the Contemplated Transactions and in no event will Buyer or any Acquired Company
have any Liability for any fee or commission including, but not limited to, any
finders, originators or brokers fee in connection with the Contemplated
Transactions.

         2.25 RELATED PARTY TRANSACTIONS. Except as described in Schedule 2.25
and except as otherwise disclosed in this Agreement or any of the Schedules
attached hereto, no Acquired Company has engaged in any purchase, lease, sale or
other transaction involving any Seller, any officer, director, employee or
Representative of any Acquired Company, any of their respective representatives,
or any Person owned or controlled, in whole or in part, by any such parties,
within the last five (5) years. No Acquired Company has any outstanding loan or
other advances, directly or indirectly, to or from any of the Sellers, any
officer, director or employee or Representative or any Acquired Company, any
affiliate or relative of Sellers or any entity in which either Sellers or any
Acquired Company have a direct or indirect interest. Except for the obligations
set forth in this Agreement and the obligations arising from the ordinary course
of employment by the Acquired Companies (including, but not limited to any
compensation and accrued benefits or right to reimbursement), no Acquired
Company has, or after Closing shall have, any Liability to the Sellers.

         2.26 ASSETS OF CHEESEMAN. Cheeseman shall furnish a sworn statement
relating to his assets which is subject to a confidentiality agreement. Such
sworn statement is true, accurate and complete in all respects and is
incorporated herein by reference.

                                       17

<PAGE>   23

                                   ARTICLE III
                     REPRESENTATIONS AND WARRANTIES OF BUYER

         As a material inducement of Sellers entering into this Agreement and
knowing and acknowledging that Seller is relying upon the same, Buyer hereby
makes, as of the date hereof and as of the Closing Date, the following
representations and warranties to Seller:

         3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Michigan.

         3.2 AUTHORITY; NO CONFLICT.

                  3.2.1 This Agreement constitutes the legal, valid, and binding
         obligation of Buyer, enforceable against Buyer in accordance with its
         terms. Buyer has the absolute and unrestricted right, power, and
         authority to execute and deliver this Agreement and to perform its
         obligations under this Agreement.

                  3.2.2 Except as set forth in Schedule 3.2.2, neither the
         execution and delivery of this Agreement by Buyer, nor the consummation
         or performance of any of the Contemplated Transactions by Buyer will
         give any Person the right to prevent, delay, or otherwise interfere
         with any of the Contemplated Transactions pursuant to:

                           (a) Any provision of Buyer's Organizational
                  Documents;

                           (b) Any resolution adopted by the board of directors
                  or the policyholders of Buyer;

                           (c) Any Legal Requirement or Order to which Buyer may
                  be subject; or

                           (d) Any Contract to which Buyer is a party or by
                  which Buyer may be bound.

         Except as set forth in Schedule 3.2.2, Buyer is not and will not be
         required to obtain any Consent from any Person in connection with the
         execution and delivery of this Agreement or the consummation or
         performance of any of the Contemplated Transactions.

         3.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.

         3.4 FINDERS OR BROKERS FEES. There are no broker commissions, finders
fees or other payments of like nature payable to any Person retained by Buyer in
connection with the

                                       18

<PAGE>   24

Contemplated Transactions and in no event will Sellers have any liability for
any fee or commission including, but not limited to, any finders, originator or
broker's fee in connection with the Contemplated Transaction.

         3.5 PURCHASE FOR OWN ACCOUNT. Buyer has acquired the Shares for its own
account, for investment purposes only, not for the account of others and not
with the intent toward the distribution or transfer thereof.

                                   ARTICLE IV
                              COVENANTS OF SELLERS

         Sellers, jointly and severally, make the following covenants to Buyer:

         4.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause each Acquired Company to (a)
afford Buyer and its representatives and prospective lenders and their
representatives (collectively, "Buyer's Advisors") full and free access to each
Acquired Company's personnel, properties, Contracts, books and records, and
other documents and data, (b) furnish Buyer and Buyer's Advisors with copies of
all such Contracts, books and records, and other existing documents and data as
Buyer may request, and (c) furnish Buyer and Buyer's Advisors with such
additional financial, operating, and other data and information as Buyer may
request.

         4.2 OPERATION OF THE BUSINESS OF THE COMPANY. Between the date of this
Agreement and the Closing Date, Sellers will, and will cause each Acquired
Company to:

                  4.2.1 Conduct the business of such Acquired Company only in
         the Ordinary Course of Business;

                  4.2.2 Preserve intact the current business organization of the
         Company, keep available the services of the current officers,
         employees, and Representatives of each Acquired Company, and maintain
         the relations and good will with suppliers, customers, landlords,
         creditors, employees, agents, and others having business relationships
         with each Acquired Company;

                  4.2.3 Confer with Buyer concerning operational matters of a
         material nature;

                  4.2.4 Report periodically to Buyer concerning the status of
         the business, operations, and finances of each Acquired Company;

                  4.2.5 Not enter into any transaction or conduct any activity
         described in Section 2.17 of this Agreement other than in the Ordinary
         Course of Business;

                                       19

<PAGE>   25

                  4.2.6 Not to take any affirmative action, or fail to take any
         action which may reasonably result in any breach, failure, error or
         misrepresentation under any representation, warranty, covenant or
         provision of this Agreement or in any Material Adverse Effect to the
         Company or its business, prospects, assets, liabilities or rights;

         4.3 REQUIREMENT; APPROVALS. As promptly as practicable after the date
of this Agreement, Sellers will, and will cause each Acquired Company to, make
all filings required by Legal Requirements to be made by it in order to
consummate the Contemplated Transactions. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause each Acquired Company to, (a)
cooperate with Buyer with respect to all filings that Buyer elects to make or is
required by Legal Requirements to make in connection with the Contemplated
Transaction, and (b) cooperate with Buyer in obtaining all Consents identified
in Schedule 2.3. Any expenses to be paid to Governmental Bodies for Governmental
Authorization shall be paid one-half (1/2) by Sellers and one-half (1/2) by
Buyer.

         4.4 NOTIFICATION. Between the date of this Agreement and the Closing
Date, each of the Sellers will promptly notify Buyer in writing if any Seller or
any Acquired Company becomes aware of any fact or condition that causes or
constitutes a Breach of any of Seller's representations and warranties as of the
date of this Agreement, or if any Seller or any Acquired Company becomes aware
of the occurrence after the date of this Agreement of any fact or condition that
would cause or constitute a Breach of any such representation or warranty had
such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Schedules if the Schedules were dated as of the date of the
occurrence or discovery of any such fact or condition, Sellers will promptly
deliver to Buyer a supplement to the Schedules specifying such change. During
the same period, each Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of a Seller in this Article 4 or of the occurrence of any
event that may make the satisfaction of the conditions in Article 6 impossible
or unlikely. Notwithstanding anything contained in this Section 4.4, no
disclosure, supplement to Schedule or other action taken by Sellers as required
or described herein shall be deemed to amend or supplement this Agreement or any
Schedule, or to cure any misrepresentation, Breach or failure of Sellers under
this Agreement or to waive any right or remedy of Buyer for such
misrepresentation, Breach or failure.

