Document:

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                                                                    EXHIBIT 10.1

                            STOCK PURCHASE AGREEMENT

                            DATED AS OF JULY 30, 2002

                                  BY AND AMONG

                             SOFTNET SYSTEMS, INC.,

                          INDEPENDENCE HOLDING COMPANY

                                       AND

                                    SSH CORP.

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                                TABLE OF CONTENT

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<S>                                                                                         <C>
ARTICLE I. DEFINED TERMS.....................................................................1

ARTICLE II. THE PURCHASE AND SALE............................................................9

2.1     PURCHASE AND SALE OF COMMON STOCK....................................................9
2.2     FURTHER ACTION......................................................................10

ARTICLE III. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY...........................10

3.1     ORGANIZATION OF THE COMPANY.........................................................10
3.2     CAPITAL STRUCTURE...................................................................10
3.3     NO VIOLATION........................................................................11
3.4     SUBSIDIARIES........................................................................11
3.5     NO GOVERNMENTAL AUTHORIZATION OR CONSENTS REQUIRED..................................11
3.6     ABSENCE OF CERTAIN CHANGES OR EVENTS................................................11
3.7     CONTRACTS AND LEASES................................................................13
3.8     FACILITIES..........................................................................15
3.9     PERMITS.............................................................................15
3.10    FINANCIAL INFORMATION...............................................................15
3.11    BOOKS AND RECORDS...................................................................16
3.12    LITIGATION..........................................................................16
3.13    LABOR MATTERS.......................................................................16
3.14    LIABILITIES.........................................................................17
3.15    COMPLIANCE WITH LAW.................................................................17
3.16    NO BROKERS..........................................................................17
3.17    PROPRIETARY RIGHTS..................................................................17
3.18    EMPLOYEE PLANS......................................................................19
3.19    TRANSACTIONS WITH CERTAIN PERSONS...................................................20
3.20    TAX MATTERS.........................................................................20
3.21    INSURANCE...........................................................................22
3.22    COMPLIANCE WITH ENVIRONMENTAL LAWS..................................................23
3.23    PROXY STATEMENTS....................................................................24
3.24    PROPERTY............................................................................24
3.25    INSURANCE MATTERS...................................................................24
3.26    MATERIAL MISSTATEMENTS OR OMISSIONS.................................................26

ARTICLE IV. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLER AND IHC.....................26

4.1     AUTHORIZATION OF TRANSACTION; NO VIOLATION..........................................26
4.2     VALIDITY OF AGREEMENT...............................................................26
4.3     OWNERSHIP AND DELIVERY OF SHARES....................................................26
4.4     NO BROKERS..........................................................................27

ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER..........................................27

5.1     ORGANIZATION........................................................................27
5.2     AUTHORITY...........................................................................27
5.3     NO GOVERNMENTAL AUTHORIZATION OR CONSENTS REQUIRED..................................28
5.4     CAPITALIZATION......................................................................28
5.5     NO BROKERS..........................................................................28
5.6     REPORTS AND FINANCIAL STATEMENTS....................................................28
5.7     LITIGATION..........................................................................29
5.8     RIGHTS AGREEMENT....................................................................29

ARTICLE VI. COVENANTS AND AGREEMENTS........................................................29
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<TABLE>
<S>                                                                                         <C>
6.1     SELLER'S AND IHC'S CONDUCT OF BUSINESS PRIOR TO CLOSING.............................29
6.2     BUYER'S CONDUCT OF BUSINESS PRIOR TO CLOSING........................................31
6.3     APPROPRIATE ACTION; CONSENTS; FILINGS...............................................31
6.4     BUYER'S STOCKHOLDERS MEETING; FILING THE AMENDED CERTIFICATE........................32
6.5     FULFILLMENT OF CONDITIONS BY SELLER AND THE COMPANY.................................33
6.6     FULFILLMENT OF CONDITIONS BY BUYER..................................................33
6.7     NO SOLICITATION.....................................................................33
6.8     INVESTIGATION BY BUYER..............................................................34
6.9     INVESTIGATION BY SELLER.............................................................34
6.10    SECTION 338 ELECTION................................................................34
6.11    FIRPTA CERTIFICATE..................................................................35
6.12    CONFIDENTIALITY.....................................................................35
6.13    REINSURANCE TREATIES................................................................36

ARTICLE VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER...................................36

7.1     CONDITIONS..........................................................................36

ARTICLE VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.................................37

8.1     CONDITIONS..........................................................................37

ARTICLE IX. CLOSING.........................................................................38

9.1     DELIVERIES AT CLOSING...............................................................38

ARTICLE X. INDEMNIFICATION; TAX MATTERS.....................................................39

10.1    SURVIVAL OF REPRESENTATIONS, ETC....................................................39
10.2    INDEMNIFICATION.....................................................................39
10.3    NOTICE OF CLAIMS....................................................................40
10.4    THIRD PERSON CLAIMS.................................................................41
10.5    LIMITATIONS.........................................................................42
10.6    TAX INDEMNIFICATION; RESPONSIBILITY FOR CERTAIN TAX MATTERS.........................42

ARTICLE XI. TERMINATION.....................................................................45

11.1    TERMINATION.........................................................................45

ARTICLE XII. MISCELLANEOUS..................................................................46

12.1    ASSIGNMENT..........................................................................46
12.2    NOTICES.............................................................................46
12.3    CHOICE OF LAW.......................................................................47
12.4    ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; INTERPRETATION............................47
12.5    COUNTERPARTS........................................................................47
12.6    INVALIDITY..........................................................................47
12.7    HEADINGS............................................................................47
12.8    EXPENSES............................................................................47
12.9    SCHEDULES...........................................................................48
12.10   PUBLICITY...........................................................................48
12.11   NO THIRD-PARTY BENEFICIARIES........................................................48
12.12   FURTHER ASSURANCES..................................................................48
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                            STOCK PURCHASE AGREEMENT

        THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
July 30, 2002 by and among SoftNet Systems, Inc., a Delaware corporation
("Buyer"), SSH Corp., a Delaware corporation ("Seller"), and Independence
Holding Company, a Delaware corporation ("IHC").

                              W I T N E S S E T H :

        WHEREAS, Seller owns all of the outstanding capital stock of First
Standard Holdings Corp., a Delaware corporation (the "Company") and a
wholly-owned subsidiary of Seller;

        WHEREAS, the Company owns (i) all of the outstanding capital stock of
First Standard Security Insurance Company, a Delaware corporation ("First
Standard"), and (ii) all of the membership interests in IndependenceCare
Holdings LLC, a Delaware limited liability company ("Independence");

        WHEREAS, IHC owns, and as of the Closing, the Company shall own all of
the outstanding capital stock of Risk Assessment Strategies, Inc., a Delaware
corporation ("RAS");

        WHEREAS, Seller is an indirect wholly-owned subsidiary of IHC, and IHC
will benefit from the consummation of the transactions contemplated by this
Agreement;

        WHEREAS, contemporaneously herewith, Madison Investors Corporation, a
Delaware corporation ("Madison") and an Affiliate of IHC, is purchasing
5,000,000 shares of Buyer's common stock, par value $0.01 per share, from Cyber
Net Technologies Limited, a British Virgin Islands corporation and wholly-owned
subsidiary of Pacific Century Cyberworks Limited, a company incorporated in Hong
Kong with limited liability;

        WHEREAS, Seller desires to sell and Buyer desires to purchase all of the
outstanding stock of the Company for cash; and

        WHEREAS, Buyer and Seller desire to make certain representations and
warranties and other agreements in connection with this sale of all of the
outstanding stock of the Company; and

        NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:

                                   ARTICLE I.
                                  DEFINED TERMS

        As used herein, the terms below shall have the following meanings. Any
of such terms, unless the context otherwise requires, may be used in the
singular or plural, depending upon the reference.

        "AAA" shall have the meaning set forth in Section 10.3(b)(ii) of this
Agreement.

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        "Action" shall mean any action, claim, suit, litigation, proceeding,
labor dispute, arbitral action, governmental audit, inquiry, criminal
prosecution, investigation or unfair labor practice charge or complaint.

        "Acquired Proprietary Rights" shall mean all of the Company's and its
Subsidiaries' Proprietary Rights related to the Business, including, without
limitation, those set forth on Schedule 3.17(a) to this Agreement.

        "Affiliate" shall have the meaning set forth in the Securities Exchange
Act of 1934, as amended.

        "Agreement" shall have the meaning set forth in the preamble to this
Agreement.

        "Amended Certificate" shall have the meaning set forth in Section 6.4 of
this Agreement.

        "Ancillary Agreements" shall mean the agreements, certificates and
documents required hereunder to consummate the Closing.

        "Arbitrator" shall have the meaning set forth in Section 10.3(b)(ii) of
this Agreement.

        "Books and Records" shall have the meaning set forth in Section 3.11.

        "Business" shall mean the business of the Company and its Subsidiaries,
taken as a whole, which relates to insurance and reinsurance.

        "Business Day" shall mean any day on which banks are not required or
authorized to close in the New York, New York.

        "Buyer" shall have the meaning set forth in the preamble to this
Agreement.

        "Buyer Indemnified Parties" shall have the meaning set forth in Section
10.2(a) of this Agreement.

        "Buyer Material Adverse Effect" or "Buyer Material Adverse Change" shall
mean any change affecting, or condition having an effect on, Buyer and Buyer's
Subsidiaries that is, or would reasonably be expected to be, materially adverse
to the assets, Liabilities, business, financial condition or results of
operations of Buyer and Buyer's Subsidiaries, taken as a whole.

        "Buyer SEC Reports" shall have the meaning set forth in Section 5.6 of
this Agreement.

        "Buyer's Books and Records" shall mean its true, correct and complete
books and records and accounts, which, in reasonable detail, accurately and
fairly reflect the activities of Buyer and its Subsidiaries.

"Buyer's Contracts" shall mean all agreements, contracts, notes, loans,
evidences of indebtedness, leases, purchase orders, letters of credit,
indentures, security or pledge agreements, undertakings, practices, covenants
not to compete, employment agreements, severance

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agreements, licenses, instruments, obligations and commitments to which Buyer or
any of its Subsidiaries is a party or is bound, whether oral or written.

        "Buyer's Disclosure Schedules" shall mean the schedules delivered by
Buyer to IHC and Seller as of the date hereof which set forth the exceptions to
the representations and warranties contained in Article V of this Agreement and
certain other information called for by this Agreement.

        "Buyer's Stockholders Meeting" shall have the meaning set forth in
Section 6.4 of this Agreement.

        "Claim Notice" shall have the meaning set forth in Section 10.3(a) of
this Agreement.

        "Closing" shall have the meaning set forth in Section 2.1(b) of this
Agreement.

        "Closing Date" shall have the meaning set forth in Section 2.1(b) of
this Agreement.

        "COBRA" shall have the meaning set forth in Section 3.18(d) of this
Agreement.

        "Code" shall mean the Internal Revenue Code of 1986, as amended.

        "Common Stock" shall mean the common stock of the Company, par value
$.01 per share.

        "Company" shall have the meaning set forth in the recitals to this
Agreement.

        "Confidential Information" shall have the meaning set forth in Section
6.12 of this Agreement.

        "Consents" shall mean any and all consents, assignments, approvals,
authorizations or waivers of any public, governmental or regulatory body or
authority or of any other party, including parties to Contracts, that are (a)
required for the consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements or (b) necessary or desirable in order that Buyer
can conduct the Business after the Closing Date substantially in the same manner
as the Business was conducted before the Closing Date.

        "Contract" shall have the meaning set forth in Section 3.7(a) of this
Agreement.

        "Copyrights" shall mean all United States and foreign copyrights,
including, without limitation all registered copyrights, copyright applications
and unregistered copyrights.

        "Court Order" shall mean any judgment, decision, consent decree,
injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any Person or its property
under applicable law.

        "Damages" shall have the meaning set forth in Section 10.2(a) of this
Agreement.

        "Default" shall mean (a) any actual breach or default, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach or default or

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(c) the occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right of termination,
renegotiation or acceleration.

        "Disclosure Schedules" shall mean the schedules delivered by Seller and
IHC to Buyer as of the date hereof which set forth the exceptions to the
representations and warranties contained in Article III and Article IV of this
Agreement and certain other information called for by this Agreement.

        "Dispute Notice" shall have the meaning set forth in Section 10.3(b) of
this Agreement.

        "Employee Plan" shall mean any "employee pension benefit plan" as
defined in Section 3(2) ERISA, any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, and other benefit arrangement that is neither an employee
pension benefit plan nor an employee welfare benefit plan, within the meaning of
ERISA, including any employment, consulting, severance or other similar
contract, arrangement or policy and each plan, arrangement (written or oral),
program, agreement or commitment providing for insurance coverage (including
without limitation any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
fringe benefits, retirement benefits, life, health, disability or accident
benefits or for deferred compensation, profit-sharing bonuses, stock options,
stock appreciation rights, stock purchases or other equity compensation benefits
or other forms of incentive compensation, termination allowance or
post-retirement insurance sponsored, maintained or contributed to by the Company
or its Subsidiaries or any ERISA Affiliate.

        "Encumbrance" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.

        "Environmental Law" shall mean any and all federal, state, local and
foreign statutes, laws, regulations, ordinances or rules relating to the
environment; emissions, discharges or releases of Substances into the
environment, including, without limitation, ambient air, surface water,
groundwater or land; or the Handling of Substances or the investigation,
clean-up or other remediation or analysis thereof.

        "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the rules, regulations and interpretations promulgated
thereunder.

        "ERISA Affiliate" shall mean each other Person that, together with the
Company and its Subsidiaries as of the relevant measuring date under ERISA, is
required to be treated as a single employer under Section 414 of the Code.

        "Financial Statements" shall mean the Fiscal Year-End Financial
Statements and the Interim Financial Statements.

        "First Standard" shall have the meaning set forth in the recitals to
this Agreement.

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        "Fiscal Year-End Financial Statements" shall mean the consolidated
audited financial statements of each of First Standard, and RAS as of and for
the fiscal year ended December 31, 2001, and the consolidated unaudited
financial statements of Independence as of and for the fiscal year ended
December 31, 2001.

        "Fixtures and Equipment" means all of the furniture, fixtures,
furnishings, machinery, computer hardware and other tangible personal property
owned by the Company or its Subsidiaries, wherever located.

        "GAAP" means generally accepted accounting principles, consistently
applied, of the United States.

        "Handling" shall have the meaning set forth in the definition of
Pre-Closing Environmental Matters.

        "IHC" shall have the meaning set forth in the preamble to this
Agreement.

        "Indemnified Party" shall have the meaning set forth in Section 10.3(a)
of this Agreement.

        "Indemnitor" shall have the meaning set forth in Section 10.3(a) of this
Agreement.

        "Independence" shall have the meaning set forth in the recitals to this
Agreement.

        "Interim Balance Sheets" shall mean the consolidated unaudited balance
sheets of each of First Standard, RAS and Independence dated the Interim Balance
Sheet Date.

        "Interim Balance Sheet Date" shall mean March 31, 2002.

        "Interim Financial Statements" shall mean the Interim Balance Sheet and
the consolidated unaudited statements of operations and cash flow of each of
First Standard, RAS and Independence for the period ended on the Interim Balance
Sheet Date.

        "Knowledge of the Buyer," the "Buyer's knowledge" or similar reference,
shall mean the actual knowledge of each of the directors and officers of Buyer
and its Subsidiaries, and knowledge that a director or officer of Buyer or any
of its Subsidiaries should have had after reasonable inquiry.

        "Knowledge of the Company," the "Company's knowledge" or similar
reference, shall mean the actual knowledge of each of the directors and officers
of Seller, the Company and its Subsidiaries, and knowledge that a director or
officer of Seller, the Company or any of its Subsidiaries should have had after
reasonable inquiry.

        "Laws" shall mean any laws, statutes, ordinances, regulations, rules,
notice requirements, court decisions, agency guidelines, principles of law and
orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation environmental,
energy, motor vehicle safety, public utility, zoning, building and health codes,
occupational safety and health regulations, franchise laws and regulations and
laws

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respecting employment practices, employee documentation, terms and conditions of
employment and wages and hours.

        "Leased Property" shall have the meaning set forth in Section 3.8 of
this Agreement.

        "Leases" shall mean all of the existing leases, subleases, occupancy
agreements, options, rights, concessions or other agreements or arrangements
with respect to the Real Property or personal property of the Company or its
Subsidiaries as listed on Schedule 3.7, Schedule 3.8 and Schedule 3.24.

        "Liabilities" shall mean any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, known or unknown, and whether accrued, absolute,
contingent, matured, unmatured or other.

        "Madison" shall have the meaning set forth in the recitals to this
Agreement.

        "Material Adverse Effect" or "Material Adverse Change" shall mean, with
respect to the Company and its Subsidiaries, taken as a whole, any material
adverse effect on, or material adverse change in the condition (financial or
otherwise), business, results of operations, prospects, assets, Liabilities or
operations of the Business or the Company or on the ability of Seller or IHC to
consummate the transactions contemplated hereby, or any event or condition which
would or would be reasonably likely, with the passage of time, to constitute a
"Material Adverse Effect" or "Material Adverse Change."

        "Material Contract" shall have the meaning set forth in Section 3.7(b)
of this Agreement.

        "Multiemployer Plan" shall have the meaning set forth in Section 3.18(c)
of this Agreement.

        "MNL" shall have the meaning set forth in Section 6.13 of this
Agreement.

        "Operating Site" shall have the meaning set forth in the definition of
Pre-Closing Environmental Matters.

        "Ordinary Course of Business" or "Ordinary Course" or any similar phrase
shall mean the ordinary course of the Business or Buyer's business, as
applicable, in any case consistent with past practice.

        "Patents" shall mean all U.S. and foreign patents, patent applications,
patent disclosures and improvements thereto and including, without limitation,
any divisionals, continuations, continuations-in-part, reissues, and
reexamination certificates therefrom and additions thereto and extensions
thereof and any supplementary protection certificates, including without
limitation all provisional and petty patents and patent applications and utility
models and designs and applications therefor.

