INSPIRE INSURANCE SOLUTIONS INC, S-1/A, 1997-08-21

INSPIRE INSURANCE SOLUTIONS INC
S-1/A, 1997-08-21
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 21, 1997.

REGISTRATION NO. 333-31173
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
INSPIRE INSURANCE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
---------------------

<TABLE>
<S> <C> <C>
TEXAS 7373 75-2595937
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
</TABLE>

---------------------

300 BURNETT STREET
FORT WORTH, TEXAS 76102-2799
TELEPHONE: (817) 332-7761
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

F. GEORGE DUNHAM, III
300 BURNETT STREET
FORT WORTH, TEXAS 76102-2799
TELEPHONE: (817) 332-7761
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------

Copies to:

<TABLE>
<S> <C>
TERRY M. SCHPOK, P.C. FRED W. FULTON
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. THOMPSON & KNIGHT, A PROFESSIONAL CORPORATION
1700 PACIFIC AVENUE, SUITE 4100 1700 PACIFIC AVENUE, SUITE 3300
DALLAS, TX 75201-4675 DALLAS, TX 75201-4693
(214) 969-2800 (214) 969-1700
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ------------------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
===============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE REGISTRATION FEE(3)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 5,750,000 Shares $11.00 $63,250,000 $19,167(4)
- -------------------------------------------------------------------------------------------------------------------------------
Series A Junior Preferred Stock
Purchase Rights 5,750,000 Rights -- -- --
===============================================================================================================================
</TABLE>

(1) Includes 750,000 shares subject to the Underwriters' over-allotment options.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).

(3) One Preferred Stock Purchase Right will be issued with each share of Common
Stock. As no additional consideration will be received for the Preferred
Stock Purchase Rights, no registration fee is required with respect to them
under Rule 457(i).

(4) A registration fee of $17,250 was previously paid upon the initial filing of
this registration statement and the balance of the registration fee is being
paid in connection with Amendment No. 2 to this registration statement.

---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED AUGUST 21, 1997

PROSPECTUS

5,000,000 SHARES

[INSPIRE INSURANCE SOLUTIONS, INC. LOGO]

COMMON STOCK
------------------------

Of the 5,000,000 shares of Common Stock offered hereby, 2,775,000 shares
are being issued and sold by INSpire Insurance Solutions, Inc. (the "Company")
and 2,225,000 shares are being sold by the Selling Shareholder. The Company will
not receive any proceeds from the sale of Common Stock being sold by the Selling
Shareholder. The Company has applied for quotation of the Common Stock on the
Nasdaq National Market under the symbol "NSPR." Prior to this offering, there
has been no public market for the Common Stock. It is currently estimated that
the initial public offering price will be between $9.00 and $11.00 per share.
See "Underwriting" for a discussion of the factors considered in determining the
initial public offering price.

------------------------

SEE "RISK FACTORS" ON PAGES 7 THROUGH 14 FOR A DISCUSSION OF

CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=============================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDER(3)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............................. $ (4) $ (5) $ $
- -----------------------------------------------------------------------------------------------------------------------------
Total(6)............................... $ (4) $ (5) $ $
=============================================================================================================================
</TABLE>

(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses estimated at $511,500 payable by the Company.

(3) Before deducting expenses estimated at $488,500 payable by the Selling
Shareholder.

(4) At the Company's request, the Underwriters have reserved up to 175,000 of
the shares offered hereby for sale directly to directors, officers,
employees and designees of the Company at a price of $ . If all such
shares are purchased by such persons, the total Price to Public will be
$ , assuming no exercise of the Underwriters' over-allotment option.
See "Underwriting."

(5) With respect to the shares offered directly to the Company's directors,
officers, employees and designees as described in footnote (4), the per
share Underwriting Discounts and Commissions will be $ . If all such
shares are purchased by such persons, the total Underwriting Discounts and
Commissions will be $ , assuming no exercise of the Underwriters'
over-allotment option. See "Underwriting."

(6) The Company and the Selling Shareholder have granted to the Underwriters a
30-day option to purchase up to 750,000 additional shares of Common Stock on
the same terms and conditions as the securities offered hereby, solely to
cover over-allotments, if any. If such option is exercised in full and all
shares referred to in footnote (4) above are purchased as described therein,
the total Price to Public, Underwriting Discounts and Commissions, Proceeds
to Company and Proceeds to Selling Shareholder will be $ , $ ,
$ and $ , respectively. See "Underwriting."

------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
certain other conditions including the right of the Underwriters to withdraw,
cancel, modify or reject any order in whole or in part. It is expected that
delivery of the shares will be made on or about , 1997 at the
offices of Raymond James & Associates, Inc., St. Petersburg, Florida.

RAYMOND JAMES & ASSOCIATES, INC. SOUTHWEST SECURITIES

The date of this Prospectus is , 1997.
<PAGE> 3

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS OR IMPOSING
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4
[INSPIRE INSURANCE SOLUTIONS LOGO]

THE ONE-SOURCE OUTSOURCING ANSWER

POLICY ADMINISTRATION

CLAIMS ADMINISTRATION

TECHNOLOGY AND SYSTEMS

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS OR
IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

The following text overlays a stylized multi-color geometric design:

<TABLE>
<S> <C>
INSpire
Provides

o Increased Efficiency
o Greater Flexibility/Quicker Response
o Ability to Maximize Surplus
o Ease of Entry

Policy Administration
o Processing Policies, Renewals, Cancellations, Reinstatements
o Document/Application Review
o Direct, Agency and Internet Marketing Support
o Billing and Accounting
o Issuing, Canceling, Amending Policies
o Inquiries By Agents, Insureds and Others
o Bureau Reporting
o Commission Handling
o Data Access/Reporting to Customer

[INSpire Insurance Solutions Logo]

P & C Insurance Industry
o Approximately 2,500 Existing Companies
o Approximately $260 Billion in Premium Revenues Claims Administration
o New Entrants o Coverage Verification
o Financial Institutions o Loss Reports to Insured and Agents
o Virtual Insurance Companies o Administering Appraisal/Assessment Process
o Other Start-ups o Administering Claim and Loss Reports
o Preparing Checks and Vouchers
o Compromises, Releases and Agreements
o Service Standards and Claims Documentation

Technology & Systems
o Integrated Systems
Customer o Policy and Claims Administration System
Goals o Windows into Property and Casualty System
o Software Productivity Tools
o Focus on Core Competencies o EmPower - Automated Workflow Management
o Reduce Fixed Costs o Underwriting Expert System
o Leverage Economies of Technology o Policy Set Production
o Create New Distribution Channels o Visual Rater
o "Year 2000" Solution o Software Services
o Regulatory Reporting o Installation
o Improve Customer Service o Customization/Conversion/Enhancements/Upgrades
o Maintenance
</TABLE>
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including notes thereto,
appearing elsewhere in this Prospectus. As used herein, the "Company" or
"INSpire" means INSpire Insurance Solutions, Inc., and "Millers Mutual" or the
"Selling Shareholder" means The Millers Mutual Fire Insurance Company, unless
the context otherwise requires. Unless otherwise indicated, all financial
information and share data in this Prospectus (i) have been adjusted to reflect
the stock splits effected as stock dividends on March 11, 1997 and June 18, 1997
and (ii) assume no exercise of the Underwriters' over-allotment option.

THE COMPANY

The Company is a provider of policy and claims administration solutions to
the property and casualty ("P&C") insurance industry, offering a comprehensive
choice of outsourcing services and software and software services. The Company's
outsourcing services, which generally are provided on a percentage of premiums
or claims paid basis, include application of underwriting and rating criteria
defined by the insurer, policy issuance, customer service, billing and
collections, claims adjusting and processing, and policyholder mailings. The
Company's software products include policy and claims administration systems, as
well as systems that increase the productivity of insurers by automating certain
functions, such as workflow management, underwriting rules and guidelines,
document production and rating algorithms. These systems, which run on a variety
of platforms including IBM AS/400, IBM RS/6000, Windows 3.1, Windows 95 and
Windows NT, enable the Company's customers to conduct their policy and claims
administration more efficiently. The Company's software services include
installation, customization, conversion and maintenance of these systems to meet
customer specifications.

The Company was established in April 1995 as a wholly-owned subsidiary of
Millers Mutual, an insurance company chartered in Texas in 1898. The Company was
created to provide outsourcing services to other P&C insurers by capitalizing on
Millers Mutual's success in developing, implementing and managing software
systems for its internal use. As a result of the acquisition of Strategic Data
Systems, Inc. ("SDS") in March 1997 (the "SDS Acquisition"), the Company now
also develops and markets software and software services to the P&C insurance
industry. SDS offered software and software services to the P&C insurance
industry for 16 years prior to its acquisition by the Company. The Company
believes its services and products allow customers to focus on core
competencies, reduce costs by converting their fixed costs of in-house
information technology to variable costs and leverage the Company's investment
in software systems and productivity tools.

According to A.M. Best Company ("A.M. Best"), there were approximately
2,500 P&C insurance companies in the United States as of December 31, 1995,
generating more than $260 billion of premium revenues each year. According to
the National Association of Independent Insurers, information systems expenses
as a percentage of written premiums increased from 2.5% in 1992 to 3.3% in 1996.
Recent trends in the P&C insurance industry include selling policies directly to
policyholders rather than through independent agents and the emergence of new
entrants such as banks, credit unions and other financial services companies.
The Company believes the availability of outsourcing enables these insurers,
which often lack the necessary infrastructure to process policies and administer
claims, to improve efficiency, manage costs and increase customer satisfaction.
The Company's outsourcing services also allow these insurers to quickly enter
markets being exited by more established insurers seeking to reduce their
exposure to geographical risk due to the occurrence of recent natural
catastrophes.

The Company has experienced rapid growth since its inception as a result of
the development of its policy and claims administration facility in Fort Worth,
Texas, the expansion of its network of claims administration centers and the SDS
Acquisition. Pro forma revenues increased to $28.7 million for the first six
months of 1997 from pro forma revenues of $15.7 million for the first six months
of 1996, an increase of 83%. The Company's strategy is to become the leading
provider of policy and claims administration solutions to the P&C insurance
industry by offering a comprehensive choice of solutions, implementing an
integrated marketing plan, penetrating new markets, enhancing product
capabilities, generating recurring revenues and pursuing strategic acquisitions.
The Company's customers include Clarendon National Insurance Company,

3
<PAGE> 6

Employers Reinsurance Corporation, Firemen's Fund Insurance Company, Grinnell
Mutual Reinsurance Company, Interco, Inc., National Alliance Insurance Company,
Society Insurance Company, Zurich Insurance Company and Millers Mutual and
affiliated companies.

The Company was incorporated in Texas and recently changed its name to
INSpire Insurance Solutions, Inc. from MiliRisk, Inc. The Company's principal
executive office is located at 300 Burnett Street, Fort Worth, Texas 76102, and
its telephone number is (817) 332-7761.

THE OFFERING

Common Stock offered by the Company......... 2,775,000 Shares

Common Stock offered by the Selling
Shareholder................................. 2,225,000 Shares

Common Stock to be outstanding after this
offering.................................... 9,775,000 Shares(1)(2)

Use of Proceeds............................. For repayment of indebtedness
and general corporate purposes,
including working capital,
research and development and
possible acquisitions. See "Use
of Proceeds" and "Certain
Transactions."

Proposed Nasdaq National Market Symbol...... NSPR
- ---------------

(1) Excludes (a) 2,250,000 shares reserved for issuance under the Company's 1997
Stock Option Plan (the "Stock Option Plan"), pursuant to which options
covering 840,248 shares have been granted at an exercise price of $1.30 per
share and options covering 1,085,243 shares will be granted on the date of
this Prospectus at a per share exercise price equal to the initial public
offering price, (b) 50,000 shares reserved for issuance under a nonemployee
directors stock option plan (the "Director Plan"), pursuant to which options
covering 7,500 shares will be granted as of the date of this Prospectus at a
per share exercise price equal to the initial public offering price, and (c)
425,000 shares reserved for issuance under an employee stock purchase plan
(the "Stock Purchase Plan").

(2) The number of shares of Common Stock to be outstanding after this offering
would be 10,506,016 after giving effect to the issuance of 731,016 shares of
Common Stock issuable under outstanding options granted pursuant to the
Stock Option Plan applying the treasury stock method with an assumed initial
public offering price of $10.00 per share.

FORWARD-LOOKING STATEMENTS

All statements other than statements of historical fact included in this
Prospectus, including without limitation statements under "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of INSpire" and "Business" regarding the Company's financial
position, business strategy and plans and objectives of management of the
Company for future operations, are forward-looking statements. When used in this
Prospectus, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to the Company or its
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of the Company's management as well as assumptions made
by and information currently available to the Company's management. Actual
results could differ materially from those contemplated by the forward-looking
statements as a result of certain factors, such as those disclosed under "Risk
Factors," including but not limited to the Company's limited operating history
and dependence on major customers, competitive factors and pricing pressures,
changes in legal and regulatory requirements, technological change, product
development risks and general economic conditions. Such statements reflect the
current views of the Company with respect to future events and are subject to
these and other risks, uncertainties and assumptions relating to the operations,
results of operations, growth strategy and liquidity of the Company. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by this paragraph.
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<PAGE> 7

SUMMARY HISTORICAL AND PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)

The historical information as of June 30, 1997 and for the period April 28,
1995 through December 31, 1995, the year ended December 31, 1996 and the six
months ended June 30, 1997 was derived from the audited consolidated financial
statements of the Company. The information presented as of and for the six
months ended June 30, 1996 was derived from the unaudited financial statements
of the Company. With respect to the unaudited financial information, the Company
is of the opinion that all material adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the Company's
interim results of operations have been included. The pro forma condensed
consolidated financial data are based on assumptions and adjustments described
in the notes to the pro forma condensed consolidated financial statements and
are not necessarily indicative of the results of operations that may be achieved
in the future. The information set forth below should be read in conjunction
with "Selected Consolidated Financial Data of INSpire," "Management's Discussion
and Analysis of Financial Condition and Results of Operations of INSpire," the
Company's Consolidated Financial Statements and the Company's Pro Forma
Condensed Consolidated Financial Statements (Unaudited). The results of
operations presented below are not necessarily indicative of the results of
operations that may be achieved in the future.

<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
AS
ACTUAL ADJUSTED(5)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 451 $15,726
Working capital............................................. (2,576) 17,094
Total assets................................................ 30,888 46,163
Current portion of long-term debt........................... 1,563 --
Due to parent............................................... 2,833 --
Long-term debt, excluding current portion................... 5,625 --
Shareholders' equity........................................ 9,558 34,854
</TABLE>

- ---------------

(1) The Company was incorporated April 28, 1995 and commenced operations July 1,
1995.

(2) Unaudited pro forma condensed consolidated statements of operations data for
the year ended December 31, 1996 and for the six months ended June 30, 1996
and 1997 reflect: (i) the acquisition of SDS using the purchase method of
accounting as if the SDS Acquisition, which occurred on March 12, 1997, had
occurred on January 1, 1996 and (ii) the results of operations of the
Company as if the Company had operated on an independent basis separate from
Millers Mutual since January 1, 1996. See the Company's Pro Forma Condensed
Consolidated Financial Statements (Unaudited).

(3) Includes $3.0 million of purchased research and development expenses
relating to the SDS Acquisition and $3.9 million of deferred compensation
expense relating to the grant of stock options to executive officers during
the period. Excluding the effect of such one-time, noncash expenses,
historical operating expenses, operating income and net income would have
been $20.7 million, $2.5 million and $1.6 million, respectively, and
historical net income per share would have been $0.21; and pro forma
operating expenses, operating income and net income would have been $25.6
million, $3.1 million and $2.0 million,

5
<PAGE> 8

respectively, and pro forma net income per share and supplementary net
income per share would have been $0.26 and $0.27, respectively.

(4) Supplementary net income (loss) per share has been computed by adjusting pro
forma net income for the effect of the elimination of interest expense
associated with the repayment of $7.2 million of bank debt in conjunction
with this offering. Supplementary net income (loss) per share is not
presented for historical information as there is no significant difference
from net income (loss) per share as presented. See "Use of Proceeds."

(5) Adjusted to reflect: (i) the sale by the Company of 2,775,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$10.00 per share, after deducting estimated underwriting discounts and
commissions and offering expenses payable by the Company, and (ii) the
application by the Company of its estimated net proceeds therefrom. See "Use
of Proceeds."

6
<PAGE> 9

RISK FACTORS

The following factors, which may affect the Company's current position and
future prospects, should be considered carefully in addition to the other
information contained in this Prospectus before purchasing the Common Stock
offered hereby.

LIMITED OPERATING HISTORY AND NET LOSSES

The Company has a limited operating history in the policy and claims
administration outsourcing business and only two significant outsourcing
customers, one of which is Millers Mutual. In addition, the Company recently
acquired SDS in March 1997. Although SDS had a significant operating history as
a provider of software and software services to the P&C insurance industry, the
Company has very little history conducting its operations on a consolidated
basis. The Company only recently began the process of integrating the SDS
operations into the Company's financial, managerial, administrative and
marketing functions. In addition, certain of the Company's senior management
personnel recently joined the Company. There can be no assurance that the
Company will be successful in this integration process or in implementing its
long-term operating strategy. Prior to the SDS Acquisition, the Company's
operations did not generate net income for any year. The Company had net losses
of $1.3 million for the period from inception through December 31, 1995 and
$515,000 for the year ended December 31, 1996. There can be no assurance that
the Company will be able to maintain revenue growth or that the Company will not
sustain net losses in the future. See "SDS Acquisition," "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
INSpire" and "Management."

ABILITY TO GROW AND EXPAND SERVICES

The Company has grown rapidly since its formation. The Company's growth
strategy depends on its ability to increase its share of the policy and claims
administration market and expand sales of its software and software services
through the enhancement of existing products, development of new services and
products and the integrated marketing of its services and products. There can be
no assurance that the Company will have the financial, managerial,
administrative, marketing or other resources necessary to achieve these
objectives.

The success of the Company depends in large part on its ability to attract
and retain highly-skilled managerial, sales and marketing personnel. In
addition, the Company believes it will need to hire additional technical
personnel to enhance and develop its services and products. Competition for such
personnel is intense, and should the Company be unable to hire the necessary
personnel, the development and sale of new or enhanced services and products
would likely be delayed or prevented. There can be no assurance that the Company
will be able to attract, integrate and retain skilled personnel, manage its
infrastructure or overcome other difficulties associated with growth. If the
Company were to encounter difficulties in implementing the expansion or
development of its services and products, or in attracting, integrating and
retaining its personnel, such difficulties could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business -- The INSpire Strategy" and "Management."

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; VOLATILITY OF TRADING PRICE

The Company has experienced and may continue to experience significant
quarter-to-quarter fluctuations in its results of operations. Quarterly results
of operations may fluctuate as a result of a number of factors, including the
introduction of new or enhanced services and products by the Company or its
competitors, customer acceptance or rejection of new services and products,
product development expenses, the timing of significant orders, the timing of
large scale catastrophes, the volume of usage of the Company's services and
products, competitive conditions in its industry and general economic
conditions. Many of these factors are beyond the Company's control.

The sales cycles for the Company's services and products are lengthy
(generally between three and twelve months for outsourcing services and six and
twelve months for software and software services) and subject to a number of
factors beyond the Company's control. As the Company recognizes a substantial
portion of

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<PAGE> 10

revenues at the time new software systems are licensed, there can be significant
fluctuations from period to period in the revenues and operating income derived
from licensing activities. Customer decisions to enter into new license
agreements may be significantly affected by their decisions to replace current
systems. In addition, demand for the Company's claims administration services
fluctuates greatly depending on the occurrence of large scale catastrophes, such
as hurricanes. For these and other reasons, the revenues of the Company are
difficult to forecast, and the Company believes that period-to-period
comparisons of results of operations are not necessarily meaningful or
indicative of the results that the Company may achieve for any subsequent
quarter or fiscal year. Thus past operating results should not be considered a
reliable indicator of future performance.

The trading price of the Common Stock could fluctuate widely in response to
variations in the Company's quarterly operating results, changes in earnings
estimates by securities analysts, changes in the Company's business and changes
in general market or economic conditions. In addition, in recent years the stock
market has experienced extreme price and volume fluctuations. These fluctuations
have significantly affected the trading prices of the securities of many
emerging growth companies without regard to their specific operating
performance. Such market fluctuations could have a material adverse effect on
the trading price of the Common Stock. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations of INSpire."

DEPENDENCE ON MAJOR CUSTOMERS

The Company derives a substantial portion of its revenues from outsourcing
services provided to a few large customers, including Millers Mutual and its
subsidiary, The Millers Casualty Insurance Company ("Millers Casualty," and
collectively with Millers Mutual, the "Millers Group"), Clarendon National
Insurance Company ("Clarendon") and Interco, Inc. ("Interco"). The terms of the
contracts with the Millers Group expire in 2000 and automatically renew for
successive one-year periods if neither party terminates them. The Company
provides services to Clarendon through contracts with various subsidiaries of E.
W. Blanch Holdings Company, Inc. (collectively, "Blanch"), each of which is a
managing general agent of Clarendon. The Blanch contracts expire in 1999 and
automatically renew for an additional three years if neither party terminates
them. Blanch may terminate these contracts at any time without cause upon
payment of a specified termination fee. These contracts will also terminate if
the contracts between Blanch and Clarendon are terminated for any reason other
than a breach by Blanch. Pursuant to a contract with the State Corporation
Commission of the Commonwealth of Virginia (the "Virginia Commission"), the
Company provides services to Interco, which administers such contract on behalf
of the Virginia Commission. The Virginia Commission may terminate this contract
at any time without cause upon the payment of a specified termination fee. The
Millers Group, Clarendon and Interco accounted for approximately 68%, 8% and
21%, respectively, of the Company's historical revenues in 1996 and 25%, 3% and
8%, respectively, of the Company's pro forma revenues in 1996. The Millers
Group, Clarendon and Interco accounted for approximately 32%, 18% and 8%,
respectively, of the Company's historical revenues for the six months ended June
30, 1997 and 26%, 18% and 7%, respectively, of the Company's pro forma revenues
for such period. Any loss of or material decrease in the business from any of
these customers could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Customers."

TECHNOLOGICAL CHANGE AND NEW PRODUCT DEVELOPMENT RISKS

The markets in which the Company competes are increasingly characterized by
rapid technological change. The introduction of competing services or products
incorporating new technologies could render some or all of the Company's
services and products obsolete or unmarketable. The Company believes that its
future success depends on its ability to enhance its services and develop new
products that address the increasingly sophisticated needs of its customers. As
a result, the Company has expended substantial resources for the enhancement of
its services and for product development and intends to continue to do so. The
development of new or enhanced services or products results in expenditures and
capital costs that may not be recovered if the service or product is
unsuccessful. Development projects can be lengthy and subject to changing market
requirements and unforeseen costs and delays. The failure of the Company to
develop and introduce new or

8
<PAGE> 11

enhanced services or products in a timely and cost-effective manner could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Research and Development."

ACQUISITION RISKS

The Company completed the SDS Acquisition on March 12, 1997 and intends to
pursue acquisitions of other complementary businesses. There can be no
assurance, however, that the Company will be able to integrate the operations of
SDS with its own operations. Similarly, there can be no assurance that the
Company will be able to consummate or successfully integrate future
acquisitions. Acquisitions involve significant risks, including: (i) the
diversion of management's time and attention to the negotiation of the
acquisition and to the assimilation of the businesses acquired, (ii) the need to
modify financial and other systems and add management resources, (iii) the
potential liabilities of the acquired business, (iv) unforeseen difficulties in
the acquired operations, (v) the possible adverse short-term effects on the
Company's results of operations and (vi) the financial reporting effects of the
amortization of goodwill and other intangible assets. Furthermore, there can be
no assurance that SDS, or any business acquired in the future, will achieve
acceptable levels of revenue and profitability or otherwise perform as expected.
Currently, the Company has no arrangements or understandings with any party with
respect to any future acquisition. The Company, however, continues to monitor
potential acquisition opportunities. See "SDS Acquisition" and "Business -- The
INSpire Strategy."

LACK OF INDEPENDENT OPERATING HISTORY; CONTROL BY EXISTING SHAREHOLDER;
CONFLICTS OF INTEREST

The Company was formed in 1995 as a wholly-owned subsidiary of Millers
Mutual. Although SDS was an independent company prior to being acquired by the
Company in March 1997, the Company has not previously operated as a stand-alone
company. Following this offering, the Company will be required to develop
financial, managerial, administrative and other aspects of its infrastructure
previously provided to the Company by Millers Mutual. In addition, since
inception the Company has operated with negative working capital and satisfied a
significant portion of its cash requirements from capital contributions and
loans from Millers Mutual. The Company does not anticipate receiving any loans
or capital contributions from Millers Mutual in the future. The Company expects
to use a portion of its net proceeds from this offering to repay all outstanding
loans from Millers Mutual. In addition, Millers Mutual is substantially reducing
its investment in the Company as a result of its sale of Common Stock pursuant
to this offering. The Company believes that its net proceeds from this offering,
together with funds from operations, will be sufficient to fund anticipated
working capital requirements for at least one year. The Company may require
substantial additional funds for potential acquisitions and expansion. There can
be no assurance that the Company will be able to obtain any additional financing
or that the Company will not increase its outstanding indebtedness after this
offering to levels that may have a material adverse effect on the Company's
business, financial condition and results of operations. Although the Company
and Millers Mutual have entered into several agreements that are intended to
ease the Company's transition to independent status, there can be no assurance
that the Company will be able to manage this transition or develop independent
resources successfully.

After this offering, Millers Mutual will beneficially own 48.8% of the
outstanding shares of Common Stock (or 43.6% if the Underwriters' over-allotment
option is exercised in full). As the Company's largest shareholder, Millers
Mutual is likely to be able to maintain effective control of the Company
including the ability to elect a majority of the Board of Directors and,
collectively with certain affiliates and management who are expected to purchase
shares in this offering, is likely to own a majority of the outstanding shares
of Common Stock of the Company. The collective ownership of shares of Common
Stock after this offering by Millers Mutual and such affiliates and management
may discourage or prevent unsolicited mergers, acquisitions, tender offers,
proxy contests or changes of incumbent management, even when shareholders other
than Millers Mutual consider such a transaction or event to be in their best
interest. Accordingly, holders of Common Stock may be deprived of an opportunity
to sell their shares at a premium over the trading price of the shares.

9
<PAGE> 12

Until recently, F. George Dunham, III, the Company's President, Chief
Executive Officer and Chairman of the Board, also served as President and Chief
Executive Officer of each of Millers Mutual and Millers Casualty. On June 18,
1997, Mr. Dunham resigned from those positions with Millers Mutual and Millers
Casualty. However, Mr. Dunham serves as Vice Chairman of the Board of Directors
of each of Millers Mutual and Millers Casualty, and his father, Frank G. Dunham,
Jr., serves as Chairman of the Board and Chief Executive Officer of each of
Millers Mutual and Millers Casualty. In addition, the Company will continue to
have a variety of contractual relationships with Millers Mutual and Millers
Casualty, including a benefits administration agreement pursuant to which
Millers Mutual provides certain benefits administration services to the Company
and certain contracts pursuant to which the Company provides policy and claims
administration services to Millers Mutual and Millers Casualty. As the interests
of the Company and the Millers Group will differ, Mr. Dunham will face certain
conflicts of interest. See "Use of Proceeds," "Principal and Selling
Shareholders" and "Certain Transactions."

COMPETITION

The markets for policy and claims administration services and products are
highly competitive and subject to rapid changes in technology. The Company
competes in the following three markets serving the P&C insurance industry: (i)
outsourcing of policy administration, (ii) outsourcing of claims administration
and (iii) software and software services.

The policy administration outsourcing market is relatively new and is
dominated by a few large companies, including Policy Management Services
Corporation ("PMSC"). The Company competes for policy administration outsourcing
customers on the basis of customer service, performance and price. The claims
administration outsourcing market is highly fragmented, with competition from a
large number of claims administration companies of varying size as well as
independent contractors. Competition in the claims administration outsourcing
market is principally price driven. Two of the larger competitors in this market
are Lindsey Morden Claim Services Inc. and Crawford & Company, Inc. The P&C
insurance software and software services market is highly competitive and is
dominated by PMSC. The Company competes for software customers on the basis of
customer service, performance, product features, ability to tailor products and
services to specific customer requirements, timely delivery and price.

The Company believes that its most significant competition for policy and
claims administration software and outsourcing services comes from potential
customers' in-house personnel. Insurance companies that have developed
proprietary software systems to conduct all or most of their policy and claims
administration internally have made a significant investment in their policy and
claims information systems. In addition, insurance company personnel have a
vested interest in maintaining these responsibilities in-house.

Many of the Company's competitors have longer operating histories and
significantly greater financial, technical, marketing and other resources than
the Company, including name recognition with current and potential customers. As
a result, these competitors may devote more resources to the development,
promotion and sale of services or products than the Company and respond more
quickly to emerging technologies and changes in customer requirements. In
addition, current and potential competitors may establish cooperative
relationships among themselves or with third parties to increase the ability of
their services and products to address customer needs. Accordingly, new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. There can be no assurance that the Company will be
able to compete successfully against current and future competitors, or that
competitive pressure faced by the Company will not have a material adverse
effect on its business, financial condition and results of operations. See
"Business -- Competition."

DEPENDENCE ON KEY PERSONNEL

The Company's continued success will depend largely on the efforts and
abilities of its executive officers, including F. George Dunham, III, the
President and Chief Executive Officer of the Company, Stuart H. Warrington, an
Executive Vice President of the Company and founder of SDS, Robert K. Agazzi, an
Executive Vice President of the Company and former President of SDS, and certain
key technical, managerial

10
<PAGE> 13

and sales employees. The loss of the services of Messrs. Dunham, Warrington or
Agazzi, or any of the Company's other key employees, could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company has an employment agreement with Mr. Dunham that
terminates in 2000 and employment agreements with Messrs. Warrington and Agazzi
that terminate in 1998. The Company maintains a $1,000,000 key-man life
insurance policy on Stuart H. Warrington with the Company as beneficiary, but
does not maintain life insurance on any other key employees. There can be no
assurance that the Company will be successful in retaining its key personnel.
See "Business -- Competition" and "-- Employees" and "Management."

RELIANCE ON INFORMATION PROCESSING SYSTEMS

The Company's outsourcing services depend on its ability to store,
retrieve, process and manage significant databases, and expand and upgrade
periodically its information processing capabilities. The Company's principal
computer equipment and software systems are maintained at the Company's
facilities in Fort Worth, Texas and Sheboygan, Wisconsin. Interruption or loss
of the Company's information processing capabilities through loss of stored
data, breakdown or malfunctioning of computer equipment and software systems,
telecommunications failure or damage caused by fire, tornadoes, lightning,
electrical power outage or other disruption could have a material adverse effect
on the Company's business, financial condition and results of operations.
Although the Company maintains business interruption insurance with an aggregate
limit of $5.0 million per occurrence, and has entered into an agreement with
International Business Machines, Inc. to provide disaster recovery services, if
needed, there can be no assurance that such insurance or services will continue
to be available at reasonable prices, cover all such losses or compensate the
Company for the possible loss of customers occurring during any period that the
Company is unable to provide services. See "Business -- Customer Support and
Operations."

DEPENDENCE ON PROPRIETARY RIGHTS AND RISKS OF INFRINGEMENT

The Company regards the technology underlying its services and products as
proprietary. The Company has no registered copyrights or trademarks and relies
primarily on a combination of intellectual property laws, confidentiality
agreements and contractual provisions to protect its proprietary rights. Trade
secret and copyright laws afford the Company limited protection. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy aspects of the Company's software or obtain and use information
that the Company regards as proprietary. Policing unauthorized use of the
Company's software is difficult. There can be no assurance that the obligations
to maintain the confidentiality of the Company's proprietary information
(including software source code) will prevent disclosure of such information or
that the Company's proprietary information will not be independently developed
by the Company's competitors. Litigation may be necessary for the Company to
defend against claims of infringement or protect its intellectual property
rights, which could result in substantial costs to the Company and diversion of
management's efforts. There can be no assurance that the Company would prevail
in any such litigation. The absence of federal or state registrations for its
intellectual property could be detrimental to the Company in any infringement
litigation or other disputes regarding intellectual property. The inability of
the Company to protect its proprietary rights could have a material adverse
effect on the Company's business, financial condition and results of operations.

The Company is unaware of any claim that its software, trademarks or other
proprietary rights infringe the proprietary rights of third parties. There can
be no assurance, however, that third parties will not assert infringement claims
against the Company in the future. Any such claims, with or without merit, could
require the expenditure of significant time and money to defend, require the
Company to enter into royalty or license agreements or require the Company to
cease the alleged infringing activities. The failure to obtain such royalty or
license agreements, if required, and the Company's involvement in such
litigation could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Intellectual
Property."

11
<PAGE> 14

RISKS OF SOFTWARE DEFECTS

The sale and support of software by the Company entails the risks of
product liability and warranty claims, which could be substantial. Software
products may contain errors or defects, especially when first introduced or when
new versions or enhancements are released. Any such defects in the Company's
software products could result in loss of revenues or delay market acceptance of
new products, which could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's license
agreements with its customers typically contain provisions designed to limit the
Company's exposure to product liability or warranty claims. These limitation of
liability provisions, however, may be ineffective because of existing or future
federal, state or local laws or unfavorable judicial decisions.

In February 1997, a lawsuit was filed against the Company by a customer
claiming damages in excess of $1.3 million. The customer alleges that the
software sold to such customer does not meet required specifications. The
Company and the former shareholders of SDS placed $1.5 million of the SDS
purchase price in an escrow account pending resolution of such claim. No
assurance can be given with respect to the outcome of this lawsuit, including
whether the amount of any judgment or settlement will exceed the escrowed funds
and require the Company to pay the amount of the excess. A successful product
liability or warranty claim against the Company could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "SDS Acquisition" and "Business -- Research and Development,"
"-- Intellectual Property" and "-- Legal Proceedings."

GOVERNMENT REGULATION

The P&C insurance industry is subject to extensive regulation by state
governments. As the Company markets and sells its services and products to P&C
insurers, certain aspects of the Company's business are affected by such
regulation. The Company must continuously update its software to reflect changes
in regulations. In addition, changes in regulations that adversely affect the
Company's existing and potential customers could have a material adverse effect
on the Company's business, financial condition and results of operations.
Although the Company's services and products are not directly subject to
insurance regulations in the states where the Company currently provides them,
the Company's outsourcing services may be subject to insurance regulations in
states where the Company may do business in the future. Such regulations could
require the Company to obtain a license as a managing general agent or third
party administrator. No assurance can be given with respect to the extent to
which the Company may become subject to regulation in the future, the ability of
the Company to comply with any such regulation or the cost of compliance. See
"Business."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock in the open market
after this offering could adversely affect the trading price of the Common
Stock. Immediately after this offering Millers Mutual will hold 4,775,000
shares, representing 48.8% of the outstanding shares of Common Stock (43.6% if
the Underwriters' over-allotment option is exercised in full). A decision by
Millers Mutual to sell shares of Common Stock could adversely affect the trading
price of the Common Stock. Upon consummation of this offering, the Company will
have 9,775,000 shares of Common Stock outstanding (10,191,250 shares if the
Underwriters' over-allotment option is exercised in full). Of these shares, all
shares sold in this offering (other than those sold to affiliates of the
Company) will be freely tradeable. All remaining shares of Common Stock are
subject to lock-up agreements with the Underwriters. Such lock-up agreements
restrict transfers of such shares without the written consent of Raymond James &
Associates, Inc. until 180 days after the date of this Prospectus. After such
180-day period expires, approximately 4,775,000 shares (4,441,250 shares if the
Underwriters' over-allotment option is exercised in full) will be eligible for
sale pursuant to Rule 144 under the Securities Act. In addition, 2,250,000
shares of Common Stock have been reserved for issuance under the Stock Option
Plan, 1,925,491 of which are issuable upon exercise of options outstanding at
the date of this Prospectus, including options to purchase 584,075 shares
exercisable as of the date of this Prospectus or that will become exercisable
within 180 days after the date of this Prospectus, and 50,000 shares of Common
Stock reserved for issuance under the Director Plan, 7,500 of which will be
issuable upon exercise of options that will

12
<PAGE> 15

be outstanding and fully vested as of the date of this Prospectus. Such shares
issuable upon the exercise of options within 180 days after the date of this
Prospectus are subject to the lock-up agreements described above. An additional
425,000 shares will be available for future purchase by employees of the Company
pursuant to the Stock Purchase Plan. The Company intends to register on Form S-8
under the Securities Act the offering and sale of Common Stock issuable under
the Stock Option Plan, the Director Plan and the Stock Purchase Plan. See
"Management -- Stock Option Plan," "-- Director Stock Option Plan," "-- Employee
Stock Purchase Plan" and "Shares Eligible For Future Sale."

ANTI-TAKEOVER CONSIDERATIONS

Certain provisions of the Company's Restated Articles of Incorporation (the
"Restated Articles"), the Company's Bylaws (the "Bylaws") and the Texas Business
Corporation Act ("TBCA") may have the effect of discouraging unsolicited
proposals for acquisition of the Company. The Restated Articles and the Bylaws
divide the Board of Directors into three classes serving staggered three-year
terms. Pursuant to the Restated Articles, shares of preferred stock may be
issued by the Company in the future without shareholder approval and upon such
terms and conditions, and having such rights, privileges and preferences, as the
Board of Directors may determine. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, any such preferred stock. The
issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions, financings and other corporate transactions, could
have the effect of discouraging a third party's acquisition of a majority of the
Common Stock. The Company has no present plans to issue any shares of preferred
stock. In addition, the Company has adopted a shareholder rights plan that could
further discourage attempts to acquire control of the Company. Finally,
effective September 1, 1997, the TBCA will restrict certain business
combinations with any "affiliated shareholder," as defined therein and will
provide that directors serving on staggered boards of directors may be removed
only for cause unless the articles of incorporation otherwise provide. The
Company's Restated Articles do not otherwise so provide. See "Description of
Capital Stock -- Anti-Takeover Considerations" and "-- Preferred Stock."

NO PRIOR PUBLIC MARKET; DETERMINATION OF INITIAL PUBLIC OFFERING PRICE; DILUTION

Prior to this offering, there has been no public market for the Common
Stock. There can be no assurance that an active public market will develop for
the Common Stock or that the Common Stock will trade in the public market
subsequent to this offering at or above the initial public offering price. If no
active public market for the Common Stock develops, the trading price and
liquidity of the Common Stock will be materially and adversely affected. The
initial public offering price will be determined by negotiations among the
Company, the Selling Shareholder and the Underwriters and may not be indicative
of the trading price for the Common Stock after this offering.

Purchasers of Common Stock in this offering will experience immediate and
substantial dilution in the net tangible book value of their shares. Prior to
this offering, each share of Common Stock had a net tangible book value of
$(.81). Assuming an initial public offering price of $10.00 per share: (i) after
this offering each share of Common Stock will have a net tangible book value of
$2.01 and (ii) the net tangible book value dilution to purchasers of Common
Stock in this offering will be $7.99 per share. See "Dilution,"
"Management -- Stock Option Plan" and "Underwriting."

NO DIVIDENDS

The Company has never paid cash dividends on its stock and has no plans to
do so in the foreseeable future. The Company intends to retain earnings, if any,
to fund growth. See "Dividend Policy."

BENEFITS OF THE OFFERING TO THE CURRENT SHAREHOLDERS

The Selling Shareholder and current holders of options to purchase Common
Stock will benefit from this offering in that a public market will be created
for their stock in the Company. The 4,775,000 shares of Common Stock that will
be owned by the Selling Shareholder after this offering (4,441,250 if the
Underwriters' over-allotment option is exercised in full), which were acquired
at a cost of approximately

13
<PAGE> 16

$9.7 million ($9.5 million if the Underwriters' over-allotment option is
exercised in full), will have a value of approximately $47.8 million ($44.4
million if the Underwriters' over-allotment option is exercised in full),
assuming a market price equal to the assumed initial public offering price of
$10.00 per share. The Selling Shareholder will also realize a substantial profit
on the shares it sells in this offering. None of the Company's officers,
directors or employees are selling any Common Stock in this offering. See
"Principal and Selling Shareholders."

SDS ACQUISITION

On March 12, 1997, the Company acquired all of the capital stock of
Strategic Data Systems, Inc., a Wisconsin corporation, for $18.0 million in
cash. Of this amount, $2.5 million remains in escrow to secure certain
indemnification obligations of the former SDS shareholders. The SDS Acquisition
was financed with a $7.5 million loan from NationsBank of Texas, N.A.
("NationsBank") and a capital contribution of $10.5 million from Millers Mutual.
The Company intends to repay the loan from NationsBank with a portion of its net
proceeds from this offering. SDS was merged into the Company in July 1997. See
"Use of Proceeds."

SDS began operations in 1981 as a provider of software and software
services to the P&C insurance industry. SDS's revenues and net income were $23.7
million and $698,000, respectively, in 1996 and $5.4 million and $231,000,
respectively, for the period from January 1, 1997 through March 11, 1997. SDS's
founder and Chief Executive Officer, Stuart H. Warrington, and its President,
Robert K. Agazzi, have become Executive Vice Presidents -- Software and Systems
of the Company.

The software acquired by the Company through the SDS Acquisition includes
policy and claims administration systems, as well as software that increases the
productivity of insurers by automating functions such as workflow management,
underwriting rules and guidelines, document production and rating algorithms.
Through the SDS Acquisition, the Company gained the ability to provide
additional software services, including installation, customization, conversion
and maintenance of the SDS systems to meet customer specifications.

Prior to the SDS Acquisition, the Company's operations were focused solely
on providing outsourcing services to the P&C insurance industry. Millers Mutual
has utilized SDS software since 1993. The SDS Acquisition allows the Company to
offer a comprehensive choice of solutions, including software systems and
services to satisfy the needs of customers that choose to retain their
processing capabilities in-house. These software systems and services also
enhance the quality of the Company's outsourcing services. The Company believes
that utilization of the experienced sales and marketing personnel of SDS and
access to the SDS customer base will facilitate cross-selling opportunities and
expansion of the Company's outsourcing services.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,775,000 shares of
Common Stock offered by the Company at an assumed initial public offering price
of $10.00 per share are expected to be approximately $25.3 million
(approximately $29.1 million if the Underwriters' over-allotment option is
exercised in full) after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company. The Company intends to use
approximately $7.2 million of such net proceeds to repay the outstanding
balance, including accrued interest, under its bank credit facility with
NationsBank (the "NationsBank Facility") incurred to fund part of the SDS
Acquisition and approximately $2.8 million to repay funds borrowed from Millers
Mutual for working capital purposes. The Company intends to use the remaining
net proceeds of approximately $15.3 million for general corporate purposes,
including working capital, research and development and possible acquisitions.
The Company has no present commitments or understandings with respect to the
acquisition of any business, although the Company continues to monitor potential
acquisition opportunities. Pending such uses, the Company intends to invest the
net proceeds in short-term, investment grade, interest bearing securities.

The NationsBank Facility is comprised of a revolving credit facility and a
term credit facility. The revolving credit facility provides for maximum
borrowings of $4.0 million, with an outstanding balance of

14
<PAGE> 17

$2.5 million as of June 30, 1997. The term credit facility had an original
principal amount of $5.0 million, with an outstanding balance of $4.7 million as
of June 30, 1997. Both facilities bear interest at floating rates that may be
fixed for 180-day periods. The interest rate is 7.4375% until September 29, 1997
under the term credit facility and 7.5% until December 1, 1997 under the
revolving credit facility. The Company must pay a commitment fee of 0.25% per
annum on the average daily unused portion of the revolving credit facility. The
revolving credit facility matures March 12, 1999 and the term credit facility
matures March 12, 2001.

The Company has borrowed from and repaid funds to Millers Mutual based on
the Company's working capital needs. The Company's borrowings from Millers
Mutual do not have a fixed maturity date and do not bear interest. The
outstanding balance of these borrowings was $2.8 million as of June 30, 1997.

The Company will not receive any proceeds from the sale of the shares of
Common Stock offered by the Selling Shareholder. The net proceeds to be received
by the Selling Shareholder from the sale of the 2,225,000 shares offered by the
Selling Shareholder at an assumed initial public offering price of $10.00 per
share are expected to be approximately $20.2 million (approximately $23.4
million if the Underwriters' over-allotment option is exercised in full) after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Selling Shareholder. See "Principal and Selling Shareholders."

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on the Common
Stock. The Company intends to retain any future earnings to fund growth and does
not anticipate paying any cash dividends in the foreseeable future. Under the
terms of the NationsBank Facility, the Company cannot declare or pay any
dividends or return any capital to its shareholders or authorize or make any
other distribution, payment or delivery of property or cash to its shareholders
as such without the prior written consent of NationsBank.

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<PAGE> 18

DILUTION

The net tangible book value of the Company as of June 30, 1997 was
approximately $(5.7) million, or $(.81) per share. "Net tangible book value per
share" represents the amount of total assets less total liabilities and
intangible assets divided by the number of shares of Common Stock outstanding.
Without taking into account any other changes in the net tangible book value
after June 30, 1997, other than to give effect to the receipt by the Company of
the estimated net proceeds from the sale of 2,775,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$10.00 per share, the net tangible book value of the Company as of June 30, 1997
would have been $19.6 million, or $2.01 per share. This represents an immediate
increase of net tangible book value of $2.82 per share to the existing
shareholder and an immediate dilution of $7.99 per share to new investors. The
following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $10.00
------
Net tangible book value per share before this offering.... $(.81)
Increase per share attributable to new investors.......... 2.82
-----
Net tangible book value per share after this offering(1).... 2.01
------
Dilution per share to new investors......................... $ 7.99
======
</TABLE>

- ---------------

(1) If the Underwriters' over-allotment option is exercised in full, the net
tangible book value after this offering would be $2.30 per share, resulting
in dilution to new investors in this offering of $7.70 per share.