         4.5 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers will cause all indebtedness owed to any
Acquired Company by Sellers or any related Person of Sellers to be paid in full
prior to Closing.

         4.6 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Article 8, Sellers will not, and will cause any Acquired
Company and its representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets (other than in
the Ordinary Course of Business) of the Company,

                                       20

<PAGE>   26

or any of the Shares or any capital stock of the Company, or any merger,
consolidation, shares exchange, reorganization, business combination, or similar
transaction involving the Company.

         4.7 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Sellers will use their Best Efforts to cause the conditions in Article 6
to be satisfied.

         4.8 STRATTON, CHEESEMAN AND WALSH, INC. Cheeseman shall, or shall cause
Stratton, Cheeseman and Walsh, Inc., a Michigan corporation ("SC&W"), to perform
all of the following:

                  4.8.1 Within 12 months of the Closing Date, SC&W's corporate
         name must be changed to eliminate permanently Cheeseman's surname. Such
         action shall be documented and confirmed in writing to Buyer
         immediately. Changing SC&W's corporate name to SCW Agency Group, Inc.
         is an acceptable name change in compliance with this section.

                  4.8.2 On or before the Closing Date, Cheeseman shall resign
         from the Board of Directors of SC&W and resign from all other positions
         he may hold as an officer or employee of SC&W. Such action shall be
         documented and confirmed in writing to Buyer immediately.

                  4.8.3 Without the prior written consent of the Buyer, at any
         time after the Closing Date while Cheeseman is employed by the Buyer,
         Cheeseman shall not serve as a director, officer, employee or
         consultant of SC&W or otherwise provide services to SC&W.

                  4.8.4 Without the prior written consent of the Buyer, as an
         employee of the Buyer or an affiliate of the Buyer after the Closing
         Date, and during any period subject to Cheeseman's non-competition with
         MICOA arising from his employment, Cheeseman will be expressly
         prohibited from negotiating any Contracts with SC&W, or otherwise
         participating in overseeing SC&W's daily affairs. Subject to provisions
         contained otherwise in this Agreement, Cheeseman may, however, address
         issues which impact SC&W by virtue of its status as an insurance agency
         for Buyer, but may only do so as necessary and appropriate to his role
         as an officer of Buyer representing Buyer's interests.

                  4.8.5 Cheeseman and his MICOA management team shall use Best
         Efforts to cause SC&W to provide at least annual written reports to the
         Buyer comparing SC&W's commission rates and performance against other
         agents in the markets served by SC&W.

                  4.8.6 Prior to any transaction between Cheeseman and SC&W,
         except as to actions relating to his stock in the normal course of
         business such as voting his SC&W stock for the election of officers or
         directors or the receipt of nonextraordinary dividends, Cheeseman shall
         disclose the material facts of the transaction and his interest therein
         to MICOA. Thereafter, a majority of Buyer's Board of Directors other
         than Cheeseman must approve or ratify any such disclosed transactions.
         In determining whether to approve or ratify the transaction, the Board
         of Directors shall not unreasonably withhold approval.

                                       21

<PAGE>   27

         Prior to the approval or execution of any agreements between Buyer or
         its successors and SC&W, Cheeseman shall so disclose them to MICOA.
         Thereafter, a majority of Buyer's Board of Directors other than
         Cheeseman must approve or ratify any such disclosed agreements.

                  4.8.7 Cheeseman expressly acknowledges and agrees that a
         Breach of any of the covenants contained in this Section 4.8 will
         result in unmeasurable damages to Buyer. Therefore, the parties agree
         that upon breach of Cheeseman of this Section 4.8, Cheeseman will pay
         Buyer the sum of Two Million ($2,000,000) Dollars as liquidated
         damages. The Damages provided in this subparagraph shall not exceed Two
         Million Dollars ($2,000,000) in total whether or not multiple breaches
         have been alleged or have occurred.

         4.9 SECTION 338(h)(10) ELECTION. Each of the Sellers shall join with
Buyer in making an election under IRC Section 338(h)(10) (and any corresponding
elections under state, local, or foreign tax law) (collectively, a "Section
338(h)(10) Election") with respect to the purchase and sale of the Shares.
Sellers will pay any Tax, including any Liability of the Acquired Companies for
Taxes resulting from the application of Treasury Regulation
ss.1.338(h)(10)-1(e)(5), attributable to the making of the Section 338(h)(10)
Election and will indemnify the Buyer, and the Acquired Companies against any
Damages (as hereinafter defined in Article IX) arising out of any failure to pay
such Tax. Sellers will also pay any state, local, or foreign Tax (and indemnify
the Buyer and the Acquired Companies against any Damages arising out of any
failure to pay such Tax) attributable to an election under state, local or
foreign law similar to the election available under IRC Section 338(g) (or which
results from the making of an election under IRC 338(g) of the Code) with
respect to the purchase and sale of the Shares. Buyer and Sellers agree to
follow an allocation of purchase price consistent with the allocation provided
in 1.3.11 and the provisions of Section 338 and the regulations thereunder for
purposes of all relevant tax return filings. Buyer and Sellers will not
voluntarily take any action inconsistent with the validity of the mutual Section
338(h)(10) election or inconsistent with the asset values determined herein for
purposes of all tax returns and examinations thereof.

                                    ARTICLE V
                    COVENANTS OF BUYER PRIOR TO CLOSING DATE

         Buyer makes the following covenants to Sellers:

         5.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after
the date of this Agreement, Buyer will make all filings required by Legal
Requirements to be made by it to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will cooperate
with Sellers with respect to all filings that Sellers are required by Legal
Requirements to make in connection with the Contemplated Transactions, and
cooperate with Sellers in obtaining all Consents.

                                       22

<PAGE>   28

         5.2 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Buyer will use its Best Efforts to cause the conditions in Article 7 to be
satisfied.

         5.3 DISTRIBUTIONS BY THE COMPANY. It is the intention of the parties
that the Sellers retain the cash and earnings to the date of Closing. In order
to carry out this intention, the parties will take the following actions:

                  5.3.1 Notwithstanding the provisions of Section 4.2, the
         Company may distribute to the Sellers any and all available cash (or
         equivalents). If any cash is held by the Company at Closing, the
         Company will distribute it to the Sellers in proportion to their
         stockholdings prior to Closing as soon as practicable after Closing.

                  5.3.2 As soon as practicable following the Closing, the
         Company will distribute to the Sellers in proportion to their stock
         holdings prior to Closing, the amount of any expense reimbursement to
         which the Company is entitled by Buyer or its subsidiaries under
         Management Services Agreements as of the Date of Closing which were
         paid by the Company on or before the Closing but not yet reimbursed by
         Buyer.

                  5.3.3 As soon as practicable following the Closing, the
         Company will distribute to the Sellers, in proportion to their
         stockholdings prior to Closing, the amount of any incentive payments
         which have been earned prior to the Closing Date pursuant to Management
         Services Agreements with Buyer or its subsidiaries. Such distribution
         will be an additional purchase price payment as provided in 1.3.10.

                  5.3.4 As soon as practicable after the amount can be
         determined (following the end of the calendar year), the Company shall
         distribute to the Sellers, in proportion to their stockholdings prior
         to Closing, the amount of incentive payments due to the Company by
         Buyer or its subsidiaries pursuant to Management Services Agreements
         which cannot be determined prior to the end of the Calendar Year in
         which the sale is closed, which incentive payments shall be prorated to
         the Closing Date. Such distribution will be an additional purchase
         price payment as provided in 1.3.10.