        "PCBs" shall have the meaning set forth in the definition of Pre-Closing
Environmental Matters.

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        "Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other Person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of, the Business.

        "Permitted Encumbrances" shall mean (a) statutory liens of landlords,
liens of carriers, warehousepersons, mechanics and materialpersons incurred in
the ordinary course of business for sums (i) not yet due and payable or (ii)
being contested in good faith, if, in either such case, an adequate reserve,
shall have been made therefor in such Person's financial statements, (b) liens
incurred or deposits made in connection with workers' compensation, unemployment
insurance and other similar types of social security programs or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return of money bonds and similar
obligations, in each case in the ordinary course of business, consistent with
past practice, (c) easements, rights-of-way, restrictions and other similar
charges or encumbrances, in each case, which do not interfere with the ordinary
conduct of business of such Person and do not materially detract from the value
of the property upon which such encumbrance exists, (d) liens securing taxes,
assessments and governmental charges not yet delinquent, (e) purchase money
security interests incurred in the ordinary course of business and consistent
with past practice, and (f) liens related to leased furniture and equipment.

        "Person" shall mean any person or entity, whether an individual,
trustee, corporation, partnership, limited partnership, limited liability
company, trust, unincorporated organization, business association, firm, joint
venture, or governmental agency or authority.

        "Pre-Closing Environmental Matters" shall mean (a) the production, use,
generation, emission, storage, treatment, transportation, recycling, disposal,
discharge, release, or other handling or disposition of any kind at any time on
or prior to the Closing Date (collectively "Handling") by the Company or its
Subsidiaries of any "hazardous substance," "hazardous waste," "pollutant,"
"contaminant" or "toxic substance," as defined by Environmental Laws applicable
to the Company and its Subsidiaries (collectively "Substances"), either in, on,
from or under any Real Property or facility owned, leased or used at any time by
the Company or its Subsidiaries (or an Affiliate of the Company or its
Subsidiaries) (an "Operating Site"), and (b) any other act or omission of the
Company or its Subsidiaries (or Affiliate of the Company or its Subsidiaries)
prior to the Closing Date that gives rise to liability or potential liability
under any Environmental Law.

        "Proposed Competing Transactions" shall have the meaning set forth in
Section 6.7 of this Agreement.

        "Proprietary Rights" means (a) Patents, (b) Trademarks, (c) Copyrights,
(d) U.S. and foreign mask work rights and registrations and applications for
registration thereof, (e) Trade Secrets, (f) URL registrations, (g) other
proprietary rights, (h) copies and tangible embodiments thereof (in whatever
form or medium) and (i) licenses granting any rights with respect to any of the
foregoing.

        "Proxy Statement" shall have the meaning set forth in Section 3.23 of
this Agreement.

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        "Purchase Consideration" shall have the meaning set forth in Section
2.1(b) of this Agreement.

        "RAS" shall have the meaning set forth in the recitals to this
Agreement.

        "Real Property" shall mean all real property owned or leased by or used,
or intended by the Company or its Subsidiaries for use, in connection with the
Business, together with all buildings, improvements, fixtures, easements,
licenses, options, insurance proceeds and condemnation awards and all other
rights of the Company or its Subsidiaries in or appurtenant thereto.

        "Reinsurance Arrangements" shall have the meaning set forth in Section
3.25(d) of this Agreement.

        "Reinsurance Treaties" shall have the meaning set forth in Section 6.13
of this Agreement.

        "Representative" with respect to any Person shall mean any officer,
director, principal, attorney, agent, employee or other representative of such
Person.

        "Resolved Dispute Notice" shall have the meaning set forth in Section
10.3(c) of this Agreement.

        "Section 338(h)(10) Election" shall have the meaning set forth in
Section 6.10(a) of this Agreement.

        "Section 338(h)(10) Forms" shall have the meaning set forth in Section
6.10(c) of this Agreement.

        "Seller" shall have the meaning set forth in the preamble to this
Agreement.

        "SSLICNY" shall have the meaning set forth in Section 6.13 of this
Agreement.

        "Subsidiary" or "Subsidiaries" of a Person shall mean as of the date
hereof or as of the Closing Date (i) any corporation or company in an unbroken
chain of corporations or companies beginning with such Person if each of the
corporations or companies other than the last corporation or company in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations or
companies in such chain, (b) any partnership or limited liability company in
which the Person is a general partner or managing member, or (c) any partnership
or limited liability company in which the Person possesses a 50% or greater
interest in the total capital or total income of such partnership or limited
liability company.

        "Substances" shall have the meaning set forth in the definition of
Pre-Closing Environmental Matters.

        "Tax" or "Taxes" shall mean any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits,

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environmental, customs duties, capital stock, franchise, profits, withholding,
social security, unemployment, disability, Real Property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.

        "Tax Returns" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.

        "Trademarks" shall mean all U.S. and foreign trademarks and service
marks, including, without limitation, registered trademarks, registered service
marks, trademark and service mark applications and unregistered trademarks and
service marks.

        "Trade Secrets" means all trade secrets and confidential information,
whether patentable or unpatentable and whether or not reduced to practice,
(including ideas, formulas, compositions, discoveries, inventions, know-how,
moral rights, research and development information, software, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans marketing mailing and e-mail lists, and customer and
supplier mailing and e-mail lists and information).

        "Transfer Taxes" shall have the meaning set forth in Section 10.6(g) of
this Agreement.

        "Terminating Buyer Breach" shall have the meaning set forth in Section
11.1(e) of this Agreement.

        "Terminating Company Breach" shall have the meaning set forth in Section
11.1(d) of this Agreement.

                                   ARTICLE II.
                              THE PURCHASE AND SALE

               2.1 Purchase and Sale of Common Stock.

                   (a) On and subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell, and
IHC shall cause Seller to sell, to Buyer, all of the Common Stock held by
Seller, representing all of the outstanding shares of the Company, for the
consideration set forth below in this Section 2.1.

                   (b) Unless this Agreement is earlier terminated pursuant to
Article XI or if Buyer and Seller shall otherwise agree, the closing of the
transactions contemplated by this Agreement (the "Closing") will take place at
the location mutually agreed upon by the parties to this Agreement, as soon as
practicable (but in no event more than two (2) Business Days) after the
conditions set forth in Articles VII and VIII of this Agreement shall have been
satisfied or waived (the "Closing Date"). On the Closing Date, in addition to
the deliveries of Buyer, Seller and IHC set forth in Section 9.1, Buyer agrees
to pay Seller $31,920,000 in cash (the "Purchase Consideration"), and Seller
agrees to deliver, and IHC shall cause Seller to deliver, to Buyer the

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stock certificates representing all of the Common Stock of the Company, endorsed
in blank or accompanied by duly executed assignment documents.

               2.2 Further Action. Buyer, Seller and IHC shall take all such
reasonable lawful action as may be necessary or appropriate in order to effect
the transactions contemplated by this Agreement as promptly as practicable.

                                  ARTICLE III.
              REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

        As an inducement to the Buyer to enter into this Agreement, IHC and
Seller hereby jointly and severally represent and warrant to Buyer as follows,
which representations and warranties are, as of the date hereof, and will be, as
of the Closing Date, true, complete and correct:

               3.1 Organization of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware with full corporate power and corporate authority to conduct
its business as it is presently being conducted, to own or lease, as applicable,
its Real Property, and to perform all its obligations under the Contracts to
which it is a party. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
its properties owned or leased or the nature of its activities make such
qualification necessary, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect. Copies of the Company's
certificate of incorporation and bylaws heretofore delivered to Buyer are
accurate and complete as of the date hereof.

               3.2 Capital Structure.

                   (a) As of the date of this Agreement, the authorized capital
stock of the Company consists of 1,000 shares of Common Stock, of which 100
shares are issued and outstanding. All of the outstanding shares of Common Stock
are owned of record by Seller. No additional shares of capital stock of the
Company will be issued after the date hereof. Other than this Agreement, the
Company does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of Common Stock or any other equity
securities of the Company or any securities representing the right to purchase,
convert into or otherwise receive any shares of Common Stock or other equity
securities of the Company, or requiring the Company to repurchase, redeem or
otherwise acquire any shares of its capital stock.

                   (b) There are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote. No shares of the Company's outstanding
capital stock are subject to any preemptive rights, rights of first refusal or
other rights to purchase such stock (whether in favor of the Company or any
other person).

                   (c) The outstanding shares of the capital stock of the
Company are duly authorized and validly issued, fully paid and nonassessable,
and have been approved by all

                                       10
<PAGE>

requisite action. All outstanding Company securities have been issued in
compliance with the applicable state and federal securities laws. The stock
ledgers and related records provided by the Company to Buyer are complete and
accurate in all respects.

               3.3 No Violation. Neither the execution and delivery of this
Agreement or the Ancillary Agreements by Seller and IHC nor the consummation by
Seller and IHC of the transactions contemplated hereby and thereby, nor
compliance by Seller and IHC with any of the terms or provisions hereof and
thereof, will (i) violate or conflict with any provision of the Company's
certificate of incorporation or bylaws, (ii) violate, conflict with, or result
or constitute a Default under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination or acceleration
under, any of the terms, conditions or provisions of any Material Contract or
Permit, (iii) violate, conflict with, contravene or give any Person the right to
exercise any remedy or obtain any relief under any Law or Court Order or (iv) or
impose any Encumbrance on the assets or property of the Company or any of its
Subsidiaries.

               3.4 Subsidiaries. Schedule 3.4 sets forth all of the Subsidiaries
of the Company. The Company owns directly all of the outstanding shares of
capital stock or other equity interests of each of its Subsidiaries, except as
set forth on Schedule 3.4. All of the outstanding shares of capital stock in the
Company's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. All of the outstanding
shares of capital stock of the Subsidiaries owned by Company are owned free and
clear of all Encumbrances. There are no options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements, commitments, stock
appreciation rights or similar derivative securities which obligate Company or
its Subsidiaries to issue, transfer or sell any shares of capital stock of any
of the Company's Subsidiaries or make any payments in lieu thereof. Except for
interests in the Company's Subsidiaries as set forth on Schedule 3.4, the
Company does not own directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business, trust
or other entity. Unless the context otherwise requires, each reference to the
Company in this Agreement shall be deemed to include each of its Subsidiaries.

        3.5 No Governmental Authorization or Consents Required. Except for
filings and consents required by the Insurance Commissioner of the State of
Delaware, prior to the Closing, no consent, order, authorization or approval or
other action by, and no notice or disclosure to or filing with, any governmental
or regulatory authority will be required to be obtained or made by Seller, IHC,
the Company or any of its Subsidiaries in connection with the due execution and
delivery by the Company of this Agreement and the Ancillary Agreements and the
consummation by the Company of the transactions contemplated hereby.

               3.6 Absence of Certain Changes or Events. Except as disclosed in
Schedule 3.6, since January 1, 2002, there has not been any:

                   (a) Material Adverse Change;

                   (b) sale, assignment or transfer of any of the material
assets of the Company or any of its Subsidiaries, singly or in the aggregate,
other than sales, assignments or transfers of assets in the Ordinary Course of
Business consistent with past practice;

                                       11
<PAGE>

                   (c) waiver of any material rights of value to the Company or
any of its Subsidiaries, except in the Ordinary Course of Business and
consistent with past practice;

                   (d) amendment, cancellation or termination of any material
Contract or Permit material to the Company or any of its Subsidiaries taken as a
whole;

                   (e) capital expenditure, execution of any Lease or the
incurrence of any obligations by the Company or any of its Subsidiaries to make
any capital expenditure or execute any Lease, involving payments in excess of
$50,000 individually or $250,000 in the aggregate;

                   (f) failure to pay any material obligation except those
contested in good faith and for which proper reserves have been made;

                   (g) failure to operate the Business in the Ordinary Course or
to use reasonable efforts to preserve the Business intact and to preserve the
goodwill of parties having business relations with the Company, its Subsidiaries
or their Representatives;

                   (h) change in any method of accounting or accounting practice
by the Company or its Subsidiaries except for such change required by reason of
a concurrent change in GAAP;

                   (i) revaluation of any of the assets, including without
limitation, writing off notes or accounts receivable other than those for which
reserves were established in the Interim Balance Sheet;

                   (j) damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the Company or its Subsidiaries as
a whole or the operation of the Business;

                   (k) creation of a new material Encumbrance, singly or in the
aggregate, other than a Permitted Encumbrance against any of the assets of the
Company or its Subsidiaries;

                   (l) indebtedness incurred by the Company or any of its
Subsidiaries for borrowed or purchase money or any commitment to borrow money
entered into by the Company or its Subsidiaries, or any loans made or agreed to
be made by the Company or its Subsidiaries other than indebtedness in the
Ordinary Course of Business to meet working capital requirements and capital
expenditure requirements;

                   (m) material Liability incurred by the Company or any of its
Subsidiaries;

                   (n) any change in any assumptions underlying or methods of
calculating any bad debt, contingency or other reserves;

                                       12
<PAGE>

                   (o) payment, discharge or satisfaction of any material
Liabilities of the Company or its Subsidiaries, singly or in the aggregate,
other than the payment, discharge or satisfaction of Liabilities in the Ordinary
Course of Business;

                   (p) distribution or incurrence of any obligation to make any
distribution by the Company to Seller;

                   (q) increase in compensation or benefits payable to or to
become payable to any employees, officers or directors of the Company or its
Subsidiaries other than immaterial increases in the Ordinary Course of Business
or any establishment of any new Employee Plans;

                   (r) other event or condition of any character which in any
one case or in the aggregate has had or might be reasonably expected to have a
Material Adverse Effect; or

                   (s) agreement by the Company, its Subsidiaries, Seller or IHC
to do any of the foregoing.

               3.7 Contracts and Leases.

                   (a) For purposes of this Agreement, "Contracts" shall mean
all agreements, contracts, notes, loans, evidences of indebtedness, Leases,
purchase orders, letters of credit, indentures, security or pledge agreements,
undertakings, practices, covenants not to compete, employment agreements,
severance agreements, licenses, instruments, obligations and commitments to
which the Company or any of its Subsidiaries is a party or is bound, whether
oral or written.

                   (b) "Material Contracts" shall mean:

                       (i) Contracts not made in the Ordinary Course of
Business;

                       (ii) license agreements or royalty agreements, whether
the Company or any of its Subsidiaries is the licensor or licensee thereunder;

                       (iii) confidentiality and non-disclosure agreements
(whether the Company or any of its Subsidiaries is the beneficiary or the
obligated party thereunder);

                       (iv) contracts involving future expenditures or
liabilities, actual or potential, or future revenues in excess of $25,000 after
the date hereof or otherwise material to the Business;

                       (v) employment contracts, consulting contracts and
severance agreements, including contracts (A) to employ or terminate executive
officers or other personnel and other contracts with present or former officers
or directors of the Company or its Subsidiaries or (B) that will result in the
payment by, or the creation of any Liability to pay on behalf of the Company,
any of the Company's Subsidiaries, Seller or Buyer any severance, termination,
"golden parachute," or other similar payments to any present or former personnel
of

                                       13
<PAGE>

the Company or its Subsidiaries following termination of employment or otherwise
as a result of the consummation of the transactions contemplated by this
Agreement;

                       (vi) indemnification agreements;

                       (vii) promissory notes, loans, loan agreements,
indentures, evidences of indebtedness, guarantees, currency or interest rate
agreements or other instruments relating to an obligation to pay money, whether
the Company or any of its Subsidiaries is the borrower, lender or guarantor
thereunder;

                       (viii) contracts containing covenants limiting the
freedom of the Company or any officer, director, employee, or any other
Affiliate of the Company or its Subsidiaries, to engage in any line of business
or compete with any Person;

                       (ix) any Contract with the federal, state or local
government or any agency or department thereof;

                       (x) Leases;

                       (xi) letters of credit;

                       (xii) any other Contract material to the operation of the
Business; and

                       (xiii) that certain Amended and Restated Credit Agreement
between Independence Capital Corp., a Delaware corporation and Subsidiary of
IHC, and Bank of America, NA dated June 14, 1999.

True, correct and complete copies of all of the Material Contracts which are
written, or written summaries of oral Material Contracts, including all
amendments and supplements thereto, have been made available to Buyer, and a
list of all Material Contracts is set forth on Schedule 3.7(b). Each such
Material Contract is in full force and effect, paid currently, and has not been
materially impaired by any acts or omissions of the Company, its Subsidiaries or
any of their respective Representatives. Except as set forth on Schedule 3.7(b),
no Material Contract requires the consent of any other contracting party to the
consummation of the transactions contemplated by this Agreement or the Ancillary
Agreements. Each of the Material Contracts is valid, binding and enforceable in
accordance with its terms except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
enforcement of creditor's rights generally and except insofar as the
availability of equitable remedies may be limited by applicable law. The Company
or its Subsidiaries have fulfilled, or taken all action necessary to enable them
to fulfill when due, all of its obligations under each of the Material
Contracts. To the Knowledge of the Company, all other parties to the Material
Contracts have complied in all material respects with the provisions thereof, no
party is in Default thereunder and no notice of any claim of Default has been
given to or by the Company or its Subsidiaries. The Company has no knowledge of
any intent by any party to any Material Contract to terminate or amend the terms
thereof or to refuse to renew any such Material Contract upon expiration of its
term.

                                       14
<PAGE>

               3.8 Facilities. The Company owns no Real Property. The Company
has leasehold interests in the Real Property specified on Schedule 3.8 (the
"Leased Properties"). The Company and each of its Subsidiaries has valid
leasehold interests in, all of its Leased Properties subject only to
Encumbrances set forth on Schedule 3.8(a) and Permitted Encumbrances. The
Company and each of its Subsidiaries has complied with the terms of all Leases
with respect to Leased Properties to which it is a party that are material to
the conduct of the Business taken as a whole and under which it is in occupancy,
and all such Leases are in full force and effect. Except as disclosed on
Schedule 3.8(b), no consent is required of any landlord or other third party to
any Lease to consummate the transactions contemplated by the Agreement or any
Ancillary Agreement, and upon consummation of the transactions contemplated
hereby and thereby, each Lease will continue to entitle the Company or its
Subsidiaries to the use and possession of the Real Property specified in such
Lease and for the purposes for which such Real Property is now being used by the
Company or its Subsidiaries. With respect to each of the Leased Properties: (a)
each is in material compliance with all applicable zoning ordinances, building
codes, and other laws and regulations, including, without limitation, those
relating to human health and the environment; and (b) the Company and its
Subsidiaries have disclosed to the Buyer any material defects known to them with
respect to the physical condition and maintenance of the Leased Properties, and
to their knowledge there are no facts or circumstances that adversely affect the
Leased Properties or any portion thereof that has not been disclosed to the
Buyer.