The following table summarizes, on a pro forma basis as of June 30, 1997,
the differences between the existing shareholder and new investors purchasing
Common Stock in this offering (at an assumed initial public offering price of
$10.00 per share) with respect to the number of shares of Common Stock purchased
from the Company, the total consideration paid and the average price per share
paid:

<TABLE>
<CAPTION>
SHARES OF COMMON TOTAL
STOCK ACQUIRED CONSIDERATION AVERAGE
-------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Shareholder.............. 7,000,000 71.6% $14,191,609 33.8% $ 2.03
New Investors..................... 2,775,000 28.4 27,750,000 66.2 10.00
---------- ----- ----------- -----
Total................... 9,775,000 100.0% $41,941,609 100.0% $ 4.13
========== ===== =========== =====
</TABLE>

The computations in the above table are determined without deducting the
underwriting discounts and commissions and estimated offering expenses payable
by the Company. Both tables set forth in this section assume no exercise of
outstanding stock options. As of June 30, 1997, options to purchase 840,248
shares of Common Stock were outstanding, with an exercise price of $1.30 per
share. To the extent outstanding options are exercised, there will be further
dilution to holders of Common Stock. See "Management -- Stock Option Plan."

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<PAGE> 19

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of June 30, 1997, and as adjusted to reflect: (i) the sale by the
Company of 2,775,000 shares of Common Stock offered hereby at an assumed initial
public offering price of $10.00 per share, after deducting estimated
underwriting discounts and commissions and offering expenses payable by the
Company, (ii) the application of the estimated net proceeds therefrom and (iii)
the amendments to the Company's articles of incorporation effected by the
Restated Articles.

<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt........................... $ 1,563 $ --
Due to parent............................................... 2,833 --
Long-term debt, excluding current portion:
Term loan................................................. 3,125 --
Revolving credit facility................................. 2,500 --
Other..................................................... --
------- -------
Total long-term debt.............................. 5,625 --
------- -------
Shareholders' equity:
Preferred stock (par value $1.00 per share, 1,000,000
shares authorized and none issued)..................... -- --
Common stock (par value $0.01 per share, 50,000,000 shares
authorized, 7,000,000 shares issued and outstanding,
and 9,775,000 shares issued and outstanding as
adjusted(1))........................................... 70 98
Additional paid-in capital................................ 14,122 41,844
Accumulated deficit....................................... (4,634) (7,088)
------- -------
Total shareholders' equity........................... 9,558 34,854
------- -------
Total capitalization.............................. $19,579 $34,854
======= =======
</TABLE>

- ---------------

(1) Excludes (a) 2,250,000 shares reserved for issuance under the Stock Option
Plan, pursuant to which options covering 840,248 shares have been granted at
an exercise price of $1.30 per share and options covering 1,085,243 shares
will be granted on the date of this Prospectus at a per share exercise price
equal to the initial public offering price of the Common Stock and (b)
50,000 shares reserved for issuance under the Director Plan, pursuant to
which options covering 7,500 shares will be granted as of the date of this
Prospectus at a per share exercise price equal to the initial public
offering price.

17
<PAGE> 20

SELECTED CONSOLIDATED FINANCIAL DATA OF INSPIRE
(IN THOUSANDS, EXCEPT SHARE DATA)

The selected consolidated financial data of the Company presented below as
of December 31, 1995 and 1996 and June 30, 1997 and for the period April 28,
1995 through December 31, 1995, the year ended December 31, 1996 and the six
months ended June 30, 1997 have been derived from the audited consolidated
financial statements of the Company. The information presented as of and for the
six months ended June 30, 1996 was derived from the unaudited financial
statements of the Company. With respect to the unaudited financial information,
the Company is of the opinion that all material adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
Company's interim results of operations have been included. The selected
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
INSpire," the Company's Consolidated Financial Statements and the Company's Pro
Forma Condensed Consolidated Financial Statements (Unaudited). The results of
operations presented below are not necessarily indicative of the results of
operations that may be achieved in the future and the historical results for the
indicated six-month periods are not comparable between periods due to the SDS
Acquisition.

<TABLE>
<CAPTION>
YEAR ENDED
PERIOD DECEMBER 31, SIX MONTHS ENDED JUNE 30,
APRIL 28, 1995(1) ------------------------ ----------------------------------------------------
THROUGH PRO PRO PRO
DECEMBER 31, FORMA FORMA FORMA
1995 1996 1996(2) 1996 1996(2) 1997 1997(2)
------------------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Outsourcing services.... $ 3,907 $ 13,653 $ 13,653 $ 5,338 $ 5,338 $ 14,394 $ 14,394
Software and software
services.............. -- -- 19,024 -- 9,299 7,562 12,402
Other................... -- -- 4,640 -- 1,073 1,303 1,875
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues.... 3,907 13,653 37,317 5,338 15,710 23,259 28,671
Expenses:
Cost of outsourcing
services.............. 4,885 10,543 10,543 4,202 4,202 10,098 10,098
Cost of software and
software services..... -- -- 11,609 -- 5,429 2,921 7,282
Cost of other
revenues.............. -- -- 2,699 -- 478 697 1,080
Selling, general and
administrative........ -- -- 4,666 -- 2,007 3,428 3,757
Research and
development........... -- -- 3,455 -- 1,821 680 945
Depreciation and
amortization.......... 33 787 3,768 350 1,857 1,695 2,299
Purchased research and
development........... -- -- -- -- -- 3,000(3) 3,000(3)
Deferred compensation... -- -- -- -- -- 3,949(3) 3,949(3)
Management fees to
parent................ 600 3,100 180 1,200 90 1,200 90
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses.... 5,518 14,430 36,920 5,752 15,884 27,668 32,500
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)... (1,611) (777) 397 (414) (174) (4,409) (3,829)
Other income (expense).... -- (2) (320) -- (196) (159) (219)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes
(benefit)............... (1,611) (779) 77 (414) (370) (4,568) (4,048)
Income taxes (benefit).... (349) (264) (71) (141) (182) (1,712) (1,631)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)......... $ (1,262) $ (515) $ 148 $ (273) $ (188) $ (2,856) $ (2,417)
========== ========== ========== ========== ========== ========== ==========
Net income (loss) per
share................... $ (.16) $ (.07) $ .02 $ (.04) $ (.02) $ (.37) $ (.31)
========== ========== ========== ========== ========== ========== ==========
Supplementary net income
(loss) per share(4)..... $ -- $ -- $ .07 $ -- $ -- $ -- $ (.30)
========== ========== ========== ========== ========== ========== ==========
Weighted average common
and common equivalent
shares outstanding...... 7,731,016 7,731,016 7,731,016 7,731,016 7,731,016 7,731,016 7,731,016
</TABLE>

See notes on following page.

18
<PAGE> 21

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997
------------------ -------------------------
1995 1996 ACTUAL AS ADJUSTED(5)
------- ------- ------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 22 $ 363 $ 451 $15,726
Working capital............................................. (1,072) (2,550) (2,576) 17,094
Total assets................................................ 2,817 5,232 30,888 46,163
Current portion of long-term debt........................... -- 2,500 1,563 --
Due to parent............................................... 1,569 996 2,833 --
Long-term debt, excluding current portion................... -- -- 5,625 --
Shareholders' equity........................................ 1,121 606 9,558 34,854
</TABLE>

- ---------------

(1) The Company was incorporated April 28, 1995 and commenced operations July 1,
1995.

(3) Represents $3.0 million of purchased research and development expenses
relating to the SDS Acquisition and $3.9 million of deferred compensation
expense relating to the grant of stock options to executive officers during
the period. Excluding the effect of such one-time, noncash expenses,
historical operating expenses, operating income and net income would have
been $20.7 million, $2.5 million and $1.6 million, respectively, and
historical net income per share would have been $0.21; and pro forma
operating expenses, operating income and net income would have been $25.6
million, $3.1 million and $2.0 million, respectively, and pro forma net
income per share and supplementary net income per share would have been
$0.26 and $0.27, respectively.

19
<PAGE> 22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF INSPIRE

OVERVIEW

The Company's revenues are derived principally from: (i) outsourcing
services and (ii) software and software services. Revenues from outsourcing
services are derived from policy administration services and claims
administration services. Revenues from software and software services are
derived from contracts that grant customers a license to use the Company's
software products and contracts that provide for installation, customization,
enhancement, conversion and maintenance services. Other revenues principally
represent hardware sold in connection with software installations.

Revenues from outsourcing services are recognized as services are rendered.
Initial installations of software systems generally include a one-time license
fee and a contract for the installation and customization of the system to meet
the customer's specifications, which the Company bills at an hourly rate.
Amounts charged for the initial license and the installation and customization
of systems are recognized as revenue during the installation period in
proportion to the hours expended for installation compared to the total hours
projected for installation. In other instances, revenues are recognized based on
performance milestones specified in the contract. The Company recognizes the
annual fee charged for maintenance of the customer's system as revenue as hours
are expended over the maintenance contract period. Revenues from computer
hardware and equipment sales are recognized when the Company receives
notification that the equipment has been shipped by the manufacturer and title
has passed to the customer. Changes in estimates of percentage of completion or
losses, if any, associated with outsourcing or software services are recognized
in the period in which they are determined.

The Company incurs research and development costs that relate primarily to
the development of new products and major enhancements to existing services and
products. Research and development costs are comprised primarily of salaries.
The Company expenses or capitalizes, as appropriate, these research and
development costs in accordance with Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed." All research and development costs incurred prior to the
time management believes a project has reached "technological feasibility" are
expensed. Software production costs incurred subsequent to reaching
technological feasibility are capitalized, if material, and reported at the
lower of unamortized cost or net realizable value. Capitalized costs are
amortized over the expected service life of the related software, generally five
to seven years, using the straight-line method. The cost and related accumulated
amortization of projects are written off as they become fully amortized.

Millers Mutual, the Company and the other subsidiaries of Millers Mutual
are parties to a Consolidated Federal Income Tax Allocation Agreement, effective
as of January 1, 1994 (as amended, the "Tax Allocation Agreement"). Under the
Tax Allocation Agreement, Millers Mutual must pay the Company an amount equal to
any decrease in the income taxes otherwise payable by the Millers Mutual
consolidated tax group attributable to any net losses of the Company.
Conversely, the Tax Allocation Agreement requires the Company to pay to Millers
Mutual the amount of any income taxes that the Company would have paid if it had
not been included in the Millers Mutual consolidated tax group. Subject to
approval by the Texas Department of Insurance, the parties to the Tax Allocation
Agreement have agreed to terminate such agreement as it applies to the Company
in contemplation of the Company leaving the Millers Mutual consolidated tax
group as a result of this offering. The agreement to terminate the Company's
participation in the Tax Allocation Agreement provides that the Company will
indemnify the other members of the Millers Mutual consolidated tax group for any
of the group's income taxes and related expenses attributable to the Company,
and Millers Mutual will indemnify the Company for any income taxes and related
expenses attributable to any members of the consolidated tax group other than
the Company.

In view of the Company's limited operating history and recent acquisition
of SDS, the Company believes that period-to-period comparisons of its historical
results of operations are not necessarily meaningful. Accordingly, discussions
of the pro forma results of operations that combine the results of operations of
the

20
<PAGE> 23

Company and SDS for the periods indicated are also included. The results of
operations presented should not be relied upon as an indication of future
performance.

RECENT DEVELOPMENTS

Purchase of SDS. On March 12, 1997 the Company acquired SDS for $18.0
million. The results of operations of SDS from March 12, 1997 through June 30,
1997 are included in the results of operations of the Company for the six months
ended June 30, 1997. SDS was merged into the Company in July 1997. See "SDS
Acquisition."

Sale of Subsidiary. In July 1997, the Company signed a nonbinding letter of
intent to sell Applied Quoting Systems, Inc., a wholly-owned subsidiary of the
Company, for $2.5 million pursuant to an unsolicited offer from Samuel J.
Fleager, the former principal shareholder of Applied Quoting Systems, Inc.
Applied Quoting Systems, Inc. sells the Applied Quoting Systems Module ("AQS"),
a DOS-based commercial lines policy administration system. AQS automates
commercial policy rating, issuance, renewals and mid-term policy changes. Sales
of AQS were $4.1 million during 1996 and $2.3 million during the six months
ended June 30, 1997. The letter of intent is subject to the negotiation of a
definitive agreement and there can be no assurance that the sale of this
subsidiary will be completed.

RESULTS OF OPERATIONS

The following table sets forth, with respect to the Company and for the
periods indicated, the percentage of total revenues represented by certain
revenue, expense and income items:

<TABLE>
<CAPTION>
YEAR ENDED
PERIOD DECEMBER 31, SIX MONTHS ENDED JUNE 30,
APRIL 28, 1995(1) ----------------- -------------------------------------
THROUGH PRO PRO PRO
DECEMBER 31, FORMA FORMA FORMA
1995 1996 1996(2) 1996 1996(2) 1997 1997(2)
------------------ ----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Outsourcing services................ 100.0% 100.0% 36.6% 100.0% 34.0% 61.9% 50.2%
Software and software services...... -- -- 51.0 -- 59.2 32.5 43.3
Other............................... -- -- 12.4 -- 6.8 5.6 6.5
----- ----- ----- ----- ----- ----- -----
Total revenues................ 100.0 100.0 100.0 100.0 100.0 100.0 100.0
===== ===== ===== ===== ===== ===== =====
Expenses:
Cost of outsourcing services........ 125.0 77.2 28.2 78.7 26.7 43.4 35.2
Cost of software and software
services.......................... -- -- 31.1 -- 34.6 12.6 25.4
Cost of other revenues.............. -- -- 7.2 -- 3.0 3.0 3.8
Selling, general and
administrative.................... -- -- 12.5 -- 12.8 14.7 13.1
Research and development............ -- -- 9.3 -- 11.6 2.9 3.3
Depreciation and amortization....... 0.8 5.8 10.1 6.6 11.8 7.3 8.0
Purchased research and
development....................... -- -- -- -- -- 12.9 10.5
Deferred compensation............... -- -- -- -- -- 17.0 13.8
Management fees to parent........... 15.4 22.7 0.5 22.5 0.6 5.2 0.3
----- ----- ----- ----- ----- ----- -----
Total expenses................ 141.2 105.7 98.9 107.7 101.1 119.0 113.4
===== ===== ===== ===== ===== ===== =====
Operating income (loss)............... (41.2) (5.7) 1.1 (7.7) (1.1) (19.0) (13.4)
Other income (expense)................ -- (0.0) (0.9) -- (1.2) (0.7) (0.8)
----- ----- ----- ----- ----- ----- -----
Income (loss) before income taxes
(benefit)........................... (41.2) (5.7) 0.2 (7.7) (2.3) (19.7) (14.2)
Income taxes (benefit)................ (8.9) (1.9) (0.2) (2.6) (1.2) (7.4) (5.7)
----- ----- ----- ----- ----- ----- -----
Net income (loss)..................... (32.3)% (3.8)% 0.4% (5.1)% (1.1)% (12.3)% (8.5)%
===== ===== ===== ===== ===== ===== =====
</TABLE>

- ---------------

(1) The Company was incorporated April 28, 1995 and commenced operations July 1,
1995.

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 ON A PRO FORMA BASIS

REVENUES. Pro forma revenues were $28.7 million for the six months ended
June 30, 1997 compared to $15.7 million for the six months ended June 30, 1996,
an increase of $13.0 million or 83%. Revenues from

21
<PAGE> 24

outsourcing services were $14.4 million for the six months ended June 30, 1997
compared to $5.3 million for the six months ended June 30, 1996, an increase of
$9.1 million or 172%, primarily as a result of three significant contracts
entered into during or after March 1996 under which the Company performed
significantly more outsourcing services. These three contracts included a claims
administration agreement with Interco as administrator for the Virginia
Commission, a policy administration agreement and a claims administration
agreement with Clarendon through Blanch. Revenues from software and software
services were $12.4 million for the six months ended June 30, 1997 compared to
$9.3 million for the period ended June 30, 1996, an increase of $3.1 million or
33%. This increase was attributable to an increased number of software product
installations and customizations, primarily WPC (as hereinafter defined), due to
increased sales and marketing efforts. Revenues from other sources were $1.9
million for the six months ended June 30, 1997 compared to $1.1 million for the
six months ended June 30, 1996, an increase of $800,000 or 73%. This increase
was attributable to increased hardware sales in connection with the increased
software installations.

COST OF REVENUES. Cost of outsourcing services, which consists primarily of
personnel costs, was $10.1 million for the six months ended June 30, 1997
compared to $4.2 million for the six months ended June 30, 1996, an increase of
$5.9 million or 140%, primarily as a result of costs associated with the
performance of the three significant contracts described above. Cost of software
and software services, which is comprised primarily of salaries, was $7.3
million for the six months ended June 30, 1997 compared to $5.4 million for the
six months ended June 30, 1996, an increase of $1.9 million or 35%, primarily as
a result of an increased number of software installations. Cost of revenues as a
percentage of total revenues decreased from 71% for the six months ended June
30, 1996 to 66% for the six months ended June 30, 1997.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses include the costs of corporate operations, finance and
accounting, human resources and other general operations of the Company.
Selling, general and administrative expenses were $3.8 million for the six
months ended June 30, 1997 compared to $2.1 million for the six months ended
June 30, 1996, an increase of $1.8 million or 81%. This increase was due to
additional staffing, office space and computer equipment and software required
to expand the infrastructure to support the Company's growth. Selling, general
and administrative expenses as a percentage of total revenues were 13% for each
of the six months ended June 30, 1996 and 1997.

RESEARCH AND DEVELOPMENT. Research and development expense is comprised
primarily of direct salaries. Research and development expense decreased from
$1.8 million for the six months ended June 30, 1996 to $945,000 for the six
months ended June 30, 1997 due to the temporary redeployment in 1997 of certain
research and development personnel to assist with systems installations.
Amortization of research and development purchased as a result of the SDS
Acquisition was approximately $600,000 and $600,000 for the six months ended
June 30, 1996 and 1997, respectively, and is included in depreciation and
amortization for the periods presented.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$2.3 million for the six months ended June 30, 1997 compared to $1.9 million for
the six months ended June 30, 1996, an increase of $400,000 or 21%. This
increase is primarily attributable to Millers Mutual's capital contribution of
approximately $2.5 million in depreciable property and equipment, including
computer and information system equipment, to the Company in January 1997.

NONRECURRING EXPENSES. In the purchase price allocation of the SDS
Acquisition, $3.0 million was assigned to in-process research and development.
This amount was charged to operations in March 1997. In addition, $3.9 million
was charged to operations as deferred compensation associated with stock options
granted to executive officers during the six months ended June 30, 1997.

INCOME TAXES (BENEFIT). Historically, Millers Mutual filed a consolidated
tax return that included all subsidiaries of Millers Mutual, including the
Company. For financial accounting purposes, the Company recorded its pro rata
share, based on its taxable income or loss, of total consolidated taxable income
or loss.

22
<PAGE> 25

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 ON AN HISTORICAL BASIS

REVENUES. The Company's total revenues were $23.3 million for the six
months ended June 30, 1997 compared to $5.3 million for the six months ended
June 30, 1996, an increase of $18.0 million or 340%. This increase is
attributable primarily to: (i) the SDS Acquisition and (ii) revenues from the
three significant outsourcing contracts described above.

COST OF REVENUES. Total cost of revenues was $13.7 million for the six
months ended June 30, 1997 compared to $4.2 million for the six months ended
June 30, 1996, an increase of $9.5 million or 226%, primarily as a result of:
(i) the SDS Acquisition and (ii) the costs associated with the performance of
services under the three significant outsourcing contracts described above.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $4.6 million for the six months ended June 30, 1997
compared to $1.2 million for the six months ended June 30, 1996, an increase of
$3.4 million or 283%. This increase was primarily due to the SDS Acquisition.
Selling, general and administrative expenses as a percentage of total revenues
decreased from 23% for the six months ended 1996 to 20% for the six months ended
June 30, 1997. This decrease is attributable primarily to revenues from the
three significant outsourcing contracts described above while the level of
management services provided by Millers Mutual, and the resulting management
fees, remained stable.

RESEARCH AND DEVELOPMENT. Research and development expense was $680,000 for
the six months ended June 30, 1997. This expense was comprised primarily of
direct salaries related to software development. Prior to the SDS Acquisition,
the Company did not incur any significant research and development expenses.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$1.7 million for the six months ended June 30, 1997 compared to $350,000 for the
six months ended June 30, 1996, an increase of $1.3 million or 371%. This
increase is primarily attributable to (i) Millers Mutual's capital contribution
of approximately $2.5 million in depreciable property and equipment to the
Company in January 1997 and (ii) amortization of goodwill recorded in connection
with the SDS Acquisition.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD FROM INCEPTION
THROUGH DECEMBER 31, 1995 ON AN HISTORICAL BASIS

REVENUES. The Company's total revenues were $13.6 million for the year
ended December 31, 1996 compared to $3.9 million for the period from inception
through December 31, 1995, an increase of $9.7 million or 249%. This increase is
attributable primarily to (i) the Company conducting twelve months of operations
in 1996 compared to approximately six months in 1995 and (ii) revenues from the
three significant outsourcing contracts described above.

COST OF REVENUES. Cost of revenues was $10.5 million for the year ended
December 31, 1996 compared to $4.9 million for the period from inception through
December 31, 1995, an increase of $5.6 million or 114%. This increase is
attributable primarily to (i) the Company conducting twelve months of operations
in 1996 compared to approximately six months in 1995 and (ii) personnel and
other costs associated with the three significant outsourcing contracts
described above. Cost of revenues as a percentage of total revenues decreased
from 140% for the period from inception through December 31, 1995 to 100% for
the year ended December 31, 1996. This decrease was primarily a result of
economies of scale associated with spreading certain fixed costs over a larger
revenue base and lower personnel costs as a percentage of revenues.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $3.1 million for the year ended December 31, 1996
compared to $600,000 for the period from inception through December 31, 1995, an
increase of $2.5 million or 417%. This increase is attributable primarily to the
Company conducting twelve months of operations in 1996 compared to approximately
six months in 1995.

23
<PAGE> 26

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$787,000 for the year ended December 31, 1996 compared to $33,000 for the period
from inception through December 31, 1995, an increase of $754,000 or 2,285%.
This increase is primarily attributable to Miller Mutual's capital contribution
of approximately $2.4 million in depreciable property and equipment during the
last six months of 1995 and the purchase of approximately $1.8 million in
depreciable property and equipment throughout 1996.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has funded its operations through cash generated
from operations, as well as borrowings and capital contributions from Millers
Mutual. Net cash provided by operating activities was $3.2 million in the six
months ended June 30, 1997 compared to $897,000 in the six months ended June 30,
1996. Cash flow used in operating activities was $459,000 and $0 for the year
ended December 31, 1996 and the period from inception through December 31, 1995,
respectively. In 1996, cash flow used in operating activities included an
increase in accounts receivable of approximately $1.2 million and a decrease in
amounts due to affiliates of approximately $573,000, which was offset by
depreciation expense of approximately $787,000 and an increase in accounts
payable and accrued expenses of approximately $1.1 million. At December 31,
1996, the Company was in compliance with its covenants under its bank
borrowings.

The Company entered into the NationsBank Facility on March 12, 1997,
pursuant to which the Company borrowed $5.0 million under a term credit facility
and $2.5 million under a revolving credit facility to finance in part the SDS
Acquisition. The term credit facility is payable in quarterly installments with
the final installment due and payable on March 12, 2001. The revolving credit
facility expires and is due and payable on March 12, 1999. Although the Company
intends to use a portion of its net proceeds from this offering to repay the
amounts owed under the NationsBank Facility, the Company intends to keep the
revolving credit facility in place for future borrowings. Borrowings under the
NationsBank Facility are secured by all accounts receivable, inventory,
equipment, servicing contract rights, all of the outstanding stock of the
Company's subsidiary and other personal property of the Company and the
Company's subsidiary. At June 30, 1997, the Company was in compliance with its
covenants under the NationsBank Facility. See "Use of Proceeds."

From time to time, the Company has received loans and capital contributions
from Millers Mutual. In March 1997, Millers Mutual made a $10.5 million capital
contribution to fund in part the SDS Acquisition. As of June 30, 1997, the
outstanding balance of the loans was $2.8 million. The Company intends to use a
portion of its net proceeds from this offering to repay these loans. The Company
does not anticipate receiving any loans or capital contributions from Millers
Mutual in the future. See "Use of Proceeds."

The Company believes that cash generated from operations and its net
proceeds from this offering will satisfy the Company's anticipated working
capital requirements for at least one year. The Company, however, may require
substantial additional funds for potential acquisitions and expansion. In the
normal course of business, the Company evaluates acquisitions of businesses,
products and technologies that complement the Company's business. The Company
has no present commitments or understandings with respect to any such
transaction. The Company, however, may acquire businesses, products or
technologies in the future.

24
<PAGE> 27

SELECTED CONSOLIDATED FINANCIAL DATA OF SDS
(IN THOUSANDS, EXCEPT SHARE DATA)

The selected consolidated financial data of SDS presented below as of
December 31, 1995, 1996 and March 11, 1997, for the years ended December 31,
1994, 1995 and 1996 and for the period January 1, 1997 through March 11, 1997
have been derived from the SDS audited consolidated financial statements
appearing elsewhere in this Prospectus. The selected consolidated financial data
of SDS presented below as of December 31, 1992, 1993, and 1994 and for the years
ended December 31, 1992 and 1993 have been derived from audited consolidated
financial statements of SDS that are not included in this Prospectus. The
selected consolidated financial data of SDS presented below for the three months
ended March 31, 1996 are unaudited but have been prepared on the same basis as
the audited consolidated financial statements of SDS included herein and, in the
opinion of management, include all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of SDS's consolidated financial
position and results of operations for such periods. The results of operations
presented below are not necessarily indicative of the results of operations that
may be achieved in the future. The selected consolidated financial data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations of SDS" and SDS's Consolidated Financial
Statements.

<TABLE>
<CAPTION>
PERIOD
THREE JANUARY 1,
MONTHS 1997
YEAR ENDED DECEMBER 31, ENDED THROUGH
----------------------------------------------- MARCH 31, MARCH 11,
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software services............................. $ 7,184 $ 9,199 $ 9,041 $ 9,078 $10,037 $ 2,396 $ 2,385
Software...................................... 6,207 5,682 4,313 9,068 8,987 2,132 2,455
Hardware...................................... 616 924 2,245 2,400 3,680 361 463
Other......................................... 245 349 405 615 960 184 109
------- ------- ------- ------- ------- ------- -------
Total revenues............................ 14,252 16,154 16,004 21,161 23,664 5,073 5,412
Expenses:
Salaries and compensation..................... 8,482 9,793 11,811 13,088 14,505 3,380 3,476
Depreciation and amortization................. 1,219 1,574 2,157 1,879 1,827 462 411
Cost of hardware sold......................... 459 738 1,862 1,979 2,699 291 384
Occupancy costs............................... 1,158 1,343 1,374 1,379 1,566 352 406
Other......................................... 1,536 1,536 1,831 1,667 2,032 379 372
------- ------- ------- ------- ------- ------- -------
Total expenses............................ 12,854 14,984 19,035 19,992 22,629 4,864 5,049
Operating income (loss)......................... 1,398 1,170 (3,031) 1,169 1,035 209 363
Interest income (expense), net.................. (264) (2) (134) (80) 77 (8) 24
Other income (expense), net..................... (15) 97 2 (2) 35 -- --
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes (benefit)..... 1,119 1,265 (3,163) 1,087 1,147 201 387
Income taxes (benefit).......................... 444 503 (1,253) 429 449 81 156
------- ------- ------- ------- ------- ------- -------
Net income (loss)............................... $ 675 $ 762 $(1,910) $ 658 $ 698 $ 120 $ 231
======= ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------- MARCH 11,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 67 $ 492 $ 289 $ 529 $ 1,516 $ 940
Working capital................................... 302 993 (1,167) 572 1,785 1,694
Total assets...................................... 11,243 12,705 13,692 12,054 13,465 13,391
Current portion of long-term debt................. 299 361 557 689 525 439
Long-term debt, excluding current portion......... 2,428 2,674 2,570 2,028 1,883 1,879
Shareholders' equity.............................. 5,000 5,596 3,739 4,538 5,385 5,617
</TABLE>

25
<PAGE> 28

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SDS

RESULTS OF OPERATIONS

The following table sets forth, with respect to SDS and for the periods
indicated, the percentage of total revenues represented by certain revenue,
expense and income items:

<TABLE>
<CAPTION>
PERIOD
JANUARY 1,
THREE MONTHS 1997
YEAR ENDED DECEMBER 31, ENDED THROUGH
------------------------- MARCH 31, MARCH 11,
1994 1995 1996 1996 1997
----- ----- ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Software services....................................... 56.5% 42.9% 42.4% 47.3% 44.1%
Software................................................ 27.0 42.9 38.0 42.0 45.3
Hardware................................................ 14.0 11.3 15.5 7.1 8.6
Other................................................... 2.5 2.9 4.1 3.6 2.0
----- ----- ----- ----- -----
Total revenues.................................... 100.0 100.0 100.0 100.0 100.0
===== ===== ===== ===== =====
Expenses:
Salaries and compensation............................... 73.8 61.8 61.3 66.6 64.2
Depreciation and amortization........................... 13.5 8.9 7.7 9.1 7.6
Cost of hardware sold................................... 11.6 9.4 11.4 5.7 7.1
Occupancy costs......................................... 8.6 6.5 6.6 6.9 7.5
Other................................................... 11.4 7.9 8.6 7.6 6.9
----- ----- ----- ----- -----
Total expenses.................................... 118.9 94.5 95.6 95.9 93.3
===== ===== ===== ===== =====
Operating income (loss)................................... (18.9) 5.5 4.4 4.1 6.7
Other income (loss)....................................... (0.8) (0.4) 0.5 (0.1) 0.4
----- ----- ----- ----- -----
Income (loss) before income taxes (benefit)............... (19.7) 5.1 4.9 4.0 7.1
Income taxes (benefit).................................... (7.8) 2.0 1.9 1.6 2.9
----- ----- ----- ----- -----
Net income (loss)......................................... (11.9)% 3.1% 3.0% 2.4% 4.2%
===== ===== ===== ===== =====
</TABLE>

COMPARISON OF SDS'S RESULTS OF OPERATIONS FOR THE PERIOD JANUARY 1, 1997 THROUGH
MARCH 11, 1997 AND THE THREE MONTHS ENDED MARCH 31, 1996

REVENUES. SDS's revenues were $5.4 million for the period January 1, 1997
through March 11, 1997 and $5.1 million for the three months ended March 31,
1996, an increase of approximately $300,000 or 5.9%. This increase was due to
additional software installation revenues, primarily sales of WPC, as well as
increased hardware sales in connection with the increased software
installations.

OPERATING EXPENSES. Operating expenses were $5.0 million for the period
January 1, 1997 through March 11, 1997 and $4.9 million for the three months
ended March 31, 1996, an increase of approximately $100,000 or 2.0%. This
increase is attributable to: (i) the increased costs of computer hardware sold
associated with the corresponding increase in computer hardware sales revenues
and (ii) additional personnel and occupancy costs. Total operating expenses as a
percentage of revenues remained fairly constant.

COMPARISON OF SDS'S RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996
AND 1995

REVENUES. SDS's revenues were $23.7 million for the year ended December 31,
1996 compared to $21.2 million for the year ended December 31, 1995, an increase
of $2.5 million or 11.8%. This increase is primarily attributable to increases
in services performed, including: (i) software service fees, (ii) software
installation revenues, primarily WPC installations, which contributed an
additional $1.2 million in revenues in 1996, and (iii) computer hardware sales
and commissions, which increased by $1.3 million from 1995 to 1996.

OPERATING EXPENSES. Operating expenses were $22.6 million for the year
ended December 31, 1996 compared to $20.0 million for the year ended December
31, 1995, an increase of $2.6 million or 13.0%. This increase is primarily
attributable to increased personnel costs of $1.4 million and the increase of
approximately $720,000 in the cost of computer hardware sold. Total operating
expenses as a percentage of revenues remained constant at approximately 95% for
the years ended December 31, 1995 and 1996.

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<PAGE> 29

COMPARISON OF SDS'S RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995
AND 1994

REVENUES. SDS's revenues were $21.2 million for the year ended December 31,
1995 compared to $16.0 million for the year ended December 31, 1994, an increase
of $5.2 million or 32.5%. This increase is attributable primarily to software
installations relating to: (i) several significant new customers in late 1994
and early 1995, as well as additional installations for existing clients, and
(ii) the introduction of new products, such as WPC and UES (as hereinafter
defined) that had been in development in the early 1990s and for which demand
increased in late 1994 and early 1995, resulting in increased software
installations. WPC alone contributed an additional $1.6 million in software
installation revenues in 1995 compared to 1994.

OPERATING EXPENSES. Operating expenses were $20.0 million for the year
ended December 31, 1995 compared to $19.0 million for the year ended December
31, 1994, an increase of $1.0 million or 5.3%. This increase was due primarily
to higher salaries and benefits expenses of approximately $1.3 million relating
to an increase in the number of SDS employees from approximately 230 at December
31, 1994 to approximately 250 at December 31, 1995. Total operating expenses as
a percentage of revenues decreased from 118.9% for the year ended December 31,
1994 to 94.5% for the year ended December 31, 1995 as a result of economies of
scale associated with spreading certain fixed costs over a larger revenue base
and lower personnel costs as a percentage of revenues.

LIQUIDITY AND CAPITAL RESOURCES

Historically, SDS funded its operations primarily through cash generated
from operations, supplemented by borrowings. Net cash provided by operating
activities was approximately $201,000 in the period from January 1, 1997 through
March 11, 1997 compared to approximately $317,000 in the three months ended
March 31, 1996. Cash flow provided by operating activities was $2.2 million,
$2.2 million and $1.2 million for the years ended December 31, 1996, 1995 and
1994, respectively. In 1996, cash flow provided by operating activities was
comprised primarily of $1.8 million of depreciation and amortization expense.

SDS entered into a letter agreement with Norwest Bank Wisconsin, National
Association ("Norwest") on September 21, 1994 (as amended, the "Norwest
Agreement"), pursuant to which SDS borrowed under a line of credit facility and
under certain promissory notes to help finance certain property acquisitions,
such as a building and business equipment, and the repurchase of SDS common
stock. In addition, SDS entered into a contract with the Redevelopment Authority
of Sheboygan, Wisconsin (the "Redevelopment Authority") on November 1, 1988 (the
"Authority Contract"), pursuant to which SDS borrowed $150,000 from the
Redevelopment Authority to finance the acquisition of certain land. In
connection with the SDS Acquisition, SDS transferred the building and land to
Riverview Building, LLC ("Riverview"), and Riverview assumed the debt associated
with the building under the Norwest Agreement and the debt associated with the
land under the Authority Contract. In addition, on June 23, 1997, SDS paid the
outstanding principal balance and accrued interest on the remaining outstanding
debt under the Norwest Agreement. As a result, there are no outstanding
borrowings under the Norwest Agreement or the Authority Contract. See "Certain
Transactions."

27
<PAGE> 30

BUSINESS

INTRODUCTION

The Company is a provider of policy and claims administration solutions to
the P&C insurance industry, offering a comprehensive choice of outsourcing
services and software and software services. The Company's outsourcing services,
which generally are provided on a percentage of premiums or claims paid basis,
include application of underwriting and rating criteria defined by the insurer,
policy issuance, customer service, billing and collections, claims adjusting and
processing, and policyholder mailings. The Company's software products include
policy and claims administration systems, as well as systems that increase the
productivity of insurers by automating certain functions, such as workflow
management, underwriting rules and guidelines, document production and rating
algorithms. These systems, which run on a variety of platforms including IBM
AS/400, IBM RS/6000, Windows 3.1, Windows 95 and Windows NT, enable the
Company's customers to conduct their policy and claims administration more
efficiently. The Company's software services include installation,
customization, conversion and maintenance of these systems to meet customer
specifications.

The Company was established in April 1995 as a wholly-owned subsidiary of
Millers Mutual, an insurance company chartered in Texas in 1898. The Company was
created to provide outsourcing services to other P&C insurers by capitalizing on
Millers Mutual's success in developing, implementing and managing software
systems for its internal use. As a result of the SDS Acquisition in March 1997,
the Company now also develops and markets software and software services to the
P&C insurance industry. SDS offered software and software services to the P&C
insurance industry for 16 years prior to its acquisition by the Company. The
Company believes its services and products allow customers to focus on core
competencies, reduce costs by converting their fixed costs of in-house
information technology to variable costs and leverage the Company's investment
in software systems and productivity tools.

OVERVIEW OF THE PROPERTY AND CASUALTY INSURANCE INDUSTRY

The P&C insurance industry provides financial protection for individuals,
businesses and others against losses of property or losses by third parties for
which the insured is liable. P&C insurers underwrite policies that cover various
types of risk, which can generally be divided into personal lines of insurance
covering individuals and commercial lines of insurance covering businesses.
Personal lines generally include automobile insurance (physical damage and
liability insurance) and homeowners' insurance. Commercial lines generally
include workers' compensation, business, directors and officers liability, theft
and medical malpractice insurance as well as insurance covering other commercial
risks.

The P&C insurance industry is highly competitive. Insurance companies
compete primarily on the basis of price, consumer satisfaction and claims paying
ability. According to A. M. Best, as of December 31, 1995, there were
approximately 2,500 P&C insurance companies in the United States generating
approximately $260 billion in annual premium revenues, of which approximately
53% were written by the top 20 insurers. Based on statistics released by the
Insurance Services Office, an industry advisory organization, premium revenues
for the P&C insurance industry over the past several years have been increasing
approximately 3% annually.

According to a study published by A.M. Best, the 10 largest insured
catastrophes have occurred since 1989, including Hurricane Andrew in 1992, the
Northridge, California earthquake in 1994 and Hurricane Hugo in 1989. The
Company believes that these catastrophes have caused insurers to decrease their
exposure in areas prone to natural disasters. Much of the new demand created by
insurers leaving markets is being met by reinsurers and new market entrants that
have not made significant infrastructure investments and do not desire to do so.
The Company believes that its ability to deliver services priced as a percentage
of premiums or claims paid should be attractive to these new entrants, as it
will enable them to enter new markets without incurring substantial fixed
infrastructure costs.

According to a recent survey by the National Association of Independent
Insurers, information systems expenses as a percentage of written premiums
increased from 2.5% in 1992 to 3.3% in 1996. The Company believes that this
increasing investment in information systems is indicative of the demand for
automation in

28
<PAGE> 31

the P&C insurance industry. This demand promotes the sale of software and
software services and represents an opportunity to provide outsourcing services
for those insurers that do not wish to make increasing levels of capital
expenditures.

NEED FOR INFORMATION MANAGEMENT AND WORK PROCESS AUTOMATION

Technology is a critical element in an insurance company's ability to
compete. Insurance companies use technology and information systems as
management tools to improve efficiency, manage costs and increase customer
satisfaction. A highly technical industry has evolved to meet the unique needs
of P&C insurers to manage and process large amounts of policyholder data. The
focus of insurers has recently shifted away from finding more efficient means of
storing information toward more efficient ways of processing information.

The Company provides a wide variety of services and products to manage and
process policy and claims information more efficiently, including: (i) software
and software services, (ii) policy administration services, (iii) claims
administration services and (iv) "virtual insurance company" services (which
include the outsourcing of both policy and claims administration and related
functions). The Company believes that there are significant opportunities to
market its services and products for the following reasons:

- ECONOMIES OF TECHNOLOGY. The investment in information systems necessary
for P&C insurers to remain competitive is often cost prohibitive,
particularly for smaller companies, because of the specialized technical
knowledge required to develop, install, operate and maintain
sophisticated systems. The Company's services and products allow
insurance companies to take advantage of economies of technology by
leveraging the Company's investment in software systems and productivity
tools.

- TREND TOWARD DIRECT SALES. Many personal lines insurers are reducing
costs by selling policies directly to policyholders rather than through
independent agents. By selling directly to policyholders, insurance
companies can reduce costs, which allows them to reduce premiums. This
trend has created opportunities for the Company to market its services
and products to insurers that sell directly to policyholders and those
that continue to sell through independent agents. Automation of the
policy and claims administration functions allows insurers selling
directly to customers to provide services efficiently that were
traditionally performed by agents. Automation also enables insurers that
sell through agents to reduce administration costs to compete more
effectively with insurers that sell directly to policyholders.

- YEAR 2000 PROBLEM. The Year 2000 problem manifests itself in a number of
ways in the policy and claims administration area. The Year 2000 problem
arose because, until recently, most software systems were not programmed
to recognize correctly dates beyond December 31, 1999. For example,
policy and claims administration systems process information based on
policy commencement and renewal dates, yet systems that are not Year 2000
compliant cannot correctly recognize policy dates beyond December 31,
1999. According to a survey conducted by the National Association of
Independent Insurers, as of November 1996 only 45% of insurance companies
had resolved this problem. The Company believes that many insurance
companies may resolve the Year 2000 problem by either: (i) purchasing new
software systems or (ii) entirely outsourcing their policy and claims
needs rather than incurring the cost of updating their old systems.

- STATE REGULATION. P&C insurers are subject to supervision and regulation
on a state-by-state basis with respect to numerous aspects of their
business. State insurance regulators closely regulate the product
offerings, claims processes and premium structure of insurance companies.
State regulators also require insurance companies to file annual and
other reports relating to their financial condition. Policy and claims
administration systems can facilitate compliance with numerous regulatory
requirements by automating statutory reporting and other compliance
tasks.

- CUSTOMER SERVICE. As policyholders demand faster, broader and better
service, P&C insurers that provide superior customer service enjoy a
competitive advantage. Dissatisfaction with policy or claims handling
processes is frequently cited as a cause of policy nonrenewal. In
addition, retaining an existing

29
<PAGE> 32

policyholder with good customer service is more cost effective for an
insurance company than attracting a new policyholder away from a
competitor. Automation and outsourcing can allow insurance companies to
improve customer service while lowering fixed costs.

TREND TOWARD OUTSOURCING

Since the late 1980s, many P&C insurers have sought to use third parties to
provide certain functions or services that the insurers historically performed
in-house. These companies seek to focus on their core competencies, reduce costs
and avoid the significant investment associated with developing, installing,
operating and maintaining information management and automation systems. The
Company believes that insurance companies increasingly will conclude that policy
and claims administration and regulatory compliance are too complicated, costly
and administratively burdensome to be performed in-house. Other factors
contributing to the outsourcing trend include the following:

- NEED FOR FLEXIBILITY. Many P&C insurers lack the ability to respond
rapidly to changing market conditions. Outsourcing enables insurance
companies to enter new markets quickly and cost-effectively to take
advantage of favorable market conditions without incurring substantial
fixed infrastructure costs.

- NEED TO DIVERSIFY RISK. Many P&C insurers are overexposed to risks from
natural catastrophes in certain markets. Because many states restrict the
ability of insurers to cancel policies or exit particular lines of
business, these insurers often cease writing new policies and outsource
the administration of their remaining policies and claims ("stranded
policies"). Alternatively, insurers may reduce their risk by reinsuring
policies with other insurers that do not have a similar geographic
concentration or by allowing other insurers to renew the stranded
policies. As insurers leave markets, they create demand for outsourcing
the policy and claims administration of the stranded policies.

- DESIRE TO MAXIMIZE STATUTORY SURPLUS. As most state regulations require
insurance companies to maintain certain ratios of surplus to premiums,
insurance companies that maximize surplus are able to write greater total
premiums. Insurance companies cannot capitalize, for statutory-basis
financial statement reporting purposes, most of the hardware and software
they purchase or develop for policy and claims administration. As a
result, an insurance company with a large investment in its policy and
claims administration infrastructure generally will experience a lower
statutory surplus than it would if it were to outsource its policy and
claims administration.

- VIRTUAL INSURANCE COMPANIES. Deregulation has permitted new companies
that are not traditional insurance companies to enter the P&C insurance
industry. Banks, credit unions and other financial services companies are
beginning to underwrite P&C insurance. These new entrants often do not
have policy and claims administration infrastructure or expertise in
place and are natural candidates for outsourcing. The Company facilitates
the creation of these "virtual insurance companies" by providing policy
and claims administration and related back office administration to new
entrants that desire to focus their resources on the core marketing,
underwriting and financial aspects of the P&C insurance business.

THE INSPIRE STRATEGY

The Company's objective is to become the leading provider of policy and
claims administration solutions to the P&C insurance industry. The Company's
strategy to achieve this objective involves the following elements:

- OFFER A COMPREHENSIVE CHOICE OF SOLUTIONS. The Company offers an "a la
carte" menu of services and products that is attractive to a wide variety
of potential customers. This comprehensive and flexible approach enhances
customer stability and increases opportunities for new sales by allowing
the Company to sell multiple services and products to both existing and
new customers.

- IMPLEMENT AN INTEGRATED MARKETING PLAN. The Company is integrating its
sales and marketing efforts to capitalize on its ability to offer a
comprehensive choice of solutions. This integration process involves

30
<PAGE> 33

training the Company's sales and marketing personnel to sell a full line
of services and products, forming a dedicated sales team to focus on
larger accounts (generally defined as insurance companies with annual
premiums in excess of $250 million) and expanding sales and marketing
support staff to market directly to specialty line P&C insurers and new
entrants in the P&C insurance industry, such as banks, credit unions and
other financial services companies.

- GENERATE RECURRING REVENUES. The Company's services and products are
structured to generate revenues based on events that occur in the normal
course of a customer's business. Policy administration services generate
recurring revenues because the Company earns a percentage of each premium
received by the insurance company. Claims administration services
generate recurring revenues because the Company earns a percentage of
either each claim paid or each premium received by the insurance company.
Software licensing generates recurring revenues because most of the
Company's customers enter into systems support, maintenance or
enhancement agreements to purchase additional services and software
enhancements throughout the life of their systems.