                                   ARTICLE VI
               CONDITIONS PRECEDENT OF BUYER'S OBLIGATION TO CLOSE

         All of Buyer's obligations under this Agreement, including, without
limitation, Buyer's obligations to purchase the Shares and to take the other
actions required to be taken by Buyer under this Agreement or at the Closing,
are subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived in writing by Buyer, in whole
or in part):

         6.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations and
warranties in this Agreement, individually and in the aggregate, must be and
remain accurate in all respects as of

                                       23

<PAGE>   29

the date of this Agreement, and must be accurate in all respects as of the
Closing Date as if made on the Closing Date.

         6.2 SATISFACTORY DUE DILIGENCE AND APPROVAL OF THE BOARD OF DIRECTORS.
The Buyer shall be satisfied, in its sole discretion, with the results of its
due diligence investigation and the Buyer's Board of Directors shall have
approved this Agreement, the Contemplated Transactions and all other agreements
in connection therewith.

         6.3 SELLERS' PERFORMANCE.

                  6.3.1 All of the covenants and obligations that Sellers are
         required to perform or to comply with pursuant to this Agreement at or
         prior to the Closing, individually and in the Aggregate, must have been
         duly and fully performed and complied with in all respects.

                  6.3.2 Each document, agreement, instrument or certificate
         required to be executed and/or delivered by Sellers shall have been
         duly executed and/or delivered, as applicable.

         6.4 CONSENTS. Each of the Consents must have been obtained and must be
in full force and effect.

         6.5 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:

                  6.5.1 An opinion of MacLean, Seaman, Laing & Guilford, P.L.C.,
         legal counsel to the Sellers, dated as of the Closing Date, in the form
         of Exhibit 6.5.1; and

                  6.5.2 Such other documents as Buyer may reasonably request for
         the purpose of (i) evidencing the accuracy of any of Sellers'
         representations and warranties, (ii) evidencing the performance by any
         Seller of, or the compliance by any Seller with, any covenant or
         obligation required to be performed or complied with by such Seller,
         (iii) evidencing the satisfaction of any condition referred to in this
         Article 6, or (iv) otherwise facilitating the consummation or
         performance of any of the Contemplated Transactions.

         6.6 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.

         6.7 NO CLAIM REGARDING STOCK OWNERSHIP OF SALE PROCEEDS. There must not
have been made or Threatened by any Person any claim asserting that such Person
(a) is the holder or

                                       24

<PAGE>   30

the beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any Shares or stock of, or any other voting, equity, or ownership
interest in, and Acquired Company, or (b) is entitled to all or any portion of
the Purchase Price payable for the Shares.

         6.8 NO PROHIBITION. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.

         6.9 RESIGNATION OF OFFICERS. Buyer shall have received the
resignations, effective as of the Closing, in accordance with Schedule 1.5.1.

         6.10 FINANCING. The Buyer shall have obtained, on terms and conditions
satisfactory to it, all of the financing necessary in order to consummate the
Contemplated Transactions and fund the working capital requirements of the
Company after the Closing.

         6.11 EMPLOYMENT AGREEMENTS. The Buyer shall have entered into
Employment Agreements with Sellers, in the form attached hereto as Exhibit 6.11
(Employment Agreements").

                                   ARTICLE VII
              CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE

         All of Sellers' obligations under this Agreement, including, without
limitation, Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing are subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived in writing by Sellers, in whole or in part):

         7.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement, individually and in the Aggregate, must be and
remain accurate in all respects as of the date of this Agreement and must be
accurate in all respects as of the Closing Date as if made on the Closing Date.

         7.2 BUYER'S PERFORMANCE.

                  7.2.1 All of the covenants and obligations that Buyer is
         required to perform or to comply with pursuant to this Agreement at or
         prior to the Closing, individually and in the aggregate, must have been
         duly and fully performed and complied with in all respects.

                  7.2.2 Each document, agreement, instrument or certificate
         required to be executed and/or delivered by Buyer shall have been duly
         executed and/or delivered, as applicable.

                                       25

<PAGE>   31

         7.3 ADDITIONAL DOCUMENTS. Buyer must have caused to be delivered to
Sellers such documents as Sellers may reasonably request for the purpose of (i)
evidencing the accuracy of any representation or warranty of Buyer, (ii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (iii)
evidencing the satisfaction of any condition referred to in this Section 7, or
(iv) otherwise facilitating the consummation of any of the Contemplated
Transactions.

         7.4 NO INJUNCTION. There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the sale of the Shares by
Sellers to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.

         7.5 EMPLOYMENT AGREEMENTS. The Sellers shall have entered into the
Employment Agreements.

         7.6 OPINION. An Opinion of Kerr, Russell and Weber, PLC, legal counsel
to the Buyer, dated as of the Closing Date, in the form of Exhibit 7.6.

         7.7 CONSENTS. Each of the Consents must have been obtained and be in
full force and effect.

         7.8 MODIFICATION OF MANAGEMENT AGREEMENT. The Management Agreements
must have been modified to the mutual satisfaction of the parties.

                                  ARTICLE VIII
                                   TERMINATION

         8.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or
at the Closing, be terminated:

                  8.1.1 By either Buyer or Sellers if a Breach of any provision
         of this Agreement has been committed by the other party and such Breach
         has not been waived in writing;

                  8.1.2 By (a) Buyer if any of the conditions in Article 6 have
         not been satisfied as of the Closing Date or if satisfaction of such a
         condition is or becomes impossible (other than through the failure of
         Buyer to comply with its obligations under this Agreement) and Buyer
         has not waived in writing such condition on or before the Closing Date;
         or (b) Sellers, if any of the conditions in Article 7 has not been
         satisfied of the Closing Date or if satisfaction of such a condition is
         or becomes impossible (other than through the failure of Sellers to
         comply with their obligations under this Agreement) and Sellers have
         not waived in writing such condition on or before the Closing Date;

                  8.1.3 By mutual consent of Buyer and Sellers; or

                                       26

<PAGE>   32

                  8.1.4 By either Buyer or Sellers if the Closing has not
         occurred (other than through the failure of any party seeking to
         terminate this Agreement to fully comply with its obligations under
         this Agreement) on or before January 31, 2000, or such later date as
         the parties may agree upon.

         8.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.2, 11.4 and 11.5 will survive; provided,
however, that if this Agreement is terminated by a party because of the Breach
of the Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.