               3.9 Permits. Schedule 3.9 sets forth a complete list of all
material Permits used in the operation of the Business or otherwise held by the
Company or its Subsidiaries, all of which are as of the date hereof, and all of
which will be as of the Closing Date, in full force and effect. The Company and
its Subsidiaries have, and at all times have had, all Permits required under any
Law for the operation of the Business, and own or possess such Permits free and
clear of all Encumbrances. The Company and its Subsidiaries are not in Default,
nor have they received any notice of any claim of Default, with respect to any
such Permit. Except as otherwise governed by law, all such Permits are renewable
by their terms or in the Ordinary Course of Business without the need to comply
with any special qualification procedures or to pay any amounts other than
routine filing fees and will not be adversely affected by the completion of the
transactions contemplated by this Agreement or the Ancillary Agreements. No
present or former stockholder, director, officer or employee of the Company, any
of its Subsidiaries or any Affiliate thereof, or any other Person, owns or has
any proprietary, financial or other interest (direct or indirect) in any Permit
which the Company or its Subsidiaries owns, possesses or uses.

               3.10 Financial Information. The Company heretofore has delivered
to Buyer true and correct copies of the Financial Statements. The Financial
Statements (a) are complete in all material respects, (b) are in accordance with
the Books and Records, (c) have been prepared in accordance with GAAP and (d)
fairly and accurately present the consolidated assets, Liabilities (including
all reserves) and financial position of the Company as of the respective dates
thereof and the results of operations and changes in cash flows for the periods
then ended (subject, in the case of the Interim Financial Statements, to normal
year-end adjustments which will not be material in amount). At the respective
dates of the Financial Statements, there were no Liabilities of the Company or
its Subsidiaries, which, in accordance with GAAP, should have

                                       15
<PAGE>

been set forth or reserved for in the Financial Statements or the notes thereto,
which are not set forth or reserved for in the Financial Statements or the notes
thereto.

               3.11 Books and Records. The Company has made and kept (and
delivered to Buyer) its true, correct and complete books and records and
accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company and its Subsidiaries (the "Books and Records"). The
minute books of the Company and its Subsidiaries previously delivered to Buyer
accurately and adequately reflect all action previously taken by the
stockholders, board of directors and committees of the board of directors of the
Company and its Subsidiaries. The copies of the stock book records of the
Company and its Subsidiaries previously delivered to Buyer in connection with
Buyer's due diligence are true, correct and complete, and accurately reflect all
transactions effected in the Company's and its Subsidiaries' equity securities
through and including the date hereof. The Company and its Subsidiaries have not
in any material respect engaged in any transaction, maintained any bank account
or used any corporate funds except for transactions, bank accounts and funds
which have been and are reflected in the Books and Records.

               3.12 Litigation. Except as disclosed on Schedule 3.12, there is
no Action pending, or to the Knowledge of the Company, threatened or
anticipated, (i) against, related to or affecting (A) the Company, its
Subsidiaries or the Business (including, without limitation, with respect to
Environmental Laws), (B) any officers or directors of the Company or its
Subsidiaries, in such capacity or (C) any stockholder of the Company in such
stockholder's capacity as a stockholder of the Company, (ii) seeking to delay,
limit or enjoin the transactions contemplated by this Agreement or the Ancillary
Agreements, (iii) that involves the risk of criminal liability, or (iv) in which
the Company or its Subsidiaries is a plaintiff, including any derivative suits
brought by or on behalf of the Company or its Subsidiaries. Neither the Company
nor any of its Subsidiaries is in Default with respect to or subject to any
Court Order, and there are no unsatisfied judgments against the Company, its
Subsidiaries or the Business. To the Knowledge of the Company, there is not a
reasonable likelihood of an adverse determination of any pending Action. There
are no Court Orders or agreements with, or liens by, any governmental authority
or quasi-governmental entity relating to any Environmental Laws which regulate,
obligate, bind or in any way affect the Company, its Subsidiaries or the
Business.

               3.13 Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to any labor agreement with respect to its employees
with any labor organization, union, group or association, and there are no
employee unions (nor any other similar labor or employee organizations) under
local statutes, custom or practice which pertain to employees of the Company or
its Subsidiaries. Neither the Company nor any of its Subsidiaries has
experienced any attempt by organized labor or its representatives to make it
conform to demands of organized labor relating to its employees or to enter into
a binding agreement with organized labor that would cover the employees of the
Company or its Subsidiaries. There is no labor strike or labor disturbance
pending or threatened against the Company or its Subsidiaries, nor is any
grievance currently being asserted, and neither the Company nor any of its
Subsidiaries has experienced a work stoppage or other labor difficulty, and is
not and has not engaged in any unfair labor practice. The Company and each of
its Subsidiaries is in compliance in all material respects with all applicable
Laws relating to the employment of labor, including but not limited to wages,
hours and collective bargaining. Without limiting the foregoing, the Company and
each of its

                                       16
<PAGE>

Subsidiaries are in compliance with the Immigration Reform and Control Act of
1986 and maintain a current Form I-9, as required by such act, in the personnel
file of each employee hired after November 9, 1986. Neither the Company nor any
of its Subsidiaries has received any notice of a sex, age, race, disability,
gender or religious discrimination claim brought or threatened to be brought
against the Company or its Subsidiaries. A schedule of the names and current
annual salary rates or current hourly wages of all present employees of the
Company and its Subsidiaries whose annual cash compensation for the 2002
calendar year is expected to exceed $75,000 and the earnings for each such
employee as reflected on Form W-2 for the 2001 calendar year has been provided
to Buyer. No employee of the Company or its Subsidiaries is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
non-competition or proprietary rights agreement, between such employee and any
other Person that in any way adversely affects or will affect the performance of
his or her duties as an employee of the Company, its Subsidiaries or Buyer.

               3.14 Liabilities. The Company and its Subsidiaries have no
material Liabilities due or to become due, except (a) Liabilities which are
reflected and appropriately reserved for in the Financial Statements, (b)
Liabilities arising in the Ordinary Course of Business under Contracts, Leases,
Permits and other business arrangements and (c) Liabilities incurred since the
Interim Balance Sheet Date in the Ordinary Course of Business and in accordance
with this Agreement (none of which relates to any material Default under any
Contract, Lease or Permit, breach of warranty, tort, infringement or violation
of any Law or Court Order or arose out of any Action).

               3.15 Compliance with Law. The Company, its Subsidiaries and the
conduct of the Business have not violated in any material respect and are in
compliance in all material respects with all Laws and Court Orders relating to
the Company, its Subsidiaries or the Business. Except as set forth on Schedule
3.15, since January 1, 1999, none of IHC, Seller, the Company or their
respective Subsidiaries has received any notice to the effect that, or otherwise
been advised that, the Company or any of its Subsidiaries is not in compliance
with any such Laws or Court Orders, and none of IHC, Seller, the Company or
their respective Subsidiaries has any reason to anticipate that any existing
circumstances are likely to result in violations of any of the foregoing.

               3.16 No Brokers. None of IHC, Seller, the Company or their
respective Subsidiaries nor any of their Representatives has entered into or
will enter into any contract, agreement, arrangement or understanding with any
broker, finder or similar agent or any Person which will result in the
obligation of Buyer, the Company or any of their respective Affiliates to pay
any finder's fee, brokerage fees or commission or similar payment in connection
with the transactions contemplated by this Agreement and the Ancillary
Agreements.

               3.17 Proprietary Rights.

                    (a) Schedule 3.17(a) contains a complete list of each item
of Acquired Proprietary Rights whether or not such Acquired Proprietary Rights
has been registered, filed or for which an application to register is pending,
including: the (i) applicable registration or application number; (ii) filing,
registration, issue or application date; (iii) inventors; (iv) record owner; (v)
country; (vi) title or description; and (vii) remaining life. Schedule 3.17(a)
also

                                       17
<PAGE>

includes a description of each material license, agreement, or other written
permission under which the Business uses any Proprietary Rights of any third
party. Except as set forth on Schedule 3.17(a), the Acquired Proprietary Rights
consists of all of the Proprietary Rights necessary for the operation of the
Business in the manner in which and to the extent to which it is currently being
conducted.

                    (b) Except as set forth on Schedule 3.17(b), neither the
Company nor its Subsidiaries has any obligation to compensate any Person for the
use of the Acquired Proprietary Rights in any manner, nor has the Company or its
Subsidiaries granted to any Person any license, option or other rights to use in
any manner the Acquired Proprietary Rights, whether requiring the payment of
royalties or not, nor has the Company or its Subsidiaries agreed with any Person
not to bring an action with respect to or to otherwise enforce any Acquired
Proprietary Rights.

                    (c) Except as set forth on Schedule 3.17(c)(i), the Company
or its Subsidiaries, as applicable, solely owns all right, title, and interest
in and to, or has a valid, absolute and unrestricted right to make, use,
possess, license, copy, offer to sell, sell, import, distribute, market,
advertise and/or dispose of, the Acquired Proprietary Rights worldwide. Except
as set forth on Schedule 3.17(c)(ii), the Company and its Subsidiaries own all
the foregoing rights in perpetuity on a royalty free basis. Except as set forth
on Schedule 3.17(c)(iii), (i) the Acquired Proprietary Rights are not subject to
any Court Order; (ii) no Action is pending or, to the Knowledge of the Company,
has been threatened, which challenges the legality, validity, enforceability,
use or ownership of the Acquired Proprietary Rights; (iii) neither the Company
nor its Subsidiaries has received notice of, nor to the Knowledge of the Company
is there, any infringement or other violation by any of the Acquired Proprietary
Rights, or by any activity or product of, or material used in, the Business, of
any rights of any other Person; and (iv) to the Knowledge of the Company, no
Person is infringing or violating the rights of the Company and its Subsidiaries
to the Acquired Proprietary Rights.

                    (d) Each license, agreement, or written permission listed on
Schedule 3.17(a) is legal, valid, binding, enforceable, and in full force and
effect, except as may be limited by the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar Laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law). Neither the
Company nor its Subsidiaries (i) is in default or breach in any material respect
under any such, license, agreement or written permission; (ii) has knowledge of
any breach or anticipated breach by the other parties thereto; and (iii) has
received any written notice of cancellation or termination of any such license,
agreement or written permission.

                    (e) Except as set forth on Schedule 3.17(e), upon the
consummation of the transactions contemplated by this Agreement, the Company
will have good and marketable title to, or have a continuing valid right to
make, use, possess license, copy, offer to sell, sell, import, distribute,
market, advertise and/or dispose of all such Acquired Proprietary Rights, free
and clear of all Encumbrances other than Permitted Encumbrances.

                    (f) The Company and its Subsidiaries have taken all
commercially reasonable steps (including measures to protect secrecy and
confidentiality) to protect their right,

                                       18
<PAGE>

title and interest in and to all Acquired Proprietary Rights, and to assure that
each of their employees who have access to confidential or proprietary
information of the Business have a contractual or legal obligation of
confidentiality to the Company or its Subsidiaries with respect to such
information, and have an obligation to transfer all right and title for no
additional consideration in inventions, and authored works, whether or not
patented, patentable, copyrighted or otherwise protectable under the law, made
during the course of their employment using resources of the Company or its
Subsidiaries and relating to the Business.

                    (g) To the Knowledge of the Company, none of the Acquired
Proprietary Rights has become abandoned or has otherwise expired for failure to
pay a fee or otherwise taken timely action.

               3.18 Employee Plans.

                    (a) Disclosure of Employee Plans. Schedule 3.18 contains a
complete list of all Employee Plans.

                    (b) Pension Plans. Except as set forth on Schedule 3.18, no
Employee Plan is subject to Title IV of ERISA. Except as set forth on Schedule
3.18, each Employee Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code has received or will file an application within the
remedial amendment period for a determination letter from the Internal Revenue
Service stating that such Employee Plan meets the requirements of Section 401(a)
of the Code, and no fact exists which would adversely affect such plan's
qualified status or the ability to receive a favorable determination letter that
could not be corrected under Revenue Procedure 98-22 (or any successor thereto)
without material liability to the Company or its Subsidiaries.

                    (c) Multiemployer Plans. Except as set forth on Schedule
3.18, no Employee Plan is a "multiemployer plan" as defined in Sections 3(37) or
4001(a)(3) of ERISA ("Multiemployer Plan"), and neither the Company nor any of
its respective ERISA Affiliates sponsors or has previously sponsored,
maintained, contributed to or incurred an obligation to contribute to any
Multiemployer Plan.

                    (d) Welfare Plans. Except as set forth on Schedule 3.18,
each Employee Plan which is a "group health plan," as defined in Section 607(1)
of ERISA, has been operated in material compliance with provisions of Parts 6
and 7 of Title I, Subtitle B of ERISA and Section 4980B of the Code and any
similar applicable state laws ("COBRA") at all times. No Employee Plan provides
for post termination health or life benefits to former employees of the Company
or its Subsidiaries, other than as required by COBRA. None of the Employee Plans
is a "voluntary employees' beneficiary association," as defined in Section
501(c)(9) of the Code

                    (e) No Liability to Buyer. Except as set forth on Schedule
3.18, neither the execution and delivery of this Agreement by the Company, nor
the consummation of the transactions contemplated hereby will result by
themselves in any additional Liability to Buyer under or with respect to any
Employee Plan outside of the Ordinary Course of accruals or benefit payments
under such plan.

                                       19
<PAGE>

                    (f) Compliance with Laws. (i) Neither the Company nor its
Subsidiaries has engaged in a prohibited transaction under Section 406 of ERISA
or 4975 of the Code; (ii) none of the Company, any ERISA Affiliate or, to the
Knowledge of the Company, any third party fiduciary has breached its fiduciary
responsibility under Part 4 of Title I of ERISA with respect to any Employee
Plan, which could result in a material liability to the Company or its
Subsidiaries; (iii) each Employee Plan has been maintained and operated in
material compliance with its terms and applicable law, including where
applicable ERISA and the Code; (iv) neither the Company nor any of its ERISA
Affiliates has any material liability for any penalty or Tax under Sections
4971, 4972, 4975, 4976, 4979 or 4980 of the Code or Section 502 of ERISA; (v)
other than claims for benefits in the Ordinary Course, there is no material
claim pending, or, to the Knowledge of the Company, threatened involving any
Employee Plan; and (vi) no Employee Plan is subject to an ongoing audit or other
administrative proceeding of the Internal Revenue Service, the Department of
Labor or any other governmental agency or has applied for administrative relief
under any voluntary compliance program of the Internal Revenue Service, the
Department of Labor or any other governmental entity.

               3.19 Transactions with Certain Persons. No officer, director,
employee or other Affiliate of the Company or its Subsidiaries nor any member of
any such Person's immediate family is presently a party to any transaction with
the Company or any of its Subsidiaries, including, without limitation, any
Contract (a) providing for the furnishing of services by, (b) providing for the
rental of real or personal property from, or (c) otherwise requiring payments to
(other than for services as officers, directors or employees of the Company or
its Subsidiaries), any such Person or corporation, partnership, trust or other
entity in which any such Person has an interest as a stockholder, officer,
director, trustee or partner, except as listed in Schedule 3.19.

               3.20 Tax Matters.

                    (a) Filing of Tax Returns. Except as set forth on Schedule
3.20(a), each of the Company and its Subsidiaries has timely filed with the
appropriate taxing authorities all Tax Returns required to be filed through the
date hereof. All such Tax Returns are complete and accurate in all material
respects. All Taxes due and owing by any of the Company and its Subsidiaries on
or before the date hereof (whether or not shown on any Tax Return) have been
paid except for those Taxes that are both being contested by the Company in good
faith and for which adequate reserves have been established on the Company's
and/or Subsidiaries' Financial Statements. Except as set forth on Schedule
3.20(a), neither the Company nor any of its Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where any of the
Company and its Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.

                    (b) Payment of Taxes. The unpaid Taxes of the Company and
its Subsidiaries (i) did not, as of the dates of the Financial Statements,
exceed the reserve for Tax Liability (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the balance sheets (rather than in any notes thereto) contained
in the Financial Statements, and (ii) will not exceed that reserve as adjusted
for operations and transactions through the Closing Date in accordance with the
past custom and practice of the Company and its Subsidiaries in filing their Tax
Returns. Since the date of the

                                       20
<PAGE>

most recent Financial Statement, neither the Company nor any of its Subsidiaries
has incurred any Liability for Taxes outside the ordinary course of business or
otherwise inconsistent with past custom and practice.

                    (c) Audits, Investigations or Claims. No deficiencies for
Taxes any of the Company and its Subsidiaries have been claimed, proposed or
assessed by any taxing or other governmental authority. Except as set forth on
Schedule 3.20(c), there are no pending or, to the knowledge of any of the
Company and its Subsidiaries, threatened audits, assessments or other Actions
for or relating to any Liability in respect of Taxes of any of the Company and
its Subsidiaries, and there are no matters under discussion with any
governmental authorities, or known to any of IHC, Seller, the Company and its
Subsidiaries, with respect to Taxes that are likely to result in an additional
Liability for Taxes with respect to any of the Company and its Subsidiaries.
Seller and IHC have delivered or made available to Buyer complete and accurate
copies of federal, state and local Tax Returns of each of the Company and its
Subsidiaries and their predecessors for the years ended June 30, 1998, 1999,
2000 and 2001, and complete and accurate copies of all examination reports and
statements of deficiencies assessed against or agreed to by any of the Company
and its Subsidiaries or any predecessors since December 31, 1997. Except as set
forth on Schedule 3.20(c), neither the Company nor any of its Subsidiaries nor
any predecessor has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.