- PENETRATE NEW MARKETS. Prior to the SDS Acquisition, SDS traditionally
marketed its software products and services to small to mid-size domestic
insurance companies. Utilizing the combined resources of the merged
companies, the Company intends to pursue sales opportunities with larger
insurance companies.

- ENHANCE PRODUCT CAPABILITIES. Maintaining technology leadership is
critical to remaining competitive in the Company's industry. The Company
plans to enhance continuously its existing services and products and
develop entirely new services and products to respond to constantly
changing customer requirements.

- PURSUE STRATEGIC ACQUISITIONS. The Company intends to consider potential
acquisition candidates that offer opportunities to increase market share
and expand the Company's line of outsourcing services and software and
software services.

SERVICES AND PRODUCTS

The Company offers a range of services and products to address the policy
and claims administration needs of the P&C insurance industry. The Company
installs, enhances and maintains a variety of policy and claims administration
software systems and offers outsourcing of policy and claims administration.

OUTSOURCING SERVICES. The Company's outsourcing services include
policyholder mailings, underwriting approval, policy rating and issuance, policy
acceptance, customer service, billing and collections, and claims adjusting and
processing. The customer determines the extent to which it uses the Company's
services. A team of Company and customer personnel work closely together to
ensure the seamless integration of the customer's outsourced and in-house
activities. The Company's outsourcing services include the following:

- POLICY ADMINISTRATION. Policy administration services describes the suite
of services the Company offers customers that desire to outsource their
policy administration. The customer retains all of the financial risk and
works with the Company to provide underwriting and rating guidelines. The
Company typically is paid a percentage of premiums for policy
administration services, which include the following:

- Direct, agency and Internet marketing support

- Policy issuance and acceptance

- Application of underwriting and rating criteria defined by the insurer

- Customer service phone center for policyholders and agents

- Accounting, billing and collections

- Commission calculation and disbursement

- Statutory reporting and regulatory compliance

- Comprehensive management and service bureau reporting

31
<PAGE> 34

- CLAIMS ADMINISTRATION. Claims administration services describes the
management of appraising, qualifying and settling P&C insurance claims.
The Company maintains a staff of claims adjusters and examiners. The
Company also uses independent claims adjusters when needed, such as when
a high level of claims arises from a major catastrophe. The Company
reviews insurance coverage, performs a claim analysis and prepares a
check for payment of the claim, if warranted. The Company typically is
compensated on either a percentage of premiums or claims paid basis.

SOFTWARE PRODUCTS. The Company sells information processing systems and
software productivity tools that automate policy and claims administration. The
information processing systems are designed to run on a variety of platforms,
including IBM AS/400 ("AS/400"), IBM RS/6000 ("RS/6000"), Windows 3.1, Windows
95 and Windows NT. The Company's software productivity tools add functionality
and flexibility to base systems. These productivity modules can be sold in
conjunction with the Company's base systems or as add-ons to other vendors' base
systems.

- INTEGRATED SYSTEMS

- POLICY AND CLAIMS ADMINISTRATION SYSTEM. The Policy and Claims
Administration System ("PCA") is an integrated system that offers
policy and claims administration, billing and collections, financial
administration, and management and statistical bureau reporting. PCA
runs on the AS/400 and RS/6000 platforms. PCA was originally
introduced in 1988 and the current version was introduced in 1995. The
Company has completed 38 AS/400 installations and 8 RS/6000
installations of PCA.

- WINDOWS INTO PROPERTY AND CASUALTY SYSTEM. Functionally comparable to
PCA, Windows into Property and Casualty System ("WPC") is an
integrated system that performs functions from submission tracking to
policy and claims administration to management and bureau reporting.
WPC runs on a PC platform in a client/server environment and on most
major PC network operating systems, including Novell Netware and
Microsoft Windows NT. Since its introduction in 1992, the Company has
installed 22 WPC systems.

- SOFTWARE PRODUCTIVITY TOOLS

- EMPOWER. EmPower is an automated workflow management system designed
for the personal lines policy administration needs of P&C insurers.
EmPower interfaces with PCA, other vendors' systems or insurers'
proprietary systems to provide imaging and workflow management
technology. EmPower automatically processes the flow of information,
substantially reducing manual activities through the integration of
voice, data, image and text into one system. EmPower was introduced in
1996 and operates in a client/server environment using Microsoft
Windows. The Company plans to enhance EmPower to support claims
administration and commercial lines policy administration software.

- UNDERWRITING EXPERT SYSTEM. The Underwriting Expert System ("UES")
automates underwriting rules and guidelines to mirror a client's
underwriting process. UES enhances consistency of review and
streamlines customer service and operations departments by reducing
the need for manual underwriting review. UES uses a relational
database to store and report statistics concerning underwriting
efficiency and results of the review process. UES operates in a
client/ server environment and interfaces with PCA and WPC, as well as
most systems sold by other vendors or insurers' proprietary systems.
UES was introduced in 1993.

- POLICY SET PRODUCTION. Policy Set Production ("PSP") allows for laser
quality printing of policy declarations, booklets, forms,
endorsements, billing notices and letters. PSP manages the logistics
of producing the appropriate documents necessary for each
policyholder. Introduced in 1995, PSP operates in a client/server
environment and interfaces with PCA and WPC, as well as most systems
sold by other vendors or insurers' proprietary systems.

- VISUAL RATER. Visual Rater is a productivity tool using object
oriented programming technology that allows nontechnical users to
create, build, test and maintain the rating components of

32
<PAGE> 35

insurance processing. Visual Rater's "point and click" rating
construction and maintenance interface can be operated by persons who
are not technical programmers. Instead, reusable rating components
become simple icons used as building blocks to create rating
algorithms. Visual Rater was introduced in 1995 and generally is sold
with WPC.

SOFTWARE SERVICES. The Company customizes all of its software products to
meet customer specifications. The initial license fee paid to the Company gives
the customer the right to use the software, but does not cover customization,
conversion, enhancements or upgrades. The Company provides systems installation,
customization, conversion and maintenance on a time-and-materials basis.
Disaster recovery planning services and bureau reporting services are provided
on either a fixed fee or time-and-materials basis. Future enhancements and
upgrades to a system are provided for an annual fee equal to a percentage of the
initial license fee. Installations of upgrades and enhancements are performed on
a time-and-materials basis.

RESEARCH AND DEVELOPMENT

The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards and frequent introductions of new
products and enhancements. The Company's future success depends in part on its
ability to enhance its existing services and products and develop new services
and products to meet changing customer requirements. The Company's research and
development efforts are focused on enhancement of existing services and
products, expansion of operating system compatibility and development of new
applications for emerging insurance markets. In addition, the Company has in the
past acquired new services and products through the acquisition of complementary
businesses and may do so in the future. Currently, major areas of research and
development emphasis are (i) the expansion of EmPower to include claims
administration and commercial lines policy administration and (ii) the expansion
of software applications to address additional P&C insurance markets.

Since inception, the Company has made substantial investments in enhancing
and developing its services and products. Prior to being acquired by the
Company, SDS incurred expenses of approximately $3.7 million, $2.8 million and
$2.9 million in 1994, 1995 and 1996, respectively, for research and development
and the Company intends to devote substantial resources to research and
development in the future. As of June 30, 1997, the Company had approximately 56
employees that perform product development and quality assurance, as well as
participate in the initial installations of new products. There can be no
assurance that the Company will be successful in developing and marketing new or
enhanced services or products.

CUSTOMER SUPPORT AND OPERATIONS

The Company's policy administration outsourcing services are provided at
the Company's service center in Fort Worth, Texas. The Company maintains a
customer service phone center for policyholders and agents five days a week. The
Company employs approximately 30 people in the policy administration service
center to administer approximately 200,000 policies representing $170 million in
annual premiums to the insurers.

The Company provides claims administration outsourcing services at its
service centers in Fort Worth, Texas; Laguna Hills, California; Troy, Michigan;
and St. Petersburg, Florida. The Company employs approximately 20 full-time
claims administrators.

The Company provides software development, installation, maintenance and
enhancement services at its facilities in Sheboygan, Wisconsin; Hartland,
Wisconsin; Columbia, South Carolina; and Uxbridge, Massachusetts. The Company
recently signed a nonbinding letter of intent to sell the subsidiary that leases
the facilities in Hartland, Wisconsin. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations of INSpire -- Recent
Developments." The Company employs approximately 150 people who provide software
support and maintains a customer help line five days a week.

SALES AND MARKETING

The Company markets its outsourcing services through insurance brokers,
industry consultants, managing general agents and reinsurers. Once an
opportunity is identified by one of these sources and a request for

33
<PAGE> 36

proposal is received, the Company prepares and submits a comprehensive proposal
directly to the prospective customer. The prospective customer is then invited
to Fort Worth to tour the Company's service center and discuss the customer's
requirements in detail. If the Company is selected to be the outsourcing service
provider, a multi-year contract is negotiated and executed. While the
outsourcing sales cycle varies from customer to customer, it typically ranges
from three to twelve months.

The Company's software and software services have traditionally been
marketed through a direct sales force located in Sheboygan, Wisconsin and
Columbia, South Carolina. To support its sales force of five people, the Company
conducts marketing programs that include direct mail, trade shows, public
relations, advertising and ongoing customer communication programs. The Company
also maintains strategic relationships with industry consultants who frequently
assist insurance companies in identifying vendors. While the software systems
sales cycle varies from customer to customer, it typically ranges from six to
twelve months.

The Company is in the process of integrating its sales and marketing
efforts to capitalize on its ability to offer outsourcing services as well as
software and software services. This integration process involves training the
Company's sales and marketing personnel to sell a full line of services and
products, forming a dedicated sales team to focus on larger accounts (generally
defined as insurance companies with annual premiums in excess of $250 million)
and expanding the Company's sales and marketing support staff to market directly
to specialty line insurance companies and new entrants into the P&C insurance
industry, such as banks, credit unions and other financial services companies.

COMPETITION

The policy administration outsourcing market is relatively new and is
dominated by PMSC. The Company competes for policy administration outsourcing
customers on the basis of customer service, performance and price. The claims
administration market is highly fragmented, with competition from a large number
of claims administration companies of varying size as well as independent
contractors and in-house claims adjusters employed by P&C insurance companies.
Competition in the claims administration market is highly price driven. Two of
the larger competitors in the claims administration arena are Lindsey Morden
Claim Services Inc. and Crawford & Company, Inc. The P&C insurance software and
software services market is highly competitive and is dominated by PMSC. The
Company competes for software customers on the basis of customer service,
performance, product features, ability to tailor products and services to
specific customer requirements, timely delivery and price. Other competitors
include Computer Sciences Corporation, The Freedom Group, Inc. and The Wheatley
Group, Ltd.

The Company believes that its most significant competition for outsourcing
services and software comes from policy and claims administration and
information systems development performed in-house by insurance companies.
Insurers that perform in-house administration typically have made a significant
investment in their policy and claims administration systems. In addition,
insurance company personnel have a vested interest in maintaining these
responsibilities in-house.

Many of the Company's competitors have longer operating histories and
significantly greater financial, technical, marketing and other resources than
the Company, including name recognition with current and potential customers. As
a result, these competitors may devote more resources to the development,
promotion and sale of their products than the Company and respond more quickly
to emerging technologies and changes in customer requirements. In addition,
current and potential competitors may establish cooperative relationships among
themselves or with third parties to increase the ability of their services and
products to address customer needs. Accordingly, new competitors or alliances
among competitors may emerge and rapidly acquire significant market share. There
can be no assurance that the Company will be able to compete successfully
against current and future competitors, or that competitive pressure faced by
the Company will not have a material adverse effect on its business, financial
condition and results of operations.

34
<PAGE> 37

CUSTOMERS

The Company currently provides claims administration outsourcing services
to reinsurers and managing general agents. The Company has four claims
administration customers, including the Millers Group, Clarendon and Interco.
The Company has two significant policy administration outsourcing customers,
Clarendon and Millers Casualty. The Company provides services to Clarendon
through contracts with Blanch. Pursuant to a contract with the Virginia
Commission, the Company provides services to Interco, which administers such
contract on behalf of the Virginia Commission. Prior to its acquisition by the
Company, SDS historically provided its software and software services to P&C
insurance companies with premium revenues of less than $250 million. The Company
intends to pursue sales opportunities with larger insurance companies in the
future. The Company currently has over 130 software and software services
customers, including Employers Reinsurance Corporation, Zurich National
Insurance Company, Providence Washington Insurance Company, Firemen's Fund
Insurance Company, Old Guard Group, Inc., Colorado Farm Insurance Company,
Society Insurance Company, Rockford Mutual Insurance Company and National
Alliance Insurance Company.

The Millers Group, Clarendon and Interco accounted for approximately 68%,
8% and 21%, respectively, of the Company's historical revenues in 1996 and 25%,
3% and 8%, respectively, of the Company's pro forma revenues in 1996. The
Millers Group, Clarendon and Interco accounted for approximately 32%, 18% and
8%, respectively, of the Company's historical revenues for the six months ended
June 30, 1997 and 26%, 15% and 7%, respectively, of the Company's pro forma
revenues for such period. Any loss of or material decrease in the business from
any of these customers could have a material adverse effect on the Company's
business, financial condition and results of operations.

EMPLOYEES

As of June 30, 1997, the Company had 471 full-time employees, of whom 11
were employed in sales and marketing functions, 172 in customer support
functions, 56 in product development, installations and quality assurance
functions, 190 in operations and 42 in finance and administration. The Company's
employees are not represented by any collective bargaining organization and none
of its employees are covered by a collective bargaining agreement. The Company
believes that its relationship with its employees is good. The Company regularly
seeks to identify skilled software engineers and other potential employee
candidates and experiences intense competition for personnel in the software
industry. The Company believes that its ability to recruit and retain highly
skilled technical, sales and marketing and other management personnel will be
critical to the Company's future success. There can be no assurance that the
Company will be able to hire a sufficient number of employees with the skills
necessary to enable the Company to attain its objective of becoming the leading
provider of policy and claims administration solutions to the P&C insurance
industry. As of June 30, 1997, the Company had 104 additional employees through
Applied Quoting Systems, Inc. The Company has entered into a nonbinding letter
of intent to sell this subsidiary. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations of INSpire -- Recent
Developments."

INTELLECTUAL PROPERTY

The Company licenses its software systems to customers under nonexclusive
and nontransferable license agreements, which generally provide for a paid-up
license fee or a license fee payable in installments. The initial license fee
grants the customer the right to use the version of the software system existing
at the time the license is granted and does not cover upgrades or enhancements.

The Company relies on contract rights and copyright and other intellectual
property laws to protect its products, including software source code, as trade
secrets and confidential proprietary information. The Company's agreements with
its customers and prospective customers prohibit disclosure of the Company's
trade secrets and proprietary information to third parties without the consent
of the Company and generally restrict the use of the Company's products to the
customers' operations. The Company also informs its employees of the proprietary
nature of its products and typically obtains from them agreements not to
disclose trade secrets and proprietary information. Notwithstanding these
restrictions, there can be no assurance that

35
<PAGE> 38

competitors of the Company could not obtain unauthorized access to the Company's
software source code and other trade secrets and proprietary information. The
Company owns common law trademarks, copyrights and service marks that it uses in
connection with its business, none of which are registered.

The Company is not engaged in any material disputes with other parties with
respect to the ownership or use of the Company's proprietary technology. There
can be no assurance, however, that third parties will not assert technology
infringement claims against the Company in the future. The litigation of such
claims may involve significant expense and management time. In addition, if any
such claim were successful, the Company could be required to pay monetary
damages, refrain from distributing or using the alleged infringing product, or
obtain a license from the party asserting the claim, which could be unavailable
on commercially reasonable terms. The absence of federal or state registrations
for its intellectual property could be detrimental to the Company in any
infringement litigation or other disputes regarding intellectual property.

LEGAL PROCEEDINGS

In February 1997, the Philadelphia Contributionship for the Insurance of
Houses from Loss by Fire ("PCIHLF") filed a lawsuit (Civil Action No.
97-CV-1262) against the Company in the United States District Court for the
Eastern District of Pennsylvania. The suit alleges that the PCA, PSP and UES
systems that SDS sold to PCIHLF in 1995 did not meet PCIHLF's specifications.
PCIHLF claims damages in excess of $1.3 million. The Company and the former SDS
shareholders placed $1.5 million of the SDS purchase price in an escrow account
in respect of this claim. The Company has no recourse against the former SDS
shareholders to the extent that the aggregate of any judgment, settlement and
expenses exceeds the amount of the escrowed funds. SDS filed a counterclaim
against PCIHLF for $550,000 for amounts due under its agreements with PCIHLF.
There can be no assurance with respect to the outcome of this lawsuit.

The Company is not a party to any other legal proceedings that the Company
believes could have a material adverse effect on the Company's business,
financial condition or operating results.

PROPERTIES

The following table sets forth certain information with respect to the
principal facilities used in the Company's operations, all of which are leased:

<TABLE>
<CAPTION>
CURRENT
MONTHLY APPROXIMATE LEASE
LOCATION FUNCTION LEASE RATE SQ. FT. EXPIRATION DATE
-------- -------- ---------- ----------- ---------------
<S> <C> <C> <C> <C>
Fort Worth, Texas............ Headquarters and policy and $25,449 19,000 Monthly
claims administration
Sheboygan, Wisconsin......... Software and software services 20,679 28,100 February 2007
Columbia, South Carolina..... Software and software services 22,768 17,800 August 2002
Sheboygan, Wisconsin......... Software and software services 5,433 6,500 February 2002
Uxbridge, Massachusetts...... Software and software services 793 1,600 June 1998
Laguna Hills, California..... Claims administration 4,561 3,200 October 1998
St. Petersburg, Florida...... Claims administration 2,978 2,500 December 1999
Troy, Michigan............... Claims administration 1,873 1,600 May 2000
</TABLE>

The aggregate monthly lease rate for the properties listed above is
$84,534. The Company also leases approximately 5,600 square feet in Westborough,
Massachusetts at $6,018 per month under a lease expiring in December 1998, which
the Company subleases to a subtenant at substantially the same monthly lease
rate under a sublease expiring in December 1998. In addition, Applied Quoting
Systems, Inc. leases approximately 16,900 square feet in Hartland, Wisconsin at
a current monthly lease rate of approximately $20,000 under a lease expiring in
July 1999. The Company recently signed a nonbinding letter of intent to sell
this subsidiary. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of INSpire -- Recent Developments."

The Company believes that its existing facilities are adequate to meet the
Company's requirements for the foreseeable future.

36
<PAGE> 39

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
F. George Dunham, III...... 39 President, Chief Executive Officer, Chairman and
Director
Ronald O. Lynn............. 59 Executive Vice President and Chief Information
Officer
Terry G. Gaines............ 37 Executive Vice President, Chief Financial Officer
and Treasurer
Stuart H. Warrington....... 63 Executive Vice President -- Software and Systems
Robert K. Agazzi........... 53 Executive Vice President -- Software and Systems
Jeffrey W. Robinson........ 40 Executive Vice President -- Outsourcing
W. Scott Lewis............. 42 Executive Vice President -- Marketing
Harry E. Bartel............ 55 Director
R. Earl Cox, III........... 63 Director
Mitch S. Wynne............. 38 Director
</TABLE>

F. GEORGE DUNHAM, III has served as President, Chief Executive Officer and
a director of the Company since its inception in 1995. His current term as
director expires in 2000. Mr. Dunham served from inception to March 1996 as
Chairman of the Board of the Company and was again elected to that position in
June 1997. From 1994 to June 1997, Mr. Dunham served as President and Chief
Executive Officer of Millers Mutual and Millers Casualty. From 1992 to 1994, Mr.
Dunham served as Executive Vice President and Chief Financial Officer of Millers
Mutual and Millers Casualty. Mr. Dunham has served as a director of Millers
Mutual and Millers Casualty since 1992, and in June 1997 he was elected Vice
Chairman of the Board of both companies. From 1991 to 1992, Mr. Dunham served as
Vice President -- Finance of Lindsey Morden Claim Services, Inc., an insurance
claim services and administration company.

RONALD O. LYNN has served as Executive Vice President and Chief Information
Officer of the Company since March 1997 and, from March 1996 to March 1997, as
Vice President of the Company. Mr. Lynn also served as Executive Vice President
and Chief Information Officer from March 1997 to June 1997 and as Vice President
from 1993 to March 1997 of Millers Mutual and Millers Casualty. From 1992 to
1993, Mr. Lynn served as Vice President of Harco National Insurance Company,
where he was responsible for computer related functions. From 1988 to 1992, Mr.
Lynn served as Assistant Vice President of Property and Casualty Processing
Services for PMSC.

TERRY G. GAINES has served as Executive Vice President and Chief Financial
Officer of the Company since June 1997 and Treasurer of the Company since July
1997. From March 1997 to June 1997 Mr. Gaines served as Vice
President -- Finance and Administration of Federal Liaison Services, Inc., a
software development company, and from March 1996 to March 1997 as a Product
Manager for that company. From 1992 to February 1996, Mr. Gaines was Controller
of the fixed income department of Rauscher Pierce Refsnes, Inc., a regional
investment banking firm, where he also served as Vice President from August 1995
to February 1996. From 1989 to 1992 he served as Vice President -- Finance of
Richmond Petroleum Inc., an oil and gas company. Mr. Gaines is a Certified
Public Accountant and was employed by Deloitte & Touche LLP from 1982 to 1989.

STUART H. WARRINGTON has served as Executive Vice President of Software and
Systems of the Company since July 1997. Mr. Warrington founded SDS and served as
its Chief Executive Officer from 1989 to July 1997, and as Chairman of the Board
from inception in 1981 until March 12, 1997. Mr. Warrington also served as
President of SDS from inception to 1989. Prior to 1981, Mr. Warrington served in
various executive management and analyst positions for several insurance and
software development companies.

ROBERT K. AGAZZI has served as Executive Vice President of Software and
Systems of the Company since July 1997. Mr. Agazzi served as President of SDS
from 1989 until July 1997 and as Vice President-Marketing

37
<PAGE> 40

of SDS from 1983 to 1989. Prior to 1983, Mr. Agazzi served in various management
positions with PMSC and several insurance and software development companies.

JEFFREY W. ROBINSON has served as Executive Vice President -- Outsourcing
of the Company since June 1997. From November 1996 to June 1997, Mr. Robinson
served as Vice President -- Policy Life Cycle of the Company, Millers Mutual and
Millers Casualty. From 1985 to March 1997, Mr. Robinson served in various
management positions with PMSC, including Vice President of the Risk Services
Division. Prior to 1985, Mr. Robinson served in various management and analyst
positions for Home Insurance Company and Business Computer Systems, an insurance
processing and administration company.

W. SCOTT LEWIS joined the Company in May 1997 as Executive Vice
President -- Marketing. From 1988 to May 1997, Mr. Lewis served as Regional
Sales Manager of The Wheatley Group, Ltd., a software development and policy and
claims administration company. Prior to 1988, Mr. Lewis served in various sales
and sales management positions with PMSC and other companies that develop
software and sell administration services.

HARRY E. BARTEL has served as a director of the Company since 1996 and his
current term as director expires in 2000. Mr. Bartel also served as a director
of Millers Mutual and Millers Casualty from March 1995 to June 1997. Mr. Bartel
has been a partner with the law firm of Cantey & Hanger, L.L.P. since 1968.

R. EARL COX, III has served as a director of the Company since 1996 and his
current term as director expires in 1998. Mr. Cox also served as a director of
Millers Mutual and Millers Casualty from March 1987 to June 1997. Since 1977,
Mr. Cox has served as president of R.E. Cox Realty Co. and has been a co-owner
of OFCO Office Furniture, Inc. since 1985. Mr. Cox has served as a director of
KBK Capital Corp., a factoring company, since 1995 and a director and Chairman
of the Board of Tandycraft, Inc., a manufacturer and retailer of craft products,
since 1985.

MITCH S. WYNNE was elected as a director of the Company in March 1997 and
his current term as director expires in 1999. Mr. Wynne also served as a
director of Millers Mutual and Millers Casualty from March 1997 to June 1997.
Mr. Wynne has owned and operated Wynne Petroleum Company, an oil and gas
production company, for more than five years.

EMPLOYMENT AND INDEMNIFICATION AGREEMENTS

The Company has entered into employment agreements with Messrs. Dunham,
Lynn, Robinson and Gaines, each of which terminates in June 2000, and which
provide for an annual salary for Mr. Dunham of $350,000 and annual salaries for
Messrs. Lynn, Robinson and Gaines of $115,000 each. As of the consummation of
this offering, Messrs. Dunham, Lynn, Robinson and Gaines will have options to
purchase 931,539; 158,362; 158,362; and 93,154 shares of Common Stock,
respectively, under the Stock Option Plan. Each of Messrs. Dunham, Lynn,
Robinson and Gaines is entitled to an annual bonus, based on the Company
achieving certain performance thresholds, of up to 50% of his base salary and is
subject to noncompetition and confidentiality provisions. Mr. Dunham's
employment agreement also permits him to serve as Vice Chairman of the Board of
Millers Mutual and Millers Casualty. See "-- Stock Option Plan."

Each employment agreement with Messrs. Dunham, Lynn, Robinson and Gaines
also provides that if there is a "change of control" of the Company, the
employee shall be paid, for the term of his employment agreement plus a period
of two years thereafter, his annual "cash compensation" (which is based upon
such employee's average cash compensation for the two years prior to such change
of control), along with an annual amount equal to 50% of such average annual
cash compensation (the "Bonus"). The total amount, however, cannot exceed the
amount that would cause such payment to be deemed a "parachute payment" under
Section 280G of the Internal Revenue Code. Each agreement also provides that the
payments to such employee will cease if he is terminated for cause or in the
event of reasonable proof of any violation of the noncompetition or
confidentiality provisions of his employment agreement. Also, if following a
change of control an employee voluntarily terminates employment for other than
good reason (as defined in the employment agreement), his annual cash
compensation and Bonus will be payable for only one year following such
termination.

38
<PAGE> 41

The Company also has entered into employment agreements with Messrs.
Warrington and Agazzi that terminate in March 1998. Mr. Warrington's agreement
provides for an annual salary of $190,500, options to purchase 93,154 shares of
Common Stock and deferred annual compensation of $40,000 to be paid each year
for the 20-year period commencing January 1, 1999 and ending December 31, 2018.
Mr. Agazzi's agreement provides for an annual salary of $169,000 and options to
purchase 93,154 shares of Common Stock. Messrs. Warrington and Agazzi are
subject to noncompetition and confidentiality provisions.

The Company has entered into indemnification agreements with each of its
directors. Each indemnification agreement provides that the Company shall
indemnify the director against certain liabilities and expenses actually and
reasonably incurred by the director in connection with any threatened, pending
or completed action, suit or proceeding, including an action by or on behalf of
shareholders of the Company or by or in the right of the Company, to which the
director is, or is threatened to be made, a party by reason of his status as a
director, provided that such individual did not derive an improper benefit, such
individual did not commit acts or omissions that were not in good faith or that
involved intentional misconduct or a knowing violation of the law, or such
indemnification is not otherwise disallowed under Texas law.

EXECUTIVE COMPENSATION

During 1995 and 1996 Mr. Dunham was the President and Chief Executive
Officer of both the Company and Millers Mutual, and Millers Mutual paid all
compensation of Mr. Dunham and certain other officers of the Company who were
also officers of Millers Mutual. In turn, the Company paid Millers Mutual a
management fee. Accordingly, the Company did not pay any compensation during
1995 or 1996 to its Chief Executive Officer, and the total salary and bonus that
the Company paid to its other executive officers in 1996 did not exceed $100,000
with respect to any individual. See "Certain Transactions."

EMPLOYEE BENEFIT PLANS

Millers Mutual has a defined benefit pension plan that covers the employees
of the Company. The Company believes that an agreement will be reached between
Millers Mutual and the Company to provide that the assets of this plan
attributable to the Company's employees will be treated as if the Company's
employees were terminated employees under such plan. Millers Mutual and the
Company, however, have not yet determined the terms of such agreement. In
addition, the Company maintains a defined contribution plan for its employees
that is qualified under Section 401(k) of the Internal Revenue Code of 1986.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Frank G. Dunham, Jr., Frank A. Bailey, III, R. Earl Cox, III, F. George
Dunham, III and Frank C. Wilson served as members of the Compensation Committee
of the Company in 1996. Each member of the Compensation Committee in 1996 also
served as a member of the compensation committees for Millers Mutual and Millers
Casualty in 1996. Frank G. Dunham, Jr. is the father of F. George Dunham, III
and both men served as executive officers of the Company, Millers Mutual and
Millers Casualty in 1996. The Company has entered into certain transactions with
Millers Mutual and Millers Casualty. See "Certain Transactions."

The Compensation Committee has established salary and bonus levels for the
executive officers of the Company, including the Chief Executive Officer, based
on a combination of objective and subjective criteria. In certain cases, an
executive officer's salary and potential bonus has been established in an
employment agreement. See "-- Employment and Indemnification Agreements."

The Board of Directors has appointed an Audit Committee, consisting of R.
Earl Cox, III, Harry E. Bartel and Mitch S. Wynne, which will have
responsibility for reviewing the results and scope of the annual audit of the
Company's financial statements and other services provided by the Company's
independent certified public accountants.

39
<PAGE> 42

STOCK OPTION PLAN

A total of 2,250,000 shares of Common Stock has been reserved for issuance
pursuant to the Stock Option Plan. The Stock Option Plan was initially adopted
by the Board of Directors in March 1997 and amended and restated by the Board of
Directors in July 1997. The Stock Option Plan is administered by the Board of
Directors and both nonqualified stock options and incentive stock options (as
defined in the Internal Revenue Code) may be granted. Incentive stock options
granted under the Stock Option Plan may be exercised solely by the grantee, or
in the case of a grantee's death or incapacity, by the grantee's executors,
administrators, guardians or other legal representatives and are not assignable
or transferable by such grantee. Nonqualified stock options (including the
pre-IPO options) may be transferred to certain permitted transferees under the
Stock Option Plan. The following executive officers and other employees have
been or will be granted options pursuant to the Stock Option Plan:

<TABLE>
<CAPTION>
PRE-IPO OPTIONS(1) IPO OPTIONS(2)
----------------------------- -----------------------------
NUMBER OF SHARES EXERCISE NUMBER OF SHARES EXERCISE
NAME UNDERLYING OPTIONS PRICE UNDERLYING OPTIONS PRICE
---- ------------------ -------- ------------------ --------
<S> <C> <C> <C> <C>
F. George Dunham, III................ 279,462 $1.30 652,077(3) (4)
Ronald O. Lynn....................... 93,154 1.30 65,208 (4)
Terry G. Gaines...................... -- -- 93,154 (4)
Stuart H. Warrington................. 93,154 1.30 65,208 (4)
Robert K. Agazzi..................... 93,154 1.30 65,208 (4)
Jeffrey W. Robinson.................. 93,154 1.30 65,208 (4)
W. Scott Lewis....................... -- -- 46,577 (4)
Other employees(5)................... 188,170 1.30 32,603 (4)
------- ---------
Total...................... 840,248 1,085,243
======= =========
</TABLE>

- ---------------

(1) The pre-IPO options are subject to a two-year vesting schedule, with
one-third becoming exercisable on the date of grant and an additional
one-third becoming exercisable on each of the first two anniversaries of the
date of grant.

(2) The Board of Directors has approved the grant of the IPO options effective
as of the date of this Prospectus. The IPO options, except for Mr. Dunham's,
will be subject to a four-year vesting schedule, with one-fifth becoming
exercisable on the date of this Prospectus and an additional one-fifth
becoming exercisable on each of the first four anniversaries of such date.

(3) The IPO options that will be granted to Mr. Dunham are subject to a two-year
vesting schedule, with one-third becoming exercisable on the date of this
Prospectus and an additional one-third becoming exercisable on each of the
first two anniversaries of such date.

(4) The exercise price of the IPO options will be the initial public offering
price per share of Common Stock.

(5) Excludes IPO options covering up to an aggregate of 100,000 shares of Common
Stock that may be granted by the Company effective on the date of this
Prospectus to additional employees. Such additional IPO options will be
granted with an exercise price equal to the initial public offering price
per share of Common Stock and will be subject to a five-year vesting
schedule with one-fifth of such options becoming exercisable on the first
anniversary of the date of grant and on each of the next four anniversaries
thereafter.

DIRECTOR STOCK OPTION PLAN

In July 1997 the Board of Directors adopted the Director Plan, which is
administered by the Board of Directors.

Each current nonemployee director will be granted options under the
Director Plan to purchase 2,500 shares of Common Stock effective as of this date
of this Prospectus at an exercise price equal to the initial public offering
price per share of Common Stock. Such options will vest and become exercisable
as of the date of this Prospectus.

40
<PAGE> 43

Each new nonemployee director who is elected (or appointed to fill any
vacancy) as a director of the Company after this offering will be granted
options under the Director Plan to purchase 2,500 shares of Common Stock at the
fair market value of the Common Stock on the date of grant. Also, each
nonemployee director who has previously been granted options under the Director
Plan will be granted additional options under the Director Plan to purchase 250
shares of Common Stock on the day immediately after each annual meeting of
shareholders of the Company subsequent to the time at which such nonemployee
director is first elected or appointed as a director of the Company if such
nonemployee director continues to serve as a director on such date of grant. The
options under the Director Plan will vest and be exercisable as of the date of
grant.

A total of 50,000 shares of Common Stock has been reserved for issuance
pursuant to the Director Plan. Options granted under the Director Plan may be
exercised solely by the grantee, or in the case of a grantee's death or
incapacity, by the grantee's executors, administrators, guardians or other legal
representatives, and are not assignable or transferable by such grantee, except
for certain permitted transfers subject to the prior consent of the Board of
Directors.

EMPLOYEE STOCK PURCHASE PLAN

In July 1997 the Board of Directors adopted the Stock Purchase Plan, under
which a total of 425,000 shares of Common Stock has been reserved for issuance.
The Board of Directors has appointed a committee to administer the Stock
Purchase Plan. Any employee who has been employed by the Company for 90 days is
eligible to participate in offerings under the Stock Purchase Plan.

The Stock Purchase Plan initially will be implemented by an offering of
25,000 shares of Common Stock beginning October 1, 1997 and terminating December
31, 1997. The Stock Purchase Plan will be further implemented by four annual
offerings of Common Stock beginning on January 1 in each of the years 1998,
1999, 2000 and 2001, and terminating December 31 of each such year. The maximum
number of shares issued in such years will be 100,000 in 1998, and 100,000 plus
the number of unissued shares from prior offerings for each of 1999, 2000 and
2001.

On the commencement date of each offering under the Stock Purchase Plan, a
participating employee will be deemed to have been granted an option to purchase
a maximum number of shares of Common Stock equal to: (i) the percentage of the
employee's base pay that such employee has elected to be withheld (not to exceed
10%), (ii) multiplied by such employee's base pay during the period of such
offering and (iii) divided by the lower of 85% of the closing market price of
the Common Stock on the applicable offering commencement date or 85% of the
closing market price of the Common Stock on the offering termination date.
Options held by a participant shall be exercisable only by that participant.

No employee may be granted options to participate in the Stock Purchase
Plan if, as a result of such grant, such employee would (i) own stock or hold
options to purchase stock possessing 5% or more of the total combined voting
power or value of all classes of stock of the Company or (ii) have rights to
purchase stock under all employee stock purchase plans of the Company that
accrue at a rate in excess of $25,000 in fair market value for any calendar
year.

Unless a participant gives written notice to the Company, such
participant's option for the purchase of Common Stock with payroll deductions
made during an offering shall be deemed to have been exercised automatically on
the offering termination date applicable to such offering, for the purchase of
the number of full shares of Common Stock that the accumulated payroll
deductions at that time will purchase at the applicable option price. A
participant may withdraw payroll deductions credited to his account under the
Stock Purchase Plan at any time.

41
<PAGE> 44

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth the number and percentage of the outstanding
shares of Common Stock owned beneficially as of the date of this Prospectus by:
(i) each director of the Company, (ii) each executive officer of the Company,
(iii) all directors and executive officers as a group and (iv) the only
shareholder that beneficially owned more than 5% of the Common Stock as of the
date of this Prospectus.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
OF COMMON STOCK OF COMMON STOCK
PRIOR TO THIS OFFERING SHARES TO AFTER THIS OFFERING
----------------------- BE SOLD IN -----------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT THIS OFFERING SHARES PERCENT
------------------------ ---------- -------- ------------- --------- -------
<S> <C> <C> <C> <C> <C>
Millers Mutual...................... 7,000,000 100.0% 2,225,000(2) 4,775,000(3) 48.8%
300 Burnett Street
Fort Worth, Texas 76102-2799
F. George Dunham, III............... 310,513(1) 4.2 -- 310,513(1)(4) 3.1
Ronald O. Lynn...................... 44,093(1) * -- 44,093(1) *
Terry G. Gaines..................... 18,631(1) * -- 18,631(1) *
Stuart H. Warrington................ 44,093(1) * -- 44,093(1)(4) *
Robert K. Agazzi.................... 44,093(1) * -- 44,093(1) *
Jeffrey W. Robinson................. 44,093(1) * -- 44,093(1) *
W. Scott Lewis...................... 9,315(1) * -- 9,315(1) *
Harry E. Bartel..................... 2,500(1) * -- 2,500(1)(4) *
R. Earl Cox, III.................... 2,500(1) * -- 2,500(1)(4) *
Mitch S. Wynne...................... 2,500(1) * -- 2,500(1)(4) *
All directors and executive officers
as a group (10 individuals)....... 524,331(1) 7.0% -- 524,331(1) 5.1%
</TABLE>

- ---------------

* Less than 1%

(1) Represents shares of Common Stock subject to options exercisable as of the
date of this Prospectus and within 60 days thereafter.

(2) Assuming exercise in full of the Underwriters' over-allotment option,
Millers Mutual will sell 2,558,750 shares of Common Stock in this offering.

(3) Assuming exercise in full of the Underwriters' over-allotment option,
Millers Mutual will own 4,441,250 shares of Common Stock, constituting 43.6%
of the outstanding shares of Common Stock.

(4) Excludes any shares of Common Stock that may be purchased by such
individuals in this offering.

CERTAIN TRANSACTIONS

BENEFITS ADMINISTRATION CONTRACT

Effective July 1, 1997, the Company and Millers Mutual entered into a
benefits administration contract (the "Benefits Administration Contract")
pursuant to which Millers Mutual provides the Company with certain benefits
administration services, including payroll, and the Company pays Millers Mutual
a service fee of $15,000 per month. The term of the Benefits Administration
Contract is three years.

The Company and Millers Mutual were parties to a management agreement
effective as of January 1, 1996 (the "Management Agreement"), which covered the
period July 1, 1995 to June 30, 1997 under which Millers Mutual provided certain
management, administrative and support services to and on behalf of the Company,
including personnel, legal, banking, investment, financial, payroll, accounting
and recordkeeping, marketing and sales, management information and electronic
data processing. The Company paid Millers Mutual a monthly fee of $200,000 plus
an annual fee equal to a fixed percentage, to be determined annually by mutual
agreement of the parties, of the Company's pre-tax income. For 1995 and 1996,
the Company paid Millers Mutual management fees of $600,000 and $3.1 million,
respectively. For the six months ended June 30, 1997, the Company paid Millers
Mutual management fees of $1.2 million. The Management Agreement has been
replaced by the Benefits Administration Contract.

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<PAGE> 45

SERVICE CONTRACTS

Effective July 1, 1997, the Company, Millers Mutual and Millers Casualty
entered into an amended and restated service contract (the "Service Contract"),
which provides for the Company to perform claims administration services for and
on behalf of Millers Mutual and Millers Casualty. Under the Service Contract,
each of Millers Mutual and Millers Casualty pays a monthly service fee equal to:
(i) 7.5% of monthly net earned premiums for the agribusiness line of business,
(ii) 10.2% of monthly net earned premiums for the commercial casualty line of
business, (iii) 8.5% of monthly net earned premiums for the commercial property
line of business and (iv) 7.5% of monthly net earned premiums for personal lines
of business (excluding the premiums written through Sun Coast General Insurance
Agency ("Sun Coast") for Millers Mutual, as described below). The Service
Contract provides that these percentages will be adjusted annually based on the
agreement of the parties. The term of the Service Contract is three years.

The Company, Millers Mutual and Millers Casualty were parties to a service
contract effective as of January 1, 1996, which covered the period July 1, 1995
through November 30, 1996 under which the Company provided claims administration
services to Millers Mutual and Millers Casualty for service fees ranging from
7.5% to 13.2% of net written premiums with respect to various classes of
business. Effective December 1, 1996, the contract was amended to provide that
each of Millers Mutual and Millers Casualty would pay a monthly service fee
equal to: (i) 8.5% of monthly net earned premiums for agribusiness and
commercial lines of business and (ii) 7.5% of monthly net earned premiums for
personal lines of business (excluding the premiums written through Sun Coast for
Millers Mutual, as described below). Millers Mutual and Millers Casualty paid
the Company aggregate service fees under these contracts of $3.4 million in 1995
and $7.6 million in 1996. For the six months ended June 30, 1997, Millers Mutual
and Millers Casualty paid the Company aggregate service fees under the latter
contract of $3.2 million. This contract has been replaced by the Service
Contract.

The Company and the Speciality Personal Lines Division of Millers Mutual
are parties to a service contract effective as of April 1, 1997 under which the
Company provides claims administration services to Millers Mutual with respect
to nonstandard auto policies issued by Sun Coast. Under this contract, Millers
Mutual pays a service fee of 7.0% of monthly earned premiums and, with respect
to catastrophes, a fee of $175 per claim. Millers Mutual paid the Company fees
for services related to policies issued by Sun Coast of $590,000 in 1995 and
$1.7 million in 1996. For the six months ended June 30, 1997, Millers Mutual
paid the Company fees under this contract of $1.0 million.

INFORMATION SERVICES CONTRACT

Effective July 1, 1997, the Company, Millers Mutual and Millers Casualty
entered into an amended and restated information services contract (the
"Information Services Contract"), which requires the Company to provide certain
information system services to Millers Mutual and Millers Casualty, including
telecommunications services, hardware services, application software services,
system software services, network services and system integration services.
Under the Information Services Contract, each of Millers Mutual and Millers
Casualty pays a monthly service fee equal to monthly net written premiums,
multiplied by 6% for the remainder of 1997, 5.5% in 1998, 5% in 1999, and
thereafter such percentage as may be agreed upon by the parties. The term of the
Information Services Contract is three years.

The Company, Millers Mutual and Millers Casualty were parties to an
information services contract, effective as of October 1, 1996, under which the
Company provided certain information system services. This contract has been
replaced by the Information Services Contract. Under this contract, each of
Millers Mutual and Millers Casualty paid a monthly service fee of 6% of monthly
net written premiums. No fees were paid in 1996. For the six months ended June
30, 1997, Millers Mutual and Millers Casualty paid the Company an aggregate of
$2.7 million under this contract.

OUTSOURCING SERVICES CONTRACTS WITH MILLERS CASUALTY

Effective May 1, 1997, the Company and Millers Casualty entered into a
policy administration services agreement (the "Policy Administration Services
Agreement") pursuant to which the Company provides policy administration
services for Millers Casualty's homeowners line of business in Florida. Millers
Casualty

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<PAGE> 46

pays a monthly service fee equal to 5.6% of its monthly direct written premiums,
subject to a $50.51 per policy minimum. The term of the Policy Administration
Services Agreement is three years, which will automatically renew for additional
three-year terms unless terminated by either party.

Effective June 1, 1997, the Company and Millers Casualty entered into a
claims administration services agreement (the "Claims Administration Services
Agreement") pursuant to which the Company provides claims administration
services for Millers Casualty's homeowners line of business in Florida. Millers
Casualty pays a monthly service fee equal to 7% of its monthly gross direct
earned premiums for noncatastrophe claims and 5% of incurred catastrophe loss
for catastrophe claims. The term of the Claims Administration Services Agreement
is three years, which will automatically renew for additional three-year terms
unless terminated by either party.

MISCELLANEOUS

As of June 30, 1997, the Company had outstanding borrowings from Millers
Mutual of $2.8 million for working capital purposes. The largest amount of
borrowings from Millers Mutual outstanding since the inception of the Company
was $4.3 million. See "Use of Proceeds."

In 1993, Millers Mutual licensed SDS software pursuant to a license
agreement with SDS. For 1994, 1995 and 1996, Millers Mutual paid SDS $16,222,
$31,077 and $31,662, respectively, for software and software services. For the
six months ended June 30, 1997, Millers Mutual incurred $442,000 under this
agreement.

The Company leases its principal Sheboygan, Wisconsin facility pursuant to
a lease dated March 12, 1997 (the "Building Lease"). The building is owned by
Riverview, which is controlled by Stuart H. Warrington, an Executive Vice
President of the Company. The term of the Building Lease ends February 28, 2007.
Pursuant to the Building Lease, Riverview leases to the Company approximately
28,000 square feet of office space at a monthly rate of approximately $21,000
for the first four years, $23,000 for the next five years, and $25,000 for the
last year. For the six months ended June 30, 1997, the Company paid Riverview
approximately $75,000 under the Building Lease.

The Company leases its approximately 19,000 square foot headquarters in
Fort Worth, Texas from Millers Mutual pursuant to a month-to-month rental
agreement, effective as of May 1, 1996 (the "Lease"), which provides for monthly
rental payments of approximately $26,000. For 1996 and the six months ended June
30, 1997, the Company incurred rental expense of $207,000 and $158,000,
respectively, under the Lease. Prior to May 1, 1996, the Company incurred no
rental expense for office space provided by Millers Mutual.

The Company and Millers Mutual are parties to a sublease agreement, dated
as of January 1, 1997, pursuant to which Millers Mutual subleases to the Company
certain furniture, equipment and other personal property that Millers Mutual has
leased from third parties under various equipment leases for the benefit of the
Company. The sublease payments by the Company to Millers Mutual under the
sublease equal the lease payments by Millers Mutual to the lessors under the
respective leases.