                                   ARTICLE IX
              INDEMNIFICATION, REMEDIES AND POST CLOSING COVENANTS

         9.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY CHEESEMAN. Except for
"Damages" (as hereinafter defined) for which an Acquired Company would have been
reimbursed by the Buyer pursuant to the Management Agreement, Cheeseman will
indemnify, defend and hold harmless Buyer, and each Acquired Company and their
respective representatives, stockholders, controlling Persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, Liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation, defense
and reasonable attorneys' fees) or diminution of value (after deduction for any
insurance reimbursement and third party recoveries), whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with:

                  9.1.1 Any Breach of any representation or warranty made in
         this Agreement, the Schedules, the supplements to the Schedules, or any
         other certificate or document delivered pursuant to this Agreement;

                  9.1.2 Any Breach by Cheeseman of any covenant or obligation of
         Sellers in this Agreement;

                  9.1.3 Any Liability or claim for any Tax which relates to any
         period prior to the Closing Date and any Tax which is a result of the
         338(h)(10) Election;

                  9.1.4 Any Liability of the Company incurred or arising from
         any circumstances or events prior to or as of the Closing Date which is
         not reflected on the Interim Financial Statement, except for accounts
         payable and accrued expenses incurred from the operations

                                       27

<PAGE>   33

         of the Company in the Ordinary Course of Business since the date of the
         Interim Financial Statement and reflected in the books and records of
         the Company;

         9.2 INDEMNIFICATION BY GAUGIER. Except for Damages for which an
Acquired Company would have been reimbursed by the Buyer pursuant to the
Management Agreement, Gaugier will indemnify, defend and hold harmless
Indemnified Persons, and will pay to the Indemnified Persons, the amount of any
Damages arising, directly or indirectly, from or connection with any Breach of
any of the representations or warranties made by Seller contained in Sections
2.1, 2.2 and 2.4. The aggregate amount of Damages to which the Buyer shall be
entitled to receive from Gaugier shall not exceed the Purchase Price received by
Gaugier.

         9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Seller, and will pay to Seller the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, or (b) any Breach
by Buyer of any covenant or obligation of Buyer in this Agreement.

         9.4 LIMITATIONS ON INDEMNITY. Notwithstanding anything in this
Agreement to the contrary, the aggregate amount of Damages to which the Buyer
shall be entitled shall not exceed the Purchase Price (the "Indemnification
Ceiling") and the Buyer shall be entitled to Damages for an amount not in excess
to the Indemnification Ceiling only to the extent that the aggregate amount of
all Damages exceed the sum of One Hundred Thousand ($100,000.00) Dollars.

         9.5 SURVIVAL REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Each of the representations, warranties, covenants and agreements made by the
Sellers in this Agreement are pursuant hereto shall survive for a period of
three (3) years after the Closing of the Contemplated Transactions, except that
(i) the representations and warranties contained in Section 2.2 and 2.4 shall
continue indefinitely, (ii) the representations contained in Section 2.11 shall
survive for a period commensurate with any applicable statute of limitations
and, (iii) the covenants contained in Sections 4.8 and 4.9 shall survive for a
period commensurate with any applicable statute of limitations.

         9.6 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
BY BUYER. Each of the representations, warranties, covenants and agreements made
by the Buyer in this Agreement are pursuant hereto shall survive the Closing for
a period commensurate with any applicable statute of limitations.

         9.7 EXCLUSIVE REMEDY. The Buyer and the Sellers acknowledge and agree
that the foregoing indemnification provisions contained in this Article IX shall
be the sole and exclusive remedy of the Buyer and the Seller with respect to the
Contemplated Transactions.

                                       28

<PAGE>   34

                                    ARTICLE X
                                   DEFINITIONS

         For purposes of this Agreement, the following terms have the following
meanings:

         10.1 "ACQUIRED COMPANIES" shall mean the Company and the Subsidiary.

         10.2 "ACQUIRED COMPANY" shall mean each of the Company and the
Subsidiary.

         10.3 "AGREEMENT" shall mean this Stock Purchase Agreement together with
all Schedules, documents, exhibits and instruments delivered in connection with
this Stock Purchase Agreement.

         10.4 "BEST EFFORTS" shall mean the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.

         10.5 "BREACH" shall mean a breach of a representation, warranty,
covenant, obligation, or other provision of this Agreement, any Schedule or any
instrument delivered pursuant to this Agreement which the Party alleging a
Breach reasonably determines to be material in isolation or along with other
breaches. Notwithstanding anything in this Agreement to the contrary, if a
breach is due to any inaccuracy in a representation or Schedule, the other Party
shall be entitled to recover any Damages resulting therefrom as provided under
Article IX of this Agreement, but such breach shall not otherwise be deemed a
breach.

         10.6 "CHANGE IN CONTROL" shall occur if there is: a loss of, direct or
indirect, voting or equity control of the Buyer (or of any resulting
organization) by Buyer's policyholders; or, a change of more than 50% of MICOA's
board of directors in any contiguous period of 24 months due to other than
death, disability, retirement of sitting directors, or normal expiration of
director terms. By way of clarification, but not limitation, no Change in
Control shall occur from (a) the reorganization, consolidation or dissolution of
one or more of Buyer's current or future subsidiaries, divisions or affiliates;
(b) as a result of the full or partial completion of a mutual holding company
reorganization, not resulting in the loss of Buyer's policy holders voting or
equity control; (c) the full or partial demutualization of Buyer's absent loss
of policy holder voting or equity control; or (d) any other process firm which
Cheeseman consents to any proposed transaction which does not displace Buyer's
policy holder voting or equity control.

         10.7 "CLOSING DATE" shall mean the date and time as of which the
Closing actually takes place.

         10.8 "CONSENT" or "CONSENTS" shall mean any approval, consent,
ratification, waiver, or other authorization (including, without limitation, any
Governmental Authorization) of any Person (i) listed in Schedule 2.3, (ii)
required to be obtained in order to consummate the Contemplated Transactions,
and (iii) listed in Schedule 10.8.

                                       29

<PAGE>   35

         10.9 "CONTEMPLATED TRANSACTIONS" shall mean all of the transactions
contemplated by this Agreement, including, without limitation:

                  10.9.1 The sale of the Shares by Sellers to Buyer;

                  10.9.2 The execution, delivery, and performance of the
         Noncompetition Agreements, the Releases and the Employment Agreements;

                  10.9.3 The performance by Buyer and Sellers of their
         respective covenants and obligations under this Agreement; and

                  10.9.4 Buyer's acquisition and ownership of the Shares and
         exercise of control over the Company.

         10.10 "CONTRACT" shall mean any agreement (or group of related
agreements), contract, obligation, option, commitment, promise or understanding
(whether written or oral and whether expressed or implied) (a) under which any
Acquired Company has or may acquire any rights, (b) under which any Acquired
Company has or may become subject to any obligation or Liability, (c) by which
any Acquired Company or any of the assets owned or used by it is or may become
bound, or (d) which may relate to, establish or restrict any rights or
obligations affecting the Shares or any present or future securities of any
Acquired Company. Solely for the purposes of any disclosure schedule required
pursuant to this Agreement, the term "Contract" shall not include purchase
commitments made in the ordinary course of business at amounts less than Ten
Thousand ($10,000) Dollars, nor shall include any "Management Agreement" or any
other Management Service Agreement entered into between the Buyer (or any
subsidiary of the Buyer) and the Company (or any subsidiary of the Company).

         10.11 "EMPLOYEE BENEFIT PLAN" shall mean any qualified and/or
non-qualified fringe benefit, disability, health, medical, life insurance,
supplemental compensation, incentive, wage continuation, retirement, pension,
profit sharing, bonus, deferred compensation, stock ownership or other plan,
trust, policy or arrangement involving any past, present or future employee,
consultant, representative, or agent of any Acquired Company, including without
limitation any plan, program or arrangement defined in or relevant to any
provision of ERISA.