                    (d) Liens. There are no Encumbrances for Taxes other than
Permitted Encumbrances on any assets of any of the Company and its Subsidiaries.

                    (e) Tax Elections. All material elections with respect to
Taxes affecting any of the Company and its Subsidiaries as of the date hereof,
to the extent such elections are not shown on or in the Tax Returns that have
been delivered or made available to Buyer, are set forth on Schedule 3.20(e).
Neither the Company nor any of its Subsidiaries (i) has consented at any time
under Section 341(f)(1) of the Code to have the provisions of Section 341(f)(2)
of the Code apply to any disposition of the assets of any of the Company and its
Subsidiaries; (ii) has agreed, or is required, to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise; (iii) has made an election, or is required, to treat any of its
assets as owned by another Person pursuant to the provisions of former Section
168(f) of the Code or as tax-exempt bond financed property or tax-exempt use
property within the meaning of Section 168 of the Code; (iv) has acquired or
owns any assets that directly or indirectly secure any debt the interest on
which is tax exempt under Section 103(a) of the Code; (v) has made or will make
a consent dividend election under Section 565 of the Code; (vi) has elected at
any time to be treated as an S corporation within the meaning of Sections 1361
or 1362 of the Code; or (vii) has made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state or local
Tax provision.

                    (f) Tax Sharing Agreements. Except as disclosed in Schedule
3.20(f), there are no Tax-sharing agreements or similar arrangements (including
indemnity arrangements) with respect to or involving any of the Company and its
Subsidiaries, and, after the Closing Date, none of the Company and its
Subsidiaries shall be bound by any such Tax-sharing agreements or similar
arrangements or have any Liability thereunder for amounts due in respect of
periods prior to the Closing Date.

                                       21
<PAGE>

                    (g) Other Entity Liability. Except as disclosed in Schedule
3.20(g), none of the Company and its Subsidiaries has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which is IHC). Except as disclosed in Schedule
3.20(g), none of the Company and its Subsidiaries has any Liability for the
Taxes of any Person (other than Taxes of the Company and its Subsidiaries) (i)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local, or foreign law), (ii) as a transferee or successor, (iii) by contract, or
(iv) otherwise.

                    (h) No Withholding. Each of the Company and its Subsidiaries
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party. The transaction contemplated herein
is not subject to the tax withholding provisions of Section 3406 of the Code ,
or of Subchapter A of Chapter 3 of the Code or of any other provision of law.

                    (i) USRPHC. None of the Company and its Subsidiaries has
been a United State real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in section
897(c)(1)(A)(ii) of the Code.

                    (j) Partnerships, Single Member LLCs, CFCs and PHCs. Except
as disclosed in Schedule 3.20(j), neither the Company nor any of its
Subsidiaries (i) is a partner for Tax purposes with respect to any joint
venture, partnership, or other arrangement or contract which is treated as a
partnership for Tax purposes, (ii) owns a single member limited liability
company which is treated as a disregarded entity, (iii) is a shareholder of a
"controlled foreign corporation" as defined in Section 957 of the Code (or any
similar provision of state, local or foreign law) or (iv) is a "personal holding
company" as defined in Section 542 of the Code (or any similar provision of
state, local or foreign law).

                    (k) Permanent Establishment. Neither the Company nor any of
its Subsidiaries has or has had a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States of America and such foreign country.

                    (l) Disallowance of Interest Deductions. None of the
outstanding indebtedness of any of the Company and its Subsidiaries constitutes
indebtedness with respect to which any interest deductions may be disallowed
under Sections 163(i) or 163(l) or 279 of the Code or under any other provision
of applicable law.

                    (m) Spin-Offs. Neither the Company nor any of its
Subsidiaries has distributed the stock of any corporation in a transaction
satisfying the requirements of Section 355 of the Code since April 16, 1997, and
neither the stock of the Company nor the stock of any of its Subsidiaries has
been distributed in a transaction satisfying the requirements of Section 355 of
the Code since April 16, 1997.

               3.21 Insurance. Schedule 3.21 contains a complete and accurate
list of all policies or binders of fire, liability, title, worker's
compensation, product liability and other forms of insurance currently
maintained by the Company and its Subsidiaries on the Business, the assets of
the Company and its Subsidiaries or the Company's and its Subsidiaries'

                                       22
<PAGE>

employees. All insurance coverage applicable to the Company, its Subsidiaries,
the Business and the assets of the Company and its Subsidiaries is in full force
and effect, insures the Company and its Subsidiaries in reasonably sufficient
amounts against all risks usually insured against by Persons operating similar
businesses of similar size, provides coverage as may be required by applicable
Law and by any and all Contracts to which the Company or its Subsidiaries are a
party and has been issued by insurers of recognized responsibility. There is no
Default under any such coverage nor has there been any failure to give notice or
present any claim under any such coverage in a due and timely fashion. There are
no outstanding unpaid premiums and no notice of cancellation or nonrenewal of
any such coverage has been received. There are no provisions in such insurance
policies for retroactive or retrospective premium adjustments. Except as set
forth on Schedule 3.21, all general liability and workers' compensation
insurance policies maintained by the Company and its Subsidiaries have been
occurrence policies and not claims-made policies. There are no outstanding
performance bonds covering or issued for the benefit of the Company and its
Subsidiaries. No insurer has advised the Company or its Subsidiaries that it
intends to reduce coverage, increase premiums or fail to renew any existing
policy or binder.

               3.22 Compliance With Environmental Laws. Except as set forth in
Schedule 3.22, (a)(i) there is and has been no Handling of Substances by the
Company or its Subsidiaries at, on, or from any Operating Site in violation of
any applicable Environmental Law, and (ii) to the Knowledge of the Company,
there is and has been no Handling of Substances at, on, from any Operating Site,
by any other Person that has resulted in any liability or potential liability to
the Company or its Subsidiaries under any Environmental Law; (b) no Substances
are present on, in or under any Operating Site in violation of any applicable
Environmental Law as a result of the operations of the Business of the Company
or its Subsidiaries; (c) to the Knowledge of the Company, (i) no underground
tanks are or have been owned or operated by the Company or its Subsidiaries,
(ii) no underground storage tanks are or have been located on, in or under any
facility currently owned or leased by the Company or its Subsidiaries, and (iii)
no PCBs or asbestos-containing materials are located on, in or under any
facility currently owned or leased by the Company or its Subsidiaries; (d)(i)
neither the Company nor any of its Subsidiaries has received written or, to the
Knowledge of the Company, oral notice of any assertion by any governmental or
regulatory agency or other Person that any of them may be a potentially
responsible party in connection with any Substance disposal site, and (ii)
neither the Company nor any of its Subsidiaries has received written or, to the
Knowledge of the Company, oral notice of any pending or threatened claims or any
reasonable basis for a claim by any Person against the Company or its
Subsidiaries under any Environmental Law; (e) no Encumbrances have been, or are,
imposed on the Business or any of the assets of the Company or its Subsidiaries
under any Environmental Law; and (f) the Company and its Subsidiaries have
obtained all Permits and have made all reports and notifications required under
any Environmental Law in connection with the assets of the Company and its
Subsidiaries and the operation of the Business, and is in material compliance
with all applicable Environmental Laws. Schedule 3.22 also contains a list and
brief description of all filings by the Company or its Subsidiaries with,
notices to the Company or its Subsidiaries from, and related reports to any
governmental authority administering an Environmental Law including without
limitation, filings made, corrective action taken, or citations and notices of
violations received by the Company or its Subsidiaries with respect to any
Operating Site.

                                       23
<PAGE>

               3.23 Proxy Statements. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the proxy
statement related to the meeting of Buyer's stockholders to be held in
connection with the transactions contemplated by this Agreement (the "Proxy
Statement") will, on the date it is first mailed to the Buyer's stockholders or
at the time of Buyer's Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

               3.24 Property. The Company and its Subsidiaries own or lease all
personal property necessary for the conduct of the Business as presently
conducted, and the personal property (taken as a whole) is in such operating
condition and repair (subject to normal wear and tear) as is necessary for the
conduct of the Business as presently conducted.

                    (a) Owned Personal Property. Except as set forth on Schedule
3.24(a), the Company and its Subsidiaries have good and marketable title to all
such personal property owned by it, free and clear of any and all Encumbrances
other than Permitted Encumbrances. With respect to each such item of personal
property (i) there are no Leases, subleases, licenses, options, rights,
concessions or other agreements, written or oral, granting to any party or
parties the right of use of any portion of such item of personal property, (ii)
there are no outstanding options or rights of first refusal in favor of any
other party to purchase any such item of personal property or any portion
thereof or interest therein and (iii) there are no parties (other than the
Company and its Subsidiaries) who are in possession of or who are using any such
item of personal property.

                    (b) Leased Personal Property. The Company and its
Subsidiaries have good and valid leasehold title to all of Fixtures and
Equipment and other tangible personal property leased by them from third
parties, free and clear of any and all Encumbrances other than Permitted
Encumbrances which would not permit the termination of the lease therefor by the
lessor.

               3.25 Insurance Matters.

                    (a) The reserves carried on the books of the Company, on a
consolidated basis, and each of its applicable Subsidiaries for future insurance
policy benefits, losses, claims and similar purposes were, as of the respective
dates of such financial statements required to be submitted to the appropriate
regulatory authorities of the jurisdictions in which FSS is domiciled on forms
prescribed or permitted by such authority in compliance in all material respects
with the requirements for reserves established by the insurance departments of
the state of domicile of FSS, were determined in all material respects in
accordance with generally accepted actuarial standards consistently applied, and
were fairly stated in all material respects in accordance with sound actuarial
and statutory accounting principles. FSS has not made any changes in its
insurance reserving practices, either on a gross or net of reinsurance basis,
since December 31, 1999, that would, singly or in the aggregate, have (i) a
Material Adverse Effect or (ii) a material adverse effect on the ability of FSS
to pay dividends or the amount thereof.

                                       24
<PAGE>

                    (b) All insurance policies issued by the Company and each of
the Company's Subsidiaries, as now in force, are, to the extent required under
applicable law, in a form acceptable to applicable regulatory authorities or
have been filed and not objected to by such authorities within the period
provided for objection. All premium rates, rating plans and policy forms used by
the Company or any of its Subsidiaries that are required to be filed with or
approved by insurance regulatory authorities have been so filed or approved, the
premiums charged conform in all respects to the premiums so filed or approved
and comply in all respects with the insurance laws applicable thereto and no
such premiums are subject to any investigation by any insurance regulatory
authority.

                    (c) No loss experience has developed, within any individual
lines of business or on an aggregate basis for all lines, that would require or
make it appropriate for the Company or any of its Subsidiaries to alter or
modify its reserving methodology or assumptions since December 31, 1999. The
Company has provided to Buyer true and complete copies of all reports and
analyses of the loss, loss adjustment expense and reinsurance recoverable
reserves of FSS as of December 31, 1999 or any subsequent date prepared (i) by
any accounting or actuarial Persons retained or engaged by the Company or its
Subsidiaries or (ii) by or on behalf of any insurance regulatory or other
governmental authority to the extent in either case copies of such reports or
analyses were provided to the Company or any of its Subsidiaries.

                    (d) All reinsurance treaties, contracts, agreements and
arrangements ("Reinsurance Arrangements") to which FSS is a party are in full
force and effect, other than those that, by their terms, have expired by their
terms or otherwise terminated. Each of the Reinsurance Arrangements is valid and
binding in accordance with its terms on FSS. To the Company's Knowledge, all
amounts recoverable by FSS pursuant to any Reinsurance Arrangement are fully
collectible in due course. Neither FSS nor any other party thereto is in default
as to any Reinsurance Arrangement, and there is no reason to believe that the
financial condition of any such other party is impaired to the extent that a
default thereunder may reasonably be anticipated. FSS is entitled to take full
credit in its statutory financial statements for any reinsurance, coinsurance or
excess insurance ceded by it.

                    (e) All underwriting management and/or administration
agreements entered into by the Company and any of the Company's Subsidiaries as
now in force are, to the extent required under applicable Law, in a form
acceptable in all material respects to applicable regulatory authorities (or
have been submitted for approval which is pending, or have been filed and not
objected to by such authorities within the period provided for objection).

                    (f) The Company has made available to Buyer true and
complete copies of all annual and quarterly statements filed with or submitted
to any state insurance regulatory authority and all reports of examinations
(whether financial, market conduct or other) issued by any state insurance
regulatory authorities in respect of the Company and its Subsidiaries covering,
in whole or in part, any period on or after December 31, 1999, together with
true and complete copies of all written responses submitted by or on behalf of
the Company or any of its Affiliates in respect of any such report of
examination. In addition, the Company has made available to Buyer all files of
the Company and each of its Subsidiaries relating to correspondence with
insurance regulatory authorities and other governmental entities.

                                       25
<PAGE>

                    (g) FSS will maintain all current deposits on file with the
State of Delaware prior to Closing and will refrain from knowingly taking any
action that would adversely affect the status or validity of any of the licenses
issued by the State of Delaware or in any way jeopardize Buyer's ability to
operate FSS pursuant to such licenses from and after Closing.

               3.26 Material Misstatements Or Omissions. No representations or
warranties by Seller or IHC in this Agreement, nor any document, exhibit,
statement, certificate or schedule heretofore or hereafter furnished to Buyer
pursuant hereto, or in connection with the transactions contemplated hereby,
including without limitation the Disclosure Schedules, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact necessary to make the statements or facts contained therein not
misleading.

                                   ARTICLE IV.
          ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLER AND IHC.

        Seller and IHC hereby represent and warrant as follows with respect to
each of Seller and IHC, as the case may be, which representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true, complete
and correct:

               4.1 Authorization of Transaction; No Violation. Seller and IHC
each has full power and authority to execute and deliver this Agreement and the
Ancillary Agreements, as applicable, and to perform Seller's and IHC's
obligations hereunder and thereunder. Except as provided herein, Seller has the
absolute and unrestricted right, power and authority to vote, sell, transfer and
assign all of the outstanding shares of Common Stock. Neither the execution and
delivery of this Agreement or the Ancillary Agreements by Seller or IHC nor the
consummation of the transactions contemplated hereby or thereby, nor compliance
by Seller or IHC with any of the terms or provisions hereof or thereof, will (i)
violate, conflict with, or result or constitute a Default under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, any of the terms, conditions or
provisions of any agreement to which Seller or IHC is a party or by which
Seller's or IHC's property is bound, or (ii) impose any Encumbrance on any share
of Common Stock.

               4.2 Validity of Agreement. This Agreement and the Ancillary
Agreements constitute valid and binding obligations of Seller and IHC and are
enforceable against Seller and IHC in accordance with their terms, except to the
extent that enforcement thereof may be limited by or subject to applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or
hereafter in effect affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in equity or
at law).

               4.3 Ownership and Delivery of Shares. Seller is the sole
beneficial holder and record holder of all of the shares of Common Stock and has
good and marketable title to such shares, free and clear of any and all
covenants, conditions, restrictions, liens, security interests and claims, and
has the sole and unrestricted right to vote such shares in respect of any matter
submitted to the holders of such shares for a vote, including a vote to approve
the transactions contemplated by this Agreement.

                                       26
<PAGE>

               4.4 No Brokers. There is no basis for any claim against the
Company, its Subsidiaries, Seller or IHC for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Seller or IHC.

                                   ARTICLE V.
                     REPRESENTATIONS AND WARRANTIES OF BUYER

        As an inducement to Seller and IHC to enter into this Agreement, Buyer
hereby represents and warrants to Seller and IHC as follows, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true, complete and correct:

               5.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
corporate power and corporate authority to conduct its business as it is
presently being conducted, to own or lease, as applicable, its real property,
and to perform all its obligations under Buyer's Contracts to which it is a
party. Buyer is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of its properties owned
or leased or the nature of its activities make such qualification necessary,
except where the failure to be so qualified or in good standing would not have a
Buyer Material Adverse Effect. Copies of the Buyer's certificate of
incorporation and bylaws heretofore made available to Seller are accurate and
complete as of the date hereof.

               5.2 Authority.

                   (a) Buyer has all requisite power and authority, and, except
for obtaining the approval of the stockholders of Buyer, has taken all corporate
action necessary, to execute and deliver this Agreement and the Ancillary
Agreements to which it is a party, to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder.
Except for approval of the stockholders of Buyer, no other proceedings on the
part of Buyer are necessary to authorize the execution, delivery and performance
by Buyer of this Agreement and the Ancillary Agreements and the consummation by
Buyer of the transactions contemplated hereby and thereby. This Agreement has
been duly executed and delivered by Buyer and constitutes, and upon execution
and delivery of the Ancillary Agreements to which Buyer is a party, the
Ancillary Agreements will constitute, a legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with their respective terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting enforcement of creditor's
rights generally and except insofar as the availability of equitable remedies
may be limited by applicable law.

                   (b) Neither the execution and delivery of this Agreement or
the Ancillary Agreements by Buyer nor the consummation by Buyer of the
transactions contemplated hereby and thereby, nor compliance by Buyer with any
of the terms or provisions hereof, will (i) violate or conflict with any
provision of the Buyer's certificate of incorporation or bylaws, (ii) violate,
conflict with, or result or constitute a Default under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, any of the terms, conditions or provisions
of any agreement, contract or

                                       27
<PAGE>

obligation legally binding on Buyer, (iii) violate, conflict with, contravene or
give any Person the right to exercise any remedy or obtain any relief under any
Law or Court Order, or (iv) or impose any Encumbrance on the assets or property
of Buyer.

               5.3 No Governmental Authorization or Consents Required. Except
for filings and consents required by the Insurance Commissioner of the State of
Delaware, the Nasdaq National Market and the Securities and Exchange Commission,
prior to the Closing, no consent, order, authorization or approval or other
action by, and no notice or disclosure to or filing with, any governmental or
regulatory authority will be required to be obtained or made by Buyer in
connection with the due execution and delivery by the Buyer of this Agreement
and the Ancillary Agreements and the consummation by the Buyer of the
transactions contemplated hereby.