Millers Mutual, the Company and the other subsidiaries of Millers Mutual
are parties to the Tax Allocation Agreement. Under the Tax Allocation Agreement,
Millers Mutual must pay the Company an amount equal to any decrease in the
income taxes otherwise payable by the Millers Mutual consolidated tax group
attributable to any net losses of the Company. Conversely, the Tax Allocation
Agreement requires the Company to pay to Millers Mutual the amount of any income
taxes that the Company would have paid if it had not been included in the
Millers Mutual consolidated tax group. For the period from April 28, 1995
through December 31, 1995, the Company received from Millers Mutual $337,000
under the Tax Allocation Agreement. The amounts of any payments for 1996 and
1997 have not yet been determined. Subject to approval by the Texas Department
of Insurance, the parties to the Tax Allocation Agreement have agreed to
terminate such agreement as it relates to the Company in contemplation of the
Company leaving the Millers Mutual consolidated tax group as a result of this
offering. The agreement to terminate the Tax Allocation Agreement provides that
the Company will indemnify the other members of the Millers Mutual consolidated
tax group for any of the group's income taxes and related expenses attributable
to the Company and Millers

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<PAGE> 47

Mutual will indemnify the Company for any income taxes and related expenses
attributable to any members of the consolidated tax group other than the
Company.

DESCRIPTION OF CAPITAL STOCK

As of the date of this Prospectus, the authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock, par value $0.01 per
share, of which 9,775,000 shares will be outstanding immediately following this
offering, and 1,000,000 shares of Preferred Stock, par value $1.00 per share
(the "Preferred Stock"), of which no shares will be outstanding immediately
following this offering. The following summary of the Company's capital stock is
qualified in its entirety by reference to the Company's Restated Articles and
its Bylaws, each of which is filed as an exhibit to the Registration Statement
of which this Prospectus is a part.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by shareholders, including the election of directors, and do
not have cumulative voting rights. Subject to the rights of holders of any then
outstanding shares of Preferred Stock, the holders of the Common Stock are
entitled to such dividends as may be declared in the discretion of the Board of
Directors out of funds legally available therefor. Holders of Common Stock are
entitled to share ratably in the net assets of the Company upon liquidation
after payment or provision for all liabilities and any preferential liquidation
rights of the Preferred Stock then outstanding. The holders of Common Stock have
no preemptive rights to purchase shares of stock in the Company. Shares of
Common Stock are not subject to any redemption provisions and are not
convertible into any other securities of the Company. All outstanding shares of
Common Stock are, and the shares of Common Stock to be issued by the Company
pursuant to this offering will be, upon payment therefor, fully paid and
nonassessable. The rights, preferences and privileges of holders of Common Stock
will be subject to those of the holders of any shares of Preferred Stock the
Company may issue in the future. See "Dividend Policy."

PREFERRED STOCK

The Board of Directors may from time to time authorize the issuance of one
or more classes or series of Preferred Stock without shareholder approval.
Subject to the provisions of the Restated Articles and limitations prescribed by
law, the Board of Directors is authorized to adopt resolutions to issue the
shares, establish the number of shares, change the number of shares constituting
any series, and provide or change the voting powers, designations, preferences
and relative, participating, optional or other special rights, qualifications,
limitations or restrictions on shares of Preferred Stock, including dividend
rights (including whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences, in each case without any action or vote by
the shareholders. The Company has no current plans to issue any shares of
Preferred Stock of any class or series, except as described below and under
"Anti-Takeover Considerations -- Rights Agreement" below.

One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to discourage an attempt to obtain control of the Company by
means of a tender offer, proxy contest, merger or otherwise, and thereby protect
the Company's management. The issuance of Preferred Stock pursuant to the Board
of Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock or may otherwise adversely affect the
trading price of the Common Stock.

The Board of Directors has authorized 300,000 shares of Series A Junior
Preferred Stock, par value $1.00 per share ("Series A Preferred Stock"), in
connection with the authorization and declaration of the Rights (as defined
below). Each holder of Series A Preferred Stock will be entitled to 100 votes
for each share on all matters voted upon by the shareholders, except as provided
in the Restated Articles. Each share of

45
<PAGE> 48

Series A Preferred Stock will be entitled to a minimum preferential quarterly
dividend payment, out of funds legally available therefor, of the greater of:
(i) $1.00 per share or (ii) 100 times the dividend declared per share of Common
Stock. Upon any voluntary or involuntary liquidation, dissolution or winding up
of the Company, no distribution may be made to holders of Common Stock (or other
shares of capital stock ranking junior to Series A Preferred Stock) unless the
holders of Series A Preferred Stock shall have received an amount per share
equal to the greater of: (i) $100 per share, plus accrued and unpaid dividends,
or (ii) an aggregate amount per share equal to 100 times the aggregate amount to
be distributed per share to holders of Common Stock. Shares of Series A
Preferred Stock are not subject to any redemption provisions.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

Under the Restated Articles, upon completion of this offering there will be
37,500,000 shares of Common Stock (assuming the Underwriters' over-allotment
option is not exercised and excluding an aggregate of 2,725,000 shares reserved
for issuance under the Stock Option Plan, the Director Plan and the Stock
Purchase Plan) and 1,000,000 shares of Preferred Stock available for future
issuance without shareholder approval. These additional shares may be utilized
for a variety of corporate purposes, including future public offerings to raise
additional capital or facilitate acquisitions. The Company does not currently
have any plans to issue additional shares of Common Stock or Preferred Stock
(other than shares of Common Stock issuable under the Stock Option Plan, the
Director Plan and the Stock Purchase Plan and as described under "Anti-Takeover
Considerations -- Rights Agreement" below).

SPECIAL PROVISIONS OF THE RESTATED ARTICLES, THE BYLAWS AND TEXAS LAW

The Texas Miscellaneous Corporation Laws Act (the "Texas Miscellaneous
Laws") authorizes corporations to limit or eliminate the personal liability of
directors to corporations and their shareholders for monetary damages for breach
of their fiduciary duty as directors except for liability of a director
resulting from: (i) a breach of such director's duty of loyalty to the
corporation or its shareholders, (ii) an act or omission that is not in good
faith or that involves intentional misconduct or a knowing violation of laws,
(iii) a transaction from which the director received an improper personal
benefit or (iv) an act or omission for which the liability of the director is
expressly provided by an applicable statute. The Restated Articles limit the
liability of directors of the Company (in their capacity as directors but not in
their capacity as officers) to the Company or its shareholders to the fullest
extent permitted by the Texas Miscellaneous Laws. The inclusion of this
provision in the Restated Articles may reduce the likelihood of derivative
litigation against directors and may discourage or deter shareholders from suing
directors for breach of their duty of care, even though such an action, if
successful, might otherwise benefit the Company and its shareholders. The
inclusion of such provisions in the Restated Articles together with a provision
requiring the Company to indemnify its directors, officers and certain other
individuals against certain liabilities, is intended to enable the Company to
attract qualified persons to serve as directors who might otherwise be reluctant
to do so. The Securities and Exchange Commission has taken the position that
personal liability of directors for violations of the federal securities laws
cannot be limited and that indemnification by the issuer for such violations is
unenforceable.

The Company has entered into separate indemnification agreements with each
of its directors that may require the Company, among other things, to indemnify
them against certain liabilities that may arise by reason of their status or
service as directors to the maximum extent permitted under the TBCA and advance
their expenses incurred as a result of any proceeding against them for which
they could be indemnified, obtain directors' and officers' insurance or maintain
self-insurance in lieu thereof.

Under the TBCA, the board of directors of a corporation has the power to
amend and repeal the corporation's bylaws unless the corporation's articles of
incorporation reserve the power exclusively to the shareholders or a particular
bylaw expressly provides that the board of directors may not amend or repeal the
bylaw. The Restated Articles give the Board of Directors the power to amend and
repeal the Company's Bylaws. The Company's Restated Articles and Bylaws also
provide that the number of directors shall be fixed from time to time by
resolution of the Board of Directors. These provisions, in addition to the
existence of authorized but unissued capital stock, may have the effect, either
alone or in combination with each other, of discouraging an acquisition of the
Company deemed undesirable by the Board of Directors.

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<PAGE> 49

ANTI-TAKEOVER CONSIDERATIONS

ANTI-TAKEOVER STATUTE. Beginning September 1, 1997, the Company will become
subject to newly-enacted Part 13 of the TBCA ("Part 13"), which subject to
certain exceptions, prohibits a Texas corporation from engaging in any "business
combination" with an "affiliated shareholder" for three years following the date
that such shareholder became an affiliated shareholder, unless: (i) prior to
such date, the board of directors of the corporation approved either the
business combination or the transaction that resulted in the shareholder
becoming an affiliated shareholder or (ii) the business combination is
authorized at a meeting of shareholders called not less than six months after
such date by the affirmative vote of at least two-thirds of the outstanding
voting shares not owned by the affiliated shareholder.

Part 13 generally defines a "business combination" to include: (i) any
merger, share exchange or conversion involving the corporation and the
affiliated shareholder, (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 10% or more of the assets of the corporation to
the affiliated shareholder, (iii) subject to certain exceptions, any transaction
that results in the issuance or transfer by the corporation of any stock of the
corporation to the affiliated shareholder, (iv) any transaction involving the
corporation that has the effect of increasing the proportionate ownership
percentage of the stock of any class or series of the corporation beneficially
owned by the affiliated shareholder, (v) any receipt by the affiliated
shareholder of the benefit of any loans, advances, guarantees, pledges or other
financial benefits provided by or through the corporation or (vi) any adoption
of a plan or proposal for the liquidation or dissolution of the corporation
proposed by, or pursuant to any agreement or understanding with, an affiliated
shareholder. In general, Part 13 defines an "affiliated shareholder" as any
entity or person beneficially owning 20% or more of the outstanding voting stock
of the corporation and any entity or person affiliated with or controlling or
controlled by such entity or person. As Millers Mutual will own more than 20% of
the Common Stock outstanding before this offering, however, transactions between
Millers Mutual and the Company will not be subject to these restrictions. The
provisions of Part 13 could have the effect of delaying, deferring or preventing
a change of control of the Company even if a change of control were in the
shareholders' interests.

CLASSIFIED BOARD OF DIRECTORS. The Restated Articles provide for the Board
of Directors to be divided into three classes serving staggered three-year
terms. The term of office of the first class of directors will expire at the
1998 annual meeting of shareholders, the term of office of the second class will
expire at the 1999 annual meeting of shareholders and the term of office of the
third class will expire at the 2000 annual meeting of shareholders. The terms of
office of the current directors of the Company are set forth herein under
"Management -- Directors and Executive Officers."

At each annual meeting of shareholders, the class of directors to be
elected at such meeting will be elected for a three-year term, and the directors
in the other two classes will continue in office. As holders of Common Stock
will have no right to cumulative voting for the election of directors, at each
annual meeting of shareholders Millers Mutual, as the holder of a majority of
the shares of Common Stock, will be able to elect all of the successors of the
class of directors whose term expires at that meeting. In addition, the
staggered terms for directors may affect the shareholders' ability to change
control of the Company even if a change of control were in the shareholders'
interests.

SHAREHOLDER ACTION. If provided for in the articles of incorporation, the
TBCA permits shareholder action without a meeting, without prior notice, and
without a vote, upon the written consent of less than all of the holders of
outstanding stock. The Restated Articles prohibit shareholder action without a
meeting, except by unanimous written consent. The Company's Bylaws provide that
special meetings of the shareholders may be called only by the President,
Chairman of the Board, a majority of the Board of Directors or the holders of at
least 10% of all shares entitled to vote at the proposed meeting. These
provisions could have the effect of delaying, deferring or preventing a change
of control of the Company even if a change of control were in the shareholders'
interests.

RIGHTS AGREEMENT. The Board of Directors has authorized and declared a
dividend distribution of one right (a "Right") for each outstanding share of
Common Stock of the Company to the sole shareholder as of the date of the
adoption of the Rights Agreement (as defined below). One Right will thereafter
be issued for each share of Common Stock that becomes outstanding between the
date of adoption of the Rights

47
<PAGE> 50

Agreement and the earliest of the Distribution Date (as defined below), the
Final Expiration Date (as defined below), and the date the Rights are redeemed.
Except as described below, each Right represents the right to purchase from the
Company one one-hundredth ( 1/100) of a share of Series A Junior Preferred
Stock, par value $1.00 per share (the "Preferred Shares"), at a price of $40.00
(the "Exercise Price"), subject to adjustment. The mechanics of such adjustment,
the timing of the exercise of the Rights, and the description, terms and
preferences of the Rights are set forth in the Rights Agreement (the "Rights
Agreement") between the Company and U.S. Trust Company of Texas, N.A., as Rights
Agent. A copy of a form of the Rights Agreement has been filed with the
Securities and Exchange Commission as an exhibit to the registration statement
of which this Prospectus is a part. This summary of the Rights Agreement and the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement.

The Rights will be evidenced by the Common Stock certificates and not by
separate certificates until the earlier of: (i) ten days following a public
announcement that a person or group of affiliated or associated persons, with
certain limited exceptions (an "Acquiring Person"), has acquired, or obtained
the right to acquire, beneficial ownership of capital stock of the Company
representing 15% or more of the voting power of the Company (the "Stock
Acquisition Date") or (ii) ten business days (or such later date as may be
determined by action of the Board of Directors upon approval by a majority of
the Continuing Directors (as defined below), prior to the time that any person
becomes an Acquiring Person) following the commencement of (or a public
announcement of an intention to make) a tender or exchange offer if, upon
consummation thereof, such person or group would be the beneficial owner of
capital stock of the Company representing 15% or more of the voting power of the
Company (such date being called the "Distribution Date").

Until the Distribution Date: (i) the Rights shall be transferred with, and
only with, the Common Stock and (ii) the transfer of any Common Stock
certificates shall also constitute the transfer of the Rights associated
therewith. Following the Distribution Date, separate certificates evidencing the
Rights (the "Right Certificates") will be mailed to the record holders of Common
Stock as of the close of business on the Distribution Date, and thereafter such
separate Right Certificates alone will evidence the Rights.

The Rights are not exercisable until the Distribution Date, and will expire
upon the earliest of: (i) the close of business on the tenth anniversary of the
adoption of the Rights Agreement (the "Final Expiration Date"), (ii) the
redemption of the Rights by the Company as described below, (iii) the date on
which such Rights expire pursuant to the Rights Agreement or (iv) the exchange
of the Rights by the Company as described below.

A person generally will not become an Acquiring Person under the Rights
Agreement if such person is: (i) the Company, (ii) a subsidiary of the Company,
(iii) an employee benefit plan or employee stock plan of the Company or of a
subsidiary of the Company, (iv) Millers Mutual or an affiliate or associate of
Millers Mutual, (v) F. George Dunham, III, or any of the members of his family
or certain trusts, estates or other entities created for their benefit or
controlled by them, (vi) an "Exempt Person" (as defined in the Rights Agreement)
as designated by the Board of Directors or (vii) an Acquiring Person solely by
reason of (A) obtaining 15% or more of the voting power of the Company through
transactions approved by a majority of the Board of Directors and Continuing
Directors before such person or group became an Acquiring Person or (B) a
reduction in the number of shares of voting stock of the Company pursuant to a
transaction approved by a majority of the Board of Directors and Continuing
Directors.

Unless the Rights are earlier redeemed, in the event that a person or group
becomes the beneficial owner of capital stock of the Company representing 15% or
more of the voting power of the Company (other than pursuant to a tender or
exchange offer for all outstanding shares of Common Stock of the Company
approved by a majority of the Board of Directors and Continuing Directors), each
holder of Rights will thereafter have the right to exercise its Rights and to
receive, upon payment of the Exercise Price (as adjusted), for each of its
Rights, such number of shares of Common Stock of the Company (or in certain
circumstances, cash, property or other securities of the Company) as shall have
a value equal to twice the Exercise Price. Until a Right is exercised, the
holder thereof, as such, will have no rights as a shareholder of the Company,
including without limitation the right to vote or to receive dividends.
Notwithstanding anything to the contrary, however,

48
<PAGE> 51

following the time that a person becomes an Acquiring Person, any Rights that
are beneficially owned by such Acquiring Person or by a transferee of such
Acquiring Person shall automatically become null and void.

The Exercise Price payable and the number of Preferred Shares, shares of
Common Stock or other securities or property issuable upon exercise of a Right,
and the number of Rights outstanding, are subject to adjustment from time to
time to prevent dilution. In addition, if at any time on or after the
Distribution Date the Company is merged into or consolidates with another person
and the Company does not survive such merger or consolidation or all or part of
the shares of Common Stock are in connection with such merger or consolidation
exchanged for securities of another person, or the Company or one or more of the
subsidiaries of the Company transfers to any other person 50% or more of the
assets or earning power of the Company and the subsidiaries, proper provision
will be made so that each holder of a Right will thereafter have the right to
receive, upon exercise at the then current Exercise Price of the Right, common
stock of the applicable issuer or the surviving company having a value equal to
twice the Exercise Price of the Right.

Upon the exercise of a Right, the Company will not be required to issue
fractional Preferred Shares (other than fractions in multiples of one
one-hundredth of a Preferred Share), and in lieu thereof may issue depositary
receipts evidencing fractions of such shares or cash based on the Fair Market
Value (as defined in the Rights Agreements) of Preferred Shares.

At any time after the date of the Rights Agreement until the earlier of ten
days after the Stock Acquisition Date or the Final Expiration Date, the Company
may, upon approval by a majority of the Board of Directors and Continuing
Directors, redeem the Rights in whole, but not in part, at a price of $0.01 per
Right (the "Redemption Price"), subject to adjustment. The Redemption Price may,
at the option of the Company, be paid in cash, shares of Preferred Stock or
shares of Common Stock. The Rights will thereupon terminate and the only right
of the holders of Rights will be to receive the Redemption Price.

At any time after a person or group of affiliated or associated persons
becomes an Acquiring Person and prior to the acquisition by any such person or
group of 50% or more of the voting power of the Company, the Board of Directors
(with the approval of a majority of the Continuing Directors) may exchange the
Rights (other than Rights owned by such person or group which have become void),
in whole or in part, at an exchange ratio of one share of Common Stock (or a
fraction of a share of Preferred Stock or other consideration having equivalent
value) per Right, subject to adjustment.

As long as the Rights are redeemable, the provisions of the Rights
Agreement may be amended by the Company without the approval of any holders of
the Rights. Any amendment adopted thereafter may not materially adversely affect
the interests of holders of the Rights.

For purposes of the Rights Agreement, a "Continuing Director" means any
member of the Board of Directors who is not an Acquiring Person or an affiliate
or associate of an Acquiring Person, or a representative or nominee of an
Acquiring Person or any such affiliate or associate and who either (i) was a
member of the Board of Directors on the date the Rights Agreement was adopted or
(ii) subsequently became a member of the Board of Directors and whose nomination
for election or election to the Board was recommended or approved by a majority
of the Continuing Directors then on the Board of Directors.

The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
other than pursuant to a tender offer or other transaction approved by the Board
of Directors. The Rights, however, provide the Board of Directors and the
Acquiring Person a ten-day period to negotiate such a merger or consolidation
before the Rights become exercisable. If an acceptable arrangement is reached
within this period, the Board of Directors may redeem all of the Rights.

PREFERRED STOCK. The Restated Articles permit the Company's Board of
Directors to issue Preferred Stock at any time without shareholder approval. See
"-- Preferred Stock" and "-- Certain Effects of Authorized but Unissued Stock."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.

49
<PAGE> 52

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for the Common Stock.
Future sales of a substantial number of shares of Common Stock in the public
market could adversely affect trading prices prevailing from time to time. The
Selling Shareholder will hold 5,000,000 shares, representing 48.8% of the
outstanding shares of Common Stock after this offering (43.6% if the
Underwriters' over-allotment option is exercised in full), and a decision by the
Selling Shareholder to sell shares of Common Stock in the open market could
adversely affect the trading price of the Common Stock.

Upon completion of this offering, the Company will have outstanding
9,775,000 shares of Common Stock (10,191,250 shares if the Underwriters'
over-allotment option is exercised in full). Of these shares, the shares sold in
this offering will be freely tradable without restriction under the Securities
Act, unless purchased by "affiliates" of the Company as that term is defined in
Rule 144 under the Securities Act ("Rule 144"), which is summarized below.

The remaining 4,775,000 shares (4,441,250 shares if the Underwriters'
over-allotment option is exercised in full) held by the Selling Shareholder will
be "restricted securities" as that term is defined in Rule 144 ("Restricted
Shares"). Restricted Shares may be sold in the public market only if such sale
is registered under the Securities Act or if it qualifies for an exemption from
registration, such as the one provided by Rule 144. Sales of the Restricted
Shares in the open market, or the availability of such shares for sale, could
adversely affect the trading price of the Common Stock.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least one year following the later of the date of the acquisition of such shares
from the issuer or an affiliate of the issuer would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of:
(i) 1% of the number of shares of Common Stock then outstanding (approximately
97,750 shares immediately after this offering, or 101,913 shares if the
Underwriters' overallotment option is exercised in full) or (ii) the average
weekly trading volume of the Common Stock during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale provisions and notice
requirements and the availability of current public information about the
Company. Rule 144 generally becomes available 90 days after the issuer has been
subject to the information reporting requirements of the Exchange Act. Under
Rule 144(k), a person who is not deemed to have been an affiliate of the Company
at any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years following the later of the
date of the acquisition of such shares from the issuer or an affiliate of the
issuer, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.

The Company intends to file a registration statement on Form S-8 under the
Securities Act covering the offering and sale of the 2,250,000 shares of Common
Stock reserved for issuance under the Stock Option Plan, the 50,000 shares
reserved for issuance under the Director Plan and the 425,000 shares reserved
for issuance under the Stock Purchase Plan. Accordingly, shares of Common Stock
issued upon exercise of options granted under the Stock Option Plan or the
Director Plan or purchased with payroll deductions under the Stock Purchase Plan
will be available for sale in the open market, unless such shares are subject to
certain lock-up agreements. See "Underwriting."

50
<PAGE> 53

UNDERWRITING

Subject to the terms and conditions of an Underwriting Agreement, the
Underwriters named below, through their representatives, Raymond James &
Associates, Inc. and Southwest Securities, Inc. (the "Representatives"), have
severally agreed to purchase from the Company and the Selling Shareholder the
following respective numbers of shares of Common Stock at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Raymond James & Associates, Inc.............................
Southwest Securities, Inc...................................

---------
Total............................................. 5,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to certain conditions. The Underwriters are obligated
to take and pay for all shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are to
be purchased.

The Underwriters, through the Representatives, propose to offer part of the
shares of Common Stock directly to the public at the offering price set forth on
the cover page of this Prospectus and part of the shares to certain dealers at a
price that represents a concession not in excess of $ per share under
the initial public offering price. The Underwriters may allow, and such dealers
may re-allow, a concession not in excess of $ per share to certain
other dealers. The Representatives of the Underwriters have advised the Company
that the Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

The Company and the Selling Shareholder have granted the Underwriters an
option, exercisable not later than 30 days after the date of this Prospectus, to
purchase up to an aggregate of 750,000 additional shares of Common Stock, at the
initial public offering price, less the underwriting discounts and commissions
set forth on the cover page of this Prospectus. To the extent that the
Underwriters exercise such option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage thereof that the number
of shares of Common Stock to be purchased by it shown in the above table bears
to the total shown, and the Company and the Selling Shareholder will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise their option only to cover over-allotments made in
connection with the sale of the shares of Common Stock offered hereby. If
purchased, the Underwriters will sell such additional shares on the same terms
as those on which the shares that the Underwriters have agreed to purchase from
the Company and the Selling Shareholder are being offered.

This offering of Common Stock is made for delivery when, as and if accepted
by the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of this offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

Until the distribution of Common Stock in this offering is completed, rules
of the Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Common Stock. As an exception to these rules, the Representatives are permitted
to engage in certain transactions that stabilize the price of the Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock. If the

51
<PAGE> 54

Underwriters create a short position in the Common Stock in connection with this
offering, i.e., if they sell more shares of Common Stock than are set forth on
the cover page of this Prospectus, the Representatives may reduce the short
position by purchasing Common Stock in the open market. The Representatives may
also elect to reduce any short position by exercising all or part of the
over-allotment option described above. The Representatives may also impose a
penalty bid on certain Underwriters and selling group members. This means that
if the Representatives purchase shares of Common Stock in the open market to
reduce the Underwriters' short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of this
offering. In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
discouraged resales of any security. Neither the Company, the Selling
Shareholder nor any of the Underwriters makes any representation or predictions
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the Common Stock. In addition, neither the
Company, the Selling Shareholder nor any of the Underwriters makes any
representation that the Representatives will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.

The Company, the Selling Shareholder and certain officers and directors of
the Company, which upon consummation of this offering will own or have the right
to acquire in the aggregate 5,299,331 shares of Common Stock, have agreed that
they will not, without the prior written consent of Raymond James & Associates,
Inc., sell, offer to sell, contract to sell or otherwise transfer or dispose of
any shares of Common Stock (other than the shares offered by the Selling
Shareholder in this offering), options, rights or warrants to acquire shares of
Common Stock, or securities exchangeable for or convertible into shares of
Common Stock, during the 180-day period commencing on the date of this
Prospectus, except that the Company may issue shares of Common Stock under the
Stock Purchase Plan and upon exercise of options outstanding under the Stock
Option Plan and the Director Plan and may grant additional options under the
Stock Option Plan and the Director Plan, provided that without the prior written
consent of Raymond James & Associates, Inc., such additional options shall not
be exercisable during such period. See "Shares Eligible for Future Sale."

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company, the Selling Shareholder and the
Representatives. Among the factors to be considered in determining the initial
public offering price are prevailing market and economic conditions, revenues
and earnings of the Company, market valuations of other companies engaged in
activities similar to those of the Company, estimates of the business potential
and prospects of the Company, the present state of the Company's business
operations, the Company's management and other factors deemed relevant. The
estimated initial public offering price range set forth on the cover page of
this Prospectus is subject to change as a result of market conditions and other
factors.

The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against, and to contribute to losses arising out of, certain civil
liabilities, including liabilities under the Securities Act.

The Company has additionally agreed to pay to the Representatives, solely
by deduction from the proceeds of this offering, a financial advisory fee equal
to the lesser of (i) three-fourths of one percent (0.75%) of the gross proceeds
to the Company and the Selling Shareholder of this offering or (ii) $300,000.
Such financial advisory fee shall be paid by the Company and the Selling
Shareholder in proportion to the respective number of shares of Common Stock
being offered by them hereby, and relates to financial advisory services
provided by the Representatives to the Company and Selling Shareholder in
connection with this offering and related matters.

At the Company's request, the Underwriters have reserved up to 175,000
shares of Common Stock for sale to the Company's directors, officers, employees
and designees and have agreed to permit them to buy such shares at 96% of the
initial public offering price. The number of shares of Common Stock available
for sale by the Company to the general public will be reduced to the extent
purchasers designated by the Company purchase such reserved shares. Any reserved
shares not so purchased will be offered by the Underwriters to the general
public at the initial public offering price.

52
<PAGE> 55

The foregoing includes a summary of the principal terms of the Underwriting
Agreement and does not purport to be complete. Reference is made to the form of
Underwriting Agreement that is on file as an exhibit to the Registration
Statement of which this Prospectus is a part.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Akin, Gump, Strauss, Hauer & Feld, L.L.P., Dallas,
Texas. Certain matters will be passed upon for the Underwriters by Thompson &
Knight, A Professional Corporation, Dallas, Texas.

EXPERTS

The consolidated financial statements of the Company as of and for the six
months ended June 30, 1997, as of and for the year ended December 31, 1996 and
as of December 31, 1995 and for the period April 28, 1995 (date of inception)
through December 31, 1995 included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, and have been so included in
reliance upon the opinion of such firm given upon their authority as experts in
accounting and auditing.

The consolidated financial statements of SDS and subsidiary as of March 11,
1997 and the period January 1, 1997 through March 11, 1997 and as of and for the
three years in the period ended December 31, 1996 included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, and have been
so included in reliance upon the opinion of such firm given upon their authority
as experts in accounting and auditing.

During 1996, the Company changed its independent accountants from Price
Waterhouse LLP ("Price Waterhouse") to Deloitte & Touche LLP. There were no
disagreements between the Company and Price Waterhouse on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure that if not resolved to the satisfaction of Price Waterhouse
would have caused such firm to make reference thereto in connection with its
reports on the financial statements of the Company. The Company's decision to
change to Deloitte & Touche LLP was approved by the Board of Directors of the
Company. In 1997, in connection with the SDS Acquisition, SDS changed its
independent accountants from KPMG Peat Marwick LLP ("KPMG") to Deloitte & Touche
LLP, the Company's independent accountants. There were no disagreements between
SDS and KPMG on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure that if not resolved to the
satisfaction of KPMG would have caused such firm to make reference thereto in
connection with its reports on the financial statements of SDS. SDS's decision
to change its independent accountants was approved by the Board of Directors of
the Company.

53
<PAGE> 56

AVAILABLE INFORMATION

The Company has not previously been subject to the reporting requirements
of the Exchange Act. The Company has filed with the Securities and Exchange
Commission (the "Commission"), a Registration Statement on Form S-1 under the
Securities Act (the "Registration Statement") with respect to the offering and
sale of Common Stock. This Prospectus does not contain all the information set
forth in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Common Stock, reference
is made to the Registration Statement and to the exhibits and schedules filed
therewith. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. A copy of the Registration Statement may be
inspected without charge at the Commission's principal office in Washington,
D.C., and copies of all or any part of the Registration Statement may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices at 7 World
Trade Center, New York, New York 10048 and at 500 Madison Street, Chicago,
Illinois 60661, upon payment of certain fees prescribed by the Commission. The
Commission maintains an Internet world wide web site that contains reports,
proxy and information reports and other materials that are filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval System. The site
can be accessed at http://www.sec.gov.

The Company intends to distribute to the holders of Common Stock annual
reports containing consolidated financial statements audited by independent
accountants.

54
<PAGE> 57

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Condensed Consolidated Financial Information...... F-2
Pro Forma Condensed Consolidated Financial Statements....... F-3
Notes to Pro Forma Condensed Consolidated Financial
Statements................................................ F-6

INSPIRE INSURANCE SOLUTIONS, INC. CONSOLIDATED FINANCIAL
STATEMENTS
Independent Auditors' Report................................ F-7
Consolidated Financial Statements:
Consolidated Balance Sheets............................... F-8
Consolidated Statements of Operations..................... F-9
Consolidated Statements of Shareholder's Equity........... F-10
Consolidated Statements of Cash Flows..................... F-11
Notes to Consolidated Financial Statements................ F-12

STRATEGIC DATA SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-23
Consolidated Financial Statements:
Consolidated Balance Sheets............................... F-24
Consolidated Statements of Operations..................... F-25
Consolidated Statements of Shareholders' Equity........... F-26
Consolidated Statements of Cash Flows..................... F-27
Notes to Consolidated Financial Statements................ F-28
</TABLE>

F-1
<PAGE> 58

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

INTRODUCTION

The accompanying unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 1996 and for the six months ended
June 30, 1997 reflect: (i) the acquisition of Strategic Data Systems, Inc.
("SDS") using the purchase method of accounting as if the acquisition of SDS,
which occurred on March 12, 1997, had occurred on January 1, 1996 and (ii) the
results of operations of INSpire Insurance Solutions, Inc. (the "Company") as if
the Company had operated on an independent basis separate from The Millers
Mutual Fire Insurance Company ("Millers Mutual") since January 1, 1996.

The unaudited pro forma condensed consolidated statements of operations are
based on currently available information and do not purport to represent what
the Company's results of operations would have been if the events referred to
above had occurred on January 1, 1996, or to project the Company's results of
operations for any future periods.

The pro forma condensed consolidated statements of operations should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations of INSpire," "Management's Discussion and
Analysis of Financial Condition and Results of Operations of SDS," the Company's
Financial Statements and SDS's Consolidated Financial Statements.

F-2
<PAGE> 59

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
INSPIRE INSURANCE STRATEGIC DATA PRO FORMA
SOLUTIONS, INC. SYSTEMS, INC. COMBINED ADJUSTMENTS PRO FORMA(A)
----------------- -------------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Outsourcing services........ $13,653 $ -- $ 13,653 $ -- $ 13,653
Software and software
services................. -- 19,024 19,024 -- 19,024
Other....................... -- 4,640 4,640 -- 4,640
------- ------- --------- ---------
Total revenues...... 13,653 23,664 37,317 -- 37,317
------- ------- --------- ---------
Operating expenses............ 14,430 22,629 37,059 1,068(b) 36,920
(2,920)(c)
559(d)
(887)(e)
1,200(f)
947(g)
(106)(h)
------- ------- --------- ---------
Operating income (loss)....... (777) 1,035 258 397
Interest expense.............. (2) (207) (209) (430)(i) (639)
Other income (expense), net... -- 319 319 319
------- ------- --------- ---------
Income (loss) from operations
before income taxes
(benefit)................... (779) 1,147 368 77
Income taxes (benefit)........ (264) 449 185 (256)(j) (71)
------- ------- --------- ---------
Net income (loss)............. $ (515) $ 698 $ 183 $ 148
======= ======= ========= =========
Net income (loss) per share... $ 0.02 $ 0.02
========= =========
Supplementary net income
(loss) per share............ $ 0.07
=========
Weighted average common and
common equivalent shares
outstanding................. 7,731,016 7,731,016
</TABLE>

See accompanying notes.

F-3
<PAGE> 60

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
INSPIRE INSURANCE STRATEGIC DATA PRO FORMA
SOLUTIONS, INC. SYSTEMS, INC. COMBINED ADJUSTMENTS PRO FORMA(A)
----------------- -------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Outsourcing services....... $5,338 $ -- $ 5,338 $ -- $ 5,338
Software and software
services................ -- 9,299 9,299 -- 9,299
Other...................... -- 1,073 1,073 -- 1,073
------- ------- ---------- ----------
Total revenues..... 5,338 10,372 15,710 -- 15,710
------- ------- ---------- ----------
Operating expenses........... 5,752 9,861 15,613 438(b) 15,884
(1,110)(c)
360(d)
(438)(e)
600(f)
474(g)
(53)(h)
------- ------- ---------- ----------
Operating income (loss)...... (414) 511 97 (174)
Interest expense............. -- (101) (101) (215)(i) (316)
Other income (expense),
net........................ -- 120 120 120
------- ------- ---------- ----------
Income (loss) from operations
before income taxes
(benefit).................. (414) 530 116 (370)
Income taxes (benefit)....... (141) 233 92 (274)(j) (182)
------- ------- ---------- ----------
Net income (loss)............ $ (273) $ 297 $ 24 $ (188)
======= ======= ========== ==========
Net income (loss) per
share...................... $ 0.00 $ (0.02)
========== ==========
Supplementary net income
(loss) per share........... $ 0.00
==========
Weighted average common and
common equivalent shares
outstanding................ 7,731,016 7,731,016
</TABLE>

See accompanying notes.

F-4
<PAGE> 61

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
INSPIRE INSURANCE STRATEGIC DATA PRO FORMA
SOLUTIONS, INC. SYSTEMS, INC. COMBINED ADJUSTMENTS PRO FORMA(A)
----------------- -------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Outsourcing services....... $14,394 $ -- $ 14,394 $ -- $ 14,394
Software and software
services................ 7,562 4,840 12,402 -- 12,402
Other...................... 1,303 572 1,875 -- 1,875
------- ------- ---------- ----------
Total revenues..... 23,259 5,412 28,671 -- 28,671
------- ------- ---------- ----------
Operating expenses........... 27,668 5,049 32,717 700(b) 32,500
(1,110)(c)
(204)(e)
233(f)
184(g)
(20)(h)
------- ------- ---------- ----------
Operating income (loss)...... (4,409) 363 (4,046) (3,829)
Interest expense............. (212) (33) (245) (84)(i) (329)
Other income (expense),
net........................ 53 57 110 110
------- ------- ---------- ----------
Income (loss) from operations
before income taxes
(benefit).................. (4,568) 387 (4,181) (4,048)
Income taxes (benefit)....... (1,712) 156 (1,556) (75)(j) (1,631)
------- ------- ---------- ----------
Net income (loss)............ $(2,856) $ 231 $ (2,625) $ (2,417)
======= ======= ========== ==========
Net income (loss) per
share...................... $ (0.34) $ (0.31)
========== ==========
Supplementary net income
(loss) per share........... $ (0.30)
==========
Weighted average common and
common equivalent shares
outstanding................ 7,731,016 7,731,016
</TABLE>

See accompanying notes.

F-5
<PAGE> 62

NOTES TO PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(a) See the Introduction to Pro Forma Condensed Consolidated Financial
Information.

(b) Represents compensation for finance, administrative, executive and marketing
employees to perform services performed by Millers Mutual pursuant to a
management agreement.

(c) Reflects the net reduction in the management fee charged to the Company by
Millers Mutual resulting from the recognition of additional compensation for
employees to perform services provided by Millers Mutual pursuant to a
management agreement.

(d) Represents software production expenses during the period that were
capitalized by SDS as a result of conforming its software production expense
capitalization policy to that of the Company.

(e) Reflects the elimination of amortization of software production expenses
capitalized by SDS as a result of conforming its software production expense
capitalization policy to that of the Company.

(f) Reflects the amortization of $6,000,000 of purchased software associated
with the acquisition of SDS.

(g) Represents the amortization of goodwill associated with the acquisition of
SDS.

(h) Represents previously recorded amortization of goodwill by SDS resulting
from the acquisition of Applied Quoting Systems, Inc.

(i) Represents the effect of interest expense associated with the debt incurred
in conjunction with the acquisition of SDS, offset by the elimination of
certain interest expense associated with mortgage debt not assumed in the
acquisition of SDS.

(j) Income tax (benefit) is calculated at an effective rate of 36% less the
deferred tax benefit associated with the amortization of purchased software
associated with the acquisition of SDS.

F-6
<PAGE> 63

INDEPENDENT AUDITORS' REPORT

Board of Directors
INSpire Insurance Solutions, Inc. and Subsidiary
Fort Worth, Texas

We have audited the accompanying consolidated balance sheets of INSpire
Insurance Solutions, Inc. and subsidiary (formerly Millers Integrated Claims
Resources, Inc. and MiliRisk, Inc.) as of December 31, 1995, 1996 and June 30,
1997 and the related consolidated statements of operations, shareholder's equity
and cash flows for the period April 28, 1995 (date of inception) through
December 31, 1995, the year ended December 31, 1996 and the six months ended
June 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of INSpire Insurance Solutions,
Inc. and subsidiary at December 31, 1995, 1996 and June 30, 1997 and the results
of their operations and their cash flows for the period April 28, 1995 (date of
inception) through December 31, 1995, the year ended December 31, 1996 and the
six months ended June 30, 1997 in conformity with generally accepted accounting
principles.

DELOITTE & TOUCHE LLP

Fort Worth, Texas
July 18, 1997

(August 19, 1997 as to Note 13)

F-7
<PAGE> 64

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................ $ 21,868 $ 363,398 $ 451,022
Accounts receivable -- net........................... -- 1,168,148 6,416,323
Income taxes receivable.............................. 475,124 339,571 339,571
Deferred income taxes................................ -- -- 1,273,000
Prepaid expenses and other current assets............ -- 140,950 844,581
---------- ---------- -----------
Total current assets......................... 496,992 2,012,067 9,324,497
Accounts receivable, excluding current portion......... -- -- 207,601
Property and equipment, net............................ 2,320,055 3,219,892 6,277,833
Intangibles and other assets........................... -- -- 15,078,103
---------- ---------- -----------
TOTAL.................................................. $2,817,047 $5,231,959 $30,888,034
========== ========== ===========

LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Note payable......................................... $ -- $2,500,000 $ --
Accounts payable..................................... -- 1,066,013 954,243
Accrued payroll and compensation..................... -- -- 657,038
Other accrued expenses............................... -- -- 1,654,296
Customer deposits.................................... -- -- 474,880
Deferred compensation................................ -- -- 2,699,000
Income taxes payable................................. -- -- 1,065,638
Current portion of long-term debt.................... -- -- 1,562,500
Due to parent........................................ 1,569,108 995,706 2,833,053
---------- ---------- -----------
Total current liabilities.................... 1,569,108 4,561,719 11,900,648
Deferred compensation.................................. -- -- 1,609,388
Long-term debt......................................... -- -- 5,625,000
Deferred income taxes.................................. 126,500 64,000 2,195,000

Commitments and Contingencies (Note 12)................ -- -- --

SHAREHOLDER'S EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares
authorized, none issued and outstanding........... -- -- --
Common stock, $.01 par value; 1,000 shares
authorized, 100 shares issued and outstanding in
1995 and 1996; 14,000,000 shares authorized and
7,000,000 shares issued and outstanding at June
30, 1997.......................................... 1 1 70,000
Additional paid-in capital........................... 2,383,417 2,383,417 14,121,609
Accumulated deficit.................................. (1,261,979) (1,777,178) (4,633,611)
---------- ---------- -----------
Total shareholder's equity................... 1,121,439 606,240 9,557,998
---------- ---------- -----------
TOTAL.................................................. $2,817,047 $5,231,959 $30,888,034
========== ========== ===========
</TABLE>

See notes to consolidated financial statements.

F-8
<PAGE> 65

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD APRIL 28, SIX MONTHS
1995 THROUGH YEAR ENDED ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, -------------------------
1995 1996 1996 1997
------------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Outsourcing services.................... $ 3,907,108 $13,653,003 $5,337,755 $14,393,897
Software and software services.......... -- -- -- 7,561,879
Other................................... -- -- -- 1,303,439
----------- ----------- ---------- -----------
Total revenues.................. 3,907,108 13,653,003 5,337,755 23,259,215
----------- ----------- ---------- -----------
EXPENSES:
Cost of outsourcing services............ 4,884,641 10,543,077 4,202,355 10,098,207
Cost of software and software
services............................. -- -- -- 2,921,377
Cost of other revenues.................. -- -- -- 696,495
Selling, general and administrative..... -- -- -- 3,428,330
Research and development................ -- -- -- 679,600
Depreciation and amortization........... 33,070 786,768 349,635 1,695,416
Purchased research and development...... -- -- -- 3,000,000
Deferred compensation................... -- -- -- 3,949,000
Management fees to Parent............... 600,000 3,100,000 1,200,000 1,200,000
----------- ----------- ---------- -----------
Total expenses.................. 5,517,711 14,429,845 5,751,990 27,668,425
----------- ----------- ---------- -----------
OPERATING LOSS............................ (1,610,603) (776,842) (414,235) (4,409,210)
OTHER INCOME (EXPENSE):
Interest income......................... -- -- -- 74,537
Interest expense........................ -- (2,245) -- (212,044)
Other................................... -- -- -- (21,371)
----------- ----------- ---------- -----------
Total other income (expense).... -- (2,245) -- (158,878)
----------- ----------- ---------- -----------
LOSS BEFORE INCOME TAX BENEFIT............ (1,610,603) (779,087) (414,235) (4,568,088)
INCOME TAX BENEFIT........................ 348,624 263,888 140,840 1,711,655
----------- ----------- ---------- -----------
NET LOSS.................................. $(1,261,979) $ (515,199) $ (273,395) $(2,856,433)
----------- ----------- ---------- -----------
NET LOSS PER COMMON SHARE................. $ (.16) $ (.07) $ (.04) $ (.37)
=========== =========== ========== ===========
</TABLE>

See notes to consolidated financial statements.

F-9
<PAGE> 66

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE PERIOD APRIL 28, 1995 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1995,
THE YEAR ENDED DECEMBER 31, 1996 AND THE
SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Issuance of 100 shares of common stock at
inception.............................. $ 1 $ 999 $ -- $ 1,000
Parent's contribution of fixed assets.... -- 2,382,418 -- 2,382,418
Net loss................................. -- -- (1,261,979) (1,261,979)
------- ----------- ----------- -----------
Balance, December 31, 1995............... 1 2,383,417 (1,261,979) 1,121,439
Net loss................................. -- -- (515,199) (515,199)
------- ----------- ----------- -----------
Balance, December 31, 1996............... 1 2,383,417 (1,777,178) 606,240
Parent's contribution of fixed
assets................................. -- 1,308,191 -- 1,308,191
Parent's contribution of additional
paid-in capital........................ -- 10,500,000 -- 10,500,000
Stock dividend to parent of 64,900
shares, March 1997..................... 649 (649) -- --
Stock dividend to parent of 6,935,000
shares, June 1997...................... 69,350 (69,350) -- --
Net loss................................. -- -- (2,856,433) (2,856,433)
------- ----------- ----------- -----------
Balance, June 30, 1997................... $70,000 $14,121,609 $(4,633,611) $ 9,557,998
======= =========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-10
<PAGE> 67

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS
PERIOD APRIL 28, ENDED
1995 THROUGH YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, --------------------------
1995 1996 1996 1997
----------------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss..................................... $(1,261,979) $ (515,199) $(273,395) $ (2,856,433)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization.............. 33,070 786,768 349,635 1,695,416
Deferred income taxes...................... 126,500 (62,500) (57,500) (2,785,000)
Purchased research and development......... -- -- -- 3,000,000
Loss on sales of property and equipment.... 8,348 12,639 -- --
Changes in operating assets and
liabilities:
Accounts receivable...................... -- (1,168,148) (67,853) (281,026)
Income taxes receivable.................. (475,124) 135,553 (32,152) --
Prepaid expenses and other current
assets................................ -- (140,950) -- (442,267)
Other assets............................. -- -- -- 100,462
Accounts payable......................... -- 1,066,013 -- (1,291,495)
Accrued payroll and compensation......... -- -- -- (417,543)
Other accrued expenses................... -- -- -- 945,457
Customer deposits........................ -- -- -- (867,220)
Income taxes payable..................... -- -- -- 615,638
Deferred compensation.................... -- -- -- 3,980,753
Due to parent............................ 1,569,108 (573,402) 977,924 1,837,347
----------- ----------- --------- ------------
Net cash provided by (used in)
operating activities................ (77) (459,226) 896,659 3,234,089
----------- ----------- --------- ------------
INVESTING ACTIVITIES:
Proceeds from sales of property and
equipment.................................. 23,039 67,494 -- --
Purchases of property and equipment.......... (2,094) (1,766,738) (456,560) (882,627)
Acquisition of SDS, net of cash acquired..... -- -- -- (17,118,849)
----------- ----------- --------- ------------
Net cash provided by (used in) investing
activities................................. 20,945 (1,699,244) (456,560) (18,001,476)
----------- ----------- --------- ------------
FINANCING ACTIVITIES:
Proceeds from borrowings..................... -- 2,500,000 77,220 7,500,000
Repayment of borrowings...................... -- -- -- (3,410,396)
Contribution from parent..................... -- -- -- 10,500,000
Issuance of common stock..................... 1,000 -- -- --
Bank overdrafts.............................. -- -- -- 265,407
----------- ----------- --------- ------------
Net cash provided by financing
activities.......................... 1,000 2,500,000 77,220 14,855,011
----------- ----------- --------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS...... 21,868 341,530 517,319 87,624
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD....................................... -- 21,868 21,868 363,398
----------- ----------- --------- ------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD....................................... $ 21,868 $ 363,398 $ 539,187 $ 451,022
=========== =========== ========= ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid................................ $ -- $ 2,245 $ -- $ 112,947
=========== =========== ========= ============
Income taxes refunded........................ $ -- $ 336,939 $ -- $ --
=========== =========== ========= ============
Noncash investing activities -- contribution
of fixed assets from parent................ $ 2,382,418 $ -- $ -- $ 1,308,191
=========== =========== ========= ============
</TABLE>

See notes to consolidated financial statements.