         10.12 "ENCUMBRANCE" shall mean any charge, claim, community property or
dower interest, mortgage, equitable interest, lien, option, pledge, security
interest, right of first refusal, contract, Liability or restriction of any
kind, including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.

         10.13 "EMPLOYMENT AGREEMENTS" shall have the meaning set forth in
Section 6.11.

         10.14 "ENVIRONMENT" shall mean any soil, land surface or subsurface
strata, surface waters (including, without limitation, navigable waters, ocean
waters, streams, ponds, drainage basins, and wetlands), ground waters, drinking
water supply, stream, sediments, ambient air

                                       30

<PAGE>   36

(including indoor air), plant and animal life, and any other environmental
medium or natural resource.

         10.15 "ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" shall mean any
cost, damage, expense, Liability, obligation, or other responsibility arising
from or under Environmental Law or Occupational Safety and Health Law including,
without limitation, any costs, damage, financial responsibility, expenses,
liabilities, obligations or other Liability for, arising out of or relating to:

                  10.15.1 The Environment;

                  10.15.2 The presence, generation, use, handling, transport,
         recycling, reclamation, disposal, treatment, storage or release of any
         Hazardous Material;

                  10.15.3 Any environmental, health, or safety matters or
         conditions (including on-site or off-site contamination, occupational
         safety and health, and regulation of chemical substances or products);

                  10.15.4 Fines, penalties, judgments, awards, settlements,
         legal or administrative Proceedings, damages, losses, claims, demands
         and response, investigative, remedial and inspection costs and expenses
         arising under Environmental Law or Occupational Safety and Health Law;

                  10.15.5 Any Environmental Law or Occupational Safety and
         Health Law for cleanup costs or corrective action, including any
         investigation, cleanup, removal, containment, or other remediation or
         response actions ("Cleanup") required by any applicable Environmental
         Law or any Occupational Safety and Health Law (whether or not such
         Cleanup has been required or requested by any Governmental Body or any
         other Person) and for any natural resource damages; and/or

                  10.15.6 Any other compliance, corrective, investigative, or
         remedial measures required under any Environmental Law or any
         Occupational Safety and Health Law.

         The terms "removal," "remedial," and "response action," include,
without limitation, the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
ss. 9601 et seq., as amended ("CERCLA").

         10.16 "ENVIRONMENTAL LAW" shall mean any Legal Requirement that
governs, regulates, requires or relates to: (a) advising appropriate
authorities, employees, and the public of intended or actual releases of
pollutants or hazardous substances or materials, violations of discharge limits,
or other prohibitions and of the commencements of activities, such as resource
extraction or construction, that could have significant impact on the
Environment; (b) preventing or reducing to acceptable levels the release of
pollutants or Hazardous Materials into the Environment; (c) reducing the
quantities, preventing the Release, or minimizing the hazardous characteristics
of wastes that are generated; (d) assuring that products are designed,
formulated, packaged, and used

                                       31

<PAGE>   37

so that they do not present unreasonable risks to human health or the
Environment when used or disposed of; (e) protecting resources, species, or
ecological amenities; (f) reducing to acceptable levels the risks inherent in
the transportation of Hazardous Materials, pollutants, oil, or other potentially
harmful substances; (g) cleaning up pollutants that have been released,
preventing the Threat of Release, or paying the costs of such clean up or
prevention; (h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets; (i) Hazardous Activities, Hazardous Materials,
pollutants, petroleum products, oil, asbestos or other potentially harmful
substances; or (j) the protection of the health, safety and welfare of the
public, water health and safety and pollution and/or protection of the
Environment.

         10.17 "ERISA" shall mean the Employee Retirement Income Security Act of
1974 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.

         10.18 "FIDUCIARY" shall have the meaning as defined in ERISA ss.3(21).

         10.19 "FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 2.5.

         10.20 "GAAP" shall mean the United States generally accepted accounting
principles, consistently applied.

         10.21 "GOVERNMENTAL AUTHORIZATION" shall mean any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.

         10.22 "GOVERNMENTAL BODY" shall mean any: (a) federal, state, local,
municipal, foreign, or other government; or (b) governmental or
quasi-governmental authority of any nature, including without limitation, (i)
any governmental agency, branch, department, official, or entity, (ii) any
court, judicial authority or other tribunal, and (iii) any arbitration body or
tribunal;

         10.23 "HAZARDOUS ACTIVITY" shall mean the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment, and/or any other act, business, operation, or
action that poses a risk of illness or property damage or diminution in value of
any property resulting from Hazardous Materials.

         10.24 "HAZARDOUS MATERIALS" shall mean any waste or other substance
that is listed, regulated, defined, designated, or classified under, or
otherwise determined to be, hazardous, radioactive, toxic, or a pollutant or a
contaminant pursuant to, any Environmental Law and shall include materials or
equipment containing polychlorinated biphenals or asbestos in any form.

                                       32

<PAGE>   38

         10.25 "IRC" shall mean the Internal Revenue Code of 1986 or any
successor law, and all U. S. Treasury regulations and rulings issued by the IRS
or any Governmental Authority pursuant to the Internal Revenue Code or any
successor law.

         10.26 "IRS" shall mean the United States Internal Revenue Service or
any successor agency, and the United States Department of the Treasury.

         10.27 "KNOWLEDGE" of any Person shall be deemed to include a particular
fact or other matter if: (a) such Person is actually aware of such fact or other
matter; or (b) a prudent Person could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of such fact or
other matter. A Person other than an individual will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.

         10.28 "LEGAL REQUIREMENT" shall mean any federal, state, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, operational memorandum, guidance documents, policy, charter,
ordinance, rule, code, principle of common law, case, decision, regulation,
statute, or treaty including, without limitation, Environmental Laws,
Occupational Safety and Health Laws, Orders, ERISA and the IRC.

         10.29 "LIABILITY" shall mean any liability or obligation whether known
or unknown, foreseeable or unforeseeable, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due.

         10.30 "MANAGEMENT AGREEMENT" shall mean the Management Services
Agreements by and between Buyer (or any subsidiary of the Buyer) and any
Acquired Company.

         10.31 "MATERIAL ADVERSE CHANGE (OR EFFECT)" means a change (or effect),
in the condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, business or prospects of any Person which change (or
effect), individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations, business or
prospects of as Person.

         10.32 "OCCUPATIONAL SAFETY AND HEALTH LAW" shall mean any Legal
Requirement which governs, regulates or relates to safety and health conditions
or is designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.

                                       33

<PAGE>   39

         10.33 "ORDER" shall mean any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.

         10.34 "ORDINARY COURSE OF BUSINESS" shall mean an action taken by a
Person that is consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person and such
action is similar in nature and magnitude to actions customarily taken, without
any authorization by the board of directors (or by any Person or group of
Persons exercising similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business as
such Person.

         10.35 "ORGANIZATIONAL DOCUMENTS" shall mean the articles or
certificates of incorporation and the bylaws of a corporation including any
amendments thereto or restatements thereof, and all resolutions of the Board of
Directors and stockholders of such corporation.