               5.4 Capitalization. As of the date hereof, the authorized capital
stock of Buyer consists of: 100,000,000 shares of common stock, par value $0.01
per share; and 3,970,000 shares of preferred stock, par value $0.10 per share.
As of June 30, 2002, there were 25,183,487 shares of Buyer's common stock issued
and outstanding and no shares of preferred stock issued and outstanding.

               5.5 No Brokers. Except for an agreement with Bears, Stearns &
Co., Inc., neither Buyer nor any of its Representatives has entered into or will
enter into any contract, agreement, arrangement or understanding with any
broker, finder or similar agent or any Person which will result in the
obligation of Buyer, the Company or any of their respective Affiliates to pay
any finder's fee, brokerage fees or commission or similar payment (other than a
payment to Bears, Stearns & Co., Inc.) in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements.

               5.6 Reports and Financial Statements. Since September 30, 2001,
Buyer has timely filed all required reports, schedules, forms, statements and
other documents required to be filed by it with the Securities and Exchange
Commission (collectively, the "Buyer SEC Reports"). The Buyer SEC Reports, as of
their respective dates, did not, and any Buyer SEC Reports filed with the
Securities and Exchange Commission after the date hereof will not, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. Each of the
financial statements included or to be included in the Buyer SEC Reports
presents or will present fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of
Buyer and its subsidiaries as of the respective dates or for the respective
periods set forth therein, all in accordance with GAAP consistently applied
during the periods involved except as otherwise noted therein, and subject, in
the case of the unaudited interim financial statements, to normal year-end
adjustments that will not be material in amount. All of such Buyer SEC Reports,
as of their respective dates, complied as to form in all material respects with
the applicable requirements of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

                                       28
<PAGE>

               5.7 Litigation. Except as disclosed on Schedule 5.6, there is no
Action pending, or to the knowledge of Buyer, threatened or anticipated, which
could reasonably be expected to have a Buyer Material Adverse Effect.

               5.8 Rights Agreement. Buyer will enter into a rights agreement
dated as of July 30, 2002 with Mellon Investor Services LLC as rights agent in
substantially the form previously provided to Seller, and Buyer will not redeem
the rights under such agreement or otherwise terminate such agreement prior to
the earlier of (i) the Closing and (ii) the termination of this Agreement.

                                   ARTICLE VI.
                            COVENANTS AND AGREEMENTS

               6.1 Seller's and IHC's Conduct of Business Prior to Closing.
Until the Closing Date, except as may be approved by Buyer in writing or as
otherwise expressly provided in this Agreement or on Schedule 6.1, Seller and
IHC shall cause the Company and its Subsidiaries to be operated, in the Ordinary
Course of Business and Seller and IHC shall cause the Company and its
Subsidiaries not to:

                   (a) sell, assign or transfer any of the material assets
(tangible or intangible), singly or in the aggregate, of the Company or its
Subsidiaries;

                   (b) waive any material rights of value to the Company or its
Subsidiaries;

                   (c) make any capital expenditure or execute any lease or
incur any obligation relating thereto in excess of $50,000 individually or
$250,000 in the aggregate;

                   (d) fail to pay all material obligations except those
contested in good faith and for which proper reserves have been made;

                   (e) fail to operate the Business in the Ordinary Course or
fail to use reasonable efforts to preserve the assets of the Business intact and
to preserve the goodwill of employees, suppliers, customers, and others having
business relations with the Company, its Subsidiaries or their respective
Representatives;

                   (f) change any method of accounting or accounting practice by
the Company or its Subsidiaries except for any such change required by reason of
a concurrent change in GAAP;

                   (g) declare, set aside or pay any dividends or distributions
in respect of any capital stock of the Company or its Subsidiaries or redeem,
purchase or acquire any of the capital stock of the Company or its Subsidiaries;

                   (h) issue or reserve for issuance any shares of capital stock
or other equity securities or obligations or securities convertible into or
exchangeable or exercisable for shares of capital stock or other equity
securities;

                                       29
<PAGE>

                   (i) revalue any of the assets, including without limitation,
writing off notes or accounts receivable other than (i) those for which reserves
were established in the Interim Balance Sheet or (ii) in the Ordinary Course of
Business;

                   (j) amend the certificate of incorporation or bylaws (or
other similar formation documents) of the Company or its Subsidiaries;

                   (k) create an Encumbrance, other than a Permitted
Encumbrance, against any of the assets of the Company or its Subsidiaries;

                   (l) incur indebtedness for borrowed or purchase money, make
any commitment to borrow money or make or agree to make any loans, except for
transactions among the Company and its Subsidiaries;

                   (m) enter into, amend, cancel or terminate any Contract or
Permit material to the operation of the Business other than in the Ordinary
Course of Business;

                   (n) dispose of or permit to lapse any of the Acquired
Proprietary Rights, in whole or in part or, disclose any trade secret, process
or know-how to any Person not an employee of the Company or its Subsidiaries;

                   (o) incur any material Liability;

                   (p) make any change in any assumptions underlying or methods
of calculating any bad debt, contingency or other reserves;

                   (q) acquire any interest in any other business entity;

                   (r) increase compensation or benefits payable to or to become
payable to any employees, officers or directors of the Company or its
Subsidiaries, amend any Employee Plans or establish any new Employee Plans;

                   (s) make any material payment, loan or advance of any amount
to or in respect of, or sell, transfer or lease any material properties or
material assets to, or enter into any Contract with, any Affiliate of the
Company;

                   (t) make or change any election in respect of Taxes, adopt or
change any material accounting method in respect of Taxes, enter into any tax
allocation agreement, tax sharing agreement, tax indemnity agreement or closing
agreement, settle or compromise any claim, notice, audit report or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;

                   (u) do any other act which would cause any representation or
warranty of Seller or IHC in this Agreement to be or become untrue in any
material respect;

                   (v) fail to disclose promptly to Buyer in writing any
information set forth in the Schedules hereto which no longer is correct in all
material respects and any information of the nature of that set forth in the
Schedules which arises after the date hereof and

                                       30
<PAGE>

which would have been required to be included in the Schedules if such
information had been obtained on the date hereof; or

                   (w) agree or commit to do any of the foregoing.

               6.2 Buyer's Conduct of Business Prior to Closing. Until the
Closing Date, except as may be approved by Seller in writing or as otherwise
expressly provided in this Agreement, Buyer shall operate and cause its
Subsidiaries to operate in the Ordinary Course of Business and Buyer shall not,
and cause its Subsidiaries not to:

                   (a) change any method of accounting or accounting practice by
Buyer or its Subsidiaries except for any such change required by reason of a
concurrent change in GAAP;

                   (b) declare, set aside or pay any dividends or distributions
in respect of any capital stock of Buyer or its Subsidiaries or redeem, purchase
or acquire any of the capital stock of Buyer or its Subsidiaries;

                   (c) revalue any of the assets, including without limitation,
writing off notes or accounts receivable other than in the Ordinary Course of
Business;

                   (d) make any material payment, loan or advance of any amount
to or in respect of, or sell, transfer or lease any material properties or
material assets to, or enter into any Buyer's Contract with, any Affiliate of
Buyer; or

                   (e) agree or commit to do any of the foregoing.

               6.3 Appropriate Action; Consents; Filings.

                   (a) Buyer, Seller and IHC shall use their reasonable efforts,
and Seller and IHC shall cause the Company to use its reasonable efforts, to (A)
take, or cause to be taken, all appropriate action, and do, or cause to be done,
all things necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the transactions contemplated by this Agreement or
by any of the Ancillary Agreements as promptly as practicable, (B) obtain any
Consents, and (C) make all necessary filings, including the filings with the
Commissioner of Insurance of the State of Delaware, and thereafter make any
other required submissions, with respect to this Agreement required under any
applicable Law; provided, that Buyer, Seller and IHC shall cooperate with each
other, and Seller and IHC shall cause the Company to cooperate with Buyer, in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing and,
if requested, to accept all reasonable additions, deletions or changes suggested
in connection therewith and, provided, however, that nothing in this Section
6.3(a) shall require Buyer to agree to (AA) the imposition of conditions, (BB)
the requirement of divestiture or (CC) the requirement of expenditure of money
by Buyer the Company or its Subsidiaries to a third party in exchange for any
such consent that, in the case of clause (CC), would be reasonably likely to
have a Material Adverse Effect or a Buyer Material Adverse Effect. Buyer, Seller
and IHC shall furnish to each other, and Seller and IHC shall cause the Company
to furnish to Buyer, all information required for any

                                       31
<PAGE>

application or other filing under the rules and regulations of any applicable
Law in connection with the transactions contemplated by this Agreement or by any
of the Ancillary Agreements.

                   (b) Buyer, Seller and IHC shall give (or shall cause the
Company or their respective Subsidiaries to give) any notices to third parties,
and use, and cause the Company and their respective Subsidiaries to use, all
reasonable efforts to obtain any third party consents, (A) necessary, proper or
advisable to consummate the transactions contemplated in this Agreement, (B)
required to be disclosed in the Company Disclosure Schedule or the Buyer
Disclosure Schedule, as applicable, or (C) required to prevent a Material
Adverse Effect or Buyer Material Adverse Effect from occurring prior to or after
the Closing Date. In the event that either party shall fail to obtain any third
party consent described in the first sentence of this Section 6.3(b), such party
shall use all reasonable efforts, and shall take any such actions reasonably
requested by the other party hereto, to minimize any adverse effect upon Buyer,
Seller, IHC, the Company, their respective Subsidiaries, and their respective
businesses resulting, or which could reasonably be expected to result after the
Closing, from the failure to obtain such consent.

                   (c) From the date of this Agreement until the Closing, Seller
and IHC shall promptly notify Buyer in writing of any pending or, to the
Knowledge of the Company, threatened action, suit, arbitration or other
proceeding or investigation by any governmental entity or any other Person (A)
challenging or seeking material damages in connection with this Agreement or (B)
seeking to restrain or prohibit the consummation of this Agreement or otherwise
limit the right of Buyer or its subsidiaries to own or operate all or any
portion of the businesses or assets of the Company or its Subsidiaries.

                   (d) From the date of this Agreement until the Closing, Buyer
shall promptly notify Seller in writing of any pending or, to the Knowledge of
the Buyer, threatened action, suit, arbitration or other proceeding or
investigation by any governmental entity or any other Person (A) challenging or
seeking material damages in connection with this Agreement or (B) seeking to
restrain or prohibit the consummation of this Agreement.

               6.4 Buyer's Stockholders Meeting; Filing the Amended Certificate.
As soon as practicable following the date of this Agreement, Buyer shall prepare
and file with the Securities and Exchange Commission the Proxy Statement and
shall mail the Proxy Statement to Buyer's stockholders. Buyer shall also, as
soon as practicable following the date of this Agreement, duly call, give notice
of, convene and hold a meeting of its stockholders (the "Buyer's Stockholders
Meeting") for the purpose of, among other things, obtaining approval of (i) the
transactions contemplated in this Agreement and (ii) an amendment to Buyer's
certificate of incorporation in a form reasonably agreed to by the parties
hereto (the "Amended Certificate"), and, Buyer shall, through its Board of
Directors, recommend to its stockholders that they approve the foregoing. The
approval of the transactions contemplated in this Agreement shall require the
approval of the holders of a majority of the shares of common stock of Buyer
present in person or by proxy at the Buyer's Stockholders Meeting at which a
quorum is present, excluding shares held by IHC and its Affiliates. However,
notwithstanding the preceding sentence, the adoption of the Amended Certificate
shall require the approval of the holders of a majority of the outstanding
common stock of Buyer entitled to vote at the Buyer's Stockholders Meeting
(including shares held by IHC and its Affiliates). Prior to the Closing

                                       32
<PAGE>

Date, and subject to approval of the Amended Certificate by Buyer's
stockholders, Buyer shall file the Amended Certificate with the Secretary of
State of the State of Delaware.

               6.5 Fulfillment of Conditions by Seller and the Company. Seller
and IHC shall not knowingly take or cause to be taken, or fail to take or cause
to be taken, (or permit the Company or its Subsidiaries to knowingly take or
cause to be taken, or fail to take or cause to be taken) any action that would
cause the conditions to the obligations of Seller, IHC or Buyer to consummate
the transactions contemplated hereby to fail to be satisfied or fulfilled at or
prior to the Closing, including, without limitation, by taking or causing to be
taken, or failing to take or cause to be taken, any action that would cause the
representations and warranties made by Seller and IHC in Article III and Article
IV, as applicable, hereof to fail to be true and correct as of the Closing.
Seller and IHC shall take, or cause to be taken, all reasonable actions within
its power to cause to be satisfied or fulfilled, at or prior to the Closing, the
conditions precedent to the obligations of Buyer to consummate the transactions
contemplated hereby as set forth in Section 7.1 hereof.

               6.6 Fulfillment of Conditions by Buyer. Buyer shall not knowingly
take or cause to be taken, or fail to take or cause to be taken, any action that
would cause the conditions to the obligations of Seller, IHC or Buyer to
consummate the transactions contemplated hereby to fail to be satisfied or
fulfilled, including, without limitation, by taking or causing to be taken, or
failing to take or cause to be taken, any action that would cause the
representations and warranties made by Buyer in Article V hereof to fail to be
true and correct as of the Closing. Buyer shall take, or cause to be taken, all
commercially reasonable actions within its respective power to cause to be
satisfied or fulfilled, at or prior to the Closing, the conditions precedent to
the obligations of Seller and IHC to consummate the transactions contemplated
hereby as set forth in Section 8.1 hereof.

               6.7 No Solicitation.

                   (a) Seller and IHC shall not (and Seller and IHC will cause
their respective officers, directors, employees, agents, affiliates and
representatives, including investment bankers and attorney, and the Company and
its Subsidiaries not to) directly or indirectly solicit or initiate any
discussions or negotiations with or encourage or respond to any inquiries or
proposals by, or participate in any negotiations with or provide any information
to or otherwise cooperate in any other way with, any corporation, partnership,
person or other entity or group, other than Buyer and its Representatives,
concerning a sale of all or a significant portion of the assets of the Company
or any of its Subsidiaries, or of any shares of capital stock of the Company or
any merger, consolidation, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries, or any sale, assignment,
license or other transfer of the Company's or its Subsidiaries' intellectual
property rights or any other transaction that could have the effect of
precluding or inhibiting the consummation of the transactions contemplated by
this Agreement (all such transactions being referred to herein as "Proposed
Competing Transactions").

                   (b) Seller and IHC will immediately notify Buyer if any
discussions or negotiations are sought to be initiated, any inquiry or proposal
is made, or any information is requested with respect to any Proposed Competing
Transaction and communicate to Buyer the

                                       33
<PAGE>

identity of the prospective purchaser or soliciting party and the terms of any
such inquiry or proposal.

               6.8 Investigation by Buyer. From the date hereof through the
Closing, Seller and IHC shall cause the Company to afford the Representatives of
Buyer and its Affiliates access at all reasonable times to the business and
assets of the Company and its Subsidiaries for the purpose of inspecting the
same, and to the officers, employees and Representatives, properties, Books and
Records and Contracts of the Company and its Subsidiaries, and shall furnish
Buyer and its Representatives all financial, operating and other data and
information as Buyer or its Affiliates, through their respective
Representatives, may reasonably request. In addition, Seller and IHC shall
notify, and shall cause the Company to notify, Buyer of any issues, facts or
circumstances he, she or it knows or believes to be material to the Business.

               6.9 Investigation by Seller. From the date hereof through the
Closing, Buyer shall afford the Representatives of Seller and its Affiliates
reasonable access at all reasonable times to the business and assets of Buyer
and its Subsidiaries for the purpose of inspecting the same, and to the
officers, employees and Representatives, properties, Buyer's Books and Records
and Buyer's Contracts and shall furnish Seller and its Representatives all
financial, operating and other data and information as Seller or its Affiliates,
through their respective Representatives, may reasonably request.

               6.10 Section 338 Election.

                    (a) IHC and Buyer shall join in making an election under
Code 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 stock of the Company and the deemed purchase and
sale of the stock of First Standard hereunder.

                    (b) IHC and Seller will be responsible for paying any Tax
attributable to the making of the Section 338(h)(10) Election and will indemnify
Buyer, the Company and its Subsidiaries against any Damages arising out of any
failure to pay such Tax. IHC and Seller will also pay any state, local or
foreign Tax (and indemnify Buyer, the Company and its Subsidiaries 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 Code
Section 338(g) (or which results from the making of an election under Code
Section 338(g)) with respect to the purchase and sale of the stock of the
Company and the deemed purchase and sale of the stock of First Standard
hereunder.

                    (c) To the extent possible, IHC and Buyer agree to mutually
prepare and duly execute at Closing an Internal Revenue Service Form 8023 (and
any similar forms under applicable state, local or foreign Tax law) (the
"Section 338(h)(10) Forms"). If any Section 338(h)(10) Forms are not duly
executed at Closing, then as soon as practicable after the Closing, IHC and
Buyer shall mutually prepare and duly execute the Section 338(h)(10) Forms. In
all events, IHC and Buyer shall cooperate with each other to take all actions
necessary and appropriate (including duly and timely filing the Section
338(h)(10) Forms and any such additional forms, returns, elections, schedules
and other documents as may be required) to effect and preserve a timely Section
338(h)(10) Election in accordance with the provisions of Section

                                       34
<PAGE>

1.338(h)(10)-1 of the Treasury Regulations (or any comparable provisions of
state, local or foreign Tax law).

                    (d) As soon as practicable after the Closing, Buyer shall
determine the amount of the "adjusted grossed-up basis" with respect to the
Section 338(h)(10) Election (within the meaning of Treasury Regulation Section
1.338(h)(10)-1(e)(5)) and the proper allocation of such amount among the
relevant assets in accordance with Section 338(b)(5) of the Code and the
Treasury Regulations promulgated thereunder. Buyer's determination shall be
subject to IHC's reasonable review. In the event that the parties cannot agree
on a mutually satisfactory allocation within 90 days after the Closing, a
mutually selected independent accounting firm shall, at the joint expense of the
Buyer and IHC, determine the appropriate allocation, which determination shall
be binding on Buyer, IHC and Seller.