F-11
<PAGE> 68

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

General -- INSpire Insurance Solutions, Inc. ("INSpire" or the "Company")
(formerly Millers Integrated Claims Resources, Inc. and MiliRisk, Inc.) is a
wholly-owned subsidiary of The Millers Mutual Fire Insurance Company ("Millers
Mutual") and was incorporated April 28, 1995. INSpire is a provider of policy
and claims administration outsourcing services to the property and casualty
("P&C") insurance industry. Through its wholly-owned subsidiary, Strategic Data
Systems, Inc. and subsidiary ("SDS"), which was acquired March 12, 1997, the
Company also develops and markets software and software services to the P&C
insurance industry. The Company sells its products directly to the customer. The
majority of sales are in North America.

Basis of Consolidation -- The accompanying consolidated financial
statements for the period ended June 30, 1997 include the accounts of INSpire
and, since March 12, 1997, SDS. All significant intercompany accounts and
transactions have been eliminated in consolidation.

SDS Acquisition -- On March 12, 1997, INSpire acquired all the outstanding
shares of common stock of SDS for an aggregate cash purchase price of $18.0
million, subject to adjustment as provided in the purchase agreement, and costs
and expenses of $325,000. The acquisition was funded by a $10.5 million capital
contribution from Millers Mutual along with borrowings under a revolving line of
credit and term loan from a bank.

The acquisition was accounted for using the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets acquired
and liabilities assumed based on their relative fair market values. As of the
acquisition date, assets acquired and liabilities assumed were as follows (in
thousands):

<TABLE>
<S> <C>
Purchase price.............................................. $ 18,325
Fair values of net assets acquired:
Software.................................................. 6,000
Purchased research and development........................ 3,000
Fair value of tangible assets acquired.................... 10,832
Liabilities assumed....................................... (10,786)
--------
9,046
--------
Goodwill.................................................... $ 9,279
========
</TABLE>

The amount assigned to purchased research and development was charged
against operating results at the time of acquisition.

The allocation of the purchase price is pending any additional adjustments
that may arise as a result of the finalization of the Company's ongoing
analysis.

Operating results of the acquired business are included in consolidated
results only from the date of acquisition. Unaudited pro forma data reflecting
results as if the acquisition had been effective at the beginning of 1996
follows (in thousands, except per share data):

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- --------------
<S> <C> <C>
Net revenues.......................................... $37,317 $28,671
Income (loss) from operations......................... 397 (3,829)
Net income (loss)..................................... 148 (2,417)
Net income (loss) per common share.................... .02 (.31)
</TABLE>

F-12
<PAGE> 69

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pro forma results are unaudited and are based on historical results,
adjusted for the impact of certain acquisition-related adjustments, such as:
increased depreciation of property and equipment, the charge-off of purchase
price assigned to purchased research and development, the amortization of
goodwill, acquired software and other intangible assets and the related income
tax effects. The pro forma net earnings per common share were calculated using a
weighted average number of common shares outstanding and common equivalent
shares of 7,731,016 for 1996 and the six months ended June 30, 1997 after giving
effect to the common stock dividends paid during March and June 1997. Pro forma
results do not reflect any synergies that might be achieved from combined
operations and, therefore, in management's opinion, are not indicative of what
actual results would have been if the acquisition had occurred at the beginning
of 1996. In addition, they are not intended to be a projection of future
results.

The management fee historically paid by the Company was determined by
management to be reasonable based on an allocation of total projected common
costs of Millers Mutual and its subsidiaries allocated based on projected
revenues. As a result of the acquisition of SDS, including its existing finance,
administrative, executive and marketing infrastructure, and the addition of
other personnel, the Company is able to provide internally most of the services
previously provided by Millers Mutual.

The net effect of the pro forma adjustments to reflect: (i) differences
between the fees paid under the management agreement in place between the
Company and Millers Mutual through June 30, 1997 and the benefits administration
contract effective July 1, 1997, as described in Note 13, (ii) the additional
costs that would have been incurred by the Company for compensation of finance,
administrative, executive and marketing personnel to perform services provided
by Millers Mutual on behalf of the Company if the management agreement had not
been in place and (iii) the related income tax effects for the year ended
December 31, 1996 and the six months ended June 30, 1997 was to decrease net
loss as reported in the Consolidated Statements of Operations by approximately
$1,223,000 and $256,000, respectively. The pro forma net income per common share
for the year ended December 31, 1996 and the pro forma net loss per common share
for the six months ended June 30, 1997, after giving effect to these pro forma
adjustments, was $.09 and $.34, respectively.

Property and Equipment -- The Company records property and equipment at
cost, less accumulated depreciation. Depreciation is calculated using the
straight-line method based on the related assets estimated useful lives, which
range from three to seven years. Leasehold expenses are amortized over the lease
term or the estimated useful life, whichever is less. Repairs and maintenance
are charged to operations as incurred.

Revenue Recognition -- Revenues from outsourcing services are recognized as
services are rendered. Initial installations of software systems generally
include a one-time license fee and a contract for the installation and
customization of the system to meet the customer's specifications, which the
Company bills at an hourly rate. Amounts charged for the initial license and the
installation and customization of systems are recognized as revenue during the
installation period in proportion to the hours expended for installation
compared to the total hours projected for installation. In other instances,
revenues are recognized based on performance milestones specified in the
contract. The Company recognizes the annual fee charged for maintenance of the
customer's system as revenue as hours are expended over the maintenance contract
period. Revenues from computer hardware and equipment sales are recognized when
the Company receives notification that the equipment has been shipped by the
manufacturer and title has passed to the customer. Changes in estimates of
percentage of completion or losses, if any, associated with outsourcing or
software services are recognized in the period in which they are determined.

Income Taxes -- Millers Mutual and its subsidiaries, including INSpire,
file a consolidated federal income tax return. In accordance with federal income
tax regulations, all corporations included in a consolidated tax return are
jointly and severally liable for all tax liabilities. A tax sharing agreement
among Millers Mutual, the Company and the other subsidiaries of Millers Mutual
provides that taxes on income are charged to profitable subsidiaries as if they
were filing their own separate returns. Subsidiaries with losses are

F-13
<PAGE> 70

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

given credit for tax benefits of their losses to the extent utilized to reduce
the consolidated tax liability or to the extent the benefits are funded
currently. Subsidiaries receive the benefit of all tax credits. Intercompany tax
balances are settled annually.

Federal income taxes have been computed on a separate return basis in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," which requires income taxes to be accounted for
under the liability method. Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes currently
due plus deferred income taxes related primarily to differences between the
basis of property and equipment due to depreciation differences and to the
application of the purchase method of accounting for financial statement
purposes but not for tax purposes, and nondeductible asset and liability
reserves for tax purposes. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled.
Deferred tax assets are evaluated based on the guidelines for realization and
may be reduced by a valuation allowance.

Industry Concentration -- INSpire's revenues and accounts receivable are
derived primarily from the United States P&C insurance industry.

Research and Development -- All research and development costs incurred
prior to the point at which management believes a project has reached
"technological feasibility" are expensed. Software production costs incurred
subsequent to reaching technological feasibility are capitalized, if material,
and reported at the lower of unamortized cost or net realizable value.
Capitalized costs are amortized over the expected service life of the related
software, generally five to seven years, using the straight-line method. The
cost and related accumulated amortization of projects are written off as they
become fully amortized.

The Company assesses the recoverability of these costs by determining
whether the amortization of the capitalized costs over the remaining life of the
projects can be recovered through undiscounted future operating cash flows.

Cash and Cash Equivalents -- For the purposes of reporting cash flows, cash
and cash equivalents includes investments readily convertible to cash with
remaining maturities at date of purchase of three months or less.

Intangibles and Other Assets -- Goodwill is amortized over a period of 10
years using the straight-line method. Acquired software is amortized over a
period of 5 years using the straight-line method.

Accounts Payable -- Bank overdrafts totalling $265,407 are included in
accounts payable at June 30, 1997.

Financial Instruments -- Under SFAS No. 107, "Disclosure About Fair Value
of Financial Instruments," the Company's financial instruments include cash and
cash equivalents, accounts receivable, accounts payable, amount due to parent
and long-term debt. The Company believes that the carrying amounts of cash and
cash equivalents, accounts receivable, accounts payable, amount due to parent
and long-term debt are a reasonable estimate of their fair value because of the
short-term maturities of such instruments or, in the case of long-term debt,
because of interest rates available to the Company for similar obligations.

Loss Per Share -- Loss per share of common stock of the Company (the
"Common Stock") is computed by dividing net loss by the weighted average number
of common shares outstanding, including common equivalent shares. The weighted
average number of common shares outstanding and common equivalent shares were
7,731,016 in 1995, 1996 and the six months ended June 30, 1997 after giving
effect to the Common Stock dividends paid in May and June 1997. Pursuant to
Securities and Exchange Commission Staff Accounting Bulletin Topic 4D, stock
options granted during the twelve months prior to the date of the initial filing
of the Company's Form S-1 Registration Statement have been included in the
calculation of common equivalent shares using the treasury stock method, as if
they were outstanding for all periods presented. In February 1997, the Financial
Accounting Standards Board (the "FASB") issued SFAS No. 128, "Earnings

F-14
<PAGE> 71

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

per Share." SFAS No. 128 specifies the computation, presentation and disclosure
requirements for loss per share. The impact on loss per share computed using
SFAS No. 128 is immaterial.

Accounting Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those amounts.

Recently Issued Accounting Pronouncements -- SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," requires that long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Impairment is evaluated by comparing future cash flows
(undiscounted and without interest charges) expected to result from the use of
the asset and its eventual disposition to the carrying amount of the asset.
Adoption of SFAS No. 121 during 1996 had no material effect on the Company's
financial position or results of operations.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components, as defined. SFAS No. 130 requires that all items that
must be recognized under accounting standards as components of comprehensive
income be reported in a financial statement displayed with the same prominence
as other financial statements. In addition, SFAS No. 130 requires that an
enterprise classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of a balance sheet. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Management believes that comprehensive
income, as defined by SFAS No. 130, will not differ materially from net loss as
reported in the Consolidated Statements of Operations.

In addition, in June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which requires public
enterprises to report certain financial and descriptive information about
operating segments, as defined, in annual financial statements and selected
information in condensed financial statements for interim periods issued to
shareholders, if practical. SFAS No. 131 is effective for financial statements
for periods beginning after December 15, 1997.

Interim Financial Statements (Unaudited) -- The interim financial
statements presented as of June 30, 1996 and for the six months then ended are
unaudited. With respect to the unaudited interim financial statements, the
Company is of the opinion that all material adjustments, consisting only of
normal recurring adjustments necessary for a fair presentation of the Company's
interim results of operations and financial condition, have been included. The
results of operations for the six months ended June 30, 1996 should not be
regarded as necessarily indicative of the results of operations for any future
period.

F-15
<PAGE> 72

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. ACCOUNTS RECEIVABLE

Accounts receivable is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
----- ---------- -----------
<S> <C> <C> <C>
Accounts receivable -- trade..................... $ -- $1,137,512 $6,597,437
Other............................................ -- 30,636 30,700
----- ---------- ----------
-- 1,168,148 6,628,137
Allowance for doubtful accounts.................. -- -- (211,814)
----- ---------- ----------
-- 1,168,148 6,416,323
Noncurrent -- accounts receivable................ -- -- 207,601
----- ---------- ----------
$ -- $1,168,148 $6,623,924
===== ========== ==========
</TABLE>

No allowance for doubtful accounts was considered necessary by management
as of December 31, 1996.

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Computer equipment........................... $2,169,948 $ 4,084,887 $11,549,496
Office equipment............................. 65,343 335,685 2,032,086
Automobiles.................................. 103,108 68,867 231,186
Leasehold improvements....................... -- 2,464 152,174
---------- ----------- -----------
2,338,399 4,491,903 13,964,942
Accumulated depreciation and amortization.... (18,344) (1,272,011) (7,687,109)
---------- ----------- -----------
$2,320,055 $ 3,219,892 $ 6,277,833
========== =========== ===========
</TABLE>

Depreciation and amortization expense was $33,070 and $786,768 for 1995 and
1996, respectively, and $349,635 and $1,039,786 for the unaudited six months
ended June 30, 1996 and the six months ended June 30, 1997, respectively.

4. RESEARCH AND DEVELOPMENT

Research and development costs were approximately $680,000 for the six
months ended June 30, 1997.

5. INTANGIBLES AND OTHER ASSETS

Intangibles and other assets consist of the following at June 30, 1997:

<TABLE>
<S> <C>
Goodwill, net of accumulated amortization of $289,630....... $ 8,989,110
Acquired software, net of accumulated amortization of
$366,000.................................................. 5,634,000
Cash surrender value of life insurance...................... 369,898
Other....................................................... 85,095
-----------
$15,078,103
===========
</TABLE>

F-16
<PAGE> 73

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. NOTE PAYABLE AND LONG-TERM DEBT

NOTE PAYABLE -- On December 11, 1996, INSpire entered into a note agreement
with a bank. The note bears interest at prime (8.25% at December 31, 1996) and
was repaid on February 1, 1997.

LONG-TERM DEBT -- A summary of long-term debt at June 30, 1997 is as
follows:

<TABLE>
<S> <C>
Bank term note, with interest at prime (8.5% at June 30,
1997) or the London Interbank Offering Rate ("LIBOR")
(7.44% at June 30, 1997), collateralized by all assets of
the Company, payable in quarterly principal installments
of $312,500 plus interest through September 30, 2000, with
final payment due March 12, 2001.......................... $4,687,500
Note payable to bank under a $4 million line of credit which
expires on March 12, 1999, with interest at prime or
LIBOR, collateralized by all assets of the Company.
Borrowings are limited based on a borrowing base
calculation. Interest is due and payable quarterly along
with commitment fees of 0.25% of the unused balance....... 2,500,000
----------
7,187,500
Less current maturities..................................... 1,562,500
----------
$5,625,000
==========
</TABLE>

INSpire's bank term note payable and line of credit agreement, which was
amended July 18, 1997, contains certain restrictive covenants. These covenants
require that the Company meet certain requirements such as maintenance of a
minimum net worth, and restrict additional borrowings, dividends or other
distributions without prior consent of the bank. At June 30, 1997, the Company
was in compliance with the covenants in the note payable and line of credit
agreement.

The following represents the approximate future annual maturities of the
Company's long-term debt obligations at June 30, 1997:

7. INCOME TAXES

Federal income tax benefit (expense) consists of the following components:

<TABLE>
<CAPTION>
PERIOD SIX MONTHS
APRIL 28, 1995 ENDED
THROUGH YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, -------------------------
1995 1996 1996 1997
-------------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Expected tax benefit (expense)........ $ 475,124 $201,388 $ 83,340 $(1,073,345)
Deferred income tax benefit
(expense)........................... (126,500) 62,500 57,500 2,785,000
--------- -------- -------- -----------
$ 348,624 $263,888 $140,840 $ 1,711,655
========= ======== ======== ===========
</TABLE>

F-17
<PAGE> 74

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of expected income tax benefit computed by applying the
federal corporate tax rate of 34% to loss before income taxes to the actual
income taxes is as follows:

<TABLE>
<CAPTION>
PERIOD SIX MONTHS
APRIL 28, 1995 ENDED
THROUGH YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, ------------------------
1995 1996 1996 1997
-------------- ------------ ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Expected federal income tax benefit.... $ 547,605 $264,889 $140,840 $1,553,150
State income taxes, net of federal
income tax benefit................... -- -- -- (108,000)
Difference in book and tax basis of
assets contributed by parent......... (219,356) -- -- --
Goodwill............................... -- -- -- 98,000
Other.................................. 20,375 (1,001) -- 168,505
--------- -------- -------- ----------
$ 348,624 $263,888 $140,840 $1,711,655
========= ======== ======== ==========
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and deferred income tax liabilities
are presented below:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1995 1996 1997
--------- -------- -----------
<S> <C> <C> <C>
Deferred income tax assets:
Current:
Accounts receivable........................ $ -- $ -- $ 90,000
Nondeductible accrued expenses............. -- -- 1,183,000
--------- -------- -----------
1,273,000
Noncurrent:
Net operating loss carryforwards........... 102,000 210,000 --
Nondeductible accrued expenses............. -- -- 447,000
--------- -------- -----------
Total deferred income tax assets...... 102,000 210,000 1,720,000
--------- -------- -----------
Deferred income tax liabilities -- noncurrent:
Property and equipment........................ 228,500 274,000 570,000
Acquired software............................. -- -- 2,072,000
--------- -------- -----------
Total deferred income tax
liabilities......................... 228,500 274,000 2,642,000
--------- -------- -----------
Net deferred income tax liabilities............. $(126,500) $(64,000) $ (922,000)
========= ======== ===========
Represented on the consolidated balance sheet
as:
Current deferred income tax assets............ $ -- $ -- $ 1,273,000
Noncurrent deferred income tax liabilities.... (126,500) (64,000) (2,195,000)
--------- -------- -----------
$(126,500) $(64,000) $ (922,000)
========= ======== ===========
</TABLE>

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the

F-18
<PAGE> 75

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

deferred tax assets are deductible, management believes it is more likely than
not the Company will realize the benefits of these deductible differences.

8. RELATED PARTY TRANSACTIONS

Effective July 1, 1995, the Company entered into an agreement with Millers
Mutual whereby management and administrative services were provided by Millers
Mutual for a monthly fee of $100,000. Effective January 1, 1996, the agreement
was amended to provide for a monthly fee of $200,000 plus a fixed percentage of
INSpire's pretax income, to be determined annually. Total fees in 1995 and 1996
were $600,000 and $3,100,000, respectively. Fees of $1,200,000 were incurred for
each of the six months ended June 30, 1996 (unaudited) and 1997. INSpire, in
turn, provided claims services to Millers Mutual and The Millers Casualty
Insurance Company ("Millers Casualty"), an indirect 99.4% owned subsidiary of
Millers Mutual, for fees ranging from 7.5% to 9.5% of net earned premium by line
of business, as defined in the agreement, excluding the premiums written through
Sun Coast General Insurance Agency, Inc. ("Sun Coast") for Millers Mutual.
Effective December 1, 1996, the agreement was amended to provide that the fees
would be reduced to range from 7.5% to 8.5% of earned premium by line of
business, as defined. The Sun Coast business is processed for a fee of 7.0% of
earned premium. Total outsourcing fees of $3,376,168 and $7,557,261 were earned
in 1995 and 1996, under the terms of the Company's agreements with Millers
Mutual and Millers Casualty. Outsourcing fees of $3,711,630 and $3,161,877 were
earned for the unaudited six months ended June 30, 1996 and the six months ended
June 30, 1997, respectively, under the terms of those agreements. Software and
software services revenues of approximately $442,000 were recognized by INSpire
for services provided to Millers Mutual and Millers Casualty for the six months
ended June 30, 1997. Beginning May 1996, the Company incurred rental expenses,
under a month-to-month agreement with Millers Mutual, totalling $207,121 for
1996 and $49,405 and $157,716 for the unaudited six months ended June 30, 1996
and the six months ended June 30, 1997, respectively. Prior to May 1, 1996, the
Company incurred no rental expense for office space provided by Millers Mutual.
Effective January 1, 1997, INSpire began providing data processing services to
Millers Mutual and Millers Casualty for a fee of 6% of net written premiums
which totalled $2,716,320 for the six months ended June 30, 1997.

9. EMPLOYEE BENEFIT PLANS

Substantially all of INSpire's employees are covered by a defined benefit
pension plan (the "Pension Plan") sponsored by Millers Mutual that provides
retirement death and disability benefits for full-time employees completing at
least 1,000 hours of service. INSpire makes annual contributions to the Pension
Plan equal to the amounts accrued for pension expense, including amortization of
past service cost over 30 years. Contributions to the Pension Plan are
determined by consulting actuaries based upon future periodic payments,
including lump-sum distributions that are attributable under the Pension Plan's
provisions to the service employees have rendered. Benefits are based upon the
average of the employee's highest five consecutive years of compensation during
the ten years of credited service immediately preceding the valuation date. The
actuarial present value of accumulated plan benefits is that amount that results
from applying actuarial assumptions to adjust the accumulated plan benefits to
reflect the time value of money (through discounts for interest) and the
probability of payment (by means of decrements such as for death, disability,
withdrawal, or retirement) between the valuation date and the expected date of
payment. Total expense associated with the Pension Plan was $100,000 during
1995. No expense was incurred relative to the Pension Plan during 1996 or the
six months ended June 30, 1997.

INSpire participates in a defined contribution profit sharing plan
sponsored by Millers Mutual that covers substantially all of its employees (the
"Profit Sharing Plan"). Employees are not required to satisfy any age or service
requirements to become eligible to participate in the Profit Sharing Plan.
INSpire also participates in an executive incentive compensation plan covering
officers sponsored by Millers Mutual. Contributions to these plans are
discretionary and are authorized annually by the Board of Directors.
Participants in the Profit

F-19
<PAGE> 76

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Sharing Plan are permitted to contribute 1% to 12% (not to exceed $9,240 in 1996
and 1995) of their annual compensation on a tax deferred basis. Vesting of
participants' interest in the profit sharing plan's contributions is based upon
length of service. Participants with five or more years of service are fully
vested. Total expense associated with the Profit Sharing Plan was approximately
$30,000 in 1995. There were no contributions made by the Company to the Profit
Sharing Plan in 1996 or for the six months ended June 30, 1997.

10. STOCK OPTION PLAN

The Company adopted the 1997 Stock Option Plan (the "Option Plan") in March
1997, which provides for the grant of incentive and nonqualified options to
purchase up to 2,250,000 shares of Common Stock subject to certain adjustments
as described in the Option Plan. Stock options are issuable only to eligible
directors, officers and employees of the Company.

The per share exercise price of an incentive option may not be less than
the greater of par value or 100% of the fair market value of the Common Stock,
as determined by the Board of Directors, on the date the option is granted.
Incentive options granted to an employee who owns in excess of 10% of the voting
stock of the Company must have an exercise price of at least 110% of the fair
market value of the Common Stock at the date of grant. Of the options granted,
33% are immediately exercisable at the date of grant, 33% become exercisable one
year from the date of grant and the remainder become exercisable two years from
the date of grant. The Board of Directors has approved the grant of certain
additional options effective as of the date of the prospectus for INSpire's
initial public offering. Of such options, except for one officer of the Company,
20% are immediately exercisable at the date of grant and an additional 20% will
become exercisable on each of the first four anniversaries of such date. Of the
options of the officer referred to above, 33% are immediately exercisable at the
date of grant, 33% become exercisable one year from the date of grant and the
remainder become exercisable two years from the date of grant. Options may be
exercised only if the optionholder remains continuously associated with the
Company from the date of grant to the date of exercise, subject to certain
conditions as specified in the Option Plan. An option granted under the Option
Plan cannot be exercised later than ten years from the date of the grant. Any
options that expire unexercised or that terminate upon an optionee's ceasing his
or her association with the Company become available once again for issuance.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model using a risk-free interest rate of 6.1%
and an expected life of two years. No volatility factors of the expected market
price of the Company's Common Stock have been involved because the Company was a
private entity when the options were granted.

The following summarizes the stock option activity under the Option Plan
for the six months ended June 30, 1997:

<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- --------------
<S> <C> <C>
Options granted during the six months ended June 30,
1997................................................. 840,248 $1.30
========= =====
Options available for grant............................ 1,409,752
=========
Exercisable at end of period........................... 277,281
=========
</TABLE>

The weighted average fair value of options granted during the six months ended
June 30, 1997 was $4.85 per share.

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB No. 25"), and related interpretations in
accounting for the Option Plan, and, accordingly, compensation expense of
approximately $3,949,000 was recognized for the six months ended June 30, 1997
since the stock options granted under the terms of the Plan were at an exercise
price that was less than the estimated fair market value assigned to the options
at the date of grant. Had the Company implemented SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company's compensation expense would have
decreased by approximately $126,000 and the Company's pro forma net loss and net
loss per common

F-20
<PAGE> 77

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

share, considering the effects of implementing SFAS No. 123, net of tax effects,
would have been approximately $2.94 million and $0.38, respectively.

11. TRANSACTIONS WITH MAJOR CUSTOMER

In addition to the outsourcing revenues derived from Millers Mutual and
Millers Casualty (see Note 8), one customer accounted for approximately 21% and
18% of revenues for the year ended December 31, 1996 and the six months ended
June 30, 1997, respectively.

12. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Company leases certain office space and equipment
under operating leases and a sublease for periods ranging from one to five
years. Rentals on operating leases (exclusive of real estate taxes, insurance
and other expenses payable under the leases) amounted to approximately
$1,620,000 for the six months ended June 30, 1997. The Company incurred no
significant rental expense in 1995 and 1996. These leases generally contain
optional renewal provisions for one or more periods. Future annual minimum lease
payments for each of the next five years and in the aggregate are:

<TABLE>
<S> <C>
1997........................................................ $ 1,460,250
1998........................................................ 2,837,500
1999........................................................ 2,370,250
2000........................................................ 1,006,000
2001........................................................ 885,800
2002........................................................ 485,000
Thereafter.................................................. 1,162,700
-----------
Total............................................. $10,207,500
===========
</TABLE>

Employment Agreements -- The Company has employment agreements with certain
key officers that provide for minimum annual salaries and benefits aggregating
approximately $1,055,000 and an annual bonus based on the Company's operating
performance.

Other -- In February 1997, the Philadelphia Contributionship for the
Insurance of Houses from Loss by Fire ("PCIHLF") filed a lawsuit (Civil Action
No. 97-CV-1262) against SDS in the United States District Court for the Eastern
District of Pennsylvania. The suit alleges that certain software systems that
SDS sold to PCIHLF in 1995 did not meet PCIHLF's specifications. PCIHLF claims
damages in excess of $1.3 million. In connection with the acquisition of SDS by
INSpire, INSpire and the former SDS shareholders placed $1.5 million of the SDS
purchase price in an escrow account in respect of this claim. INSpire has no
recourse against the former SDS shareholders to the extent that the aggregate
amount of any judgment, settlement and expenses exceeds the amount of the
escrowed funds. SDS filed a counterclaim against PCIHLF for $550,000 for amounts
due under its agreements with PCIHLF. In addition, the Company is involved in
various other legal proceedings arising in the normal course of business.
Management believes the outcome of these matters will not materially affect the
consolidated financial position, results of operations or cash flows of the
Company.

The Company participates in a self-insurance program for certain of its
employees that provides for the payment of employee health claims. The program
provides for specific excess loss reinsurance for aggregate claims greater than
a specified amount for any one claimant. The Company accrues the estimated
liabilities for the ultimate costs of both reported claims and incurred but not
reported claims.

13. SUBSEQUENT EVENTS

In July 1997, in response to an unsolicited offer by the previous owner of
Applied Quoting Systems, Inc. ("AQS"), a wholly owned subsidiary of SDS, the
Company signed a nonbinding letter of intent to sell the stock of such
subsidiary for $2.5 million. For the period from March 12, 1997 (the date of the
SDS acquisition) through June 30, 1997, AQS had revenues of approximately
$1,415,000, net income of

F-21
<PAGE> 78

INSPIRE INSURANCE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

approximately $65,000 and income taxes of approximately $43,000. The income per
common share from the separate operations of AQS had no significant impact on
the computation of the net loss per share of INSpire for the period ended June
30, 1997. Total assets and total liabilities of AQS at June 30, 1997 were
approximately $898,000 and $337,000, respectively.

In July 1997, the Board of Directors approved the termination of the
Company's participation in the Pension Plan described at Note 9. Management
believes that the effects of termination of the Company's participation in the
Pension Plan will be immaterial to INSpire's financial position, results of
operations and cash flows.

Effective July 1, 1997, the Company and Millers Mutual entered into a
benefits administration contract, which replaces the previous management
agreement, pursuant to which Millers Mutual will provide the Company with
certain benefits administration services, including payroll, and the Company
will pay Millers Mutual a service fee of $15,000 per month over a period of
three years.

On July 30, 1997 the Board of Directors adopted the Director Stock Option
Plan ("Director Plan"). The Director Plan provides that each current nonemployee
director be granted options to purchase 2,500 shares of Common Stock as of the
effective date of the initial public offering at an exercise price equal to the
initial public offering price. Such options are immediately exercisable as of
the date of the initial public offering. A total of 50,000 shares has been
reserved for issuance pursuant to the Director Plan.

On July 30, 1997 the Board of Directors adopted the Employee Stock Purchase
Plan ("Stock Purchase Plan"), under which a total of 425,000 shares of Common
Stock has been reserved for issuance. Any employee who has been employed by the
Company for 90 days is eligible to participate in offerings under the Stock
Purchase Plan. The Stock Purchase Plan initially will be implemented by an
offering of 25,000 shares of Common Stock beginning October 1, 1997 and
terminating December 31, 1997. The Stock Purchase Plan will be further
implemented by four annual offerings of Common Stock beginning on January 1 in
each of the years 1998, 1999, 2000 and 2001, and terminating December 31 of each
such year. The maximum number of shares issued in such years will be 100,000 in
1998, and 100,000 plus the number of unissued shares from prior offerings for
each of 1999, 2000 and 2001.

Options granted under the Stock Purchase Plan will give employees the right
to purchase shares of Common Stock, via payroll deductions, at a purchase price
determined pursuant to a formula included in the Stock Purchase Plan. No
employee may be granted options to participate in the Stock Purchase Plan if, as
a result of such grant, such employee would (i) own stock or hold options to
purchase stock possessing 5% or more of the total combined voting power or value
of all classes of stock of the Company or (ii) have rights to purchase stock
under all employee stock purchase plans of the Company that accrue at a rate in
excess of $25,000 in fair market value for any calendar year.

On July 30, 1997 the Board of Directors adopted the Rights Agreement
("Rights Agreement") and authorized and declared a dividend distribution of one
right (a "Right") for each outstanding share of Common Stock of the Company to
Millers Mutual under the terms of the Rights Agreement. One Right will
thereafter be issued for each share of Common Stock that becomes outstanding
between the date of adoption of the Rights Agreement and the earlier of the date
the Rights become exercisable or are redeemed and the termination of the Rights
Agreement. Each Right represents the right to purchase one one-hundredth of a
share of Series A Junior Preferred Stock, par value $1.00 per share, at a price
of $40.00, subject to adjustment. The Rights are exercisable only in the event
that a person or group (with certain exceptions) becomes the beneficial owner of
shares representing 15% or more of the voting power of the Company, or announces
or commences a tender or exchange offer that would result in the acquisition of
such number of shares. The Rights Agreement expires ten years from the date of
adoption.

F-22
<PAGE> 79

INDEPENDENT AUDITORS' REPORT

Board of Directors
Strategic Data Systems, Inc.

We have audited the accompanying consolidated balance sheets of Strategic
Data Systems, Inc. and subsidiary (the "Company") as of December 31, 1995, 1996
and March 11, 1997 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996 and the period January 1, 1997 through March 11, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Strategic Data Systems, Inc.
and subsidiary as of December 31, 1995, 1996 and March 11, 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996 and the period January 1, 1997 through March 11,
1997 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Fort Worth, Texas
July 18, 1997

F-23
<PAGE> 80

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 11,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 528,468 $ 1,515,495 $ 939,762
Accounts receivable -- net........................ 3,608,403 4,750,708 4,755,376
Deferred income taxes............................. 273,000 180,000 343,000
Prepaid expenses and other current assets......... 181,712 166,739 262,217
----------- ----------- -----------
Total current assets...................... 4,591,583 6,612,942 6,300,355
----------- ----------- -----------
Property and equipment, net......................... 3,155,318 2,897,819 3,403,477
Accounts receivable, excluding current portion...... 397,671 367,091 313,355
Software -- net..................................... 2,935,140 2,606,888 2,398,017
Goodwill -- net..................................... 612,106 505,702 484,536
Other assets........................................ 362,012 474,927 491,316
----------- ----------- -----------
TOTAL............................................... $12,053,830 $13,465,369 $13,391,056
=========== =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................. $ 432,686 $ 883,648 $ 914,318
Accrued payroll and compensation.................. 1,069,600 1,002,342 1,033,025
Other accrued expenses............................ 204,257 245,102 187,916
Warranty reserve.................................. 100,292 100,592 197,269
Customer deposits................................. 1,263,419 1,993,242 1,342,100
Income taxes payable.............................. 260,754 78,293 493,096
Current portion of long-term debt................. 688,793 524,699 438,713
----------- ----------- -----------
Total current liabilities................. 4,019,801 4,827,918 4,606,437
----------- ----------- -----------
Long-term debt, excluding current portion........... 2,028,074 1,883,381 1,879,393
Deferred compensation............................... 216,498 311,758 327,635
Deferred income taxes............................... 1,252,000 1,057,000 961,000
Commitments and contingencies (Note 9).............. -- -- --
SHAREHOLDERS' EQUITY:
Common stock, $5.00 stated value; 150,000 shares
authorized; 142,450, 143,950 and 143,950 shares
issued and outstanding in 1995, 1996 and 1997,
respectively................................... 712,250 719,750 719,750
Additional paid-in-capital........................ 1,705,094 1,847,594 1,847,594
Retained earnings................................. 3,057,357 3,755,212 3,986,491
----------- ----------- -----------
5,474,701 6,322,556 6,553,835
Less treasury stock (26,936 shares, at cost)...... 937,244 937,244 937,244
----------- ----------- -----------
4,537,457 5,385,312 5,616,591
----------- ----------- -----------
TOTAL............................................... $12,053,830 $13,465,369 $13,391,056
=========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-24
<PAGE> 81

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS PERIOD
YEAR ENDED DECEMBER 31, ENDED JANUARY 1, 1997
--------------------------------------- JUNE 30, THROUGH
1994 1995 1996 1996 MARCH 11, 1997
----------- ----------- ----------- ------------ ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Software services................. $ 9,041,115 $ 9,078,073 $10,036,191 $5,197,143 $2,384,658
Software.......................... 4,312,881 9,068,431 8,987,395 4,101,793 2,455,628
Hardware sales and commissions.... 2,245,134 2,399,537 3,680,048 611,091 463,108
Other............................. 405,396 615,234 960,027 462,320 108,912
----------- ----------- ----------- ---------- ----------
Total revenues............ 16,004,526 21,161,275 23,663,661 10,372,347 5,412,306
----------- ----------- ----------- ---------- ----------
EXPENSES:
Salaries and compensation......... 11,810,524 13,088,072 14,505,432 6,889,904 3,476,165
Depreciation and amortization..... 2,157,093 1,878,973 1,826,826 924,322 411,266
Cost of hardware sold............. 1,862,169 1,978,836 2,698,673 477,564 383,450
Occupancy costs................... 1,374,230 1,379,332 1,565,833 733,890 405,663
Other............................. 1,830,598 1,666,854 2,032,098 835,762 372,223
----------- ----------- ----------- ---------- ----------
Total expenses............ 19,034,614 19,992,067 22,628,862 9,861,442 5,048,767
----------- ----------- ----------- ---------- ----------
OPERATING INCOME (LOSS)............. (3,030,088) 1,169,208 1,034,799 510,905 363,539
OTHER INCOME (EXPENSE):
Interest income................... 158,297 160,959 284,387 120,149 56,987
Interest expense.................. (292,491) (240,481) (207,029) (101,230) (33,272)
Gain (loss) on sale of property
and equipment.................. 1,520 (2,403) 34,698 25
----------- ----------- ----------- ---------- ----------
Total other income
(expense)............... (132,674) (81,925) 112,056 18,919 23,740
----------- ----------- ----------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
(BENEFIT)......................... (3,162,762) 1,087,283 1,146,855 529,824 387,279
INCOME TAXES (BENEFIT).............. (1,253,000) 429,000 449,000 233,000 156,000
----------- ----------- ----------- ---------- ----------
NET INCOME (LOSS)................... $(1,909,762) $ 658,283 $ 697,855 $ 296,824 $ 231,279
=========== =========== =========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-25
<PAGE> 82

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
PERIOD JANUARY 1, 1997 THROUGH MARCH 11, 1997

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK TOTAL
------------------ PAID-IN RETAINED ------------------ SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
------- -------- ---------- ----------- ------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994............. 139,594 $697,970 $1,526,110 $ 4,308,836 26,936 $(937,244) $ 5,595,672
Net loss........................... (1,909,762) (1,909,762)
Issuance of common stock........... 2,856 14,280 178,984 -- -- -- 193,264
------- -------- ---------- ----------- ------ --------- -----------
Balance, December 31, 1994........... 142,450 712,250 1,705,094 2,399,074 26,936 (937,244) 3,879,174
Net income......................... -- -- -- 658,283 -- -- 658,283
------- -------- ---------- ----------- ------ --------- -----------
Balance, December 31, 1995........... 142,450 712,250 1,705,094 3,057,357 26,936 (937,244) 4,537,457
Net income......................... 697,855 -- -- 697,855
Issuance of common stock........... 1,500 7,500 142,500 -- -- -- 150,000
------- -------- ---------- ----------- ------ --------- -----------
Balance, December 31, 1996........... 143,950 719,750 1,847,594 3,755,212 26,936 (937,244) 5,385,312
Net income......................... 231,279 231,279
------- -------- ---------- ----------- ------ --------- -----------
Balance, March 11, 1997.............. 143,950 $719,750 $1,847,594 $ 3,986,491 26,936 $(937,244) $ 5,616,591
======= ======== ========== =========== ====== ========= ===========
</TABLE>

See notes to consolidated financial statements.

F-26
<PAGE> 83

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS PERIOD
YEAR ENDED DECEMBER 31, ENDED JANUARY 1, 1997
--------------------------------------- JUNE 30, THROUGH MARCH 11,
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................ $(1,909,762) $ 658,283 $ 697,855 $ 296,824 $ 231,279
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization.............. 2,157,093 1,878,973 1,826,826 924,322 411,266
Gain (loss) on sales of property and
equipment................................ (1,520) 2,403 (34,701) -- (25)
Deferred income taxes...................... (563,957) 437,768 (102,000) -- (259,000)
Provision for uncollectible accounts
receivable............................... 277,250 235,900 2,000 66,000 21,484
Change in operating assets and liabilities:
Accounts receivable...................... (950,268) 632,474 (1,113,726) 137,306 (344,416)
Income taxes recoverable................. (357,709) 357,709 -- -- --
Prepaid expenses and other current
assets................................. (31,517) (2,818) 14,973 (21,157) (95,478)
Other assets............................. (82,333) (107,624) (112,916) 67,999 (16,389)
Accounts payable......................... (912,410) 16,811 450,962 (15,939) 30,670
Accrued payroll and compensation......... 952,909 116,691 (67,258) (28,365) 30,683
Other accrued expenses................... 204,283 (26) 40,845 (6,216) (57,186)
Warranty reserve......................... 103,270 (2,978) 300 (260,630) 468,677
Customer deposits........................ 2,441,214 (2,329,121) 729,823 (91,344) (651,142)
Income taxes payable..................... (237,120) 260,754 (182,461) (313,700) 414,803
Deferred compensation.................... 71,771 82,855 95,260 38,106 15,877
----------- ----------- ----------- --------- ----------
Net cash provided by operating
activities........................... 1,161,194 2,238,054 2,245,782 793,206 201,103
----------- ----------- ----------- --------- ----------
INVESTING ACTIVITIES:
Proceeds from sales of property and
equipment.................................. 1,520 -- 41,750 -- --
Purchases of property and equipment.......... (853,089) (362,546) (582,868) (265,371) (686,862)
Development of software...................... (1,353,750) (671,000) (558,850) (360,000)
----------- ----------- ----------- --------- ----------
Net cash used in investing
activities........................... (2,205,319) (1,033,546) (1,099,968) (625,371) (686,862)
----------- ----------- ----------- --------- ----------
FINANCING ACTIVITIES:
Net borrowings (repayment) from line of
credit..................................... 480,000 (480,000) -- -- --
Proceeds from issuance of long-term debt..... 500,000 -- 409,817 -- --
Repayments of long-term debt................. (407,004) (410,409) (718,604) (312,925) (89,974)
Proceeds (repayments) from policy loan
against cash surrender value of life
insurance policy........................... 75,000 (75,000) -- -- --
Issuance of common stock..................... 193,264 -- 150,000 -- --
----------- ----------- ----------- --------- ----------
Net cash provided by (used in)
financing activities................. 841,260 (965,409) (158,787) (312,925) (89,974)
----------- ----------- ----------- --------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................. (202,865) 239,099 987,027 (145,090) (575,733)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD....................................... 492,234 289,369 528,468 528,468 1,515,495
----------- ----------- ----------- --------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..... $ 289,369 $ 528,468 $ 1,515,495 $ 383,378 $ 939,762
=========== =========== =========== ========= ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid................................ $ 293,000 $ 240,000 $ 208,000 $ 97,200 $ 33,300
=========== =========== =========== ========= ==========
Income taxes paid (refunded)................. $ (94,000) $ (627,000) $ 734,000 $ 320,000 $ --
=========== =========== =========== ========= ==========
</TABLE>

See notes to consolidated financial statements.

F-27
<PAGE> 84

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations -- Strategic Data Systems, Inc. ("SDS") and its
wholly-owned subsidiary, Applied Quoting Systems, Inc., develop and market
software and software services to the property and casualty ("P&C") insurance
industry. SDS's software includes policy and claims administration systems, as
well as systems that increase the productivity of insurers by automating certain
functions, such as workflow management, underwriting rules and guidelines,
document production and rating algorithms. SDS's software services include
installation, customization, conversion and maintenance of these systems to meet
customer specifications. SDS also sells computer hardware and related equipment
and manages data centers. SDS sells its products directly to the customer. The
majority of sales are in North America.

Principles of Consolidation -- The consolidated financial statements
include the financial statements of SDS and its wholly-owned subsidiary. All
significant intercompany balances and transactions have been eliminated in
consolidation.

Revenue Recognition -- Initial installations of software systems generally
include a one-time licensing fee and a contract for the installation and
customization of the system to meet the customer's specifications, which SDS
bills at an hourly rate. Amounts charged for the initial license and the
installation and customization of systems are recognized as revenue during the
installation period in proportion to the hours expended for installation
compared to the total hours projected for installation. In other instances,
revenues are recognized based on performance milestones specified in the
contract. SDS recognizes the annual fee charged for maintenance of the
customer's system as revenue as hours are expended over the maintenance contract
period. Revenues from computer hardware and equipment sales are recognized when
SDS receives notification that the equipment has been shipped by the
manufacturer and title has passed to the customer. Changes in estimates of
percentage of completion or losses, if any, associated with software related
revenue activities are recognized in the period in which they are determined.

An annual fee is charged for maintenance of the customer's system and is
recognized as revenue as hours are expended over the maintenance contract
period. Losses, if any, are recognized in the period in which they are
determined.

Computer hardware and equipment sales are recognized when SDS receives
notification that the equipment has been shipped by the manufacturer to the
customer.

Depreciation -- Depreciation of property and equipment is computed using
the straight-line method over their estimated useful lives. The range of the
useful lives of the various classes of assets is 3 to 31.5 years. Leasehold
improvements are amortized over the lease term or the estimated useful life,
whichever is less.

Income Taxes -- Federal income taxes have been computed in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires income taxes to be accounted for under the liability
method. Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus deferred
income taxes related primarily to differences between the basis of property and
equipment due to depreciation differences and to the application of the purchase
method of accounting for financial statement purposes but not for tax purposes,
and nondeductible asset and liability reserves for tax purposes. The deferred
tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred tax assets are evaluated based on
the guidelines for realization and may be reduced by a valuation allowance.

Research and Development -- All research and development costs incurred
prior to the time management believes a project has reached "technological
feasibility" are expensed. Software production costs incurred subsequent to
reaching technological feasibility are capitalized and reported at the lower of
unamortized cost or net realizable value. Capitalized costs are amortized over
the expected service life of the

F-28
<PAGE> 85

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

related software, generally five to seven years using the straight-line method.
The cost and related accumulated amortization of projects are written off as
they become fully amortized.

SDS assesses the recoverability of these costs by determining whether the
amortization of the capitalized costs over the remaining life of the projects
can be recovered through undiscounted future operating cash flows.