         10.36 "PERSON" shall mean any individual, corporation, general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental Body.

         10.37 "PROCEEDING" shall mean any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator or Person.

         10.38 "RELEASE" shall mean any spilling, leaking, emitting,
discharging, depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.

         10.39 "SELLERS" shall mean those Persons identified as Sellers in the
introductory Section of this Agreement and shall mean each and every Seller
jointly and severally.

         10.40 "TAX" shall mean any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under IRC
ss.59(A)), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax, assessment or charge by a Governmental Body of
any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.

         10.41 "TAX RETURN" shall mean any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the

                                       34

<PAGE>   40

administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.

         10.42 "THREAT OF RELEASE" shall mean a reasonable possibility of a
Release that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.

         10.43 "THREATENED" shall mean a claim, Proceeding, dispute, action, or
other matter if any demand or statement has been made (orally or in writing) or
any notice has been given (orally or in writing), or if any other event has
occurred or any other circumstances exist, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action, or other matter may be
asserted, commenced, taken, or otherwise pursued in the future.

                                   ARTICLE XI
                               GENERAL PROVISIONS

         11.1 CONFIDENTIALITY. Each of the Sellers will maintain and hold in
confidence and not disclose any information concerning the business and affairs
of any Acquired Company that is not already generally available to the public
("Confidential Information"), refrain from using any Confidential Information
except in connection with this Agreement, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible embodiments (and
all copies) of the Confidential Information which are in his possession. In the
event that any of the Sellers is requested or required (by oral question or
request for information or documents in any legal Proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, such Seller will notify the Buyer promptly of the
request or requirement so that the Buyer may seek an appropriate protective
order or waive compliance with the provisions of this Section. If, in the
absence of a protective order or the receipt of a waiver hereunder, any of the
Sellers is, on the written advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, that
Seller shall use his Best Efforts to obtain, an Order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed.

         11.2 EXPENSES. Except as otherwise expressly provided in this
Agreement, the Sellers, on the one hand, and the Buyer, on the other hand, shall
bear their own respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the Contemplated Transactions,
including, but not limited to fees and expenses of agents, representatives,
investment bankers, advisors, consultants, counsel, and accountants
(collectively "Transaction Costs"). In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a Breach of this Agreement by another
party.

         11.3 SCHEDULES. The Schedules are numbered to correspond to the various
sections of this Agreement relating to the representations and warranties
contained in this Agreement and

                                       35

<PAGE>   41

certain other information called for by this Agreement. Unless otherwise
specified, no disclosure made in any particular Schedule shall be deemed made in
any other Schedule unless expressly made therein.

         11.4 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer determines. Unless consented
to by Buyer in advance or required by Legal Requirements, prior to the Closing,
Sellers shall, and shall cause the Company to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Sellers and Buyer will consult with each other concerning the means by which the
Company's employees, customers, and suppliers and others having dealings with
the Company will be informed of the Contemplated Transactions, and Buyer will
have the right to be present for any such communication.

         11.5 ARBITRATION. Buyer and Sellers shall submit and resolve any
dispute, claim or grievance arising from or relating to the interpretation or
application of this Agreement in accordance with the rules of the American
Arbitration Association as modified by this Agreement. Three arbitrators shall
be chosen: one by Buyer, one by Sellers, and a third by the first two
arbitrators. The initial two arbitrators shall be named within thirty (30) days
of the initiation of proceedings, and they shall choose the third arbitrator,
who must be a neutral attorney licensed in Michigan, within thirty (30) days
following the selection of the arbitrators named by the parties. The third
arbitrator shall function as a hearing officer. Failure to choose any arbitrator
timely shall result in appointment by the American Arbitration Association. Each
party may be represented by legal counsel. Stenographic or other mutually
acceptable record of such proceedings shall be kept. Proceedings shall rely upon
the Michigan Rules of Court and Michigan Rules of Evidence, unless deemed
unreasonable in a particular application by the hearing officer. The arbitrators
shall issue their written opinion within thirty (30) days of the termination of
any hearing. The decision of the arbitrators shall be binding upon Buyer and
Sellers and may be enforced to the fullest extent permitted by law, by a court
of competent jurisdiction, which may enter judgment thereon.

         11.6 REPRESENTATIONS. The Buyer acknowledges that the representations
and warranties made by Sellers under this Agreement have been made based upon
their knowledge, information and belief. Notwithstanding the fact that the
representations and warranties contained herein were made by Sellers based upon
their knowledge, information and belief, in the event of a Breach of a
representation or warranty, Buyer shall be entitled to recover the Damages
provided under Article IX of this Agreement regardless of whether Sellers
believed such representation or warranty was true when made.

         11.7 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), or (d) two (2) business days following the deposit of same
in the U.S. mail, in each

                                       36

<PAGE>   42

case to the appropriate addresses and telecopier numbers set forth below (or to
such other addresses and telecopier numbers as a party may designate by notice
to the other parties):

               Sellers:               William B. Cheeseman
                                      William J. Gaugier
                                      Stratton-Cheeseman Management Co.
                                      c/o 1301 N. Hagadorn Road
                                      East Lansing, MI 48826-1971
                                      Fax No. (517) 351-7866

               With a copy to:        MacLean, Seaman, Laing & Guilford, P.L.C.
                                      1301 N. Hagadorn Road
                                      East Lansing, MI 48826-4279
                                      Attn: Kenneth Laing
                                      Fax No. (517) 336-7191

               Buyer:                 Mutual Insurance Corporation of America
                                      1301 North Hagadorn
                                      P.O. Box 1471
                                      East Lansing, MI 48826-1471

               With a copy to:        Kerr, Russell and Weber, PLC
                                      500 Woodward Ave., Suite 2500
                                      Detroit, Michigan  48226
                                      Attn: Monte D. Jahnke
                                      Fax No. (313) 961-0388

         11.8 CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the Contemplated
Transactions, shall be paid by Sellers when due, and Sellers will, at their own
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees.

         11.9 FURTHER ASSURANCES. The parties agree (i) to furnish upon request
to each other such further information, (ii) to execute and deliver to each
other such other documents, and (iii) to do such other acts and things, all as
the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.

         11.10 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by

                                       37

<PAGE>   43

applicable law, (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged, in whole or in part,
by a waiver or renunciation of the claim or right, unless done so in writing
signed by the party asserting such claim or right; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.

         11.11 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties (including, but not limited to the Term
Sheet dated May 12, 1999) with respect to its subject matter and constitutes
(along with the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.

         11.12 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumptions or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authoring of any
of the provisions of this Agreement. Any reference to any federal, state, local
or foreign statute of law shall be deemed and also referred to all rules and
regulations promulgated thereunder, unless the context expressly provides
otherwise. The word "including" shall mean including without limitation. All
words used in this Agreement will be construed to be of such gender or number as
the circumstances may require. If any part has breached any representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the party has not breached shall not
detract from or mitigate the fact that the part is in breach of the first
representation, warranty or covenant. In the event of any inconsistency between
the statements in the body of this Agreement and those in the Schedules (other
than an exception expressly set forth as such in the Schedules with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.