                    (e) Buyer, IHC and Seller shall report the acquisition of
the stock of the Company and the deemed purchase and sale of the stock of First
Standard by the Buyer pursuant to this Agreement consistent with the Section
338(h)(10) Election and the agreed upon allocation, and shall not take any
position contrary thereto or inconsistent therewith, for purposes of any Tax
Returns or any discussions with or proceedings before any Tax authority, unless
otherwise required by law.

               6.11 FIRPTA Certificate. At or prior to the Closing, Seller and
IHC shall have delivered to Buyer, as agent for the Company, a form of notice to
the Internal Revenue Service in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2) and in form and substance reasonably acceptable
to Buyer along with written authorization for Buyer to deliver such notice form
to the Internal Revenue Service on behalf of Seller upon the Closing. If Seller
and IHC fails to comply with this Section 6.11, Buyer's sole remedy for such
noncompliance will be to withhold tax in accordance with Section 1445(a) of the
Code.

               6.12 Confidentiality. Each party will hold in confidence all
documents and other material and information (verbal or otherwise) containing
information which is disclosed by either party to the other party in connection
with the transactions contemplated by this Agreement ("Confidential
Information"), and not disclose or publish the same; provided, however, that the
foregoing restriction shall not apply to any portion of the foregoing which (a)
becomes generally available to the public in any manner or form through no fault
of the party receiving the Confidential Information, or its respective
employees, agents or representatives, (b) is released for disclosure by one
party with the other party's written consent, (c) is received by a party from a
third party that the receiving party does not know to have an obligation of
confidentiality, or (d) when such disclosure is required by a court or a
governmental agency or is otherwise required by law or is necessary in order to
establish rights under this Agreement or any of the Ancillary Agreements. In the
event of a proposed disclosure under item (d), the Person making such disclosure
shall deliver as much advance notice thereof as practical to the party whose
Confidential Information is to be disclosed. In the event of the termination of
this Agreement prior to the Closing, each party will return or destroy all
documents and other tangible media containing Confidential Information within
thirty (30) days after the date of such termination.

                                       35
<PAGE>

               6.13 Reinsurance Treaties. IHC and Seller shall use their best
efforts to cause First Standard to enter into reinsurance treaties (the
"Reinsurance Treaties"), in substantially the form previously provided to Buyer,
with Standard Security Life Insurance Company of New York ("SSLICNY") and
Madison National Life Insurance Company, Inc. ("MNL") pursuant to which SSLICNY
and MNL shall cede, at treaty renewals, 15% of the gross premiums from their
employer medical stop-loss programs they have written to First Standard through
treaty years ended on or before December 31, 2014; and provide that any such
programs can be terminated by First Standard annually. IHC agrees that if it or
any of its Subsidiaries other than SSLICNY and MNL currently or in the future
write medical stop-loss business, that IHC shall cause them to likewise cede, at
treaty renewals, 15% of the gross premiums from their employer medical stop-loss
programs they have written to First Standard through treaty years ended on or
before December 31, 2014 on substantially the same terms and conditions as set
forth in the Reinsurance Treaties.

               6.14 RAS. Prior to Closing, IHC shall transfer or assign all of
the outstanding shares of capital stock or other equity interests of RAS and
First Standard Associates Corp. to the Company.

                                  ARTICLE VII.
                  CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

               7.1 Conditions. The obligations of Buyer to consummate the
transactions provided for hereby are subject, in the discretion of Buyer, to the
satisfaction of each of the following conditions, on or prior to the Closing
Date, any of which may be waived by Buyer:

                   (a) the representations and warranties in Article III and
Article IV shall be true and correct when made and at and as of the Closing Date
as if such representations and warranties were made at such time (except that
those representations and warranties which are made as of a specific date shall
be true and correct only as of such date);

                   (b) Seller, IHC and the Company shall have performed and
satisfied in all material respects all agreements and covenants required hereby
to be performed or satisfied by them prior to or at the Closing Date;

                   (c) all Consents from any Person, including without
limitation those set forth on Schedule 3.7(b), and all filings, registrations
and notifications necessary to permit the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements shall have been
obtained or made with no material adverse conditions being imposed;

                   (d) no Person that is not a party to this Agreement (or an
Affiliate thereof) shall have obtained a Court Order which makes the
transactions contemplated by this Agreement or the Ancillary Agreements illegal
or otherwise prohibited;

                   (e) there shall not have occurred any event, change or
condition that, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect;

                                       36
<PAGE>

                   (f) the Company shall have capital and surplus of no less
than $21,300,000 under GAAP;

                   (g) First Standard shall have entered into the Reinsurance
Treaties as described in Section 6.13;

                   (h) Buyer and its Affiliates and Seller and its Affiliates,
as applicable, shall have entered into a service agreement or agreements in form
and substance reasonably satisfactory to each of Buyer and Seller;

                   (i) The holders (other than IHC and its Affiliates) of a
majority of the shares of common stock of Buyer present in person or by proxy at
the Buyer's Stockholders Meeting shall have approved the transactions
contemplated by this Agreement;

                   (j) The Company shall own directly all of the outstanding
shares of capital stock of RAS and RAS shall own directly all of the outstanding
shares of capital stock of First Standard Associates Corp.; and

                   (k) Seller, IHC, the Company and its Subsidiaries, as
applicable, shall have delivered the documents required to be delivered by them
pursuant to Section 9.1(a), in form and content reasonably satisfactory to
Buyer.

                                  ARTICLE VIII.
                  CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

               8.1 Conditions. The obligations of Seller and IHC to consummate
the transactions provided for hereby are subject, in the discretion of Seller
and IHC, to the satisfaction of each of the following conditions, on or prior to
the Closing Date, any of which may be waived by Seller and IHC:

                   (a) the representations and warranties in Article V shall be
true and correct when made and at and as of the Closing Date as if such
representations and warranties were made at such time (except that those
representations and warranties which are made as of a specific date shall be
true and correct only as of such date);

                   (b) Buyer shall have performed and satisfied in all material
respects all agreements and covenants required hereby to be performed or
satisfied by them prior to or at the Closing Date;

                   (c) no Person that is not a party to this Agreement (or an
Affiliate thereof) shall have obtained a Court Order which makes the
transactions contemplated by this Agreement or the Ancillary Agreements illegal
or otherwise prohibited;

                   (d) all Consents from any Person, including without
limitation those set forth on Schedule 3.7(b), and all filings, registrations
and notifications necessary to permit the consummation of the transactions
contemplated by this Agreement and the Ancillary

                                       37
<PAGE>

Agreements shall have been obtained or made with no material adverse conditions
being imposed;

                   (e) Buyer and its Affiliates and Seller and its Affiliates,
as applicable, shall have entered into a service agreement or agreements in form
and substance reasonably satisfactory to each of Buyer and Seller;

                   (f) there shall not have occurred any event, change or
condition that, individually or in the aggregate, has had or could reasonably be
expected to have a Buyer Material Adverse Effect; and

                   (g) Buyer shall have delivered the documents required to be
delivered by it pursuant to Section 9.1(b) in form and content reasonably
satisfactory to Seller and IHC.

                                   ARTICLE IX.
                                     CLOSING

               9.1 Deliveries at Closing. On the Closing Date:

                   (a) Deliveries by Seller to Buyer. Seller and IHC shall
execute, or shall have cause the Company or its Subsidiaries to execute, (where
applicable) and deliver to Buyer:

                       (i) the Ancillary Agreements to which they are a party;

                       (ii) a certificate in the form attached hereto as Exhibit
B dated as of the Closing Date, signed by the secretary of Seller and the
secretary of IHC on behalf of Seller and IHC, respectively;

                       (iii) a certificate in the form attached hereto as
Exhibit C executed by an officer of Seller and an officer of IHC to the effect
that all of the conditions set forth in Section 7.1(a), (b), (e), (f) and (j) of
this Agreement have been satisfied in full;

                       (iv) certificates of good standing issued by the
Secretary of State of the state of incorporation or formation for Seller, IHC,
the Company and each of its Subsidiaries, dated not more than five days prior to
the Closing Date;

                       (v) the opinion of Seller's and IHC's legal counsel,
dated as of the Closing Date, providing the opinions set forth in Exhibit D in a
form customary for transactions of this type;

                       (vi) the Internal Revenue Service notice set forth in
Section 6.11 of this Agreement; and

                       (vii) such other documents and items as Buyer may
reasonably request.

                                       38
<PAGE>

                   (b) Deliveries by Buyer to the Company and Seller. Buyer
shall execute (where applicable) and deliver to Seller and IHC:

                       (i) the Ancillary Agreements to which it is a party;

                       (ii) a certificate in the form attached hereto as Exhibit
E dated as of the Closing Date, signed by the secretary of Buyer on behalf of
Buyer;

                       (iii) a certificate in the form attached hereto as
Exhibit F executed by an officer of Buyer to the effect that all of the
conditions set forth in Section 8.1(a), (b) and (e) of this Agreement have been
satisfied in full; and

                       (iv) certificates of good standing issued by the
Secretary of State of the state of incorporation or formation for Buyer, dated
not more than five days prior to the Closing Date;

                       (v) the opinion of Buyer's legal counsel, dated as of the
Closing Date, providing the opinions set forth in Exhibit G in a form customary
for transactions of this type; and

                       (vi) such other documents and items as Seller or IHC may
reasonably request.

                                   ARTICLE X.
                          INDEMNIFICATION; TAX MATTERS

               10.1 Survival of Representations, Etc. The representations and
warranties of IHC, Seller and Buyer contained herein shall survive the Closing
Date for a period of eighteen months from the Closing Date; provided, however,
that (a) Seller's and IHC's representations and warranties set forth in Section
3.2 ("Capital Structure"), Section 3.3 ("No Violation"), Section 3.4
("Subsidiaries"), Section 4.1 ("Authorization of Transaction") and Section 4.3
("Ownership and Delivery of Shares") shall survive in perpetuity and (b)
Seller's and IHC's representations and warranties in Sections 3.18 ("Employee
Plans"), 3.20 ("Tax Matters") and 3.22 ("Compliance with Environmental Laws")
shall survive for a period equal to the relevant statute of limitations
(including, in the case of Taxes, any waivers or extensions thereof). The right
to indemnification or other remedy based on the representations, warranties,
covenants and agreements herein will not be affected by any investigation
conducted with respect to, or any knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant or agreement. If
written notice of a claim meeting the requirement of Section 10.3 below has been
given prior to the expiration of the applicable representations and warranties
by a party in whose favor such representations and warranties were made, then
the relevant representations and warranties shall survive as to such claim,
until the claim has been finally resolved.

               10.2 Indemnification.

                                       39
<PAGE>

                    (a) IHC and Seller shall jointly and severally indemnify
Buyer, its Affiliates (including, after the Closing Date, the Company), and each
of their respective officers, directors, employees, stockholders, partners and
agents as the case may be ("Buyer Indemnified Parties") against, and hold each
Buyer Indemnified Party harmless from, any damage, claim, loss, cost, liability
or expense, including without limitation, interest, penalties, reasonable
attorneys' fees and expenses of investigation and defense, damages and
diminution in value (collectively "Damages") incurred by such Buyer Indemnified
Party, that are incident to, arise out of or in connection with, or are related
to, whether directly or indirectly: (i) the breach of any warranty or
representation of IHC or Seller contained in this Agreement, in any Ancillary
Agreement or in any agreement, certificate or other instrument delivered by IHC,
Seller or the Company pursuant to this Agreement; and (ii) any breach or
non-performance by IHC, Seller or the Company of any of the covenants or
agreements contained in this Agreement.

                    (b) The term "Damages" as used in this Section 10.2 is not
limited to Damages resulting from matters asserted by third parties against
Buyer Indemnified Parties, but includes Damages incurred or sustained by such
persons in the absence of third-party claims, and payments by the Indemnified
Party shall not be a condition precedent to recovery.

               10.3 Notice of Claims.

                    (a) Any Buyer Indemnified Party (the "Indemnified Party")
seeking indemnification hereunder shall, within the relevant limitation period
provided for in Section 10.1 above, give to IHC and Seller (together, the
"Indemnitor"), a notice (a "Claim Notice") describing in reasonable detail the
facts giving rise to any claims for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of computation of
the amount of such claim, and a reference to the provision of this Agreement or
any agreement, certificate or instrument executed pursuant hereto or in
connection herewith upon which such claim is based; provided, that a Claim
Notice in respect of any action at law or suit in equity by or against a third
Person as to which indemnification will be sought shall be given promptly after
the action or suit is commenced; and provided further, that failure to give such
notice shall not relieve the Indemnitor of its obligations hereunder except to
the extent it shall have been materially prejudiced by such failure.

                    (b) The Indemnitor shall have thirty (30) days after the
giving of any Claim Notice pursuant hereto to (i) agree to the amount or method
of determination set forth in the Claim Notice and to pay such amount to such
Indemnified Party in immediately available funds, or (ii) to provide such
Indemnified Party with notice that it disagrees with the amount or method of
determination set forth in the Claim Notice (the "Dispute Notice"). Within
fifteen (15) days after the giving of the Dispute Notice, representatives of
Indemnitor and such Indemnified Party shall negotiate in a bona fide attempt to
resolve the matter. In the event that the controversy is not resolved within
thirty (30) days of the giving of the Dispute Notice, the parties shall proceed
to binding arbitration construed in accordance with the Federal Arbitration Act,
9 U.S.C. Section 1, et seq. pursuant to the following procedures:

                        (i) Any party may send another party written notice
identifying the matter in dispute and invoking the procedures of this Section.
Within fourteen (14) days, each party involved in the dispute shall meet at a
mutually agreed location in New

                                       40
<PAGE>

York, New York, for the purpose of determining whether they can resolve the
dispute themselves by written agreement, and, if not, whether they can agree
upon a third-party arbitrator to whom to submit the matter in dispute for final
and binding arbitration.

                        (ii) If such parties fail to resolve the dispute by
written agreement or agree on the Arbitrator within said 14-day period, any such
party may submit the matter in dispute to arbitration before the American
Arbitration Association ("AAA") for the appointment of a single arbitrator (the
"Arbitrator") to resolve the dispute by arbitration. Except as provided in this
Agreement, such arbitration shall be in accordance with the Commercial
Arbitration Rules of the AAA currently in effect. Such arbitration shall take
place in New York, New York.

                        (iii) Within thirty (30) days of the selection of the
Arbitrator, the parties involved in the dispute shall meet in New York, New York
with such Arbitrator at a place and time designated by such Arbitrator after
consultation with such parties and present their respective positions on the
dispute. The decision of the Arbitrator shall be made in writing no more than
thirty (30) days following the end of the proceeding. Such an award shall be a
final and binding determination of the dispute and shall be fully enforceable as
an arbitration decision in any court having jurisdiction and venue over such
parties. The prevailing party (as determined by the Arbitrator) shall in
addition be awarded by the Arbitrator such party's own attorneys' fees and
expenses in connection with such proceeding. The non-prevailing party (as
determined by the Arbitrator) shall pay the Arbitrator's fees and expenses.

                   (c) A Claim shall be determined to be valid (i) if the
Indemnitor agrees to the amount set forth in the Claim Notice; (ii) if the
Indemnified Person does not timely receive a Dispute Notice from the Indemnitor;
(iii) if the Indemnitor and Indemnified Person mutually agree upon an amount to
settle the Claim; or (iv) upon the receipt of a final, non-appealable judgment,
order or decree of the court or other judicial body or arbitrator or panel of
arbitrators of competent jurisdiction that decided the underlying claim with
respect to such amount that indicates whether the Indemnified Person is entitled
indemnification with regard to such Claim. Once a Claim is determined to be
valid, the Indemnified Person shall provide written notice (the "Resolved
Dispute Notice") to the Indemnitor. Within five (5) Business Days after receipt
of the Resolved Dispute Notice, the Indemnitor shall distribute to the
Indemnified Person an amount in cash equal to the Claim (subject to the
limitations set forth in Section 10.5).

               10.4 Third Person Claims. If a claim by a third Person is made
against an Indemnified Party, and if such party intends to seek indemnity with
respect thereto under this Article X, such Indemnified Party shall promptly
notify the Indemnitor in writing of such claims, setting forth such claims in
reasonable detail. The Indemnitor shall have ten (10) days after receipt of such
notice to undertake, conduct and control, through counsel of its own choosing
and at its own expense, the settlement or defense thereof, and the Indemnified
Party shall cooperate with it in connection therewith; provided that the
Indemnified Party may participate in such settlement or defense through counsel
chosen by such Indemnified Party and paid at its own expense and provided
further that, if in the opinion of counsel for such Indemnified Party there is a
reasonable likelihood of a conflict of interest between the Indemnitor and the
Indemnified Party, the Indemnitor shall be responsible for reasonable fees and
expenses of one counsel to such Indemnified Party in connection with such
defense. So long as the Indemnitor is reasonably

                                       41
<PAGE>

contesting any such claim in good faith, the Indemnified Party shall not pay or
settle any such claim without the consent of the Indemnitor. If the Indemnitor
does not notify the Indemnified Party within ten (10) days after receipt of the
Indemnified Party's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof, the Indemnified Party shall have the right to
undertake, at Indemnitor's cost, risk and expense, the defense, compromise or
settlement of the claim but shall not thereby waive any right to indemnity
therefore pursuant to this Agreement. The Indemnitor shall not, except with the
consent of the Indemnified Party, enter into any settlement that does not
include as an unconditional term thereof the giving by the person or persons
asserting such claim to all Indemnified Parties of an unconditional release from
all liability with respect to such claim or consent to entry of any judgment.

               10.5 Limitations. In the absence of fraud or willful
misrepresentation, IHC and Seller shall have no liability and no obligation to
indemnify the Buyer for any Losses unless and until the aggregate indemnity
obligations hereunder with respect to the Losses shall exceed $250,000,
whereupon the Buyer shall be entitled to receive indemnification for the full
amount of all Losses dollar-for-dollar from the first dollar of such Losses
provided that the maximum amount the Buyer may recover, in the aggregate, for
Losses is $8,000,000.