Financial Instruments -- SDS's financial instruments under Statement of
Financial Accounting Standards No. 107, "Disclosure About Fair Value of
Financial Instruments," include cash and cash equivalents, accounts receivable,
accounts payable and long-term debt. SDS believes that the carrying amounts of
cash and cash equivalents, accounts receivable, accounts payable and long-term
debt are a reasonable estimate of their fair value because of the short-term
maturities of such instruments or, in the case of long-term debt, because of
interest rates available to SDS for similar obligations on such long-term debt.

Goodwill -- Goodwill represents the excess of the cost over the estimated
fair value of the net assets acquired and is amortized using the straight-line
method over a period of ten years.

Recently Issued Accounting Pronouncements -- Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Impairment is
evaluated by comparing future cash flows (undiscounted and without interest
charges) expected to result from the use of the asset and its eventual
disposition to the carrying amount of the asset.

Interim Financial Statements (Unaudited) -- The interim financial
statements presented as of June 30, 1996 and for the six months then ended are
unaudited. With respect to the unaudited interim financial statements, SDS is of
the opinion that all material adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation of SDS's interim results of
operations and financial condition, have been included. The results of
operations for the six months ended June 30, 1996 should not be regarded as
necessarily indicative of the results of operations for any future period.

2. ACCOUNTS RECEIVABLE

Accounts receivable is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 11,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Accounts receivable -- trade................... $3,991,355 $4,961,126 $4,987,278
Allowance for doubtful accounts................ (382,952) (210,418) (231,902)
---------- ---------- ----------
3,608,403 4,750,708 4,755,376
Noncurrent -- accounts receivable.............. 397,671 367,091 313,355
---------- ---------- ----------
$4,006,074 $5,117,799 $5,068,731
========== ========== ==========
</TABLE>

F-29
<PAGE> 86

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 11,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Land........................................... $ 150,000 $ 150,000 $ 150,000
Land improvements.............................. 217,276 217,276 217,276
Building....................................... 1,502,574 1,502,574 1,502,576
Computer equipment............................. 4,794,462 5,251,033 5,412,021
Office equipment............................... 1,361,324 1,426,933 1,922,545
Automobiles.................................... 303,326 126,784 126,784
Leasehold improvements......................... 80,154 80,154 105,322
---------- ---------- ----------
8,409,116 8,754,754 9,436,524
Accumulated depreciation and amortization...... (5,253,798) (5,856,935) (6,033,047)
---------- ---------- ----------
$3,155,318 $2,897,819 $3,403,477
========== ========== ==========
</TABLE>

Depreciation and amortization expense was approximately $1,146,000,
$1,030,000 and $833,000 in 1994, 1995 and 1996, respectively, and $432,000 and
$152,000 respectively for the unaudited six months ended June 30, 1996 and the
period from January 1, 1997 through March 11, 1997.

4. RESEARCH AND DEVELOPMENT

The total amount amortized for the capitalized computer software was
approximately $905,000, $742,000 and $887,000 in 1994, 1995 and 1996,
respectively. In addition, the total amortization of capitalized software was
$439,000 and $209,000, respectively, for the unaudited six-month period ended
June 30, 1996 and the period January 1, 1997 through March 11, 1997.

Research and development costs, including amortization expense, were
approximately $4,587,000, $3,581,000 and $3,783,000 in 1994, 1995 and 1996,
respectively.

In addition, total research and development costs were approximately
$1,900,000 and $474,000, respectively, for the unaudited six months ended June
30, 1996 and the period January 1, 1997 through March 11, 1997.

Software -- net consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 11,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Software costs.............................. $ 4,435,161 $ 4,994,011 $ 4,994,011
Accumulated amortization.................... (1,500,021) (2,387,123) (2,595,994)
----------- ----------- -----------
$ 2,935,140 $ 2,606,888 $ 2,398,017
=========== =========== ===========
</TABLE>

5. GOODWILL

Goodwill -- net consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 11,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Goodwill....................................... $1,078,508 $1,078,507 $1,078,507
Accumulated amortization....................... (466,402) (572,805) (593,971)
---------- ---------- ----------
$ 612,106 $ 505,702 $ 484,536
========== ========== ==========
</TABLE>

F-30
<PAGE> 87

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. DEBT

A summary of long-term debt is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 11,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Mortgage note payable, interest at 7.37%, due
in equal monthly installments of principal
and interest of $17,000, with the final
payment due on January 20, 2001.............. $1,748,223 $1,672,670 $1,658,563
Computer note payable, interest at 6.75%, due
in equal monthly installments of principal
and interest of $23,931, with the final
payment due on December 27, 1996............. 278,054 -- --
Computer note payable, interest at 8.35%, due
in equal monthly installments of principal
and interest of $18,700, with the final
payment due on September 21, 1997............ 291,665 124,997 97,219
Treasury stock purchase note payable, interest
at 7.25%, due in equal monthly installments
of principal and interest of $4,978, with the
final payment due on December 27, 1998....... 166,156 111,639 103,049
Computer note payable with total availability
of $600,000, interest payable at prime plus
1.0%, due in monthly installments of
principal sufficient to amortize the
outstanding balance over a 36-month period,
and interest with the final payment due on
January 31, 1999............................. 143,289 437,127 397,628
Second mortgage note payable, interest at 7.0%,
due in equal annual installments of principal
and interest of $34,097 with the final
payment due on November 1, 1998.............. 89,480 61,647 61,647
---------- ---------- ----------
2,716,867 2,408,080 2,318,106
Less current maturities........................ 688,793 524,699 438,713
---------- ---------- ----------
$2,028,074 $1,883,381 $1,879,393
========== ========== ==========
</TABLE>

The mortgage note payable is collateralized by real estate and
substantially all other assets of SDS. In 1995, the final payment for the
mortgage note payable was extended from January 20, 1996 to January 20, 2001.
The computer notes payable are collateralized by the computer equipment of SDS.
The treasury stock purchase note payable is collateralized by the accounts
receivable of SDS. The second mortgage note is collateralized by a purchase
money mortgage lien pursuant to the terms of the note.

F-31
<PAGE> 88

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following represents the approximate future annual maturities for SDS's
long-term debt obligations:

<TABLE>
<CAPTION>
MARCH 11,
1997
----------
<S> <C>
Year Ended March 11:
1997...................................................... $ 438,713
1998...................................................... 380,107
1999...................................................... 96,726
2000...................................................... 104,101
2001...................................................... 1,298,459
----------
$2,318,106
==========
</TABLE>

7. INCOME TAXES

Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
SIX MONTHS PERIOD
YEAR ENDED DECEMBER 31, ENDED JANUARY 1, 1997
---------------------------------- JUNE 30, THROUGH MARCH 11,
1994 1995 1996 1996 1997
----------- -------- --------- ----------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal......................... $ (689,000) $ (9,000) $ 504,000 $212,000 $ 330,000
State........................... -- -- 47,000 21,000 85,000
----------- -------- --------- -------- ---------
Total current........... (689,000) (9,000) 551,000 233,000 415,000
----------- -------- --------- -------- ---------
Deferred:
Federal......................... (407,000) 372,000 (132,000) (15,000) $(221,000)
State........................... (157,000) 66,000 30,000 15,000 (38,000)
----------- -------- --------- -------- ---------
Total deferred.......... (564,000) 438,000 (102,000) -- (259,000)
----------- -------- --------- -------- ---------
$(1,253,000) $429,000 $ 449,000 $233,000 $ 156,000
=========== ======== ========= ======== =========
</TABLE>

A reconciliation of expected income taxes computed by applying the federal
corporate tax rate of 34% to income (loss) before income taxes to actual income
taxes is as follows:

<TABLE>
<CAPTION>
PERIOD
SIX MONTHS JANUARY 1, 1997
YEAR ENDED DECEMBER 31, ENDED THROUGH
--------------------------------------- JUNE 30, MARCH 11,
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Expected federal income
taxes (benefit)........... $(1,075,000) $ 370,000 $ 390,000 $180,000 $132,000
State income taxes, net of
federal income tax
(benefit)................. (156,000) 45,000 53,000 32,000 18,000
Goodwill.................... 36,000 36,000 36,000 18,000 7,000
Research and development
credit.................... (80,000) (47,000) (63,000) (25,000) --
Other, net.................. 22,000 25,000 33,000 28,000 (1,000)
----------- ----------- ----------- -------- --------
$(1,253,000) $ 429,000 $ 449,000 $233,000 $156,000
=========== =========== =========== ======== ========
</TABLE>

F-32
<PAGE> 89

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and deferred income tax liabilities
are presented below:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 11,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Deferred income tax assets:
Current:
Accounts receivable..................... $ 150,000 $ 81,000 $ 90,000
Nondeductible accrued expenses.......... 123,000 99,000 253,000
----------- ----------- ----------
273,000 180,000 343,000
----------- ----------- ----------
Noncurrent:
Deferred compensation................... 85,000 122,000 128,000
Research and development credit
carryforward.......................... 32,000 -- --
Net operating loss carryforwards........ 61,000 -- --
----------- ----------- ----------
178,000 122,000 128,000
----------- ----------- ----------
Total deferred income tax assets... 451,000 302,000 471,000
----------- ----------- ----------
Deferred income tax liabilities --noncurrent:
Property and equipment..................... 185,000 162,000 154,000
Software costs............................. 1,245,000 1,017,000 935,000
----------- ----------- ----------
Total deferred income tax
liabilities...................... 1,430,000 1,179,000 1,089,000
----------- ----------- ----------
Net deferred income tax liabilities.......... $ (979,000) $ (877,000) $ (618,000)
=========== =========== ==========
Represented on the consolidated balance sheet
as:
Current deferred income tax assets......... $ 273,000 $ 180,000 $ 343,000
Noncurrent deferred income tax
liabilities............................. (1,252,000) (1,057,000) (961,000)
----------- ----------- ----------
$ (979,000) $ (877,000) $ (618,000)
=========== =========== ==========
</TABLE>

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes it is
more likely than not SDS will realize the benefits of these deductible
differences.

8. EMPLOYEE BENEFIT PLANS

SDS sponsors a Profit-Sharing Plan qualified under Section 401(k) of the
Internal Revenue Code of 1986 covering employees who meet minimum service
requirements and who elect to participate. Participants' contributions are
voluntary. SDS made contributions of $103,750, $135,000 and $200,000 to the Plan
in 1994, 1995 and 1996, respectively. Total expenses recognized for the
unaudited six months ended June 30, 1996 were approximately $105,000. In
addition, contributions of $70,000 were recognized for the period from January
1, 1997 through March 11, 1997.

SDS has a supplemental retirement agreement with a key employee providing
for payments over twenty years commencing upon the earlier of retirement,
termination or death. The agreement has a vesting arrangement 20% per year
pursuant to which the employee will become fully vested in 1997 or the earlier
of

F-33
<PAGE> 90

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

permanent disability, death or change in control of SDS, as defined. SDS is the
owner and beneficiary of insurance policies to provide a portion of the funding
of this agreement. The total expense related to the agreement was approximately
$72,000, $83,000, and $95,000 for 1994, 1995 and 1996, respectively. Total
expense related to the agreement for the unaudited six-month period ended June
30, 1996 and the period January 1, 1997 through March 11, 1997 was $38,000 and
$16,000, respectively.

SDS has an incentive compensation plan for certain key employees.
Participants in the plan may receive cash payments or stock contingent upon SDS
exceeding certain pretax earnings levels over a rolling four-year earnout period
as determined by the Board of Directors. If a participant terminates employment
during an earnout period, the participant will not be entitled to any
compensation under the plan. If a change in control, as defined, occurs during
an earnout period, the earnout period is deemed to be completed and all payments
earned become due. No provision was required for the years ended December 31,
1994, 1995 and 1996 and the unaudited six-month period ended June 30, 1996 and
the period January 1, 1997 through March 11, 1997.

In 1996, SDS paid a bonus to a senior executive in an amount sufficient to
fund his purchase from SDS of 1,500 shares of SDS common stock at a price per
share of $100, plus an amount equal to the federal income taxes incurred by such
executive as a result of such bonus. The purchase was made by the executive
pursuant to a purchase right granted to him by SDS in 1989, entitling him to
purchase at fair market value, as determined by the Board of Directors, up to
4,200 shares of SDS common stock upon the attainment of certain performance
goals or discretionary approval by the Board of Directors. As of December 31,
1996, no shares remained available for purchase pursuant to this arrangement.

9. COMMITMENTS AND CONTINGENCIES

Operating Leases -- SDS maintains noncancellable operating leases on
various office facilities, vehicles and computers. These leases generally
contain optional renewal provisions for one or more periods. Rental expense was
approximately $429,000, $451,000 and $530,000 in 1994, 1995 and 1996,
respectively, and $246,000 and $142,000 for the unaudited six months ended June
30, 1996 and the period January 1, 1997 through March 11, 1997.

The future annual minimum lease payments are as follows:

<TABLE>
<CAPTION>
MARCH 11,
1997
-----------
<S> <C>
Year Ending December 31:
1997...................................................... $ 456,000
1998...................................................... 564,000
1999...................................................... 364,000
2000...................................................... 280,000
2001...................................................... 285,000
Thereafter................................................ 153,000
----------
$2,102,000
==========
</TABLE>

The future annual minimum rental revenues to be received under
noncancellable subleases (with initial or remaining lease terms in excess of one
year) as of December 31, 1996 were $67,000 for 1997 and $81,000 for 1998.

F-34
<PAGE> 91

STRATEGIC DATA SYSTEMS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

this claim. INSpire has no recourse against the former SDS shareholders to the
extent that the aggregate amount of any judgment, settlement and expenses
exceeds the amount of the escrowed funds. SDS filed a counterclaim against
PCIHLF for $550,000 for amounts due under its agreements with PCIHLF. There can
be no assurance with respect to the outcome of this lawsuit.

SDS participates in a self-insurance program that provides for the payment
of employee health claims. The program provides for specific excess loss
reinsurance for aggregate claims greater than a specified amount for any one
claimant. SDS accrues the estimated liabilities for the ultimate costs of both
reported claims and incurred but not reported claims.

10. SUBSEQUENT EVENTS

On February 18, 1997, SDS's shareholders executed a definitive agreement
with INSpire whereby INSpire agreed to acquire SDS for an aggregate purchase
price of approximately $18.0 million plus assumed indebtedness of approximately
$650,000, subject to satisfactory resolution of certain matters. In addition,
INSpire and the former shareholders of SDS placed into escrow $1.0 million of
the purchase price in respect of certain contingent liabilities and $1.5 million
of the purchase price in escrow in respect of the PCIHLF lawsuit described in
Note 9. The transaction was consummated March 12, 1997.

On March 12, 1997, an affiliate of certain officers of SDS purchased the
land and improvements comprising SDS's administrative home office for the
assumption of debt in the amount of $1.8 million. Total gain from the sale was
approximately $225,000.

In March 1997, SDS terminated its supplemental retirement agreement with a
key employee, described in Note 8. SDS entered into an employment agreement with
such employee pursuant to which SDS will pay to such employee $40,000 per year
during the twenty-year period commencing January 1, 1999 and ending December 31,
2018.

In March 1997, SDS terminated its incentive compensation plan for certain
key employees, described in Note 8.

F-35
<PAGE> 92

(This page intentionally left blank)
<PAGE> 93

(This page intentionally left blank)
<PAGE> 94

(This page intentionally left blank)
<PAGE> 95

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
SDS Acquisition....................... 14
Use of Proceeds....................... 14
Dividend Policy....................... 15
Dilution.............................. 16
Capitalization........................ 17
Selected Consolidated Financial Data
of INSpire.......................... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of INSpire............ 20
Selected Consolidated Financial Data
of SDS.............................. 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of SDS................ 26
Business.............................. 28
Management............................ 37
Principal and Selling Shareholders.... 42
Certain Transactions.................. 42
Description of Capital Stock.......... 45
Shares Eligible for Future Sale....... 50
Underwriting.......................... 51
Legal Matters......................... 53
Experts............................... 53
Available Information................. 54
Financial Statements.................. F-1
</TABLE>

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================

======================================================

5,000,000 SHARES

[INSPIRE INSURANCE SOLUTIONS, INC. LOGO]

COMMON STOCK

----------------------------
P R O S P E C T U S
----------------------------

RAYMOND JAMES
& ASSOCIATES, INC.

SOUTHWEST SECURITIES

, 1997

======================================================
<PAGE> 96

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses in connection with the issuance and distribution of
the securities being registered, other than underwriting discounts and
commissions are set forth in the following table. Millers Mutual, as a selling
security holder, and the Company shall pay the estimated expenses of issuance
and distribution in proportion to the respective number of shares sold by them
in the offering. Each amount, except for the SEC and NASD fees, is estimated.

<TABLE>
<S> <C>
SEC registration fees....................................... $ 19,167
NASD filing fees............................................ $ 7,000
Nasdaq National Market application and listing fees......... $ 50,000
Transfer agents' and registrar's fees and expenses.......... $ 15,000
Printing and engraving expenses............................. $ 175,000
Legal fees and expenses..................................... $ 200,000
Accounting fees and expenses................................ $ 200,000
Representatives' advisory fee............................... $ 300,000
Blue sky fees and expenses.................................. $ 7,500
Miscellaneous............................................... $ 26,333
----------
Total.................................................. $1,000,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company, a Texas corporation, is empowered by Article 2.02-1 of the
Texas Business Corporation Act (the "TBCA"), subject to the procedures and
limitations stated therein, to indemnify certain persons, including any person
who was, is or is threatened to be made a named defendant or respondent in a
threatened, pending, or completed action, suit or proceeding because the person
is or was a director or officer, against judgments, penalties (including excise
and similar taxes), fines, settlements and reasonable expenses (including court
costs and attorneys' fees) actually incurred by the person in connection with
the threatened, pending, or completed action, suit or proceeding. The Company is
required by Article 2.02-1 to indemnify a director or officer against reasonable
expenses (including court costs and attorneys' fees) incurred by him in
connection with a threatened, pending, or completed action, suit or proceeding
in which he is a named defendant or respondent because he is or was a director
or officer if he has been wholly successful, on the merits or otherwise, in the
defense of the action, suit or proceeding. Article 2.02-1 provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under the corporation's
articles of incorporation or any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise. The Restated Articles of Incorporation
and Bylaws of the Company provide for indemnification by the Company of its
directors and officers to the fullest extent permitted by the TBCA. In addition,
the Company has, pursuant to Article 1302-7.06 of the Texas Miscellaneous
Corporation Laws Act, provided in its Restated Articles of Incorporation that,
to the fullest extent permitted by the Texas Miscellaneous Corporation Laws Act,
a director of the Company shall not be liable to the Company or its shareholders
for monetary damages for an act or omission in a director's capacity as director
of the Company.

Furthermore, the Company has entered into individual indemnification
agreements with each director of the Company that contractually obligate the
Company to provide to the directors indemnification for liabilities they may
incur in the performance of their duties and insurance or self-insurance in lieu
thereof. The form of such indemnification agreements with a schedule of director
signatories is filed as Exhibit 10.11 hereto.

The Underwriting Agreement among the Company, the Selling Shareholder and
the Underwriters provides for the indemnification by the Underwriters of the
Company, certain of its officers and any controlling person against any
liabilities and expenses incurred by any of them in certain stated proceedings
and under certain stated conditions.

II-1
<PAGE> 97

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since its inception in April 1995, the Company issued and sold the
following unregistered securities:

(1) The Company initially issued 100 shares of Common Stock to Millers
Mutual in April 1995 in exchange for $1,000. This issuance was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act").

(2) The Company declared and paid a stock dividend of 64,900 shares of
Common Stock in March 1997. The Company also declared and paid a stock
dividend of 6,935,000 shares of Common Stock in June 1997. The Company
issued rights to its sole shareholder under the Company's Shareholder
Rights Agreement on July 30, 1997. These issuances were not a "sale" under
the Securities Act.

(3) From March 12, 1997 through May 2, 1997, the Company granted
nonstatutory options to purchase an aggregate of 840,248 shares of Common
Stock to employees and officers of the Company under its 1997 Stock Option
Plan at an exercise price of $1.30 per share. These options vest over a
period of time following their respective dates of grant. These issuances
were exempt from registration under Section 4(2) of, and Rule 701
promulgated under, the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

II-2
<PAGE> 98

<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBITS
------- --------
<C> <S>
10.8* Policy Life Cycle Services Agreement, effective as of August
15, 1996, by and among the Company, Blanch Wholesale
Insurance Services, Inc., and Blanch Insurance Services,
Inc.
10.9* Form of Amendment No. 1 to Policy Life Cycle Services
Agreement, effective as of August 15, 1996.
10.10* Administrative Services Agreement, effective as of March 12,
1996, by and among State Corporation Commission of the
Commonwealth of Virginia as Deputy Receiver for HOW
Insurance Company, Home Warranty Corporation, and Home
Owners Warranty Corporation, In Receivership, and the
Company.
10.11* Form of Indemnification Agreement with a schedule of
director signatories.
10.12* Employment Agreement, effective as of July 1, 1997, by and
between the Company and F. George Dunham, III.
10.13* Employment Agreement, dated and effective as of March 12,
1997, by and between SDS and Stuart H. Warrington.
10.14* Employment Agreement, dated and effective as of March 12,
1997, by and between SDS and Robert K. Agazzi.
10.15* Building Lease, dated March 12, 1997, between SDS and
Riverview Building, LLC.
10.16* Loan Agreement, between the Company and NationsBank of
Texas, N.A., dated March 12, 1997.
10.17* Security Agreement, dated March 12, 1997, between the
Company and NationsBank of Texas, N.A.
10.18* Security Agreement, dated March 12, 1997, between SDS and
NationsBank.
10.19* Security Agreement, dated March 12, 1997, between AQS and
NationsBank.
10.20* Pledge Agreement, dated March 12, 1997, between the Company
and NationsBank of Texas, N.A.
10.21* Pledge Agreement dated March 12, 1997, between SDS and
NationsBank.
10.22* Guaranty of SDS dated March 12, 1997.
10.23* Guaranty of AQS dated March 12, 1997.
10.24* Form of License Agreement.
10.25* Form of System Support Agreement.
10.26* Form of Implementation Support Agreement.
10.27* Form of Accelerated Enhancement Plan Agreement.
10.28* Amended and Restated 1997 Stock Option Plan.
10.29* Form of Stock Option Agreement.
10.30 Consolidated Federal Income Tax Allocation Agreement
effective January 1, 1994 by and between the Company and
Millers Mutual, as amended by Addendum No. 1 and Addendum
No. 2 thereto.
10.31* Form of Policy Life Cycle Services Agreement, effective as
of May 1, 1997, by and between the Company and Millers
Casualty.
10.32* Form of Claims Life Cycle Services Agreement, effective as
of June 1, 1997, by and between the Company and Millers
Casualty.
10.33* Form of Employment Agreement, effective as of July 1, 1997,
by and between the Company and Terry G. Gaines.
</TABLE>

II-3
<PAGE> 99

<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBITS
- ------------------------- ------------------------------------------------------------------------------------------
<C> <S>
10.34* Form of Employment Agreement, effective as of July 1, 1997, by and between the Company and
Ronald O. Lynn.
10.35* Form of Employment Agreement, effective as of July 1, 1997, by and between the Company and
Jeffrey W. Robinson.
10.36* Director Stock Option Plan.
10.37* Form of Director Stock Option Agreement.
10.38* Employee Stock Purchase Plan.
10.39* Claims Administration Agreement, effective April 1, 1997, by and between the Company and
the Specialty Personal Lines Division of Millers Mutual.
10.40 Form of Management Agreement, effective as of January 1, 1996, by and between the Company
and Millers Mutual.
10.41 Service Contract, effective as of January 1, 1996, by and between the Company, Millers
Mutual and Millers Casualty.
10.42 Form of Service Contract, effective as of December 1, 1996, by and between the Company,
Millers Mutual and Millers Casualty.
10.43 Form of Information Services Contract, effective as of October 1, 1996, by and between the
Company, Millers Mutual and Millers Casualty.
11 Statement regarding Computation of Per Share Earnings.
16* Letter regarding Change in Certifying Accountant.
21* Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP regarding INSpire report.
23.2 Consent of Deloitte & Touche LLP regarding SDS report.
23.3 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in its opinion filed as
Exhibit 5 hereto).
24* Power of Attorney (included on signature page of the Registration Statement as initially
filed).
27 Restated Financial Data Schedule (included in SEC-filed copy only).
</TABLE>

- ---------------

* Previously filed

(b) Financial Statement Schedules

None.

Schedules not listed above have been omitted because they are not required,
are not applicable, or the information is included in the Financial Statements
or Notes thereto.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
registrant pursuant to Item 14 herein, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid

II-4
<PAGE> 100

by a director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-5
<PAGE> 101

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Fort Worth, State of Texas, on August 20, 1997.

INSPIRE INSURANCE SOLUTIONS, INC.

By: /s/ F. GEORGE DUNHAM, III
----------------------------------
F. George Dunham, III, President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to the Registration Statement has been signed by the
following persons in the capacities indicated on August 20, 1997:

<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>

/s/ F. GEORGE DUNHAM, III President, Chief Executive Officer (principal
- ----------------------------------------------------- executive officer) and Director
F. George Dunham, III

/s/ TERRY G. GAINES* Chief Financial Officer (principal financial
- ----------------------------------------------------- officer and principal accounting officer)
Terry G. Gaines

/s/ HARRY E. BARTEL* Director
- -----------------------------------------------------
Harry E. Bartel

/s/ R. EARL COX, III* Director
- -----------------------------------------------------
R. Earl Cox, III

/s/ MITCH S. WYNNE* Director
- -----------------------------------------------------
Mitch S. Wynne
</TABLE>

*By: /s/ F. GEORGE DUNHAM, III
--------------------------------------
F. George Dunham, III,
Attorney-in-Fact

II-6
<PAGE> 102

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBITS
------- --------
<C> <S>
1.1 Form of Underwriting Agreement.
2.1* Agreement and Plan of Merger, dated as of February 18, 1997,
among the Company, SDS, and the Management Shareholders with
a list identifying omitted schedules.
2.2* Articles and Plan of Merger of SDS into the Company.
2.3* Non-Binding Letter of Intent, dated as of July 1, 1997,
among AQS and Samuel J. Fleager.
3.1* Restated Articles of Incorporation of the Company and
Articles of Amendment No. 1 thereto.
3.2* Amended and Restated Bylaws of the Company.
4.1 Specimen Certificate for shares of Common Stock of the
Company.
4.2* Form of Rights Agreement, by and between the Company and
U.S. Trust Company of Texas, N.A., dated as of July 30,
1997.
5 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1* Benefits Administration Contract, dated as of July 1, 1997,
by and between the Company and Millers Mutual.
10.2* Amended Service Contract, dated as of July 1, 1997, by and
among the Company, Millers Mutual, and Millers Casualty.
10.3* Amended Information Services Contract, dated as of July 1,
1997, by and among the Company, Millers Mutual, and Millers
Casualty.
10.4* Form of Agreement to Lease Office Space, effective as of May
1, 1996, by and between the Company and Millers Mutual.
10.5* Form of Sublease Agreement, effective as of January 1, 1997,
by and between the Company and Millers Mutual.
10.6* Claims Life Cycle Services Agreement, effective as of August
15, 1996, by and among the Company, Blanch Wholesale
Insurance Services, Inc., and Blanch Insurance Services,
Inc.
10.7* Amendment No. 1 to Claims Life Cycle Services Agreement,
dated as of June 27, 1997.
10.8* Policy Life Cycle Services Agreement, effective as of August
15, 1996, by and among the Company, Blanch Wholesale
Insurance Services, Inc., and Blanch Insurance Services,
Inc.
10.9* Form of Amendment No. 1 to Policy Life Cycle Services
Agreement, effective as of August 15, 1996.
10.10* Administrative Services Agreement, effective as of March 12,
1996, by and among State Corporation Commission of the
Commonwealth of Virginia as Deputy Receiver for HOW
Insurance Company, Home Warranty Corporation, and Home
Owners Warranty Corporation, In Receivership, and the
Company.
10.11* Form of Indemnification Agreement with a schedule of
director signatories.
10.12* Employment Agreement, effective as of July 1, 1997, by and
between the Company and F. George Dunham, III.
10.13* Employment Agreement, dated and effective as of March 12,
1997, by and between SDS and Stuart H. Warrington.
10.14* Employment Agreement, dated and effective as of March 12,
1997, by and between SDS and Robert K. Agazzi.
10.15* Building Lease, dated March 12, 1997, between SDS and
Riverview Building, LLC.
</TABLE>

<PAGE> 103

<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBITS
------- --------
<C> <S>
10.16* Loan Agreement, between the Company and NationsBank of
Texas, N.A., dated March 12, 1997.
10.17* Security Agreement, dated March 12, 1997, between the
Company and NationsBank of Texas, N.A.
10.18* Security Agreement, dated March 12, 1997, between SDS and
NationsBank.
10.19* Security Agreement, dated March 12, 1997, between AQS and
NationsBank.
10.20* Pledge Agreement, dated March 12, 1997, between the Company
and NationsBank of Texas, N.A.
10.21* Pledge Agreement dated March 12, 1997, between SDS and
NationsBank.
10.22* Guaranty of SDS dated March 12, 1997.
10.23* Guaranty of AQS dated March 12, 1997.
10.24* Form of License Agreement.
10.25* Form of System Support Agreement.
10.26* Form of Implementation Support Agreement.
10.27* Form of Accelerated Enhancement Plan Agreement.
10.28* Amended and Restated 1997 Stock Option Plan.
10.29* Form of Stock Option Agreement.
10.30 Consolidated Federal Income Tax Allocation Agreement
effective January 1, 1994 by and between the Company and
Millers Mutual, as amended by Addendum No. 1 and Addendum
No. 2 thereto.
10.31* Form of Policy Life Cycle Services Agreement, effective as
of May 1, 1997, by and between the Company and Millers
Casualty.
10.32* Form of Claims Life Cycle Services Agreement, effective as
of June 1, 1997, by and between the Company and Millers
Casualty.
10.33* Form of Employment Agreement, effective as of July 1, 1997,
by and between the Company and Terry G. Gaines.
10.34* Form of Employment Agreement, effective as of July 1, 1997,
by and between the Company and Ronald O. Lynn.
10.35* Form of Employment Agreement, effective as of July 1, 1997,
by and between the Company and Jeffrey W. Robinson.
10.36* Director Stock Option Plan.
10.37* Form of Director Stock Option Agreement.
10.38* Employee Stock Purchase Plan.
10.39* Claims Administration Agreement, effective April 1, 1997, by
and between the Company and the Specialty Personal Lines
Division of Millers Mutual.
10.40 Form of Management Agreement, effective as of January 1,
1996, by and between the Company and Millers Mutual.
10.41 Service Contract, effective as of January 1, 1996, by and
between the Company, Millers Mutual and Millers Casualty.
10.42 Form of Service Contract, effective as of December 1, 1996,
by and between the Company, Millers Mutual and Millers
Casualty.
10.43 Form of Information Services Contract, effective as of
October 1, 1996, by and between the Company, Millers Mutual
and Millers Casualty.
11 Statement regarding Computation of Per Share Earnings.
16* Letter regarding Change in Certifying Accountant.
21* Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP regarding INSpire report.
</TABLE>

<PAGE> 104

<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBITS
------- --------
<C> <S>
23.2 Consent of Deloitte & Touche LLP regarding SDS report.
23.3 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(included in its opinion filed as Exhibit 5 hereto).
24* Power of Attorney (included on signature page of the
Registration Statement as initially filed).
27 Restated Financial Data Schedule (included in SEC-filed copy
only).
</TABLE>

- ---------------

* Previously filed.

<PAGE> 1
EXHIBIT 1.1

5,000,000 SHARES*

INSPIRE INSURANCE SOLUTIONS, INC.

COMMON STOCK

____________________

UNDERWRITING AGREEMENT

St. Petersburg, Florida
August ___, 1997

Raymond James & Associates, Inc.
Southwest Securities, Inc.
As Representative of the Several Underwriters
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716

Ladies and Gentlemen:

INSpire Insurance Solutions, Inc., a Texas corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell an aggregate of 2,775,000 shares of common stock, $.01 par value
per share (the "Common Stock"), of the Company, to the several Underwriters
named in Schedule I hereto (the "Underwriters"), and that certain shareholder
of the Company named in Schedule II hereto (the "Selling Shareholder")
proposes, subject to the terms and conditions stated herein, to sell to the
Underwriters an aggregate of 2,225,000 shares of the Common Stock (the
aggregate of such 5,000,000 shares to be sold by the Company and the Selling
Shareholder hereinafter referred to as the "Firm Shares"). In addition, the
Company and the Selling Shareholder have agreed to sell to the Underwriters,
upon the terms and conditions set forth herein, up to an additional 750,000
shares (the "Additional Shares") of the Common Stock to cover over-allotments
by the Underwriters, if any. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "Shares."

The Company and the Selling Shareholder wish to confirm as follows
their agreement with you and the other several Underwriters, on whose behalf
you are acting, in connection with the several purchases of the Shares from the
Company and the Selling Shareholder.

1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the
________________________

* Plus an additional 750,000 shares subject to the Underwriters'
over-allotment option.
<PAGE> 2

provisions of the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder (collectively, the "Act"), a
registration statement on Form S-1 (File No. 333-31173), including a prospectus
subject to completion, relating to the Shares. Such registration statement, as
amended at the time when it becomes effective and as thereafter amended by
post-effective amendment, is referred to in this Agreement as the "Registration
Statement." The prospectus in the form included in the Registration Statement,
or, if the prospectus included in the Registration Statement omits information
in reliance upon Rule 430A under the Act and such information is included in a
prospectus filed with the Commission pursuant to Rule 424(b) under the Act or
as part of a post-effective amendment to the Registration Statement after the
Registration Statement becomes effective, the prospectus as so filed, is
referred to in this Agreement as the "Prospectus." The prospectus subject to
completion in the form included in the Registration Statement at the time of
the initial filing of such Registration Statement with the Commission and as
such prospectus is amended from time to time until the date of the Prospectus
is referred to in this Agreement as the "Prepricing Prospectus."

2. AGREEMENTS TO SELL AND PURCHASE. The Company and the Selling
Shareholder (in accordance with Schedule II hereof) hereby agree, severally and
not jointly, to sell the Firm Shares to the Underwriters and, upon the basis of
the representations, warranties and agreements of the Company and the Selling
Shareholder herein contained and subject to all the terms and conditions set
forth herein, each Underwriter agrees, severally and not jointly, to purchase
from the Company and the Selling Shareholder at a purchase price of $____ per
Share (the "purchase price per Share"), the aggregate number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I hereto (or such
number of Firm Shares as adjusted pursuant to Section 11 hereof).

The Company and the Selling Shareholder hereby also agree, severally
and not jointly, to sell to the Underwriters, and upon the basis of the
representations, warranties and agreements of the Company and the Selling
Shareholder herein contained and subject to all the terms and conditions set
forth herein, the Underwriters shall have the right for 30 days from the date
of the Prospectus to purchase from the Company and the Selling Shareholder up
to an aggregate of 750,000 Additional Shares (in accordance with Schedule II
hereof) at the purchase price per Share for the Firm Shares. The Additional
Shares may be purchased solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase the number of Additional Shares (subject to such
adjustments as you may determine to avoid fractional shares) which bears the
same proportion to the total number of Additional Shares to be purchased by the
Underwriters as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number of Firm Shares as adjusted
pursuant to Section 11 hereof) bears to the total number of Firm Shares. Upon
any election by the Underwriters to purchase less than all the Additional
Shares, the aggregate number of Additional Shares to be purchased from the
Company and the aggregate number of Additional Shares to be purchased from the
Selling Shareholder by all the Underwriters shall be in the same proportion as
the maximum number of Additional Shares that may be purchased from the

2
<PAGE> 3
Company and the maximum number of Additional Shares that may be purchased from
the Selling Shareholder as set forth on Schedule II.

3. TERMS OF PUBLIC OFFERING. The Company and the Selling
Shareholder have been advised by you that the Underwriters propose to make a
public offering of their respective portions of the Shares as soon after the
Registration Statement and this Agreement have become effective as in your
judgment is advisable and initially to offer the Shares upon the terms set
forth in the Prospectus.

The Underwriters will offer a portion of the Firm Shares to be
purchased from the Company hereunder, not to exceed 175,000 Firm Shares in the
aggregate (the "Reserved Shares"), to directors, officers, employees and
designees specified to you by the Company in writing not less than two business
days prior to the time the Registration Statement becomes effective. The
Reserved Shares will be offered to such persons at a price equal to 96% of the
per share price to public set forth on the cover page of the Prospectus. The
persons to whom the Reserved Shares are offered shall in all cases be subject
to applicable laws, rules and regulations and to your reasonable approval. The
number of Firm Shares to be offered to the public shall be reduced by the
number of Reserved Shares offered as described in this paragraph, and any
Reserved Shares not purchased pursuant to such offers shall be offered by the
Underwriters to the public in accordance with this Agreement.

4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of the Firm Shares and payment therefor shall be made at the
offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1700 Pacific Avenue,
Suite 4100, Dallas, Texas, at 10:00 a.m., Dallas, Texas time, on , 1997
(the "Closing Date"). The place of closing for the Firm Shares and the Closing
Date may be varied by agreement between you and the Company.

Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the offices of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., 1700 Pacific Avenue, Suite 4100, Dallas, Texas,
at 10:00 a.m., Dallas, Texas time, on such date or dates (the "Additional
Closing Date") (which may be the same as the Closing Date but shall in no event
be earlier than the Closing Date nor earlier than three nor later than ten
business days after the giving of the notice hereinafter referred to) as shall
be specified in a written notice from you on behalf of the Underwriters to the
Company and the Selling Shareholder of the Underwriters' determination to
purchase a number, specified in such notice, of Additional Shares. Such notice
may be given to the Company and the Selling Shareholder by you at any time
within 30 days after the date of the Prospectus. The place of closing for the
Additional Shares and the Additional Closing Date may be varied by agreement
among you and the Company.

Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 1:00 p.m., St. Petersburg, Florida time, not
later than the second full business day preceding the Closing Date or the
Additional Closing Date, as the case may be. Such certificates shall be

3
<PAGE> 4
made available to you in St. Petersburg, Florida for inspection and packaging
not later than 9:30 a.m., St. Petersburg, Florida time, on the business day
immediately preceding the Closing Date or the Additional Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Additional Closing Date, as the case may be, against payment of the
purchase price therefor by wire transfer to the accounts of the Company and the
Selling Shareholder in accordance with wire transfer instructions provided to
you at least two business days prior to the Closing Date.

5. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company
covenants and agrees with the several Underwriters as follows:

a. The Company will use its best efforts to cause the
Registration Statement to become effective and will advise you
promptly and, if requested by you, will confirm such advice in writing
(i) when the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective, (ii) if Rule 430A
under the Act is employed, when the Prospectus has been timely filed
pursuant to Rule 424(b) under the Act, (iii) of any request by the
Commission for amendments or supplements to the Registration
Statement, any Prepricing Prospectus or the Prospectus or for
additional information, (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such
purposes and (v) within the period of time referred to in the first
sentence of Section 5(e) below, of any change in the Company's
condition (financial or other), business, properties, net worth,
results of operations, or prospects or of any event that comes to the
attention of the Company that makes any statement made in the
Registration Statement or the Prospectus (as then amended or
supplemented) untrue in any material respect or that requires the
making of any additions thereto or changes therein in order to make
the statements therein not misleading in any material respect, or of
the necessity to amend or supplement the Prospectus (as then amended
or supplemented) to comply with the Act or any other law. If at any
time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company will make
every reasonable effort to obtain the withdrawal of such order at the
earliest possible time.

b. The Company will furnish to you, without charge, two
signed duplicate originals of the Registration Statement as originally
filed with the Commission and of each amendment thereto, including
financial statements and all exhibits thereto, and will also furnish
to you, without charge, such number of conformed copies of the
Registration Statement as originally filed and of each amendment
thereto as you may reasonably request.

c. The Company will not file any amendment to the
Registration Statement or make any amendment or supplement to the
Prospectus of which you shall not previously have been advised (with a
reasonable opportunity to review such amendment or supplement) or to
which you have reasonably objected after being so advised.

4
<PAGE> 5
d. Prior to the execution and delivery of this
Agreement, the Company has delivered or will deliver to you, without
charge, in such quantities as you have requested or may hereafter
reasonably request, copies of each form of the Prepricing Prospectus.
The Company consents to the use, in accordance with the provisions of
the Act and with the securities or Blue Sky laws of the jurisdictions
in which the Shares are offered by the several Underwriters and by
dealers, prior to the date of the Prospectus, of each Prepricing
Prospectus so furnished by the Company.

e. As soon after the execution and delivery of this
Agreement as is practicable and thereafter from time to time for such
period as in the reasonable opinion of counsel for the Underwriters a
prospectus is required by the Act to be delivered in connection with
sales by any Underwriter or a dealer, and for so long a period as you
may reasonably request for the distribution of the Shares, the Company
will deliver to each Underwriter, without charge, as many copies of
the Prospectus (and of any amendment or supplement thereto) as they
may reasonably request. The Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance
with the provisions of the Act and with the securities or Blue Sky
laws of the jurisdictions in which the Shares are offered by the
several Underwriters and by all dealers to whom Shares may be sold,
both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the
Act to be delivered in connection with sales by any Underwriter or
dealer. If at any time during the period during which a Prospectus is
required to be delivered in accordance with the Act any event shall
occur that in the judgment of the Company or in the opinion of counsel
for the Underwriters is required to be set forth in the Prospectus (as
then amended or supplemented) or should be set forth therein in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with the Act or any other
law, the Company will forthwith prepare and, subject to Sections 5(a)
and 5(c) hereof, file with the Commission and use its best efforts to
cause to become effective as promptly as possible an appropriate
supplement or amendment thereto, and will furnish to each Underwriter
who has previously requested Prospectuses, without charge, a
reasonable number of copies thereof.

f. The Company will cooperate with you and counsel for
the Underwriters in connection with the registration or qualification
of the Shares for offering and sale by the several Underwriters and by
dealers under the securities or Blue Sky laws of such jurisdictions as
you may reasonably designate and will file such consents to service of
process or other documents as may be reasonably necessary in order to
effect such registration or qualification; provided that in no event
shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action
which would subject it to service of process in suits, other than
those arising out of the offering or sale of the Shares, in any
jurisdiction where it is not now so subject.

5
<PAGE> 6
g. The Company will make generally available to its
security holders a consolidated earnings statement (in form complying
with the Provisions of Rule 158), which need not be audited, covering
a twelve- month period commencing after the effective date of the
Registration Statement and ending not later than 15 months thereafter,
as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of
Section 11(a) of the Act.

h. During the period ending five years from the date
hereof, the Company will furnish to you and, upon your request, to
each of the other Underwriters, (i) as soon as available, a copy of
each proxy statement, quarterly or annual report or other report of
the Company mailed to shareholders or filed with the Commission, the
NASD or any securities exchange and (ii) from time to time such other
information concerning the Company as you may reasonably request.

i. If this Agreement shall terminate or shall be
terminated after execution pursuant to any provision hereof (except
pursuant to a termination under Section 11 or 12 hereof) or if this
Agreement shall be terminated by the Underwriters because of any
inability, failure or refusal on the part of the Company or the
Selling Shareholder to perform any agreement herein or to comply with
any of the terms or provisions hereof, the Company agrees to reimburse
you and the other Underwriters for all out-of-pocket expenses
(including travel expenses and reasonable fees and reasonable expenses
of counsel for the Underwriters but excluding wages and salaries paid
by you) reasonably incurred by you in connection herewith.

j. The Company will apply the net proceeds from the sale
of the Shares to be sold by it hereunder for the purposes set forth
under "Use of Proceeds" in the Prospectus.

k. If Rule 430A under the Act is employed, the Company
will timely file the Prospectus pursuant to Rule 424(b) under the Act.

l. For a period of 180 days after commencement of the
public offering of the Shares by the Underwriters, without the prior
written consent of Raymond James & Associates, Inc., the Company will
not directly or indirectly issue, sell, offer to sell, contract to
sell or otherwise dispose of or transfer any shares of Common Stock or
rights to purchase shares of Common Stock, except to the Underwriters
pursuant to this Agreement; provided, however, that the Company may
(i) issue to participants in its Employee Stock Purchase Plan, as
currently in effect, shares of Common Stock pursuant to the terms of
such Employee Stock Purchase Plan, (ii) issue to participants in its
Director Stock Option Plan, as currently in effect, shares of Common
Stock upon the exercise of currently outstanding options that are or
that become exercisable during such 180-day period and may grant
additional options under the Director Stock Option Plan and (iii)
issue to participants in its Amended and Restated 1997 Stock Option
Plan, as currently in effect, shares of Common Stock upon the exercise
of currently outstanding options that are or that become exercisable
during such 180-day period and may grant

6
<PAGE> 7
additional options under the Amended and Restated 1997 Stock Option
Plan, provided that without the prior written consent of Raymond James
& Associates, Inc., such additional options shall not be exercisable
during such 180-day period.

m. Prior to the Closing Date or the Additional Closing
Date, as the case may be, the Company will furnish to you, as promptly
as possible, copies of any unaudited interim consolidated financial
statements of the Company and its subsidiaries for any quarterly
period subsequent to the periods covered by the financial statements
appearing in the Prospectus.

n. The Company will comply with all provisions of any
undertakings contained in the Registration Statement.

o. The Company will not at any time, directly or
indirectly take any action designed, or which might reasonably be
expected to cause or result in, or which will constitute,
stabilization or manipulation of the price of the shares of Common
Stock to facilitate the sale or resale of any of the Shares.

p. The Company will use its best efforts to qualify or
register its Common Stock for sale in non- issuer transactions under
(or obtain exemptions from the application of) the Blue Sky laws of
each state where necessary to permit market making transactions and
secondary trading if you, based on advice of counsel, advise the
Company that such qualification, registration or exemption is
necessary, and will comply with such Blue Sky laws and will continue
such qualifications, registrations and exemptions in effect for a
period of five years after the date hereof.

q. The Company will timely file with the National
Association of Securities Dealers Automated Quotation National Market
System ("Nasdaq/NMS") all documents and notices required by the
Nasdaq/NMS of companies that have issued securities that are traded in
the over-the-counter market and quotations for which are reported by
the Nasdaq/NMS.

r. The Company will file with the Commission such
reports on Form SR as may be required pursuant to Rule 463 under the
Act.