         11.13 ASSIGNMENTS; SUCCESSORS; NO THIRD PARTY RIGHTS. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other parties, except that Buyer, subject to not relieving Buyer or its
successors of obligations under this Agreement, may assign any of its rights
under this Agreement to any subsidiary, parent or affiliate of Buyer. Subject to
the preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement (and their successors
and assigns) and those Persons expressly identified herein as receiving or
obtaining rights or benefits hereunder, any legal or equitable right, remedy, or
claim under or with respect to this Agreement or any provision of this
Agreement.

         11.14 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction or arbitrator, the other
provisions of this Agreement will

                                       38

<PAGE>   44

remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

         11.15 SECTION HEADINGS. The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement.

         11.16 TIME OF ESSENCE. Time is of the essence with regard to each
party's performance under this Agreement and all dates and time periods set
forth or referred to in this Agreement.

         11.17 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Michigan without regard to conflicts of laws principles.

         11.18 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement, (b) said party has relied solely and
completely upon its own judgment in executing this Agreement, (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement, (d) said party has acted voluntarily and of its own
free will and executing this Agreement, (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement, and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.

         11.19 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original of this Agreement
and all of which, when taken together, will be deemed to constitute one and the
same agreement.

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

WITNESSES:                          BUYER:

                                    MUTUAL INSURANCE CORPORATION
                                    OF AMERICA, A MICHIGAN INSURANCE
                                    CORPORATION

/s/ Monte D. Jahnke                 By: /s/ Thomas C. Payne, M.D.
----------------------------           -----------------------------------------

                                    Its: Secretary-Treasurer
                                        ----------------------------------------

                                       39

<PAGE>   45

                                    SELLERS:

/s/ Kathleen Oppenwall              /s/ William B. Cheeseman
----------------------------        --------------------------------------------
                                    WILLIAM B. CHEESEMAN

/s/ Kenneth Laing                   /s/ William J. Gaugier
----------------------------        --------------------------------------------
                                    WILLIAM J. GAUGIER

                                       40<PAGE>   1
                                                                    EXHIBIT 10.4

                            STOCK PURCHASE AGREEMENT

         AGREEMENT made between KENTUCKY MEDICAL INSURANCE COMPANY, a Kentucky
stock insurance corporation (the "Seller"), and STRATTON, CHEESEMAN & WALSH,
INC., a Michigan corporation (the "Buyer").

         The parties have reached an understanding with respect to the sale and
purchase of all of the outstanding corporate shares of KMA INSURANCE AGENCY,
INC., a Kentucky corporation (the "Company"), which is in the business of
selling insurance products, including, but not limited to, products of the
Seller.

         IT IS THEREFORE AGREED:

         1.    SALE OF CORPORATE SHARES. Seller shall sell to the Buyer for a
total purchase price of seven hundred six thousand two hundred ninety-two
dollars ($706,292.00), all of the issued and outstanding shares of the Company,
and the Buyer shall purchase the shares from the Seller at such purchase price,
effective as of 12:00 a.m. on January 1, 1997.

         2.    CLOSING. The transaction will be closed as soon as practicable
after all documents necessary to close the transaction have been prepared. The
parties will cooperate in closing the transaction, and each will take such
reasonable steps as may be necessary to prepare the documents and do such things
as may be necessary in order to close the transaction. At the closing, the
Seller shall deliver to the Buyer, free and clear of all encumbrances,
certificates for the shares in negotiable form, with any requisite transfer
stamps attached. Upon such delivery, the Buyer shall deliver to the Seller a
valid check in the amount of one hundred seventy-six thousand five hundred
seventy-three dollars ($176,573.00).

<PAGE>   2

         3.    BALANCE OF PURCHASE PRICE. The unpaid balance of the purchase
price will be paid in five (5) equal annual installments of one hundred five
thousand nine hundred forty-three and 80/100 dollars ($105,943.80), with the
first installment due on or before January 1, 1998, and the final payment due on
or before January 1, 2002. During the year ending December 31, 1997, Buyer will
pay interest on the unpaid balance at the prime rate as reported in The Wall
Street Journal on December 31, 1996, which the parties agree is 8.25%. On
December 31, 1997 and on the day closest to December 31 of each year thereafter
on which The Wall Street Journal is published, the interest rate will be
adjusted to the prime rate as reported in The Wall Street Journal for the next
succeeding year. Buyer may prepay any or all of the obligation, without penalty,
at any time.

         4.    REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants as follows:

               (a)  ORGANIZATION AND STANDING OF KMA INSURANCE AGENCY, INC. (THE
COMPANY). The Company is a corporation duly organized, validly existing, and in
good standing under the laws of Kentucky. The Company is duly licensed or
qualified and in good standing as a foreign corporation in all states in which
such license or qualification is necessary.

               (b)  CAPITALIZATION. The aggregate number of shares which the
Company is authorized to issue is two thousand (2,000) common shares, of which
one thousand (1,000) are issued and presently outstanding. All such issued
shares have been validly issued and fully paid. The Company has no outstanding
subscriptions or other obligations to issue or acquire any of its shares.

                                       2

<PAGE>   3

               (c)  SHARE OWNERSHIP. Seller represents and warrants that it is
the owner free and clear of any encumbrances of all of the outstanding common
shares of the Company. Seller has full right and authority to transfer said
shares to the Buyer, and there are no other shares of the Company owned or
claimed by any other person or entity.

               (d)  FINANCIAL STATEMENTS. Seller has delivered to the Buyer
copies of the following financial statements, all of which are true and
complete: (i) audited consolidating financial statements of the Company as of
December 31, 1995, prepared in accordance with generally accepted accounting
principles, and (ii) the unaudited balance sheet of the Company as of December
31, 1996, which fairly presents the Company's financial condition as of that
date and unaudited statement of the Company's operations for the twelve (12)
months ending December 31, 1996, which fairly presents the results of the
Company's operations for such period. Such unaudited financial statements have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the period except that no statement of
shareholder's equity or cash flow or required footnote disclosures are included.
The unaudited financial statements are subject to adjustment by the Company's
accountants in connection with their audit thereof.

               (e)  ABSENCE OF UNDISCLOSED LIABILITIES. Seller represents and
warrants that, to the best of its knowledge, except as disclosed on the
Company's financial statements and in this Agreement, the Company has no
material liabilities of any nature. Seller represents and warrants that it does
not know or have reasonable grounds to know of any basis for the assertion
against the Company of any liability of any nature or in any amount not fully
reflected or reserved against in the financial statements.

                                       3

<PAGE>   4

               (f)  ABSENCE OF OTHER CHANGES. Since December 31, 1996, there has
not been any materially adverse development in relation to the Company's
financial condition.

               (g)  CONTRACTS. The Company has no contract or commitment
involving payment by the Company of more than $1,000, except for (i) the
sponsorship agreement between the Company and the Kentucky Medical Association
entered into the 18th day of April, 1996; (ii) the agreement between KMIC and
the Company relating to commissions; (iii) certain leases relating to
automobiles provided to certain employees of the Company; and (iv) the
Consulting Agreement between Company and Insuramax, Inc.