               10.6 Tax Indemnification; Responsibility for Certain Tax Matters.

                    (a) IHC and Seller Tax Indemnification. Other than as set
forth in Section 10.6(b), IHC and Seller shall jointly and severally indemnify,
save and hold the Buyer Indemnified Parties harmless from and against any and
all Losses incurred in connection with, arising out of, resulting from or
incident to (i) any Taxes of any of the Company and its Subsidiaries with
respect to any Tax year or portion thereof ending on or before the Closing Date
(or for any Tax year beginning before and ending after the Closing Date, to the
extent allocable (as determined in the following sentence) to the portion of
such period beginning before and ending on the Closing Date), except to the
extent that such Taxes are reflected in the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the balance sheets (rather
than in any notes thereto) contained in the Fiscal Year-End Financial
Statements, as such reserve is adjusted for the passage of time through the
Closing Date in accordance with past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns, and (ii) the unpaid Taxes of any
Person (other than any of the Company and its Subsidiaries) under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or otherwise. For
purposes of the preceding sentence, in the case of any Taxes that are imposed on
a periodic basis and are payable for a Tax period that includes (but does not
end on) the Closing Date, the portion of such Tax that relates to the portion of
such Tax period ending on the Closing Date shall (i) in the case of any Taxes
other than Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire Tax period multiplied by a fraction the
numerator of which is the number of days in the Tax period ending on the Closing
Date and the denominator of which is the number of days in the entire Tax
period, and (ii) in the case of any Tax based upon or related to income or
receipts, be deemed equal to the amount which would by payable if the relevant
Tax period ended on the Closing Date.

                    (b) Buyer Tax Indemnification. Buyer will indemnify and hold
Seller harmless from and against 50% of the excess of (A) expenses relating to
Taxes incurred by Seller

                                       42
<PAGE>

with respect to the gain allocated to Seller on the deemed asset sale by the
Company resulting from the Section 338(h)(10) Election over (B) expenses
relating to the Taxes which would have been incurred by Seller with respect to
the gain recognized upon the sale of the Company by Seller if the Section
338(h)(10) Election had not been made; provided, however, that the maximum
amount Seller may recover, in the aggregate, under this Section 10.6(b) is
$250,000.

                    (c) Tax Periods Ending On or Before the Closing Date --
Nonconsolidated Tax Returns. Buyer shall prepare or cause to be prepared and
file or cause to be filed all Tax Returns for each of the Company and its
Subsidiaries for all periods ending on or prior to the Closing Date which are
filed after the Closing Date, other than Tax Returns with respect to periods for
which a consolidated, unitary or combined Tax Return of Seller will include the
operations of the Company and its Subsidiaries. Buyer shall permit Seller and
IHC to review and comment on each such Tax Return described in the preceding
sentence prior to filing and shall make such revisions to such Tax Returns as
are reasonably requested by Seller and IHC. IHC or Seller shall pay to Buyer,
within fifteen (15) days after the date on which Taxes are paid with respect to
such periods, that amount equal to such Taxes of each of the Company and its
Subsidiaries with respect to such periods, except to the extent that such Taxes
are reflected in the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) shown on the face of the balance sheets (rather than in any notes
thereto) contained in the Fiscal Year-End Financial Statements, as such reserve
is adjusted for the passage of time through the Closing Date in accordance with
past custom and practice of the Company and its Subsidiaries in filing their Tax
Returns.

                    (d) Tax Periods Ending On or Before the Closing Date --
Seller Consolidated Tax Returns. For all Tax periods ending on or prior to the
Closing Date, Seller and IHC shall cause the Company and its Subsidiaries to
join in any consolidated, unitary or combined Tax Return of Seller, and Seller
and IHC shall pay any such Taxes attributable to the Company and its
Subsidiaries (including without limitation, in the case of Seller's consolidated
federal income Tax Return, any deferred items triggered into income by Treasury
Regulation Section 1.1502-13 and any excess loss account taken into income under
Treasury Regulation Section 1.1502-19). All such Tax Returns shall be prepared
and filed in a manner consistent with prior practice.

                    (e) Tax Periods Beginning Before and Ending After the
Closing Date. Buyer shall prepare or cause to be prepared and file or cause to
be filed any Tax Returns of any of the Company and its Subsidiaries for Tax
periods which begin before the Closing Date and end after the Closing Date.
Seller and IHC shall pay to Buyer within fifteen (15) days after the date on
which Taxes are paid with respect to such periods, that amount equal to the
portion of such Taxes which relates to the portion of such Taxable period ending
on the Closing Date, except to the extent that such Taxes are reflected in the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the balance sheets (rather than in any notes thereto) contained in
the Fiscal Year-End Financial Statements, as such reserve is adjusted for the
passage of time through the Closing Date in accordance with past custom and
practice of the Company and its Subsidiaries in filing their Tax Returns. For
purposes of the preceding sentence, Taxes shall be allocated in the manner set
forth in the last sentence of Section 10.6(a).

                                       43
<PAGE>

                    (f) Cooperation on Tax Matters. Buyer, Seller and IHC shall
cooperate fully, and Seller, IHC or Buyer, as the case may be, shall cause the
Company and its Subsidiaries to cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Agreement and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Buyer, Seller
and IHC agree, and Seller, IHC or Buyer, as the case may be, shall cause the
Company and its Subsidiaries, (A) to retain all books and records with respect
to Tax matters pertinent to each of the Company and its Subsidiaries relating to
any Taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Buyer, any extensions
thereof) of the respective Taxable periods, and to abide by all record retention
agreements entered into with any Taxing authority, (B) to deliver or make
available to Buyer, within sixty (60) days after the Closing Date, copies of all
such books and records, and (C) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, the Company and its Subsidiaries,
Seller or IHC, as the case may be, shall allow the other party to take
possession of such books and records. Buyer, Seller and IHC further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).

                    (g) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other substantially similar Taxes and fees (including
any penalties and interest) incurred in connection with this Agreement
(collectively, "Transfer Taxes") shall be paid by Seller and IHC when due, and
Seller and IHC will, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such Transfer Taxes and, if required by
applicable law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation. Seller and IHC shall
provide Buyer with (i) evidence satisfactory to Buyer that such Transfer Taxes
have been paid by Seller or IHC and (ii) a clearance certificate or similar
document(s) which may be required by any state taxing authority to relieve Buyer
of any obligation to withhold any portion of the payments to Seller and IHC
pursuant to this Agreement.

                    (h) Treatment of Tax Payments. Any payment by Buyer or any
Seller under this Section 10.6 will be treated for Tax purposes as an adjustment
to the Purchase Consideration.

                    (i) FIRPTA Certificate. Seller and IHC shall have delivered
to Buyer a form of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2) and in form and
substance reasonably acceptable to Buyer along with written authorization for
Buyer to deliver such notice form to the Internal Revenue Service on behalf of
Seller upon the Closing.

                                       44
<PAGE>

                                   ARTICLE XI.
                                   TERMINATION

               11.1 Termination. This Agreement and the transactions
contemplated hereby may be terminated or abandoned at any time prior to the
Closing Date:

                    (a) by the mutual written agreement of Buyer and Seller;

                    (b) by Buyer, Seller or IHC if the Closing has not occurred
on or prior to May 1, 2003, or such later date on which the Closing is to occur
as provided in Section 2.1(b) hereof, at 11:59 p.m. (California time);

                    (c) by Buyer, Seller or IHC if any governmental entity shall
have issued an order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties shall have used their reasonable
efforts to resist, resolve or lift, as applicable) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable;

                    (d) by Buyer, upon a material breach of any covenant or
agreement on the part of Seller, IHC or the Company set forth in this Agreement,
or if (i) any representation or warranty of Seller or IHC that is qualified as
to materiality shall have become untrue or (ii) any representation or warranty
of Seller or IHC that is not so qualified shall have become untrue in any
material respect, (a "Terminating Company Breach"); provided, however, that, if
such Terminating Company Breach is capable of being cured by Seller or IHC prior
to the Closing Date through the exercise of their best efforts, Buyer shall
promptly give notice of such Terminating Company Breach to Seller and IHC and if
such Terminating Company Breach is cured within fifteen (15) days after giving
notice to Seller and IHC of such breach, Buyer may not terminate this Agreement
under this Section 11.1(d);

                    (e) by Seller or IHC, upon a material breach of any covenant
or agreement on the part of Buyer set forth in this Agreement, or if (i) any
representation or warranty of Buyer that is qualified as to materiality shall
have become untrue or (ii) any representation or warranty of Buyer that is not
so qualified shall have become untrue in any material respect ("Terminating
Buyer Breach"); provided, however, that, if such Terminating Buyer Breach is
capable of being cured by Buyer prior to the Closing Date through the exercise
of best efforts, Seller and IHC shall promptly give notice of such Terminating
Buyer Breach to Buyer and if such Terminating Buyer Breach is cured within
fifteen (15) days after giving written notice to Buyer of such breach, Seller
and IHC may not terminate this Agreement under this Section 11.1(e);

                    (f) by either Buyer or Seller following the date that is 60
days after the date of Buyer's Stockholders Meeting in the event Buyer fails to
get approval of the transactions contemplated by this Agreement from the holders
(other than IHC and its Affiliates) of a majority of the shares of common stock
of Buyer present in person or by proxy at the Buyer's Stockholders Meeting.

                                       45
<PAGE>

                                  ARTICLE XII.
                                  MISCELLANEOUS

               12.1 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Seller or IHC without the prior written
consent of Buyer, or by Buyer without the prior written consent of Seller and
IHC, except that Buyer may, without such consent but with prior notice to Seller
or IHC, assign the rights hereunder either before or after the Closing Date to
an Affiliate of Buyer or after the Closing Date to any third party and except
that Seller may, without such consent but with prior notice to Buyer, assign its
rights and obligations hereunder before the Closing Date to an Affiliate of
Seller, provided, however, that no such assignment shall release Buyer or
Seller, as the case may be, of any of its obligations under this Agreement.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns, and no other Person shall have any right, benefit or obligation
hereunder.

               12.2 Notices. All notices, requests and other communications to
any party hereunder shall be in writing and shall be deemed duly given,
effective (i) three Business Days later, if sent by registered or certified
mail, return receipt requested, postage prepaid, (ii) when sent, if sent by
telecopier or fax, provided that the telecopy or fax is promptly confirmed by
telephone confirmation thereof, (iii) when served, if delivered personally to
the intended recipient, and (iv) one Business Day later, if sent by overnight
delivery via a national courier service, and in each case, addressed,

        If to Buyer:

        SoftNet Systems, Inc.
        650 Townsend Street, Suite 225
        San Francisco, California 94103
        Attention:  Steve Harris
        Fax: (415) 354-3929

        With a copy to:

        Latham & Watkins
        505 Montgomery Street, Suite 1900
        San Francisco, California 94111
        Attention:  Tad Freese, Esq.
        Fax: (415) 395-8095

        If to Seller or IHC:

        Independence Holding Company
        96 Cummings Point Road
        Stamford, Connecticut 06902
        Attention: David Kettig
        Fax: (203) 348-3103

                                       46
<PAGE>

        with a copy to:

        Kramer Levin Naftalis & Frankel LLP
        919 Third Avenue
        New York, New York 10022
        Attention: Ezra G. Levin
        Fax: (212) 715-8227

Any party may, from time to time, designate any other address to which any such
notice to it or such party shall be sent. Any such notice shall be deemed to
have been delivered upon receipt.

               12.3 Choice of Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York, as applied to agreements among New York residents
entered into and wholly to be performed within the State of New York (without
reference to any choice of law rules that would require the application of the
laws of any other jurisdiction).

               12.4 Entire Agreement; Amendments and Waivers; Interpretation.
This Agreement, the Ancillary Agreements and all exhibits and schedules hereto
and thereto, constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties. No
supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided. 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
presumption or burden or proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.

               12.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

               12.6 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.

               12.7 Headings. The headings of the Articles and Sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.

               12.8 Expenses. Except as otherwise specifically provided in this
Agreement, each party will pay its own expenses incident to this Agreement and
the transactions contemplated hereby, including legal and accounting fees and
disbursements.

                                       47
<PAGE>

               12.9 Schedules. The Schedules and Exhibits referenced in this
Agreement are a material part hereof and shall be treated as if fully
incorporated into the body of this Agreement.

               12.10 Publicity. The parties hereto covenant and agree that,
except as provided for herein below, each will not from and after the date
hereof make, issue or release any public announcement, press release, statement
or acknowledgment of the existence of, or reveal publicly the terms, conditions
and status of, the transactions provided for herein, without the prior written
consent of the other party as to the content and time of release of and the
media in which such statement or announcement is to be made; provided, however,
that in the case of announcements, statements, acknowledgements or disclosures
which either party is required by law to make, issue or release, the making,
issuing or releasing of any such announcement, statement, acknowledgment or
disclosure by the party so required to do so by law shall not constitute a
breach of this Agreement if such party shall have given, to the extent
reasonably possible, not less than two (2) calendar days prior notice to the
other party, and shall have attempted, to the extent reasonably possible, to
clear such announcement, statement, acknowledgment or disclosure with the other
party. Each party hereto agrees that it will not unreasonably withhold any such
consent or clearance.

               12.11 No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto (and their permitted successors and assigns)
and nothing herein expressed or implied shall give, or be construed to give, to
any Person, other than the parties hereto and such permitted successors and
assigns, any legal or equitable rights hereunder.

               12.12 Further Assurances. Upon the terms and subject to the
conditions contained herein, after the Closing the parties agree (i) to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement and the Ancillary
Agreements; (ii) to execute any documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder and thereunder; and (iii) to cooperate with
each other in connection with the foregoing.

                     (b) After the Closing, each party agrees that it will
cooperate with and make available to the other party, during normal business
hours, all books and records, information and employees (without substantial
disruption of employment) retained and remaining in existence after the Closing
which are necessary or useful in connection with any financial statement audit,
tax inquiry, audit, investigation or dispute, any litigation or investigation or
any other matter requiring any such books and records, information or employees
for any reasonable business purpose and will take reasonable measures to cause
it Representatives, including its accountants, to do the same.

                                       48
<PAGE>

                           [Signature Page to Follow]

                                       49
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf all as of the day and year first above
written.

               BUYER:          SOFTNET SYSTEMS, INC.

                               By:/s/ Ronald I. Simon
                                  _____________________________________
                               Name: Ronald I. Simon
                               Title: Director

               SELLER:         SSH CORP.

                               By:/s/ Teresa A. Herbert
                                  _____________________________________
                               Name: Teresa A. Herbert
                               Title: Vice President

               IHC:            INDEPENDENCE HOLDING COMPANY

                               By: /s/ Teresa A. Herbert
                                  _____________________________________
                               Name: Teresa A. Herbert
                               Title: Vice President and Chief Financial Officer

                 Signature Page to the Stock Purchase Agreement<PAGE>

                                                                    EXHIBIT 10.2

                                STOCK AGREEMENT

                                   dated as of

                                  July 30, 2002

                                     between

                             SOFTNET SYSTEMS, INC.,

                          INDEPENDENCE HOLDING COMPANY

                                       and

                          MADISON INVESTORS CORPORATION

                        relating to the purchase and sale

                                       of

                        5,000,000 Shares of Common Stock

                                       of

                              SOFTNET SYSTEMS, INC.

                                       by

                          MADISON INVESTORS CORPORATION

                                      from

                         CYBER NET TECHNOLOGIES LIMITED

<PAGE>

                                 STOCK AGREEMENT

        This AGREEMENT dated as of July 30, 2002 is between SoftNet Systems,
Inc., a Delaware corporation (the "CORPORATION"), Independence Holding Company,
a Delaware corporation ("IHC"), and Madison Investors Corporation, a Delaware
corporation ("BUYER"). This agreement shall become effective upon the closing of
the transactions contemplated by the third WHEREAS clause set forth below.

        WHEREAS, the Corporation, IHC and SSH Corp., a Delaware corporation
("SSH CORP."), are entering into an agreement pursuant to which the Corporation
will purchase all outstanding securities of First Standard Holdings Corp., a
Delaware corporation and an Affiliate of Buyer, from SSH Corp., on the terms set
forth in Exhibit A (the "FSSIC AGREEMENT");

        WHEREAS, IHC is an Affiliate of Buyer that benefits from the rights
provided to Buyer hereunder;

        WHEREAS, contemporaneously with the execution of the FSSIC Agreement,
Buyer is purchasing 5,000,000 shares of the Corporation's Common Stock from
Cyber Net Technologies Limited ("CYBER NET") pursuant to an agreement dated as
of July 30, 2002 between Buyer and Cyber Net;

        WHEREAS, pursuant to a Stock Purchase Agreement (the "OLD STOCK PURCHASE
AGREEMENT") dated as of October 12, 1999 between the Corporation and Cyber Net,
as successor to Pacific Century Cyberworks Limited, the consent of the
Corporation is required to effect such purchase of shares of Common Stock by
Buyer; and

        WHEREAS, the parties intend to restate the rights and obligations under
the Old Stock Purchase Agreement that will apply to the Corporation and Buyer in
connection with Buyer's ownership of Shares and to terminate and supersede the
Old Stock Purchase Agreement in its entirety.

        NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

        SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:

<PAGE>

        "AFFILIATE" means, with respect to any specified Person, any other
Person which, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such specified Person. For the purposes
of this definition, "control" when used with respect to any person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "affiliated," "controlling," and "controlled" have
meanings correlative to the foregoing.

        "BOARD OF DIRECTORS" means the Board of Directors of the Corporation.

        "CLOSING DATE" means the date of the closing of the transactions
contemplated by the FSSIC Agreement.

        "COMMISSION" means the Securities and Exchange Commission.

        "COMMON STOCK" means the shares of common stock, par value $0.01 per
share, of the Corporation.

        "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

         "PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.

        "SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

        "SHARES" means 5,000,000 shares of Common Stock purchased by Buyer from
Cyber Net together with any other shares of capital stock of the Corporation
purchased by Buyer or any Affiliate of Buyer.

                                    ARTICLE 2
                                LEGENDS ON SHARES

        SECTION 2.01 Certificates for Shares. (a) Each certificate for Shares
shall bear the following legend for so long as such securities constitute
restricted securities (as such term is defined in the regulations under the
Securities Act):

        "The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold, transferred or
otherwise disposed of except in compliance with such laws."