6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter on the date hereof, and shall be
deemed to represent and warrant to each Underwriter on the Closing Date and the
Additional Closing Date, that:

a. Each Prepricing Prospectus included as part of the
Registration Statement as originally filed or as part of any amendment
or supplement thereto, or filed pursuant to Rule 424(a) under the Act,
complied when so filed in all material respects with the provisions of
the Act, except that this representation and warranty does not apply
to statements in or omissions from such Prepricing Prospectus (or any
amendment or supplement thereto) made in reliance upon and in
conformity with information relating

7
<PAGE> 8
to any Underwriter furnished to the Company in writing by or on behalf
of any Underwriter through you expressly for use therein. The
Commission has not issued any order preventing or suspending the use
of any Prepricing Prospectus.

b. The Registration Statement, in the form in which it
becomes effective and also in such form as it may be when any
post-effective amendment thereto shall become effective, and the
Prospectus, and any supplement or amendment thereto when filed with
the Commission under Rule 424(b) under the Act, will comply in all
material respects with the provisions of the Act and will not at any
such times contain an 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 not misleading, except that this
representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Prospectus (or any
amendment or supplement thereto) made in reliance upon and in
conformity with information relating to any Underwriter furnished to
the Company in writing by or on behalf of any Underwriter through you
expressly for use therein.

c. The capitalization of the Company is and will be as
set forth in the Prospectus as of the date set forth therein. All the
outstanding shares of Common Stock of the Company have been, and as of
the Closing Date will be, duly authorized and validly issued, are
fully paid and nonassessable and are free of any preemptive or similar
rights; the Shares to be issued and sold to the Underwriters by the
Company hereunder have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance
with the terms hereof, will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights; the
capital stock of the Company conforms to the description thereof in
the Registration Statement and the Prospectus (and any amendment or
supplement thereto); and the delivery of certificates for the Shares
pursuant to the terms of this Agreement and payment for the Shares
will pass valid title to the Shares, free and clear of any claim,
encumbrance or defect in title to the several Underwriters purchasing
the Shares in good faith and without notice of any lien, claim or
encumbrance. The certificates for the Shares are in valid and
sufficient form.

d. The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Texas
with full power and authority to own, lease and operate its properties
and to conduct its business as presently conducted and as described in
the Registration Statement and the Prospectus (and any amendment or
supplement thereto), and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure
to so register or qualify does not have a material adverse effect on
the condition (financial or other), business, properties, net worth,
results of operations or prospects of the Company and the Subsidiaries
(as hereinafter defined) taken as a whole (a "Material Adverse
Effect").

8
<PAGE> 9
e. Except for the subsidiaries listed in Exhibit 21 to
the Registration Statement, the Company does not own a material
interest in or control, directly or indirectly, any other corporation,
partnership, joint venture, association, trust or other business
organization. Each of the subsidiaries described on Exhibit 21 to the
Registration Statement (collectively, the "Subsidiaries") is a
corporation duly organized and validly existing under the laws of the
state of its incorporation set forth on such Exhibit 21 with full
corporate power and authority to own, lease and operate its properties
and to conduct its business as presently conducted and as described in
the Registration Statement and the Prospectus (and any amendment or
supplement thereto), and is duly registered and qualified to conduct
its business and is in good standing in each other jurisdiction or
place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the
failure to so register or qualify does not have a Material Adverse
Effect. All of the outstanding shares of capital stock of each of the
Subsidiaries has been duly authorized and validly issued, are fully
paid and nonassessable, and are owned by the Company directly or
indirectly through one of the other Subsidiaries, free and clear of
any lien, adverse claim, security interest, equity or other
encumbrance, except for the pledge of such shares pursuant to the
NationsBank Facility as described in the Prospectus.

f. There are no legal or governmental proceedings
pending or, to the best knowledge of the Company, threatened, against
the Company or any of the Subsidiaries, or to which the Company or any
of the Subsidiaries, or to which any of their respective properties,
is subject, that are required to be described in the Registration
Statement or the Prospectus (or any amendment or supplement thereto)
but are not described as required. Except as described in the
Prospectus, there is no action, suit, inquiry, proceeding, or
investigation by or before any court or governmental or other
regulatory or administrative agency or commission pending or, to the
best knowledge of the Company, threatened, against or involving the
Company or any Subsidiary, which might individually or in the
aggregate prevent or adversely affect the transactions contemplated by
this Agreement or result in a material adverse change in the condition
(financial or otherwise), properties, business, net worth, results of
operations or prospects of the Company or any of its Subsidiaries, nor
is there any basis for any such action, suit, inquiry, proceeding, or
investigation. There are no agreements, contracts, indentures, leases
or other instruments that are required to be described in the
Registration Statement or the Prospectus (or any amendment or
supplement thereto) or to be filed as an exhibit to the Registration
Statement that are not described or filed as required by the Act. All
such contracts to which the Company or any Subsidiary is a party have
been duly authorized, executed and delivered by the Company or such
Subsidiary, constitute valid and binding agreements of the Company or
such Subsidiary and are enforceable against the Company or such
Subsidiary in accordance with the terms thereof, and neither the
Company nor any Subsidiary, nor to the best of the Company's
knowledge, any other party, is in breach of or default under any of
such contracts.

g. Neither the Company nor any of the Subsidiaries is in
violation of its certificate or articles of incorporation or bylaws,
or other organizational documents, or

9
<PAGE> 10
of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries or of
any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, or in
default in any material respect in the performance of any obligation,
agreement or condition contained in (i) any bond, debenture, note or
any other evidence of indebtedness, or (ii) any material agreement,
indenture, lease or other instrument to which the Company or any of
the Subsidiaries is a party or by which any of them or any of their
respective properties may be bound; and there does not exist any state
of facts which constitutes an event of default on the part of the
Company or any Subsidiary as defined in such documents or which, with
notice or lapse of time or both, would constitute such an event of
default.

h. The execution and delivery of this Agreement and the
performance by the Company of its obligations under this Agreement
have been duly and validly authorized by the Company, and this
Agreement has been duly executed and delivered by the Company and
constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms.

i. Neither the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated
hereby (i) requires any consent, approval, authorization or other
order of or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official
(except such as may be required for the registration of the Shares
under the Act and compliance with the securities or Blue Sky laws of
various jurisdictions, all of which will be, or have been, effected in
accordance with this Agreement) or conflicts with or will conflict
with or constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or bylaws, or
other organizational documents, of the Company or any of the
Subsidiaries or (ii) conflicts or will conflict with or constitutes a
breach of, or a default under, any agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is a
party or by which any of them or any of their respective properties
may be bound, or violates any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to the Company or any
of the Subsidiaries or any of their respective properties, or results
in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of the Subsidiaries
pursuant to the terms of any agreement or instrument to which any of
them is a party or by which any of them may be bound or to which any
of the property or assets of any of them is subject.

j. Except as described in the Prospectus, the Company
does not have outstanding and at the Closing Date (and the Additional
Closing Date, if applicable) will not have outstanding any options to
purchase, or any warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue
or sell, any shares of Common Stock or any such options, warrants or
convertible securities or obligations. No holder of securities of the
Company has rights to the registration of

10
<PAGE> 11
any securities of the Company because of the filing of the
Registration Statement that have not been satisfied or heretofore
waived in writing.

k. Deloitte & Touche LLP, the certified public
accountants who have certified the financial statements filed as part
of the Registration Statement and the Prospectus (and any amendment or
supplement thereto), are independent public accountants as required by
the Act.

l. The financial statements, together with related
schedules and notes, included in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), present fairly
the consolidated financial position, results of operations and changes
in financial position of the Company and the Subsidiaries on the basis
stated in the Registration Statement at the respective dates or for
the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the
other financial and statistical information and data set forth in the
Registration Statement and Prospectus (and any amendment or supplement
thereto) is accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the
Company. No other financial statements or schedules are required to
be included in the Registration Statement.

m. Except as disclosed in the Registration Statement and
the Prospectus (or any amendment or supplement thereto), subsequent to
the respective dates as of which such information is given in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto), (i) the Company and its Subsidiaries have not
incurred any material liabilities or obligations, indirect, direct or
contingent, or other transaction which is not in the ordinary course
of business or which could result in a material reduction in the
future earnings of the Company and its Subsidiaries; (ii) the Company
and its Subsidiaries have not sustained any material loss or
interference with their respective businesses or properties from fire,
flood, windstorm, accident or other calamity, whether or not covered
by insurance; (iii) the Company has not paid or declared any dividends
or other distributions with respect to its capital stock and the
Company and its Subsidiaries are not in default in the payment of
principal or interest on any outstanding debt obligations; (iv) there
has not been any change in the capital stock (other than upon the sale
of the Shares hereunder and upon the exercise of options and warrants
described in the Prospectus) or indebtedness material to the Company
and its Subsidiaries (other than in the ordinary course of business);
and (v) there has not been any material adverse change, or any
development involving or which may reasonably be expected to involve a
potential future material adverse change, in the condition (financial
or otherwise), business, properties, net worth, results of operations
or prospects of the Company and its Subsidiaries.

n. The Company and each of the Subsidiaries has good and
marketable title to all property (real and personal) described in the
Prospectus as being owned by it, free

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<PAGE> 12
and clear of all liens, claims, security interests or other
encumbrances except (i) such as are described in the financial
statements included in, or elsewhere in, the Prospectus or (ii) such
as are not materially burdensome and do not interfere in any material
respect with the use of the property or the conduct of the business of
the Company and the Subsidiaries taken as a whole. The property (real
and personal) held under lease by each of the Company and the
Subsidiaries is held by it under valid, subsisting and enforceable
leases with only such exceptions as in the aggregate are not
materially burdensome and do not interfere in any material respect
with the conduct of the business of the Company and the Subsidiaries
taken as a whole.

o. The Company has not distributed and will not
distribute any offering material in connection with the offering and
sale of the Shares other than the Prepricing Prospectus, the
Prospectus, or other offering material, if any, as permitted by the
Act and the rules and regulations enacted thereunder (the "Rules and
Regulations").

p. The Company has not taken, directly or indirectly,
any action which is designed, or which might reasonably be expected to
cause or result in or constitute, under the Act or otherwise,
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.

q. The Company is not an "investment company," an
"affiliated person" of, or "promoter" or "principal underwriter" for
an investment company within the meaning of the Investment Company Act
of 1940, as amended.

r. The Company and each of the Subsidiaries have all
permits, licenses, franchises, approvals, consents and authorizations
of governmental or regulatory authorities (hereinafter "permit" or
"permits") as are necessary to own their respective properties and to
conduct their respective businesses in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the
Prospectus, except where the failure to have obtained any such permit
has not and will not have a Material Adverse Effect; the Company and
each of the Subsidiaries have fulfilled and performed all of their
material obligations with respect to each such permit and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination of any such permit or result in any other
material impairment of the rights of the holder of any such permit,
subject in each case to such qualification as may be set forth in the
Prospectus; and, except as described in the Prospectus, such permits
contain no restrictions that are materially burdensome to the Company
or any of the Subsidiaries.

s. The Company and the Subsidiaries have complied and
will comply in all material respects with wage and hour determinations
issued by the U.S. Department of Labor under the Service Contract Act
of 1965 and the Fair Labor Standards Act in paying its employees'
salaries, fringe benefits, and other compensation for the performance
of work or other duties in connection with contracts with the U.S.
government. The Company and the Subsidiaries have complied and will
comply in all material respects with the terms of all certifications
and representations made to the U.S.

12
<PAGE> 13
government in connection with the submission of any bid or proposal or
any contract. The Company and the Subsidiaries have complied and will
comply in all material respects with their obligations under their
agreements and contracts with the U.S. government and agencies
thereof.

t. The Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorizations; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.

u. Neither the Company nor any Subsidiary has, directly
or indirectly, at any time during the past five years (i) made any
unlawful contribution to any candidate for political office, or failed
to disclose fully any contribution in violation of law, or (ii) made
any payment to any federal, state or foreign governmental official, or
other person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United States
or any jurisdiction thereof or applicable foreign jurisdictions.

v. The Company and the Subsidiaries have obtained all
material permits, licenses and other authorizations, if any, which are
required under federal, state, local and foreign statutes, ordinances
and other laws relating to pollution or protection of the environment
("Environmental Laws"). The Company and the Subsidiaries are in
material compliance with all terms and conditions of all required
permits, licenses and authorizations, and are also in material
compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws. There is no pending
or, to the best knowledge of the Company, threatened civil or criminal
litigation, notice of violation, or administrative proceeding relating
in any way to the Environmental Laws involving the Company or the
Subsidiaries. There have not been and there are not any past, present
or foreseeable future events, conditions, circumstances, activities,
practices, incidents, actions or plans relating to the Company or the
Subsidiaries that may interfere with or prevent continued compliance
with, or that may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation under the Environmental
Laws, except where the same does not have a Material Adverse Effect.

w. The Company and the Subsidiaries own and have full
right, title and interest in and to, or have valid licenses to use,
all the patents, trade names, trademarks service marks and copyrights
necessary for the present and currently planned conduct of the
business of the Company or the Subsidiaries, and, except as described
in the

13
<PAGE> 14
Prospectus, neither the Company nor any Subsidiary has created any
lien or encumbrance on, or granted any right or license with respect
to, any such patent, trade name, trademark, service mark or copyright.
There is no claim pending against the Company or any Subsidiary with
respect to any patent, trade name, trademark, service mark or
copyright, and neither the Company nor any Subsidiary has received
notice that any patent, trade name, trademark, service mark or
copyright that it uses or has used in the conduct of its business
infringes upon or conflicts with the rights of any third party. To
the best knowledge of the Company, there is no infringement on the
intellectual property rights of the Company or the Subsidiaries by
others, and none of the activities engaged in by the Company or any
Subsidiary infringes or conflicts with the intellectual property
rights of others, in a manner that could adversely affect the
condition (financial or other), business, properties, net worth,
results of operations or prospects of the Company and the
Subsidiaries, taken as a whole.

x. All offers and sales of the Company's and its
Subsidiaries' capital stock prior to the date hereof were made in
compliance with the Act and all other applicable state and federal
laws or regulations.

y. The Shares have been duly authorized for trading on
the Nasdaq/NMS subject to notice of issuance with respect to the
Shares being offered by the Company.

z. All federal, state and local tax returns required to
be filed by or on behalf of the Company or any Subsidiary with respect
to all periods ended prior to the date of this Agreement have been
filed (or are the subject of valid extension) with the appropriate
federal, state and local authorities and all such tax returns, as
filed, are accurate in all material respects. All federal, state and
local taxes (including estimated tax payments) required to be shown on
all such tax returns or claimed to be due from or with respect to the
business of the Company or any Subsidiary have been paid or reflected
as a liability on the financial statements of the Company and the
Subsidiaries for appropriate periods, except for those taxes or claims
therefor which are being contested by the Company in good faith and
for which appropriate reserves are reflected in the Company's
financial statements. All deficiencies asserted as a result of any
federal, state or local tax audits have been paid or finally settled
and no issue has been raised in any such audit which, by application
of the same or similar principles, reasonably could be expected to
result in a proposed deficiency for any other period not so audited.
No state of facts exists or has existed which would constitute grounds
for the assessment of any tax liability with respect to the periods
which have not been audited by appropriate federal, state or local
authorities. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any federal, state or
local tax return for any period. On the Closing Date, and Additional
Closing Date, if any, all stock transfer and other taxes which are
required to be paid in connection with the sale of the shares to be
sold by the Company to the Underwriters will have been fully paid by
the Company and all laws imposing such taxes will have been complied
with.

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<PAGE> 15
aa. Except as set forth in the Prospectus, there are no
transactions with affiliates, as defined in Rule 405 promulgated under
the Act, which are required by the Act and the applicable rules and
regulations thereunder to be disclosed in the Registration Statement.

ab. The Company has procured the written agreement of the
Selling Shareholder, and each officer and director of the Company who
owns shares of Common Stock or options to acquire shares of Common
Stock of the Company as set forth in the Prospectus not to sell, offer
to sell or contract to sell, or otherwise dispose of or transfer,
directly or indirectly, any shares of Common Stock owned or
controlled, or hereafter acquired, by such persons, or any rights to
purchase any of such shares of Common Stock, for a period of 180 days
after the commencement of the public offering of the Shares by the
Underwriters without the prior written consent of Raymond James &
Associates, Inc.

ac. Neither the Company nor any of its Subsidiaries (i)
conduct business or have affiliates which conduct business in or with
Cuba, (ii) plan to commence doing business in or with Cuba after the
effective date of the Registration Statement or (iii) are required by
Florida law to report a material change in information previously
reported to the State of Florida regarding business conducted in or
with Cuba.

ad. Neither the sale of the Shares nor any action taken
by the Company or the Selling Shareholder in connection therewith
violates any provision of state insurance laws or regulations.

ae. No officer, director, nominee for director or
shareholder of the Company has any direct or indirect affiliation or
association with any member of the National Association of Securities
Dealers, Inc. (the "NASD").

7. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER.
The Selling Shareholder hereby represents and warrants to each Underwriter on
the date hereof (except as otherwise set forth herein), and shall be deemed to
represent and warrant to each Underwriter on the Closing Date and the
Additional Closing Date, that:

a. All consents, approvals, authorizations and orders
necessary for the execution and delivery by the Selling Shareholder of
this Agreement and the Power of Attorney (the "Power of Attorney")
referred to in the last paragraph of this Section 7, and for the sale
and delivery of the Shares to be sold by the Selling Shareholder
hereunder, have been obtained; and the Selling Shareholder has full
right, power and authority to enter into this Agreement and the Power
of Attorney, and to sell, assign, transfer and deliver the Shares to
be sold by the Selling Shareholder hereunder.

b. This Agreement and the Power of Attorney have been
duly authorized, executed and delivered by the Selling Shareholder and
this Agreement and the Power of Attorney constitute the valid and
binding agreements of the Selling Shareholder

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<PAGE> 16
enforceable against the Selling Shareholder in accordance with their
respective terms, except to the extent that the enforceability of the
indemnification and contribution provisions of Section 9 hereof may be
limited by securities laws or by public policy considerations as
expressed in such laws as construed by courts of competent
jurisdiction, and except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting enforcement of creditors' rights
generally or the availability of equitable remedies, regardless of
whether such enforcement is considered in a proceeding in equity or at
law; the performance of this Agreement and the Power of Attorney and
the consummation of the transactions contemplated herein and therein
will not result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, indenture,
mortgage, deed of trust, voting trust agreement, note agreement, lease
or other agreement or instrument to which the Selling Shareholder is a
party or by which the Selling Shareholder or its properties are bound,
or under any order, rule or regulation of any court or governmental
agency or body applicable to the Selling Shareholder or the business
or property of the Selling Shareholder.

c. The Selling Shareholder has, and immediately prior to
the Closing Date (and the Additional Closing Date, if any) the Selling
Shareholder will have, good and valid title to the Shares to be sold
by the Selling Shareholder hereunder, free and clear of all liens,
encumbrances, equities, shareholder agreements, voting trusts or
claims of any nature whatsoever, and, upon delivery of such Shares and
payment therefor pursuant hereto, good and valid title to such Shares,
free and clear of all liens, encumbrances, equities, shareholder
agreements, voting trusts or claims of any nature whatsoever (other
than those arising by or through the Underwriters), will pass to the
several Underwriters.

d. The Selling Shareholder will not, for a period of 180
days after the commencement of the public offering of the Shares by
the Underwriters, directly or indirectly, sell, offer to sell,
contract to sell or otherwise dispose of or transfer any shares of
Common Stock or rights to purchase shares of Common Stock otherwise
than hereunder or with the prior written consent of Raymond James &
Associates, Inc.

e. The Selling Shareholder has not taken, and will not
take, directly or indirectly, any action designed to or which has
constituted nor which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares or otherwise.

f. No consent, approval, authorization or order of, or
any filing or declaration with, any court or governmental agency or
body is required for the consummation by the Selling Shareholder of
the transactions on its part contemplated herein or in the Power of
Attorney, except such as have been obtained under the Act and such as
may be required under state securities or Blue Sky laws or the by-laws
and rules of the NASD in connection with the purchase and distribution
by the Underwriters of the Shares to be sold by the Selling
Shareholder.

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<PAGE> 17
g. The Selling Shareholder is familiar with the
Registration Statement, the Prepricing Prospectus and the Prospectus
and has no knowledge of any fact or condition not set forth in the
Registration Statement, the Prepricing Prospectus or the Prospectus
which has materially adversely affected, or may materially adversely
affect, the condition (financial or otherwise), business, properties,
net worth, results of operations or prospects of the Company, and the
sale of the Shares proposed to be sold by the Selling Shareholder is
not prompted by any such knowledge.

h. All information with respect to the Selling
Shareholder contained in the Registration Statement, the Prepricing
Prospectus and the Prospectus (as amended or supplemented, if the
Company shall have filed with the Commission any amendment or
supplement thereto) complied and will comply in all material respects
with all applicable provisions of the Act, contains and will contain
all statements required to be stated therein in accordance with the
Act, and does not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not
misleading.

i. To the best knowledge of the Selling Shareholder, the
representations and warranties of the Company contained in Section 6
hereof are true and correct.

j. Other than as permitted by the Act and the Rules and
Regulations, the Selling Shareholder has not distributed and will not
distribute any Prepricing Prospectus, the Prospectus or any other
offering material in connection with the offering and sale of the
Shares.

k. On the Closing Date, and on the Additional Closing
Date, if any, all stock transfer and other taxes (other than income
taxes) which are required to be paid in connection with the sale and
transfer of the Shares to be sold by the Selling Shareholder to the
several Underwriters hereunder will have been fully paid for by the
Selling Shareholder and all laws imposing such taxes will have been
fully complied with.

l. Neither the sale of the Shares nor any action taken
by the Selling Shareholder in connection therewith violates any state
insurance laws or regulations.

In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, the Selling
Shareholder agrees to deliver to you at least two days prior to the Closing a
properly completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).

The Selling Shareholder represents and warrants that it has duly
executed and delivered a Power of Attorney, in the form heretofore furnished to
you, appointing Joy J. Keller and Frank G. Dunham, Jr. as the Selling
Shareholder's attorneys-in-fact (the "Attorneys-in-Fact") with authority to
execute and deliver this Agreement on behalf of the Selling Shareholder, to

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<PAGE> 18
determine the purchase price to be paid by the Underwriters to the Selling
Shareholder as provided in Section 2 hereof, to authorize the delivery of the
Shares to be sold by the Selling Shareholder hereunder or otherwise to act on
behalf of the Selling Shareholder in connection with the transactions
contemplated by this Agreement. Prior to the date of this Agreement, the
Selling Shareholder has delivered to the Attorneys-in-Fact certificates in
negotiable form representing all the Firm Shares and Additional Shares to be
sold by the Selling Shareholder hereunder, to be held by the Attorneys- in-Fact
until such time as the Attorneys-in-Fact shall deliver such Shares to the
Underwriters in accordance with this Agreement and the Power of Attorney or, if
this Agreement is terminated prior to such delivery, shall return such Shares
to the Selling Shareholder. The Selling Shareholder specifically agrees that
the Shares represented by the certificates held in custody for the Selling
Shareholder under the Power of Attorney are subject to the interest of the
Underwriters hereunder, and that the arrangements made by the Selling
Shareholder for the custody, and the appointment by the Selling Shareholder of
the Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable.
The Selling Shareholder specifically agrees that the obligations of the Selling
Shareholder hereunder shall not be terminated by operation of law, whether by
the dissolution or change of control of the Selling Shareholder or by the
occurrence of any other event. If the Selling Shareholder should be dissolved,
or if any other such event should occur before the delivery of the Shares
hereunder, certificates representing the Shares shall be delivered by or on
behalf of the Selling Shareholder in accordance with the terms and conditions
of this Agreement and the Power of Attorney, and actions taken by the
Attorneys-in-Fact pursuant to the Power of Attorney shall be as valid as if
such dissolution or other event had not occurred, regardless of whether or not
the Attorneys-in-Fact, or either of them, shall have received notice of
termination, dissolution or other event.

8. EXPENSES. Whether or not the transactions contemplated hereby
are consummated or this Agreement becomes effective or is terminated, the
Company and the Selling Shareholder, jointly and severally, shall be
responsible for and shall pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's and Selling Shareholder's counsel
and accountants in connection with the registration of the Shares under the Act
and all other expenses in connection with the preparation, printing and filing
of the Registration Statement and the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof and of any Prepricing
Prospectus to the Underwriters and dealers; (ii) the printing and delivery
(including, without limitation, postage, air freight charges and charges for
counting and packaging) of such copies of the Registration Statement, the
Prospectus, each Prepricing Prospectus, the Blue Sky memoranda, the Power of
Attorney, the Agreement Among Underwriters, this Agreement, the Selected
Dealers Agreement and all amendments or supplements to any of them as may be
reasonably requested for use in connection with the offering and sale of the
Shares; (iii) all reasonable expenses in connection with the qualification of
the Shares for offering and sale under state securities laws or Blue Sky laws,
including the reasonable fees of the counsel for the Underwriters in connection
therewith; (iv) the filing fees incident to securing any required review by the
NASD of the terms of the sale of the Shares and the reasonable fees and
disbursements of the Underwriters' counsel relating thereto; (v) the cost of
preparing stock certificates; (vi) the costs and charges of any transfer agent
or registrar; (vii) the cost of the tax stamps, if any, in connection with the
issuance and

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<PAGE> 19
delivery of the Shares to the respective Underwriters; (viii) all other fees,
costs and expenses referred to in Item 13 of the Registration Statement; and
(ix) all other costs and expenses incident to the performance of the
obligations of the Company and the Selling Shareholder hereunder which are not
otherwise specifically provided for in this Section. Notwithstanding the
foregoing, in the event that the proposed offering is terminated for the
reasons set forth in Section 5(i) hereof, the Company agrees to reimburse the
Underwriters as provided in Section 5(i).

The Company and the Selling Shareholder further agree that, in
addition to the expenses payable by them under this Agreement, they shall pay
to Raymond James & Associates, Inc. and Southwest Securities, Inc., solely by
deduction from the proceeds of the public offering of the Shares contemplated
hereby, a financial advisory fee equal, in the aggregate, to the lesser of (i)
three-fourths of one percent (0.75%) of the total gross proceeds to the Company
and the Selling Shareholder resulting from such offering or (ii) $300,000. For
such purpose, "gross proceeds" means the product obtained by multiplying the
aggregate number of Shares sold by the Company and the Selling Shareholder in
the offering (including any over-allotment shares) by the price at which such
Shares are sold to the public, without deduction or offset of underwriting
discounts or commissions or any fees, costs or expenses. Such financial
advisory fee shall be paid by the Company and the Selling Shareholder in
proportion to the respective number of Shares to be sold by them under this
Agreement, as set forth on Schedule II.

9. INDEMNIFICATION AND CONTRIBUTION. The Company and the Selling
Shareholder jointly and severally agree to indemnify and hold harmless you and
each other Underwriter, the directors, officers, employees and agents of each
Underwriter, and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prepricing Prospectus or
in the Registration Statement or the Prospectus or in any amendment or
supplement thereto, or arising out of or based upon any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expense arise out of or are based upon an untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use in connection therewith, or arising
out of or based upon any inaccuracy in the representations and warranties of
the Company or the Selling Shareholder contained herein or any failure of the
Company or the Selling Shareholder to perform their respective obligations
hereunder or under law; provided, however, that with respect to any untrue
statement or omission made in any Prepricing Prospectus, the indemnity
agreement contained in this subsection shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) from
whom the person asserting any such losses, claims, damages or liabilities
purchased the shares of Stock concerned if both (A) a copy of the Prospectus
was not sent or given to such person at or prior to the written confirmation of
the sale of such shares of Stock to such person as required by the Act, and (B)
the untrue statement or omission in the

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<PAGE> 20
Prepricing Prospectus was corrected in the Prospectus. Notwithstanding
anything in this Section 9, in no event shall the Selling Shareholder's
obligation under the preceding sentence exceed the total net proceeds from the
offering received by the Selling Shareholder (it being agreed that the Company
shall bear the balance.)

In addition to their other obligations under this Section 9, the
Company and the Selling Shareholder jointly and severally agree that, as an
interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, any inaccuracy in the representations and warranties of the Company
or the Selling Shareholder herein or failure to perform its obligations
hereunder, all as described in this Section 9, it will reimburse each
Underwriter on a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
or the Selling Shareholder's obligation to reimburse each Underwriter for such
expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any
such interim reimbursement payment is so held to have been improper, each
Underwriter shall promptly return it to the Company or the Selling Shareholder,
as the case may be, together with interest, compounded daily determined on the
basis of the base lending rate announced from time to time by Chase Manhattan
Bank, N.A. (the "Prime Rate"). Any such interim reimbursement payments which
are not made to the Underwriters within 30 days of a request for reimbursement
shall bear interest at the Prime Rate from the date of such request.

If any action or claim shall be brought against any Underwriter or any
person controlling any Underwriter in respect of which indemnity may be sought
against the Company or the Selling Shareholder, such Underwriter or such
controlling person shall promptly notify in writing the party(s) against whom
indemnification is being sought (the "indemnifying party" or "indemnifying
parties"), and such indemnifying party(s) shall assume the defense thereof,
including the employment of counsel reasonably acceptable to such Underwriter
or such controlling person and payment of all fees and expenses. Such
Underwriter or any such controlling person shall have the right to employ
separate counsel (but the Company and the Selling Shareholder shall not be
liable for the fees and expenses of more than one counsel) in any such action
and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless (i) the indemnifying party(s) has (have) agreed in writing to pay such
fees and expenses, (ii) the indemnifying party(s) has (have) failed to assume
the defense and employ counsel reasonably acceptable to the Underwriter or such
controlling person or (iii) the named parties to any such action (including any
impleaded parties) include both such Underwriter or such controlling person and
the indemnifying party(s) and such Underwriter or such controlling person shall
have been advised by its counsel that one or more legal defenses may be
available to the Underwriter which may not be available to the Company, or that
representation of such indemnified party and any indemnifying party(s) by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the

20
<PAGE> 21
indemnifying party(s) shall not have the right to assume the defense of such
action on behalf of such Underwriter or such controlling person
(notwithstanding its (their) obligation to bear the fees and expenses of such
counsel)). The indemnifying party(s) shall not be liable for any settlement of
any such action effected without its (their) written consent, but if settled
with such written consent, or if there be a final judgment for the plaintiff in
any such action, the indemnifying party(s) agree(s) to indemnify and hold
harmless any Underwriter and any such controlling person from and against any
loss, claim, damage, liability or expense by reason of such settlement or
judgment, but in the case of a judgment only to the extent stated in the
immediately preceding paragraph.

Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the
Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act and the
Selling Shareholder, to the same extent as the foregoing indemnity from the
Company and the Selling Shareholder to each Underwriter, but only with respect
to information furnished in writing by or on behalf of such Underwriter through
you expressly for use in the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto. If any action
or claim shall be brought or asserted against the Company, any of its
directors, any such officers, or any such controlling person or the Selling
Shareholder based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect
of which indemnity may be sought against any Underwriter pursuant to this
paragraph, such Underwriter shall have the rights and duties given to the
Company and the Selling Shareholder by the preceding paragraph (except that if
the Company shall have assumed the defense thereof such Underwriter shall not
be required to do so, but may employ separate counsel therein and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
such Underwriter's expense), and the Company, its directors, any such officers,
and any such controlling persons and the Selling Shareholder shall have the
rights and duties given to the Underwriters by the immediately preceding
paragraph.

If the indemnification provided for in this Section 9 is unavailable
or insufficient for any reason whatsoever to an indemnified party under the
first or fourth paragraph hereof in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then an indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Shareholder on the one hand and the Underwriters on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company and the Selling Shareholder on the one hand
and the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Shareholder on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before

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<PAGE> 22
deducting expenses) received by the Company and the Selling Shareholder bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus;
provided that, in the event that the Underwriters shall have purchased any
Additional Shares hereunder, any determination of the relative benefits
received by the Company and the Selling Shareholder or the Underwriters from
the offering of the Shares shall include the net proceeds (before deducting
expenses) received by the Selling Shareholder, and the underwriting discounts
and commissions received by the Underwriters, from the sale of such Additional
Shares, in each case computed on the basis of the respective amounts set forth
in the notes to the table on the cover page of the Prospectus. The relative
fault of the Company and the Selling Shareholder on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Selling Shareholder on the one hand
or by the Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

The Company, the Selling Shareholder and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9
were determined by a pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price of the Shares underwritten by it and distributed to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to
this Section 9 are several in proportion to the respective numbers of Firm
Shares set forth opposite their names in Schedule I hereto (or such numbers of
Firm Shares increased as set forth in Section 11 hereof) and not joint.

Notwithstanding the second and fifth paragraphs of this Section 9, any
losses, claims, damages, liabilities or expenses for which an indemnified party
is entitled to indemnification or contribution under this Section 9 shall be
paid by the indemnifying party to the indemnified party as such losses, claims,
damages, liabilities or expenses are incurred. The indemnity, contribution and
reimbursement agreements contained in Section 9 and the representations and
warranties of the Company and the Selling Shareholder, respectively, set forth
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or any person controlling the Company or the Selling Shareholder,

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<PAGE> 23
(ii) acceptance of any Shares and payment therefor hereunder and (iii) any
termination of this Agreement. A successor to any Underwriter or any person
controlling any Underwriter, or to the Company, its directors or officers, or
any person controlling the Company or the Selling Shareholder, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 9.

It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in the second and fifth paragraphs
of this Section 9, including the amounts of any requested reimbursement
payments and the method of determining such amounts, shall be settled by
arbitration conducted under the provisions of the Constitution and Rules of the
Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the NASD. Any such arbitration must be commenced
by service of a written demand for arbitration or written notice of intention
to arbitrate, therein electing the arbitration tribunal. In the event the
party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand or
notice is authorized to do so. Such an arbitration would be limited to the
operation of the interim reimbursement provisions contained in the second and
fifth paragraphs of this Section 9, and would not resolve the ultimate
propriety or enforceability of the obligation to reimburse expenses which is
created by the provisions of the second and fifth paragraphs of this Section 9.

10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:

a. The Registration Statement shall have become
effective not later than 12:00 noon, New York City time, on the date
hereof, or at such later date and time as shall be consented to in
writing by you, and all filings required by Rules 424(b) and 430A
under the Act shall have been timely made.

b. You shall be reasonably satisfied that since the
respective dates as of which information is given in the Registration
Statement and Prospectus, (i) there shall not have been any change in
the capital stock (other than pursuant to the exercise of outstanding
options disclosed in the Prospectus or granted under the stock option
plans described in the Prospectus) of the Company or any of its
Subsidiaries or any material change in the indebtedness (other than in
the ordinary course of business) of the Company or any of its
Subsidiaries, (ii) except as set forth or contemplated by the
Registration Statement or the Prospectus, no material verbal or
written agreement or other transaction shall have been entered into by
the Company or any of its Subsidiaries, which is not in the ordinary
course of business or which could reasonably be expected to result in
a material reduction in the future earnings of the Company and its
Subsidiaries, (iii) no loss or damage (whether or not insured) to the
property of the Company or any of its Subsidiaries shall have been
sustained which materially and adversely affects the condition
(financial or other), business, properties, net worth, results of
operations or prospects of the Company and its Subsidiaries, (iv) no
legal or governmental action, suit or proceeding affecting the Company
or any of its Subsidiaries which is material to the Company and its
Subsidiaries

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<PAGE> 24
or which affects or could reasonably be expected to affect the
transactions contemplated by this Agreement shall have been instituted
or threatened, and (v) there shall not have been any material change
in the condition (financial or other), business, management,
properties, net worth, results or operations or prospects of the
Company and its Subsidiaries which makes it impractical or inadvisable
in your judgment to proceed with the public offering or purchase the
Shares as contemplated hereby.

c. You shall have received an opinion, which opinion
shall be interpreted in accordance with the Legal Opinion Accord (the
"Accord") of the American Bar Association Section of Business Law
(1991), of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the
Company and the Selling Shareholder, dated the Closing Date (and the
Additional Closing Date, if any), in form and substance reasonably
satisfactory to you and your counsel, to the effect that:

(i) the Company has been duly incorporated and is
validly existing as a corporation under the laws of the State
of Texas, with full corporate power and authority to own,
lease and operate its properties and conduct its business as
described in the Prospectus;

(ii) all of the outstanding shares of Common Stock
prior to the issuance of the Shares have been duly and validly
authorized and issued, are fully paid and nonassessable and
free of preemptive rights under the Company's Restated
Articles of Incorporation, or to the Knowledge of such counsel
(as used herein, the term "Knowledge" shall mean the Actual
Knowledge of the Primary Lawyer Group, as those terms are
defined in the Accord) similar rights that entitle or will
entitle any person to acquire any shares upon the issuance
thereof by the Company; the Shares to be issued and sold to
the Underwriters by the Company hereunder have been duly
authorized and, when issued and delivered to the Underwriters
against payment therefor in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable and free
of any preemptive rights under the Company's Restated Articles
of Incorporation, or to the Knowledge of such counsel, similar
rights that entitle or will entitle any person to acquire any
Shares upon the issuance thereof by the Company; and the
authorized capital stock of Company conforms in all material
respects to the description thereof under the Caption
"Description of Capital Stock" in the Prospectus;

(iii) the Company has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any business,
so as to require such qualification, except for those failures
to be so qualified or in good standing which will not in the
aggregate have a Material Adverse Effect;

(iv) (a) the Registration Statement has become
effective under the Act and, to the Knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose

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<PAGE> 25
have been instituted or are pending or contemplated under the
Act; (b) the Registration Statement and the Prospectus and
each amendment or supplement thereto (except for the financial
statements, schedules, and other financial and statistical
data included therein, as to which such counsel need express
no opinion) comply as to form in all material respects with
the requirements of the Act; (c) such counsel has no Knowledge
of any contracts or documents required to be filed as exhibits
to the Registration Statement or described in the Registration
Statement or the Prospectus which are not so filed or
described as required, and (d) to the Knowledge of such
counsel, the descriptions in the Prospectus of statutes, legal
and governmental proceedings, and contracts and other
documents present in all material respects the information
required to be shown;

(v) this Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid
and binding agreement of the Company enforceable in accordance
with its terms, except to the extent that the enforceability
of the indemnification and contribution provisions of Section
9 hereof may be limited by securities laws or by public policy
considerations as expressed in such laws as construed by
courts of competent jurisdiction and except as enforceability
may be limited by bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting
enforcement of creditors' rights generally or the availability
of equitable remedies, regardless of whether such enforcement
is considered in a proceeding in equity or at law, and neither
the performance of this Agreement nor consummation of the
transactions contemplated herein (a) will result in any breach
or violation of any of the terms or provisions of, or
constitute a default under, (i) any contract, indenture,
mortgage, deed of trust, voting trust or similar agreement,
note agreement, lease or other agreement or instrument to
which the Company or any Subsidiary is a party or by which the
Company or the Subsidiary or their respective properties are
bound and that is either (x) filed by the Company with the
Commission as an exhibit to the Registration Statement or (y)
material to the Company and its Subsidiaries, taken as a
whole, and known to such counsel (collectively, "Material
Agreements"), (ii) the Restated Articles of Incorporation or
bylaws of the Company or (iii) any Law (but excluding Local
Law) applicable to the Company or any Subsidiary or their
respective businesses or properties, the violation of which
would have a Material Adverse Effect, and (b) will not result
in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any
Subsidiary pursuant to the terms of any Material Agreement;
and, to the Knowledge of such counsel, no consent, approval,
authorization, registration, filing or order of any federal or
Texas State authority has been or is required for the
performance of this Agreement by the Company or the
consummation of the transactions contemplated hereby, except
such as have been obtained under the Act, provided that such
opinion need not extend to consents, approvals, authorizations
or orders required under state or foreign

25
<PAGE> 26
securities or Blue Sky laws or under NASD rules in connection
with the purchase and distribution of the Shares by the
Underwriters;

(vi) to the Knowledge of such counsel, there is not
pending or threatened any action, suit or proceeding before or
by any court or governmental agency or body, to which the
Company or any Subsidiary is a party, or to which any property
of the Company or any Subsidiary is subject, which (a) is not
referred to in the Prospectus and would reasonably be expected
to result in a Material Adverse Effect or (b) is required to
be described in the Prospectus and is not so described;

(vii) the form of certificates for the Shares
conforms in all material respects with the requirements of the
Texas Business Corporation Act;

(viii) to the Knowledge of such counsel, (A) the
Company has such permits, licenses, franchises, authorizations
and approvals (collectively, "permits") of federal or Texas
State governmental agencies or bodies as are necessary to own
or lease its properties and to conduct its business in the
manner described in the Prospectus, except where the failure
to have obtained any such permit would not have a Material
Adverse Effect, subject in each case to such qualifications as
may be set forth in the Prospectus and (B) the permits contain
no restrictions required to be disclosed in the Prospectus
that are not disclosed therein;

(ix) to the Knowledge of such counsel, neither the
Company nor any of its Subsidiaries is in violation of any Law
(but excluding Local Law) applicable to the Company or any of
the Subsidiaries or of any decree of any court or governmental
agency or body having jurisdiction over the Company or any of
the Subsidiaries except where such violation would not
reasonably be expected to have a Material Adverse Effect;

(x) neither the Company nor any Subsidiary is an
"investment company" or an "affiliated person" of or a
company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940;

(xi) this Agreement and the Power of Attorney have
been duly authorized, executed and delivered by or on behalf
of the Selling Shareholder and constitute a binding agreement
of the Company enforceable in accordance with its terms,
except to the extent that the enforceability of the
indemnification and contribution provisions of Section 9
hereof may be limited by securities laws or by public policy
considerations as expressed in such laws as construed by
courts of competent jurisdiction and except as enforceability
may be limited by bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting
enforcement of creditors' rights generally or the availability
of equitable remedies, regardless of whether such enforcement
is

26
<PAGE> 27
considered in a proceeding in equity or at law; and to the
Knowledge of such counsel the performance of this Agreement
and the Power of Attorney and the consummation of the
transactions herein and therein contemplated will not result
in a breach or violation of any of the terms or provisions of,
or constitute a default under, any statute, indenture,
mortgage, deed of trust, voting trust agreement, note
agreement, lease or other agreement or instrument to which the
Selling Shareholder is a party or by which the Selling
Shareholder or its properties are bound, or any Law (but
excluding any Local Law) applicable to the Selling Shareholder
or the business or property of the Selling Shareholder;

(xii) to the knowledge of such counsel, no consent,
approval, authorization or order of any federal or Texas State
authority has been or is required for the performance of this
Agreement and the Power of Attorney by the Selling Shareholder
or the consummation of the transactions contemplated by this
Agreement and the Power of Attorney in connection with the
Shares to be sold by the Selling Shareholder hereunder, except
consents, approvals, authorizations or orders that have been
duly obtained and are in full force and effect, such as have
been obtained under the Act and such as may be required under
state securities or Blue Sky laws or NASD rules and
regulations in connection with the purchase and distribution
of such Shares by the Underwriters;

(xiii) to the knowledge of such counsel, immediately
prior to the Closing Date (and immediately prior to the
Additional Closing Date, if applicable), the Selling
Shareholder has good and valid title to the Shares to be sold
by the Selling Shareholder under this Agreement, free and
clear of all pledges, liens, security interests, charges,
claims, equities or encumbrances of any kind, and full right,
power and authority to sell, assign, transfer and deliver the
Shares to be sold by the Selling Shareholder hereunder; and

(xiv) by delivery of a certificate or certificates
therefor such Selling Shareholder will transfer to the
Underwriters who have purchased such Shares pursuant to this
Agreement in good faith and without notice of any such pledge,
lien, security interest, charge, claim, equity or encumbrance
of any kind or any other adverse claim within the meaning of
the Texas Uniform Commercial Code good and valid title to such
Shares, free and clear of any pledges, liens, security
interests, charges, claims, equities, encumbrances or other
adverse claims (other than those arising by or through the
Underwriters).

In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, counsel for the Underwriters, representatives of the independent
public accountants for the Company, and the Underwriters, at which the contents
of the Registration Statement and Prospectus and related matters were discussed
and, although such counsel is not passing upon and does not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus, on the basis of the
foregoing (relying as to materiality upon the statements of

27
<PAGE> 28
officers and other representatives of the Company), no facts have come to such
counsel's attention which lead such counsel to believe (i) that the
Registration Statement or any amendment or supplement thereto (other than the
financial statements, schedules and reports thereon, and other financial and
statistical data included therein, as to which such counsel need not comment),
as of its effective date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (ii) that the Prospectus or any
amendment or supplement thereto (other than financial statements, schedules and
reports thereon, and other financial and statistical data included therein, as
to which such counsel need not comment), as of its issue date and as of the
Closing Date, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Such counsel may state that its belief
expressed in such statement is based upon the procedures set forth therein.

In rendering their opinion as aforesaid, counsel need only opine as to
the laws of the State of Texas and federal laws, and counsel may (1) rely as to
matters of fact on certificates of responsible officers and other
representatives of the Company, certificates of public officials, and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that in each such case, such counsel
shall state that it has no knowledge contrary to the information contained in
such certificates or statements and knows of no reason why you should not
reasonably rely upon the information contained in such certificates or
statements and copies of any such certificates or statements shall be delivered
to Underwriters' counsel; and (2) make such other assumptions, qualifications,
exceptions and limitations applicable to such opinions as shall be contemplated
by the Accord or otherwise reasonably acceptable to Underwriters' counsel.