               (h)  LITIGATION. There is no litigation or proceeding pending or,
to the Seller's knowledge, threatened against or relating to the Company except
for litigation involving Thomas House relating to his employment agreement with
the Company. Company agrees to pay fifty percent (50%) of the litigation
expenses of the Thomas House litigation, up to a total additional expense
payment of five thousand dollars ($5,000.00). Seller shall be responsible for
the remainder of such litigation expenses and for any damages awarded against
either Seller or Company, and shall indemnify Company for any such litigation
expenses or damages. Any recovery in favor of Seller or Company shall be applied
first to reimburse Seller for any litigation expenses which were not shared;
thereafter Seller and Company shall split the recovery on a 50/50 basis until
both have been reimbursed for their expenses; Seller shall be entitled to the
remainder of any such recovery.

         5.    REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants as follows:

                                       4

<PAGE>   5

               (a)  ORGANIZATION AND STANDING OF THE BUYER. The Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of Michigan.

               (b) AUTHORIZATION. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly adopted and approved by the Board of Directors of the Buyer. The Buyer
has all requisite power and authority to execute, deliver and perform this
Agreement, and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed, and delivered by the
Buyer. This Agreement is the valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms.

         6.    TAX TREATMENT. Buyer and Seller agree to make a joint election
under Internal Revenue Code 338(h)(10) to treat the transaction as a deemed
asset purchase for tax purposes. Buyer and Seller agree to jointly execute
Internal Revenue Service form 8023-A and any other documents necessary to make
this 338(h)(10) election. Seller shall be responsible for any taxes owed by
Seller or Company as a result of the sale of Company to Buyer. Seller shall be
responsible for any tax liabilities of the consolidated group attributable to
periods during which Company was a member of the consolidated group, except that
Company shall be responsible for its portion of the 1996 tax liability in an
amount not to exceed $21,513, as reflected on the December 31, 1996 KMA
Insurance Agency, Inc. balance sheet which has been provided to Buyer.

         7.    ACCESS AND INFORMATION. The Seller shall cause the Company to
give to the Buyer and Buyer's representatives full access throughout the period
prior to closing to all of the Company's properties, books, contracts, and
records, and shall furnish the Buyer during such

                                       5

<PAGE>   6

period with all information concerning the Company's affairs as the Buyer
reasonably may request.

         8.    CONDUCT OF BUSINESS PENDING CLOSING. Seller agrees that pending
the closing, the Company's business will be conducted only in the ordinary
course. Seller agrees that pending the closing, the Company's shareholder's
equity will not be reduced by any dividend payment or other distribution.

         9.    COMPANY PERSONNEL.

               (a)  CHANGES. At the closing the Seller shall make available to
the Buyer the written resignations of any of the Company's directors and
officers that Buyer may request and shall take or cause to be taken such action
as the Buyer may request with respect to changes in directors and officers.

               (b)  EMPLOYMENT CONTRACTS. The Company has no employment
contracts. J. Dennis Johnson provides services for the Company pursuant to an
employment agreement and covenant not to compete dated October 30, 1992, and an
executive termination agreement dated December 3, 1993, which agreements have
been assigned to and are currently with Stratton-Cheeseman Management Company.
The parties contemplate that the employment contract and the executive
termination agreements with J. Dennis Johnson will be assigned to the Company,
and the Company will accept the obligations of the employer under those
agreements effective at the closing. Services are also being provided to the
Company by Kurt A. Zinser pursuant to an employment agreement made April 22,
1996; John M. Moon pursuant to an employment agreement made May 9, 1994; and
Frank A. Buster pursuant to an employment agreement made November 6, 1995. Each
of these employment agreements has been assigned to and is currently

                                       6

<PAGE>   7

with Stratton-Cheeseman Management Company, and it is contemplated that the
Company will accept the assignment of each of these agreements effective at the
closing.

         10.   INSURANCE AGENT RELATIONSHIP. Seller confirms that it has no
current intention of revoking Seller's appointment of Company as an authorized
agent for Seller after the sale of Company to Buyer, and confirms that Seller
does not currently intend to appoint additional agents in Kentucky besides those
Seller has previously appointed. Seller and Company agree that the agency
Agreement which was entered into effective April 1, 1986, and amended by the
Amendment entered into effective December 9, 1996, shall not terminate
automatically upon the sale of Company to Buyer, and Seller and Company
therefore revise said Amendment by revoking paragraph 4 of said Amendment.
Seller and Buyer agree that, at either party's request, they will promptly enter
into negotiations to determine commission rates for insurance sold under said
agency Agreement.

         11.   INDEMNIFICATION. Seller shall indemnify and hold harmless the
Company and the Buyer against and in respect of any breach of any representation
or warranty in this agreement, provided that Seller is notified of such breach
on or before December 31, 1998. Seller shall also indemnify and hold harmless
the Company and the Buyer against any liabilities of the Company arising out of
actions taken prior to December 31, 1996, to the extent not fully reflected or
reserved against in the Company's unaudited balance sheet as of December 31,
1996. Provided, that this indemnification shall only apply to any such
liabilities which are asserted against Company and reported to Seller on or
before December 31, 1998, and provided that this indemnification shall only
apply to that portion of the total of such liabilities which exceeds

                                       7

<PAGE>   8

$10,000 (including costs and expenses, and excluding insurance recovery). The
Thomas House litigation shall be handled as provided in paragraph 4(h).

         12.   PURCHASE FOR INVESTMENT. The Buyer represents that its purchase
hereunder is being made for its own account for investment, and with no present
intention of resale.

         13.   NATURE AND SURVIVAL OF REPRESENTATIONS. All representations and
warranties in the agreement shall survive the closing.

         14.   BENEFIT. This agreement shall be binding upon, and inure to the
benefit of, the Seller, the Buyer, and their successors and assigns.

         15.   CONSTRUCTION. This agreement is being delivered and is intended
to be performed in the Commonwealth of Kentucky, and shall be construed and
enforced in accordance with the laws of that state.

         16.   NOTICES. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered or mailed, first class postage prepaid, if to Seller, at 303 N.
Hurstbourne Parkway, Suite 200, Louisville, Kentucky 40222-4995, or such other
address as it may have furnished to the Buyer in writing, or, if to the Buyer,
at 1301 N. Hagadorn Road, P.O. Box 4040, East Lansing, Michigan 48826-4040, or
such other address as it may have furnished to the Seller in writing.

                                    KENTUCKY MEDICAL INSURANCE
                                    COMPANY

DATED: March 6, 1997                By:  /s/ Richard I. Hench
       --------                        -----------------------------------------
                                              Its: Chairman and President
                                                  ------------------------------

                                       8

<PAGE>   9

                                    STRATTON, CHEESEMAN & WALSH, INC.

DATED:  February 26, 1997           By: /s/ Terrance L. Walsh
       -------------                   -----------------------------------------
                                          Its: President
                                              ----------------------------------

KMA Insurance Agency, Inc. is signing here to indicate its agreement with the
provision at paragraph 10 of this Agreement, which revokes paragraph 4 of the
amendment executed December 9, 1996 to the agency agreement between KMA
Insurance Agency, Inc. and Kentucky Medical Insurance Company.

                                    KMA INSURANCE AGENCY, INC.

                                    By:  /s/ J. Dennis Johnson
                                       -----------------------------------------
                                           Its: Vice President and COO
                                               ---------------------------------

                                       9

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