        (a) The Corporation agrees that, at the request of Buyer or any
Permitted Transferee, it will remove the legend contemplated by this Section
from the certificates representing any Shares in the event that outside counsel
for Buyer

                                       2
<PAGE>

or such Permitted Transferee determines that the transfer of such Shares is no
longer restricted by the Securities Act and outside counsel for the Corporation
reasonably concurs in such determination.

        (b) The Shares shall also bear a legend stating that their transfer or
sale is restricted by the terms of this Agreement (which shall be removed when
such restrictions no longer apply).

                                    ARTICLE 3
                     REPRESENTATIONS AND WARRANTIES OF BUYER

        Buyer represents and warrants to the Corporation as of the date hereof
that:

        Section 3.01 Purchase for Investment. Buyer is purchasing the Shares for
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof. Buyer (either alone or together with its
advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares and is capable of bearing the economic risks of such investment.
Buyer is an "accredited investor," as such term is defined in Rule 501 under the
Securities Act. Buyer has been afforded access to all information deemed by it
to by necessary, and has been given an opportunity to ask all necessary
questions of the Corporation's management, in connection with its decision to
acquire the Shares.

                                    ARTICLE 4
                          COVENANTS OF THE CORPORATION

        The Corporation agrees that:

        Section 4.01 Buyer Directors. Subject to Section 5.05, for so long as
Buyer (together with its Affiliates) owns a number of Shares equal to or greater
than the number of Shares purchased from Cyber Net, Buyer shall be entitled to
designate for election to the Board of Directors the following number of the
Corporation's directors (the "BUYER DIRECTORS"):

<TABLE>
<CAPTION>
        Total Number of Directors            Number of Buyer Directors
        -------------------------            -------------------------
        <S>                                  <C>
                    5                                    2
                    6                                    2
                    7                                    2
                    8                                    3
                    9                                    3
                   10                                    4
</TABLE>

                                       3
<PAGE>

        Subject to Section 5.05, if the Board of Directors consists of greater
than 10 directors, then Buyer shall be entitled to a number of directors that is
equal to a number of directors pro rata to the ownership of the outstanding
shares of Common Stock on a fully-converted basis of Buyer and its Affiliates
(rounded down to the nearest whole number of directors). Notwithstanding
anything to the contrary in the other provisions of this Section 4.01, once the
Corporation has issued an aggregate of 1,250,000 or more shares of Common Stock
after the date of this Agreement, the number of Buyer Directors shall at no time
thereafter exceed by more than one the percentage of the total number of
directors equal to the ownership interest percentage in the outstanding Common
Stock on a fully-converted basis of Buyer and its Affiliates.

        In the event Buyer or its Affiliates sell or otherwise dispose of such
Shares, then Buyer shall be entitled to a number of directors that is equal to
the lesser of (i) two directors and (ii) a number of directors pro rata to its
ownership of the outstanding shares of Common Stock (rounded down to the nearest
whole number of directors). In the event Buyer elects to have the Board of
Directors appoint a Buyer Director, it shall so notify the Corporation in
writing and the Corporation shall (a) increase the size of the Board of
Directors by one and fill the vacancy created thereby by electing the Buyer
Director and (b) in connection with the meeting of shareholders of the
Corporation next following such election, nominate such Buyer Director for
election as director by the shareholders and use its best efforts to cause the
Buyer Director to be so elected. If a vacancy shall exist in the office of a
Buyer Director, Buyer shall be entitled to designate a successor and the Board
of Directors shall elect such successor and, in connection with the meeting of
shareholders of the Corporation next following such election, nominate such
successor for election as director by the shareholders and recommend to
shareholders that the successor be elected. The Buyer Director shall be subject
to the prior approval of the Board of Directors, such approval not to be
unreasonably withheld.

        Section 4.02 Other Transfers of Restricted Securities. The Corporation
shall take all actions reasonably necessary to enable holders of the restricted
securities to sell such securities without registration under the Securities Act
pursuant to Rule 144 under the Securities Act or any successor rule or
regulation, subject in each case to the provisions of this Agreement and,
specifically, the filing on a timely basis of all reports required to be filed
under the Exchange Act.

        Section 4.03 Preemptive Rights. In connection with any issuance by the
Corporation of shares of Common Stock, the Corporation shall offer Buyer an
opportunity to acquire (on the terms and subject to the conditions generally
applicable to such issuance and simultaneously with such issuance) a sufficient
number of shares to maintain Buyer's then-existing percentage of ownership of
the Corporation's issued and outstanding shares of Common Stock; provided that
in connection with any public offering for cash, Buyer shall be entitled to
acquire

                                       4
<PAGE>

shares at a price equal to the public offering price less the underwriter's
commission or discount and provided further that in connection with any issuance
by the Corporation of shares of Common Stock (a) in exchange for non-cash
consideration or (b) upon exercise of stock options with an exercise price of
less than $3.00 per share, Buyer shall be required to pay a per share purchase
price equal to the greater of (j) $3.00 and (k) the Fair Market Value of a share
of Common Stock. For purposes of this Section "FAIR MARKET VALUE" as of any date
shall mean (x) the average of the daily closing prices of a share of Common
Stock for the twenty trading days before such date or (y) if no shares of Common
Stock are then listed or admitted to trading on any national exchange or traded
on any national market system, the fair market value as determined by an
investment bank selected by the Corporation and approved by Buyer.

                                    ARTICLE 5
                           COVENANTS OF BUYER AND IHC

        Buyer and IHC agree that:

        Section 5.01 Confidentiality. Buyer and IHC will, and will cause their
respective Affiliates, employees, agents and representatives to, hold in
confidence all documents and other material and information (verbal or
otherwise) containing information which is disclosed by the Corporation to Buyer
or IHC or their respective employees, agents or representatives in connection
with the transactions contemplated by this Agreement ("CONFIDENTIAL
INFORMATION"), and not disclose or publish the same; provided, however, that the
foregoing restriction shall not apply to any portion of the foregoing which (a)
becomes generally available to the public in any manner or form through no fault
of the party receiving the Confidential Information, or its respective
employees, agents or representatives, (b) is released for disclosure by Buyer or
IHC with the Corporation's written consent, (c) is received by Buyer or IHC from
a third party that Buyer or IHC, as applicable, does not know to have an
obligation of confidentiality, or (d) when such disclosure is required by a
court or a governmental agency or is otherwise required by law or is necessary
in order to establish rights under this Agreement. In the event of a proposed
disclosure under item (d), the Person making such disclosure shall deliver as
much advance notice thereof as practical to the Corporation. In the event of the
termination of this Agreement, Buyer and IHC will return or destroy all
documents and other tangible media containing Confidential Information within
thirty (30) days after the date of such termination.

        Section 5.02 Sale or Transfer of Shares. Except pursuant to a Change of
Control (as defined below), Buyer and IHC will not, and will cause their
Affiliates not to, sell, pledge, encumber or otherwise transfer, or agree to
sell, pledge, encumber or otherwise transfer, directly or indirectly, any shares
of

                                       5
<PAGE>

Common Stock for a period of six months from and after the Closing Date;
provided, that prior to the expiration of such period with the prior written
consent of the Corporation, and thereafter in its sole discretion, Buyer or IHC
may sell, pledge, encumber or otherwise transfer Common Stock (a) (i) in any
transaction (other than a transaction described in (iii) below) in compliance
with Rule 144 under the Securities Act or any successor rule or regulation, (ii)
in a public offering, registered under the Securities Act or (iii) in a private
transaction exempt from the registration requirements of the Securities Act (but
only if Buyer or IHC, as applicable, reasonably believes after due inquiry that
the acquiror, following such transaction, will not be the beneficial owner of
more than 5% of the outstanding shares of Common Stock), and (b) to Permitted
Transferees. A "PERMITTED TRANSFEREE" means a Person that (A) has agreed in
writing to be bound by the terms (including Exhibit B) of this Agreement and (B)
is a Person that is an Affiliate of Buyer.

        Section 5.03 Purchase of Additional Shares of Common Stock.

               (a) Buyer and IHC agree not to, and agree to cause their
Affiliates not to, purchase any additional shares of Common Stock without the
prior written consent of the Corporation (which may be withheld in the sole
discretion of the Corporation if Buyer owns 40% or more of the outstanding
shares of Common Stock); provided, however, that no consent shall be required
after the consummation of the Offer if following such acquisition of shares of
Common Stock Buyer is the beneficial owner of no more than 40% of the
outstanding shares of Common Stock. Buyer and IHC each agree not to, and to
cause their Affiliates not to, make a formal proposal to acquire control of the
Corporation unless it is invited to do so by the Board of Directors. Buyer
acknowledges and agrees that the directors elected pursuant to Section 4.01
shall not be eligible to deliberate or vote upon any proposal to grant such
consent.

               (b) IHC shall, or shall cause one of its Affiliates at its
expense to, (A) commence (within the meaning of Rule 14d-2 under the Exchange
Act) no later than the later of (i) February 18, 2003 or (ii) the date that is
30 days after the Closing Date, a bona fide tender offer, on commercially
reasonable terms for similar offers and including a provision for pro ration in
accordance with ownership of the Common Stock in the event that more shares of
Common Stock are tendered than solicited, for at least the Tender Shares at a
cash price of $3.00 per share net to the seller in cash (the "OFFER") that will
remain open for at least 30 business days, (B) after affording the Corporation a
reasonable opportunity to review and comment thereon, file a Tender Offer
Statement on Schedule TO and all other necessary documents with the Commission,
make all deliveries, mailings and telephonic notices required by Rule 14d-3
under the Exchange Act, and publish, send or give the disclosure required by
Rule 14d-6 under the Exchange Act by complying with the dissemination
requirements of Rule 14d-4 under the Exchange Act in each case in connection
with the Offer (collectively, together with any amendments or supplements
thereto, the "OFFER DOCUMENTS") and (C) use reasonable best efforts to
consummate the Offer, subject to the terms and

                                       6
<PAGE>

conditions thereof. Each of IHC, on the one hand, and the Corporation, on the
other hand, agrees promptly to correct any information provided by it or any of
its Affiliates for use in the Offer Documents if and to the extent that it shall
have become false or misleading in any material respect, and IHC further agrees
to take all steps necessary to cause the Offer Documents as so corrected to be
filed with the Commission and to be disseminated promptly to stockholders of the
Corporation, in each case as and to the extent required by applicable federal
securities laws. The obligation of IHC or an Affiliate of IHC, as applicable, to
accept for payment or pay for any shares tendered pursuant to the Offer will not
be subject to any conditions except to the extent required by applicable federal
securities laws. For purposes of this Section, "TENDER SHARES" shall mean the
lesser of (i) 3,000,000 shares of Common Stock and (ii) the maximum number of
shares of Common Stock of the Corporation which, when combined with (A) the
number of shares of Common Stock of the Corporation purchased by Buyer pursuant
to that certain Stock Purchase Agreement dated as of July 30, 2002 between Cyber
Net and Buyer (and/or one of its Affiliates) and (B) all other relevant events
during the applicable testing period, does not result in the percentage of stock
of the Corporation owned by one or more 5 percent shareholders having increased
by more than 44.9 percentage points over the lowest percentage of stock owned by
such shareholders at any time during the testing period, all as within the
meaning of Section 382 of the Internal Revenue Code of 1986, as amended, and the
applicable regulations promulgated thereunder.

               (c) Notwithstanding anything to the contrary in this Section 5.03
or elsewhere in this Agreement, Buyer and IHC agree not to take, and to cause
their Affiliates not to take, any action, including the acquisition of
additional shares of Common Stock, that could result in the imposition of
limitations on the use, for federal, state or city income tax purposes, of the
Corporation's carryforwards of net operating losses, federal income tax credits
or similar tax benefits.

        Section 5.04 Change of Control. In connection with any transaction
involving the merger of the Corporation with or into any other Person or any
acquisition of 50% or more of the outstanding Common Stock by any other Person
or any other transaction that effects a change in control of the Corporation, in
each case at a per share price higher than $10.00 (a "CHANGE OF CONTROL"), Buyer
and IHC will cause any shares of Common Stock owned by them or their respective
Affiliates to be voted in the same proportion as shareholders (other than Buyer,
IHC or any Affiliate of Buyer, IHC or the Corporation) who individually hold
less than 5% of the outstanding Common Stock.

        Section 5.05 Buyer Voting. Until the fifth anniversary of the Closing
Date, Buyer and IHC each agree that it will not solicit, encourage or recommend
to other shareholders of the Corporation that they vote their shares of Common

                                       7
<PAGE>

Stock in favor of any nominee or nominees for director other than those duly
proposed and nominated in accordance with Section 4.01 hereof.

                                    ARTICLE 6
                   COVENANTS OF BUYER, IHC AND THE CORPORATION

        Section 6.01 Reasonable Best Efforts; Further Assurances. Subject to the
terms and conditions of this Agreement, Buyer, IHC and the Corporation will use
their reasonable best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary or desirable under applicable laws
and regulations to carry out the provisions of this Agreement. The Corporation,
IHC and Buyer agree to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be necessary
or desirable in order to carry out the provisions of this Agreement.

        Section 6.02 Certain Filings. The Corporation, IHC and Buyer shall
cooperate with one another (i) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection carrying out the
provisions of this Agreement and (ii) in taking such actions or making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such actions, consents, approvals or waivers.

        Section 6.03 Public Announcements. Prior to the Closing Date, the
parties agree to consult with each other before issuing any press release or
making any public statement with respect to this Agreement or the transactions
contemplated hereby and, except as may be required by applicable law or any
listing agreement with any securities exchange or inter-dealer quotation system,
will not issue any such press release or make any such public statement prior to
such consultation. Following the Closing Date, the parties agree to consult with
each other before issuing any press release or making any public filing that
describes any terms of this Agreement.

        Section 6.04 Registration Rights Agreement. The terms set forth in
Exhibit B hereto are hereby incorporated by reference.

                                    ARTICLE 7
                                  MISCELLANEOUS

        Section 7.01 Notices. All notices, requests and other communications to
any party hereunder shall be in writing and shall be deemed duly given,
effective (i) three Business Days later, if sent by registered or certified
mail, return receipt requested, postage prepaid, (ii) when sent if sent by
telecopier or fax, provided that the telecopy or fax is promptly confirmed by
telephone confirmation thereof,

                                       8
<PAGE>

(iii) when served, if delivered personally to the intended recipient, and (iv)
one Business Day later, if sent by overnight delivery via a national courier
service, and in each case, addressed,

        if to Buyer or IHC, to:

        Independence Holding Company
        96 Cummings Point Road
        Stamford, Connecticut 06902
        Attention: David Kettig
        Fax: (203) 348-3103

        with a copy to:

        Kramer Levin Naftalis & Frankel LLP
        919 Third Avenue
        New York, New York 10022
        Attention: Ezra G. Levin
        Fax: (212) 715-8227

        if to the Corporation, to:

        SoftNet Systems Inc.
        650 Townsend Street, Suite 225
        San Francisco, California 94103
        Attention: Steve Harris
        Fax: (415) 354-3929

        with a copy to:

        Latham & Watkins
        135 Commonwealth Drive
        Menlo Park, California 94025
        Attention: Christopher L. Kaufman
        Fax: (650) 463-2600

        Any party may change the address to which notices or other
communications hereunder are to be delivered by giving the other party notice in
the manner herein set forth.

        Section 7.02 Amendments and Waivers. Any provision of this Agreement may
be amended or waived if, but only if, such amendment or waiver is in writing and
is signed, in the case of an amendment, by each party to this Agreement, or in
the case of a waiver, by the party against whom the waiver is to be effective.
No failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of

                                       9
<PAGE>

any other right, power or privilege. The rights and remedies herein provided
shall be cumulative.

        Section 7.03 Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.

        Section 7.04 Assignment. The rights and obligations of the parties
hereunder cannot be assigned or delegated except (i) that Buyer may assign any
or all of its rights and obligations under this Agreement under Sections 2.01,
4.02, 6.04 and Exhibit B of this Agreement to any one or more Permitted
Transferees.

        Section 7.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Delaware, without regard to
the conflicts of law rules of such state.

        Section 7.06 Counterparts; Third Party Beneficiaries. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder, except for rights provided to
Permitted Transferees under Section 7.04.

        Section 7.07 Entire Agreement. This Agreement (including the Exhibits
hereto) constitutes the entire agreement between the parties with respect to the
subject matter of this Agreement and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement.

        Section 7.08 Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.

        Section 7.09 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.

                                       10
<PAGE>

        Section 7.10 Specific Performance. The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that any
party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such party
may, in its sole discretion, apply to a court of competition jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.

        Section 7.11 No Recourse. Notwithstanding any of the terms or provisions
of this Agreement, (i) the Corporation agrees that neither it nor any person
acting on its behalf may assert any claims or cause of action against any
officer, director, partner, member or stockholder of Buyer or any of its
Affiliates (other than IHC or when a provision specifically states that it is
binding on such Affiliates) in connection with or arising out of this Agreement
or the transactions contemplated hereby and (ii) each of Buyer and IHC agree
that neither it nor any person acting on its behalf may assert any claims or
cause of action against any officer, director, partner, member or stockholder of
the Corporation or any of its Affiliates in connection with or arising out of
this Agreement or the transactions contemplated hereby.

        Section 7.12 Corporation Approval. The Corporation represents and
warrants to Buyer that its Board of Directors has approved, and it consents to,
Buyer's purchase of the Shares from Cyber Net.

                                       11
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

        SOFTNET SYSTEMS, INC.

        By:/S/ Ronald I. Simon
           _______________________________________
        Name:  Ronald I. Simon
        Title: Director

        MADISON INVESTORS CORPORATION

        By: /s/ Teresa A. Herbert
           _______________________________________
        Name: Teresa A. Herbert
        Title: Vice President

        INDEPENDENCE HOLDING COMPANY

        By:/s/ Teresa A. Herbert
           _______________________________________
        Name: Teresa A. Herbert
        Title: Vice President

                                       12

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