In rendering such opinion, such counsel may rely upon a certificate of
the Selling Shareholder as to matters of fact (i) with respect to ownership of
and liens, encumbrances, equities or claims on the Shares sold by the Selling
Shareholder, and (ii) with respect to any agreements, mortgages, deeds of
trust, voting trusts, notes, leases or other instruments, provided that such
counsel shall state that it has no knowledge contrary to the information
contained in such certificate and knows of no reason why you should not
reasonably rely upon the information contained in such certificate and a copy
of any such certificate shall be delivered to Underwriters' counsel.

d. You shall have received on the Closing Date (and the
Additional Closing Date, if any) an opinion of Thompson & Knight, a
Professional Corporation, as counsel for the Underwriters, dated the Closing
Date with respect to the issuance and sale of the Firm Shares, the Registration
Statement and other related matters as you may reasonably request, and the
Company and its counsel shall have furnished to your counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.

28
<PAGE> 29
e. You shall have received letters addressed to you and dated the
date hereof and the Closing Date from Deloitte & Touche LLP, independent
certified public accountants, substantially in the forms heretofore approved by
you.

f. No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or, to the knowledge of the Company, shall be threatened or
contemplated by the Commission at or prior to the Closing Date; (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending or, to the knowledge of the Company, threatened or contemplated by the
Commission or the authorities of any jurisdiction; (iii) any request for
additional information on the part of the staff of the Commission or any such
authorities shall have been complied with to the satisfaction of the staff of
the Commission or such authorities; (iv) after the date hereof no amendment or
supplement to the Registration Statement or the Prospectus shall have been
filed unless a copy thereof was first submitted to you and you did not object
thereto in good faith; and (v) all of the representations and warranties of the
Company contained in this Agreement shall be true and correct in all respects
on and as of the date hereof and on and as of the Closing Date as if made on
and as of the Closing Date, and you shall have received a certificate, dated
the Closing Date and signed by the chief executive officer and the chief
financial officer of the Company (or such other officers as are acceptable to
you) to the effect set forth in this Section 10(f) and in Sections 10(b) and
10(g) hereof.

g. The Company shall not have failed in any respect at or prior
to the Closing Date to have performed or complied with any of its agreements
herein contained and required to be performed or complied with by it hereunder
at or prior the Closing Date.

h. You shall have received a certificate, dated on and as of the
Closing Date, by or on behalf of the Selling Shareholder to the effect that as
of the Closing Date the Selling Shareholder's representations and warranties in
this Agreement are true and correct as if made on and as of such Closing Date,
and that the Selling Shareholder has performed all its obligations and
satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date.

i. The Company and the Selling Shareholder shall have furnished
or caused to have been furnished to you such further certificates and documents
as you shall have reasonably requested.

j. At or prior to the Closing Date, you shall have received the
written commitment of each of the Company's officers and directors and certain
of their affiliates and the Selling Shareholder not to sell, offer to sell,
contract to sell, or otherwise dispose of or transfer any shares of Common
Stock or rights to purchase any shares of Common Stock, directly or indirectly,
except to the Underwriters pursuant to this Agreement, for a period of 180 days
after commencement of the public offering of the Shares by the Underwriters
without the prior written consent of Raymond James & Associates, Inc.

29
<PAGE> 30
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.

The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of the Additional
Closing Date of the conditions set forth in this Section 10, except that, if
the Additional Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (i) shall be dated
as of the Additional Closing Date and the opinion called for by paragraph (c)
shall be revised to reflect the sale of Additional Shares.

If any of the conditions hereinabove provided for in this Section 10
shall not have been satisfied when and as required by this Agreement, this
Agreement may be terminated by you by notifying the Company of such termination
in writing or by telegram at or prior to such Closing Date, but you shall be
entitled to waive any of such conditions.

11. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon the later of (a) the execution and delivery hereof by the
parties hereto, and (b) release of notification of the effectiveness of the
Registration Statement by the Commission; provided, however, that the
provisions of Sections 8 and 9 shall at all times be effective.

If any one or more of the Underwriters shall fail or refuse to
purchase Firm Shares which it or they have agreed to purchase hereunder, and
the aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate number of the Firm Shares, each non-defaulting
Underwriter shall be obligated, severally, in the proportion which the number
of Firm Shares set forth opposite its name in Schedule I hereto bears to the
aggregate number of Firm Shares set forth opposite the names of all
non-defaulting Underwriters or in such other proportion as you may specify in
the Agreement Among Underwriters, to purchase the Firm Shares which such
defaulting Underwriter or Underwriters agreed, but failed or refused to
purchase. If any Underwriter or Underwriters shall fail or refuse to purchase
Firm Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Shares
and arrangements satisfactory to you, the Company and the Selling Shareholder
for the purchase of such Firm Shares are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Shareholder. In any
such case which does not result in termination of this Agreement, either you or
the Company and the Selling Shareholder shall have the right to postpone the
Closing Date, but in no event for longer than seven (7) days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any such default of any such Underwriter under this Agreement.

12. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or the

30
<PAGE> 31
Selling Shareholder by notice to the Company and the Selling Shareholder, if
prior to the Closing Date or the Additional Closing Date (if different from the
Closing Date and then only as to the Additional Shares), as the case may be, in
your sole judgment, (i) trading in the Company's Common Stock shall have been
suspended by the Commission or the Nasdaq/NMS, (ii) trading in securities
generally on the New York Stock Exchange, American Stock Exchange or Nasdaq/NMS
shall have been suspended or materially limited, or minimum or maximum prices
shall have been generally established on such exchange or market, or additional
material governmental restrictions, not in force on the date of this Agreement,
shall have been imposed upon trading in securities generally by any such
exchange or market or by order of the Commission or any court or other
governmental authority, (iii) a general moratorium on commercial banking
activities shall have been declared by either federal or New York State
authorities or (iv) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions or other material event the effect
of which on the financial markets of the United States is such as to make it,
in your judgment, impracticable or inadvisable to market the Shares or to
enforce contracts for the sale of the Shares. Notice of such cancellation
shall be promptly given to the Company and its counsel by telegraph, telecopy
or telephone and shall be subsequently confirmed by letter.

13. INFORMATION FURNISHED BY THE UNDERWRITERS. The Company
acknowledges that the statements set forth in footnote (4) on the cover page of
the Prospectus and in the third paragraph under the caption "Underwriting" in
any Prepricing Prospectus and in the Prospectus, constitute the only
information furnished by or on behalf of the Underwriters through you or on
your behalf as such information is referred to in Sections 6(a), 6(b) and 9
hereof.

14. MISCELLANEOUS. Except as otherwise provided in Sections 5 and
12 hereof, notice given pursuant to any of the provisions of this Agreement
shall be in writing and shall be delivered (i) if to the Company or the Selling
Shareholder, to the office of the Company at 300 Burnett Street, Fort Worth,
Texas 76102-2799, Attention: F. George Dunham, III (with a copy to Akin, Gump,
Strauss, Hauer & Feld, L.L.P., 1700 Pacific Avenue, Suite 4100, Dallas, Texas
75201-4618, Attention: Terry M. Schpok, P.C.), or (ii) if to you, as
Representatives of the Underwriters, to Raymond James & Associates, Inc., 880
Carillon Parkway, St. Petersburg, Florida 33716, Attention: Charles W. Uhrig
(with copy to Thompson & Knight, a Professional Corporation, 1700 Pacific
Avenue, Suite 3300, Dallas, Texas 75201-4693, Attention: Fred W. Fulton).

This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 9 hereof, the Selling Shareholder
and its respective successors and assigns, to the extent provided herein, and
no other person shall acquire or have any right under or by virtue of this
Agreement. Neither of the terms "successor" and "successors and assigns" as
used in this Agreement shall include a purchaser from you of any of the Shares
in his status as such purchaser.

31
<PAGE> 32
This Agreement constitutes the entire agreement, and supersedes all
other prior agreements and undertakings, both written and oral, among the
parties with respect to the subject matter hereof.

15. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas
without reference to choice of law principles thereunder.

This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.

Subject to Section 11, this Agreement shall be effective when, but
only when, at least one counterpart hereof shall have been executed on behalf
of each party hereto.

The Company, the Selling Shareholder and the Underwriters each hereby
irrevocably waive any right they may have to a trial by jury in respect to any
claim based upon or arising out of this Agreement or the transactions
contemplated hereby.

Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Shareholder and the several Underwriters.

Very truly yours,

INSPIRE INSURANCE SOLUTIONS, INC.

By:
----------------------------------------
Name: F. George Dunham, III
Title: President and
Chief Executive Officer

Selling Shareholder:

THE MILLERS MUTUAL FIRE INSURANCE COMPANY

By:
----------------------------------------
Name: Joy J. Keller
Title: Attorney-in-Fact,

as Attorney-in-Fact acting on behalf of the
Selling Shareholder named in Schedule II to this
Agreement.

32
<PAGE> 33
CONFIRMED as of the date first above mentioned,
on behalf of itself and the other several
Underwriters named in Schedule I hereto.

RAYMOND JAMES & ASSOCIATES, INC.

By:
----------------------------------------
Name: Charles W. Uhrig
Title: Managing Director

33
<PAGE> 34
SCHEDULE I

<TABLE>
<CAPTION>
Number
of Firm
Name Shares
- ---- --------
<S> <C>
Raymond James & Associates, Inc. . . . . . . . . . . . . . . . . . . . . . . . . .

Southwest Securities, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000
=========
</TABLE>

34
<PAGE> 35
SCHEDULE II

<TABLE>
<CAPTION>
Shares Firm Shares Additional Shares Total
- ------ ----------- ----------------- -----
<S> <C> <C> <C>
Company 2,775,000 416,250 3,191,250
- -------

Selling Shareholder
- -------------------

The Millers Mutual
Fire Insurance
Company 2,225,000 333,750 2,558,750
--------- ------- ---------

TOTAL: 5,000,000 750,000 5,750,000
========= ======= =========
</TABLE>

<PAGE> 1
EXHIBIT 4.1

COMMON STOCK COMMON STOCK
IIS

INCORPORATED UNDER THE
LAWS OF THE STATE OF TEXAS
NUMBER INSPIRE INSURANCE SOLUTIONS, INC. SHARES

THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NEW YORK
AND RIDGEFIELD PARK, NEW JERSEY

CUSIP 457732 10 5
SEE REVERSE FOR CERTAIN DEFINITIONS

THIS CERTIFIES THAT

is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE OF

INSPIRE INSURANCE SOLUTIONS, INC., transferable on the books of the
Corporation by the holder hereof in person or by a duly authorized attorney
upon surrender of this certificate properly endorsed. This certificate is not
valid unless countersigned by the Transfer Agent and registered by the
Registrar.

Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.

Dated:
/s/ TERRY G. GAINES COUNTERSIGNED AND REGISTERED
TREASURER ChaseMellon Shareholder Services, L.L.C.

[SEAL]

TRANSFER AGENT AND REGISTRAR
/s/ F. GEORGE DUNHAM, III BY
PRESIDENT AUTHORIZED SIGNATURE

<PAGE> 2
INSPIRE INSURANCE SOLUTIONS, INC.

The Articles of Incorporation of the Corporation on file in the office
of the Secretary of State of Texas set forth (a) the aggregate number of shares
and the par value of each class of capital shares that the Corporation is
authorized to issue, together with the designations, preferences, limitations
and relative rights of each such class; (b) a statement of the authority vested
in the Board of Directors to establish series and to fix and determine the
variations in the relative rights and preferences between any such series of
the Preferred Stock so established; (c) a denial of preemptive rights of the
shareholders to acquire additional, unissued or treasury shares of the
Corporation; and (d) a denial of cumulative voting at any meeting of the
shareholders for electing directors. The Corporation will furnish a copy of
such statement to the record holder of this certificate without charge upon
written request to the Corporation at its registered office. This certificate
also evidences and entitles the holder hereof to the same number of Rights
(subject to adjustment) as the number of shares of Common Stock represented by
this certificate, such Rights being on the terms provided under the Rights
Agreement between INSpire Insurance Solutions, Inc. and U.S. Trust Company of
Texas, N.A. (the "Rights Agent"), dated as of July 30, 1997, as it may be
amended from time to time (the "Rights Agreement"), the terms of which are
incorporated herein by reference and a copy of which is on file at the
principal executive offices of INSpire Insurance Solutions, Inc. Under certain
circumstances, as set forth in the Rights Agreement, such Rights shall be
evidenced by separate certificates and shall no longer be evidenced by this
certificate. INSpire Insurance Solutions, Inc. shall mail to the registered
holder of this certificate a copy of the Rights Agreement without charge within
five days after receipt of a written request therefor. Under certain
circumstances as provided in Section 7(e) of the Rights Agreement, Rights
issued to or Beneficially owned by Acquiring Persons or their Affiliates or
Associates or any subsequent holder of such Rights shall be null and void and
may not be transferred to any Person. Capitalized terms used in this paragraph
not otherwise defined herein have the meaning ascribed to such terms as set
forth in the Rights Agreement. The following abbreviations, when used in the
inscription on the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:

TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the ------ --------
entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gifts to
right of survivorship Minors
and not as tenants Act
in common ------------------
(State)

Additional abbreviations may also be used though not in the above list.

For Value Received, hereby sell, assign and transfer unto
--------

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]

----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)

----------------------------------------------------------------------------

Shares
----------------------------------------------------------------------
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
--------------------------------------------------------------------
to transfer the said shares on the books of the within named Corporation
with full power of substitution in the premises.

Dated
---------------------------------

-------------------------------------------

-------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT,
OR ANY CHANGE WHATEVER. SIGNATURE
GUARANTEED: THE SIGNATURE(S) SHOULD
BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION, (BANKS,
STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.

Signature Guaranteed By:

--------------------------------------

NOTE: Signatures should be guaranteed by an Officer of a Bank or Trust
Company or by a firm having membership on the New York Stock Exchange
or on the American Stock Exchange.

<PAGE> 1
EXHIBIT 5

[AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. LETTERHEAD]

August 21, 1997

INSpire Insurance Solutions, Inc.
300 Burnett Street
Fort Worth, Texas 76102-2799

Ladies and Gentlemen:

We have acted as counsel to INSpire Insurance Solutions, Inc., a Texas
corporation (the "Company"), in connection with the proposed public offering of
up to 5,750,000 shares of the Company's Common Stock, par value $.01 per share
(the "Common Stock") and up to 5,750,000 Series A Junior Preferred Stock
Purchase Rights (the "Rights"), as described in Registration Statement No.
333-31173 on Form S-1 (the "Registration Statement") filed with the Securities
and Exchange Commission.

We have, as counsel, examined such corporate records, certificates and
other documents and reviewed such questions of law as we have deemed necessary,
relevant or appropriate to enable us to render the opinions listed below. In
rendering such opinions, we have assumed the genuineness of all signatures and
the authenticity of all documents examined by us. As to various questions of
fact material to such opinions, we have relied upon representations of the
Company.

Based upon such examination and representations, we advise you that,
in our opinion:

A. The shares of Common Stock that are to be sold and delivered
by the Company and The Millers Mutual Fire Insurance Company (the "Selling
Shareholder") as contemplated by the Underwriting Agreement (the "Underwriting
Agreement"), the form of which is filed as Exhibit 1 to the Registration
Statement, have been duly authorized by the Company.
<PAGE> 2
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.

INSpire Insurance Solutions, Inc.
August 21, 1997
Page 2

B. The shares of Common Stock that are to be sold and delivered
by the Company as contemplated by the Underwriting Agreement will, when issued
and delivered in accordance with the terms of the Underwriting Agreement, be
validly issued, fully paid and non-assessable.

C. The shares of Common Stock that are currently held by the
Selling Shareholder and which are to be sold and delivered by the Selling
Shareholder as contemplated by the Underwriting Agreement, have been validly
issued and are fully paid and non-assessable.

D. The Rights have been duly authorized by the Company.

E. The Rights to be issued in connection with the Common Stock to
be sold and delivered by the Company as contemplated by the Underwriting
Agreement will, when issued, be validly issued.

F. The Rights that are currently held by the Selling Shareholder
and which are to be delivered by the Selling Shareholder in connection with the
Common Stock to be sold and delivered by the Selling Shareholder as
contemplated by the Underwriting Agreement, have been validly issued.

We consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus contained therein.

Sincerely,

/s/ Akin, Gump, Strauss Hauer & Feld, L.L.P.

<PAGE> 1
EXHIBIT 10.30

CONSOLIDATED FEDERAL INCOME TAX

ALLOCATION AGREEMENT

WHEREAS, Millers Mutual Fire Insurance Company of Texas (Mutual) and
all its includible subsidiaries (Subsidiary Companies), as defined in IRC
Section 1504, intend to file a Consolidated Income Tax Return (the
"Consolidated Return").

NOW, THEREFORE, it is agreed as follows:

1. Effective Period of Consolidation.

The election to allocate the Consolidated Tax Liability under IRC
Section 1552 shall be effective as of January 1, 1994 through December
31, 1994 and for subsequent years as determined by Mutual.

2. Allocation of Consolidated Taxable Income or Loss.

A consolidated Federal Income Tax Return will be filed for Mutual and
all includible subsidiaries. The taxable income or loss for each
subsidiary company will be computed and calculated in accordance with
the Internal Revenue Code, as though that company were filing a
separate return. The amount of taxable income or loss for each company
will then be used in computing such company's portion of the current
tax liability or benefit.

3. Determination of Current Tax Liability or Benefit.

(a) Each subsidiary company will compute its current estimated tax
liability or benefit based upon the company's taxable income
or loss. These tax calculations will be determined as if the
company has filed a separate tax return and was not part of a
consolidated group. Each company will be liable for the tax
liability computed under this method or will be entitled to
receive a benefit for its loss utilized in the Consolidated
Return. Any taxable loss not utilized in the current or prior
years tax returns will be carried forward by such company. The
benefit will be recognized by the company when the
carryforward is
<PAGE> 2
ALLOCATION AGREEMENT
Page 2

utilized in a subsequent taxable year.

(b) Pursuant to IRC Regulations Section 1.1552-1(c), Mutual as the
common parent has elected to allocate the tax liability of the
group in the manner provided by IRC Regulations Section
1.1552-1(a)(2).

Further pursuant to IRC Regulations Section 1.1502-33(d)(3),
Mutual has elected to allocate the Federal income tax
liability of the group beginning with the taxable year ending
December 31, 1994 in the manner provided by Regulations
Section 1.1502-33(d)(2)(ii) in conjunction with the method
described in Regulation Section 1.1552-1(a)(2). In reference
to Regulation Section 1.1502-33(d)(2)(ii), the percentage of
the excess provided in Regulations Section
1.1502-33(d)(2)(ii)(b) and (c) to be allocated to each member
is 100%.

4. Payment of Current Tax Liabilities or Refunds.

Final calculations will be made and the Subsidiary Companies
will remit any adjusted tax liabilities to Mutual within 30
days after the filing of the Consolidated Tax Return. Mutual
will remit any refunds and/or benefits simultaneously to the
appropriate Subsidiary Company.

5. Representations and Agreements.

(e) Within 90 days after filing the Consolidated Return
or any amendment thereto, an additional review and
adjustment (where necessary) will be made to insure
that;

1. The allocated tax liability for the companies
will not be greater than the tax liability
they would have incurred if they had been
filing separate returns for all years of the
consolidated period; and
<PAGE> 3
ALLOCATION AGREEMENT
Page 3

2. The allocated tax refund for the companies
will not be less than the tax refund they
would have incurred if they had been filing
separate returns for all years of the
consolidation period.

(b) Mutual further represents that the companies will be
adequately indemnified by their affiliates in the
event the Internal Revenue Service levies taxes in
excess of the amount specified in 5(a) above.

(c) Records of the tax allocations, the subsequent review
of such allocations, and any adjustments specified by
5(a) above will be maintained at the office of
Mutual.

6. Acquisition or Formation of Subsidiaries

Any subsidiaries acquired, formed, or to be acquired or formed
in the future shall become parties to this tax sharing
agreement when such subsidiaries become members of the
consolidated group for federal income tax purposes.

MILLERS MUTUAL FIRE INSURANCE COMPANY

BY: /s/ F. GEORGE DUNHAM, III
---------------------------------

MILLERS CASUALTY INSURANCE COMPANY

BY: /s/ F. GEORGE DUNHAM, III
---------------------------------

MILLERS LIFE INSURANCE COMPANY

BY: /s/ F. GEORGE DUNHAM, III
---------------------------------

<PAGE> 4
ADDENDUM TO CONSOLIDATED FEDERAL INCOME
TAX ALLOCATION AGREEMENT

WHEREAS, The Millers Mutual Fire Insurance Company, The Millers
Casualty Insurance Company, and The Millers Life Insurance Company entered into
that certain Consolidated Federal Income Tax Allocation Agreement to be
effective January 1, 1994 (the "Agreement");

WHEREAS, subsequent to the effective date of the Agreement, two other
Subsidiary Companies of The Millers Mutual Fire Insurance Company were formed;
and

WHEREAS, the two new Subsidiary Companies, Millers Holding Corporation
and Millers Integrated Claims Resources, Inc., have agreed to abide by and be
bound by the terms of the Agreement.

NOW, THEREFORE, Millers Holding Corporation and Millers Integrated
Claims Resources, Inc. agree to execute this Addendum indicating their
agreement to the terms and conditions set forth therein.

Executed to be effective the 30th day of September, 1995.

Millers Holding Corporation Millers Integrated Claims
Resources, Inc.

By: /s/ F. GEORGE DUNHAM, III By: /s/ JOY J. KELLER
-------------------------- ----------------------

<PAGE> 5
ADDENDUM NO. 2 TO CONSOLIDATED FEDERAL INCOME

TAX ALLOCATION AGREEMENT

This Addendum No. 2 to Consolidated Federal Income Tax Allocation
Agreement (this "Addendum No. 2") is made and entered into this 15th day of
August, 1997.

WHEREAS, The Millers Mutual Fire Insurance Company ("Mutual") and all
of its includible subsidiaries ("the Subsidiary Companies"), within the meaning
of Section 1504 of the Internal Revenue Code of 1986, as amended, constitute a
consolidated group (the "Group") for federal income tax purposes and file a
Consolidated Income Tax Return (the "Consolidated Return"); and

WHEREAS, Mutual and the Subsidiary Companies entered into that certain
Consolidated Federal Income Tax Allocation Agreement (the "Allocation
Agreement") effective as of January 1, 1994; and

WHEREAS, subsequent to the effective date of the Allocation Agreement,
two new Subsidiary Companies, Millers Holding Corporation and Millers
Integrated Claims Resources, Inc., were formed, and agreed to abide by and be
bound by the terms of the Allocation Agreement, and evidenced such agreement by
executing that certain Addendum to Consolidated Federal Income Tax Allocation
Agreement effective as of the 20th day of September, 1995; and

WHEREAS, Millers Integrated Claims Resources, Inc., subsequently
changed its name to MiliRisk, Inc., and MiliRisk, Inc. later changed its name
to INSpire Insurance Solutions, Inc. ("INSpire");

WHEREAS, subsequent to the effective date of the Allocation Agreement,
INSpire acquired Strategic Data Systems, Inc., a Wisconsin corporation ("SDS"),
which in turn wholly owned Applied Quoting Systems, Inc., a Wisconsin
corporation ("AQS") and the parties desire that SDS and AQS become parties to
the Allocation Agreement; and

WHEREAS, subsequent to the acquisition of SDS by INSpire, SDS was
merged with and into INSpire; and

WHEREAS, subsequent to the effective date of the Allocation Agreement,
Millers Holding Corporation acquired two additional Subsidiary Companies, The
Millers Direct Insurance Company (f/k/a Amtex Insurance Company) ("Millers
Direct") and Lutheran Benevolent Insurance Exchange ("LBIE") and the parties
desire that Millers Direct and LBIE become parties to the Allocation Agreement;
and

WHEREAS, an amount of stock of INSpire will be issued in an initial
public offering ("IPO") which will cause INSpire to be ineligible to continue
to be included in the Consolidated Return; and
<PAGE> 6
WHEREAS, INSpire has entered into a letter of intent contemplating the
sale of AQS to a third party purchaser which if consummated will cause AQS to
be ineligible to continue to be included in the Consolidated Return; and

WHEREAS, INSpire and AQS are hereby collectively referred to as the
"Withdrawing Members" or individually as a "Withdrawing Member"; and

WHEREAS, the parties desire to terminate the Allocation Agreement as
to the Withdrawing Members.

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

1. Effective as of March 12, 1997, INSpire and AQS agree to abide by
and be bound by the terms of the Allocation Agreement.

2. Effective as of March 24, 1997, Millers Direct agrees to abide by
and be bound by the terms of the Allocation Agreement.

3. Effective as of March 26, 1997, LBIE agrees to abide by and be
bound by the terms of the Allocation Agreement.

4. The Allocation Agreement shall be terminated as to INSpire as of
the effective date of the IPO, but will continue in full force and
effect with respect to the other parties to the Allocation Agreement.

5. The Allocation Agreement shall be terminated as to AQS as of the
earlier to occur of the effective date of the IPO or the effective
date of the sale of AQS.

6. Notwithstanding such termination as to a Withdrawing Member, the
Allocation Agreement shall continue in effect with respect to all
parties to the Allocation Agreement, including such Withdrawing
Member, with respect to any payments or refunds due or any other
obligations relating to taxable periods prior to termination. All
parties, including the Withdrawing Members, agree that Mutual shall
represent the Group in any income tax proceeding, audit, or other
matter relating to a taxable period for which a Consolidated Return
has been filed by the Group and may bind the Group with respect to
items in that year. Notwithstanding the foregoing sentence, Mutual
agrees to notify a Withdrawing Member of any material adjustment
proposed by the Internal Revenue Service that either would give rise
to any obligation of such Withdrawing Member to Mutual and to contest
at such Withdrawing Member's request, expense and direction, through
counsel reasonably satisfactory to such Withdrawing Member, any such
proposed adjustment until final judgment by the highest court having
jurisdiction thereof. In the event of any adjustment to the
Consolidated Returns as filed (by reason of an amended return, claim
for refund, settlement of an Internal Revenue Service or judicial
action), the respective obligations of the parties hereunder shall be
redetermined to give effect to any such adjustment in accordance with
the Allocation Agreement as if it had been made a part of the original
computations thereunder, and any additional accounting entries,
payments or reimbursements between the parties as may be required on
account thereof shall be made

-2-
<PAGE> 7
promptly, in the case of an uncontested adjustment, after agreement
thereon is reached, or, in the case of a contested adjustment after a
final determination of the contest. If any interest or penalty is to
be paid or received as a result of a tax deficiency or refund, such
interest or penalty shall be allocated to the parties in the ratio
each corporation's change in taxable income bears to the total change
in taxable income.

7. This Addendum No. 2 shall be binding upon and inure to the benefit
of any successor, whether by statutory merger, acquisition of assets,
or otherwise, to any of the parties hereto, to the same extent as if
the successor had been an original party to this Addendum No. 2.

8. Notwithstanding any other provision hereof, this Addendum No. 2
shall not become effective and binding on the parties hereto until
this Addendum No. 2 is filed with and approved by the Texas Department
of Insurance as may be required under applicable insurance holding
company laws and regulations.

IN WITNESS WHEREOF, the parties hereto have caused this Addendum No. 2
to be executed by their duly authorized representatives.

The Millers Mutual Fire Insurance Company INSpire Insurance Solutions, Inc.

By: /s/ JOY J. KELLER By: F. GEORGE DUNHAM, III
------------------------------------ ----------------------------------

The Millers Casualty Insurance Company Applied Quoting Systems, Inc.

By: /s/ JOY J. KELLER By: F. GEORGE DUNHAM, III
------------------------------------ ----------------------------------

Millers Holding Corporation

By: /s/ F. GEORGE DUNHAM, III
------------------------------------

The Millers Direct Insurance Company

By: /s/ JOY J. KELLER
------------------------------------

Lutheran Benevolent Insurance Exchange

By: /s/ JOY J. KELLER
------------------------------------

- 3 -

<PAGE> 1
EXHIBIT 10.40

Millers Mutual Fire Insurance Company
Millers Integrated Claims Resources, Inc.
Management Agreement

SPECIFIC CONDITIONS

This agreement is entered into between Millers Mutual Fire Insurance Company,
having its principal office at 300 Burnett Street, Fort Worth, Texas (Millers)
and Millers Integrated Claims Resources, Inc. (MICR), having its principal
office at 300 Burnett Street, Fort Worth, Texas.

Millers and MICR do hereby agree to the following conditions:

1. This agreement covers operations of MICR in all states.

2. The services to be provided shall be in accordance with Texas laws and
shall apply to management services provided to MICR by Millers
including but not limited to marketing, accounting, personnel and
administrative services.

3. MICR shall pay Millers a management fee for services provided based upon
a monthly fee of $200,000 plus a fixed percentage of MICR's pretax
income, to be determined annually. Millers will bill for services
monthly and monies are due Millers from MICR within 30 days of billing
date.

4. This contract is to provide services for the period commencing July 1,
1995 through June 30, 1996. Millers and MICR agree that unless one of
them gives notice to the other in writing received at least 60 days in
advance of the contract period, this contract will automatically renew
for a new contract period equal in duration to the contract period
described herein, commencing on July 1 of each year.

5. All services to be performed by Millers will be rendered to MICR in a
professional manner, subject to the supervision, standards and needs of
MICR.

6. The General Conditions are made apart hereof as though fully set out
herein.

<PAGE> 2

Millers Mutual Fire Insurance Company
Millers Integrated Claims Resources, Inc.
Management Agreement
Page 2

GENERAL CONDITIONS

I. MILLERS' OBLIGATIONS UNDER THE CONTRACT:

A. Millers shall perform, to the extent requested by MICR
management, administrative and support services for and on
behalf of MICR, as MICR may determine to be reasonable and
necessary in the conduct of its business. Such services shall
include, but are not limited to personnel, legal, banking,
investment, financial, payroll, accounting and recordkeeping,
marketing and sales, management information, and electronic
data processing.

B. Millers shall make available, to the extent requested by MICR,
facilities and equipment as MICR may determine to be reasonably
necessary in the conduct of its business. Such facilities and
equipment shall include but are not limited to electronic data
processing equipment, business property and communications
equipment, in all cases whether owned or leased.

C. In providing any services hereunder that require the exercise
of judgment, Millers will endeavor to perform any such service
in accordance with any reasonable and appropriate standards and
guidelines.

II. MICR'S OBLIGATION UNDER THE CONTRACT:

A. To pay Millers the management fee in the amount and in the
manner prescribed by the Specific Conditions.

B. To comply with all other terms and conditions in the General
Conditions of this contract.

<PAGE> 3
Millers Integrated Claims Resources, Inc.
Management Agreement
Page 3

III. CANCELLATION OF CONTRACT:

Cancellation of this contract without cause shall constitute a breach. This
contract may be cancelled with cause in the event of default in any material
term of this contract or in the event that there exists other reasons legally
constituting cause by either party giving to other party written notice setting
forth the reason for the cancellation and the date upon which cancellation is to
be effective.

In the event of cancellation by MICR or Millers with or without cause, Millers
must pay MICR the balance of any monies owed to MICR within 30 days of the
effective date of cancellation.

IV. GENERAL PROVISIONS

Execution of this contract by signing the Specific Conditions which are part of
this contract shall constitute agreement by both parties to all of the terms
set forth in these General Conditions including the following:

A. The provisions of this contract are for the sole benefit of the parties
named herein.

B. Either party will not be liable to any person not a party to this
contract for loss, liability, damage, or expense. Both parties agree
to hold the other party harmless for extra contractual liabilities or
losses in excess of policy limits arising out of their acts.

C. This contract may not be assigned without prior written consent and
the General Conditions and Specific Conditions contain the entire
agreement by and between the parties with respect to the services
described herein.

In witness whereof, this Agreement is executed to be effective the 1st day of
January, 1996.

Millers Mutual Fire Insurance Company Millers Integrated Claims Resources, Inc.

By: By:
---------------------------------- --------------------------------------

---------------------------------- --------------------------------------

<PAGE> 1
EXHIBIT 10.41

SERVICE CONTRACT

SPECIFIC CONDITIONS

This agreement is entered into between Millers Mutual Fire Insurance Company,
having its principal office at 300 Burnett Street, Fort Worth, Texas, Millers
Casualty Insurance Company, having its principal office at 300 Burnett Street,
Fort Worth, Texas (together referred herein as Millers) and Millers Integrated
Claims Resources, Inc. (MICR), having its principal office at 300 Burnett
Street, Fort Worth, Texas.

Millers and MICR do hereby agree to the following conditions:

1. This agreement covers operations of Millers in all states.

2. The services to be provided shall be in accordance with Texas laws and
shall apply to claims and administrative services provided to Millers
by MICR.

3. Millers shall pay MICR for services provided as a percentage of net
earned premiums as follows:

<TABLE>
<S> <C>
Commercial Property - 11.2% Agribusiness - 9.5%
Commercial Casualty - 13.2% SunCoast - 7.5%
Specialty Personal Lines - 9.5%
</TABLE>

5. All services to be performed by MICR will be rendered to Millers in a
professional manner, subject to the supervision, standards and needs of
Millers.

6. The General Conditions are made a part hereof as though fully set out
herein.

GENERAL CONDITIONS

I. MICR'S OBLIGATION UNDER THE CONTRACT:

A. To maintain a complete and accurate claim file on each reported
claim. To investigate, evaluate, settle and/or defend all claims.
Payment of claims and related expenses will be made with Millers'
funds.
<PAGE> 2
B. To appraise Millers of major developments which arise in the
administration, investigation, adjustment, settlement or defense
of a particular claim and to communicate with Millers' designated
representative regarding all important matters concerning the
proper disposition of claims involving complex or questionable
circumstances. Major developments within the contact of this
section are understood to mean:

1. Controverted claims.

2. Receipt of an adverse medical report, e.g. "injury more
serious than originally reported".

3. Death of claimant.

4. Adverse ruling from the court.

5. The need for attorney representation in a previously
unrepresented case.

C. To refrain from disclosing the contents of Millers files to third
parties except as is reasonably necessary in the carrying out of
the responsibilities under this contract or in delegating the
responsibilities to others as legally required.

II. MILLERS' OBLIGATION UNDER THE CONTRACT:

A. To pay MICR the service fee in the amount and in the manner
prescribed by the Specific Conditions.

B. To refer to MICR for service all claims which would fall within
the definition of claim, specifically any monetary demand against
Millers alleged to fall within the scope of the insurance
contracts which were issued by Millers.

C. To comply with all other terms and conditions in the General
Conditions of this contract.

III. CANCELLATION OF CONTRACT:

In the event of cancellation by MICR or Millers with or without cause, Millers
must pay MICR the balance of any monies owed to MICR within 30 days of the
effective date of cancellation.

-2-
<PAGE> 3
IV. GENERAL PROVISIONS:

A. The provisions of this contract are for the sole benefit of the
parties named herein.

B. Either party will not be liable to any person not a party to this
contract for loss, liability, damage, or expense. Both parties
agree to hold the other party harmless for extra contractual
liabilities or losses in excess of policy limits arising out of
their acts.

C. This contract may not be assigned without prior written consent
and the General Conditions and Specific Conditions contain the
entire agreement by and between the parties with respect to the
services described herein.

D. This contract supersedes the previous Service Contract entered
into between the parties dated July 1, 1995. The previous Service
Contract is cancelled as of January 1, 1996.

In witness whereof, this agreement has been executed to be effective the 1st
day of January, 1996.

<TABLE>
<S> <C>
Millers Mutual Fire Insurance Company Millers Integrated Claims Resources, Inc.

By: /s/ F. GEORGE DUNHAM, III By: /s/ F. GEORGE DUNHAM, III
------------------------- -------------------------
PRESIDENT & CEO PRESIDENT & CEO
------------------------- -------------------------

Millers Casualty Insurance Company

By: /s/ F. GEORGE DUNHAM, III
-------------------------
PRESIDENT & CEO
-------------------------

</TABLE>

-3-

<PAGE> 1
EXHIBIT 10.42

Millers Integrated Claims Resources, Inc.
Service Contract (as amended to be effective December 1, 1996)

SPECIFIC CONDITIONS

Millers and MICR do hereby agree to the following conditions:

1. This agreement covers operations of Millers in all states.

2. The services to be provided shall be in accordance with Texas laws and
shall apply to all claims and administrative services excluding legal
services provided to Millers by MICR.

3. Millers shall pay MICR for services provided at 8.5 percent of net
earned premiums for AgriBusiness and Commercial lines and 7.5 percent of
net earned premiums for Personal lines. MICR will bill for services
monthly and monies are due MICR from Millers within 30 days of billing
date. This fee will be reviewed annually and adjusted accordingly.

4. This contract is to provide services for the period commencing December 1,
1996 through December 31, 1997. Millers and MICR agree that unless one of
them gives notice to the other in writing received at least 60 days in
advance of the contract period, this contract will automatically renew for
a new contract period equal in duration to the contract period described
herein, commencing on December 1 of each year.

5. All services to be performed by MICR will be rendered to Millers in a
professional manner, subject to the supervision, standards and needs of
Millers.

6. The General Conditions are made apart hereof as though fully set out herein.

<PAGE> 2
Millers Integrated Claims Resources, Inc.
Service Contract
Page 2

General Conditions

I. MICR'S OBLIGATION UNDER THE CONTRACT:

A. To maintain a complete and accurate claim file on each reported claim.
To investigate evaluate settle and/or give notice of the necessity to
defend all claims. Payment of claims and related expenses will be
made with Millers' funds.

B. To appraise Millers of major developments which arise in the
administration, investigation, adjustment, settlement of a particular
claim and to communicate with Millers designated representative
regarding all important matters concerning the proper disposition of
claims invoicing complex or questionable circumstances. Major
developments within the context of this section are understood to mean:

1. Controverted claims.

2. Receipt of an adverse medical report, e.g. "injury more serious
than originally reported".

3. Death of claimant.

4. Adverse ruling from the court.

5. The need for attorney representation in a previously unrepresented
case.

C. To refrain from disclosing the contents of Millers files to third
parties except as is reasonably necessary in the carrying out the
responsibilities under this contract or in delegating the
responsibilities to others as legally required.

II. MILLERS OBLIGATION UNDER THE CONTRACT:

A. To pay MICR the service fee in the amount and in the manner
prescribed by the Specific Conditions.

B. To refer to MICR for service all claims which would fall within the
definition of claim, specifically any monetary demand against Millers
alleged to fall within the scope of the insurance contracts which were
issued by Millers.

<PAGE> 3
Millers Integrated Claims Resources, Inc.
Service Contract
Page 3

C. To comply will all other terms and conditions in the General Conditions
of this contract.

III. CANCELLATION OF CONTRACT:

In the event of cancellation by MICR or Millers with or without cause, Millers
must pay MICR the balance of any monies owed MICR within 30 days of the
effective date of cancellation.

IV. GENERAL PROVISIONS

A. The provisions of this contract are for the sole benefit of the parties
named herein.

B. Either party will not be liable to any person not a party to this contract
for loss, liability, damage, or expense. Both parties agree to hold the
other party harmless for extra contractual liabilities or losses in excess
of policy limits arising out of their acts.

C. This contract may not be assigned without prior written consent and the
General Conditions and Specific Conditions contain the entire agreement by
and between the parties with respect to the services described herein.

<PAGE> 4
Millers Integrated Claims Resources, Inc.
Service Contract
Page 4

In witness whereof, the parties have caused this contract to be executed in
their behalf by the undersigned duly authorized persons.

Miller Mutual Fire Insurance Company Miller Integrated Claims Resources, Inc.

By: By:
--------------------------------- -------------------------------------

--------------------------------- -------------------------------------

Millers Casualty Insurance Company

By:
---------------------------------

---------------------------------

<PAGE> 1
EXHIBIT 10.43

Millers Integrated Claims Resources, Inc.
Information Services Contract

SPECIFIC CONDITIONS

Millers and MICR do hereby agree to the following conditions:

1. This agreement covers operations of Millers in all states.

2. The services to be provided shall be in accordance with Texas laws and shall
apply to claims and administrative services provided to Millers by MICR.

3. Millers shall pay MICR for services provided at a percentage of net written
premiums. The percentage for the period commencing October 1, 1996 through
December 31, 1996 will be determined at year end. The percentage for the
period commencing on January 1, 1997 through December 31, 1997 will be
calculated at a rate of up to 6% of net written premium. MICR will bill for
services monthly and monies are due MICR from Millers within 30 days of
billing date.

4. This contract is to provide services for the period commencing October 1,
1996 through December 31, 1997. Millers and MICR agree that unless one of
them gives notice to the other in writing received at least 60 days in
advance of the contract period, this contract will automatically renew for a
new contract period equal in duration to the contract period described
herein, commencing on January 1 of each year.

5. All services to be performed by MICR will be rendered to Millers in a
professional manner, subject to the supervision, standards and needs of
Millers.

6. The General Conditions are made apart hereof as though fully set out
herein.

<PAGE> 2
Millers Integrated Claims Resources, Inc.
Information Services Contract
Page 2

GENERAL CONDITIONS

I. MICR'S OBLIGATION UNDER THE CONTRACT:

A. To provide all information system services for Millers including but
not limited to the following:

1. Telecommunications Services
2. Hardware Services
3. Application Software Services
4. System Software Services
5. Network Services
6. System Integration Services

II. MILLERS' OBLIGATION UNDER THE CONTRACT:

A. To pay MICR the service fee in the amount and in the manner prescribed
by the Specific Conditions.

B. To comply with all other terms and conditions in the General
Conditions of this contract.

III. CANCELLATION OF CONTRACT:

In the event of cancellation by MICR or Millers with or without cause, Millers
must pay MICR the balance of any monies owed to MICR within 30 days of the
effective date of cancellation.

<PAGE> 3
Service Contract
Page 3

IV. GENERAL PROVISIONS

A. The provisions of this contract are for the sole benefit of the parties
named herein.

B. This contract may not be assigned without prior written consent. This
agreement constitutes the entire agreement by and between the parties
with respect to the services described herein.

In witness whereof, this Agreement is executed to be effective the 1st day of
October, 1996.

Millers Mutual Fire Insurance Company Millers Integrated Claims Resources, Inc.

By: By:
---------------------------------- --------------------------------------

---------------------------------- --------------------------------------

Millers Casualty Insurance Company

By:
----------------------------------

----------------------------------

<PAGE> 1
EXHIBIT 11

COMPUTATION OF PER SHARE EARNINGS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- --------------------------
1995 1996 1996 1997
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Primary
Average shares outstanding................................. 7,000 7,000 7,000 7,000
Net effect of dilutive stock options based on the treasury
method using average market price assuming all stock
options issued within one year prior to filing of
registration statement deemed outstanding pursuant to
Securities and Exchange Commission Staff Accounting Bulletin
Topic 4D................................................. 731 731 731 731
------- ------- ------- -------

Total ..................................................... 7,731 7,731 7,731 7,731
======= ======= ======= =======

Net loss................................................... $(1,262) $ (515) (273) (2,856)
======= ======= ======= =======

Per share amount .......................................... $ (0.16) $ (0.07) (0.04) (0.37)
======= ======= ======= =======

Fully diluted

Average shares outstanding ................................ 7,000 7,000 7,000 7,000
Net effect of dilutive stock options based on the
treasury stock method using the period-end market
price, if higher than average market price assuming all
stock options issued within one year prior to filing of
registration statement deemed outstanding pursuant to
Securities and Exchange Commission Staff Accounting
Bulletin Topic 4D........................................ 731 731 731 731
------- ------- ------- -------

Total ..................................................... 7,731 7,731 7,731 7,731
======= ======= ======= =======

Net loss................................................... $(1,262) $ (515) (273) (2,856)
======= ======= ======= =======

Per share amount .......................................... $ (0.16) $ (0.07) (0.04) (0.37)
======= ======= ======= =======
</TABLE>

<PAGE> 1
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 2 to Registration Statement No.
333-31173 of INSpire Insurance Solutions, Inc. (formerly Millers Integrated
Claims Resources, Inc. and MiliRisk, Inc.) of our report dated July 18, 1997
(August 19, 1997 as to Note 13) on the consolidated financial statements of
INSpire Insurance Solutions, Inc. and subsidiary, appearing in the Prospectus,
which is a part of such Registration Statement, and to the reference to us under
the heading "Experts" in such Prospectus.

DELOITTE & TOUCHE LLP

Fort Worth, Texas
August 21, 1997

<PAGE> 1
EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 2 to Registration Statement No.
333-31173 of INSpire Insurance Solutions, Inc. (formerly Millers Integrated
Claims Resources, Inc. and MiliRisk, Inc.) of our report dated July 18, 1997 on
the consolidated financial statements of Strategic Data Systems, Inc. and
subsidiary, appearing in the Prospectus, which is a part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.

DELOITTE & TOUCHE LLP

Fort Worth, Texas
August 21, 1997

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND CONSOLIDATED BALANCE SHEETS OF INSPIRE
INSURANCE SOLUTIONS, INC. AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996 AND AS
OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 363 451
<SECURITIES> 0 0
<RECEIVABLES> 1,168 6,628
<ALLOWANCES> 0 212
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,012 9,324
<PP&E> 4,492 13,965
<DEPRECIATION> 1,272 7,687
<TOTAL-ASSETS> 5,232 30,888
<CURRENT-LIABILITIES> 4,562 11,901
<BONDS> 0 5,625
0 0
0 0
<COMMON> 0 70
<OTHER-SE> 606 9,488
<TOTAL-LIABILITY-AND-EQUITY> 5,232 30,888
<SALES> 0 0
<TOTAL-REVENUES> 13,653 23,259
<CGS> 0 0
<TOTAL-COSTS> 14,430 27,668
<OTHER-EXPENSES> 0 21
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2 212
<INCOME-PRETAX> (779) (4,568)
<INCOME-TAX> (264) (1,712)
<INCOME-CONTINUING> (515) (2,856)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (515) (2,856)
<EPS-PRIMARY> (.07) (.37)
<EPS-DILUTED> (.07) (.37)

</TABLE>