EXHIBIT 10.49

FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT

      This FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT, dated as of May 2,
2005 (this “Amendment”), by and among CERES GROUP, INC., a Delaware corporation
(the “Borrower”), CERES ADMINISTRATORS, LLC, a Delaware limited liability
company, CERES HEALTH CARE, INC., a Delaware corporation, CONTINENTAL GENERAL
CORPORATION, a Nebraska corporation, and WESTERN RESERVE ADMINISTRATIVE
SERVICES, INC., an Ohio corporation (collectively, the “Subsidiary Guarantors”),
NATIONAL CITY BANK, in its capacity as successor in interest to The CIT
Group/Equipment Financing, Inc. (“CIT Group”) as a lender, in its capacity on
its own behalf as a lender, and in its capacity as agent under the Credit
Agreement (defined below) (in all such capacities, the “Lender”).

W I T N E S S E T H :

      WHEREAS, the Borrower, the Subsidiary Guarantors, the National City Bank
and CIT Group entered into that certain Credit and Security Agreement, dated
December 23, 2003 (the “Credit Agreement”), pursuant to which the Borrower has
issued (1) to Lender that certain Term Loan A Note, in the principal amount of
$4,000,000 and (2) to CIT Group that certain Term Loan B Note in the principal
amount of $9,000,000 (the “CIT Note”); and

      WHEREAS, CIT Group has assigned to Lender all of the rights of CIT Group
under, and Lender has assumed all of obligations of CIT Group under, the Credit
Agreement and Loan Documents (as defined in the Credit Agreement), including
without limitation, the CIT Note; and

      WHEREAS, Section 7.3(f)(D) of the Credit Agreement currently prohibits
certain redemptions of capital stock of the Borrower and the Subsidiaries in
excess of $2,000,000 in any calendar year; and

      WHEREAS, the Borrower has requested the Lender to permit the Borrower to
redeem up to $10,000,000 of its currently outstanding capital stock;

      WHEREAS, the Lender has agreed to permit such redemption on the terms and
conditions set forth herein; and

      WHEREAS, the Borrower, the Subsidiary Guarantors and the Lender desire to
modify the Credit Agreement as provided herein.

      NOW, THEREFORE, in consideration of the foregoing and the mutual promises
set forth herein, the parties agree as follows:

Section 1. AMENDMENTS.

      1.1 The definition in Annex I to the Credit Agreement of the term “Term
Loan Maturity Date” is hereby deleted in its entirety and the following inserted
in lieu thereof:

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    “Term Loan Maturity Date” means March 1, 2007, in the case of Term Loan A,
and March 1, 2008, in the case of Term Loan B.

      1.2 Section 2.1(c)(ii) of the Credit Agreement regarding repayment of Term
Loan B is hereby deleted in its entirety and the following inserted in lieu
thereof:

    "(ii) From the date hereof, Term Loan B shall be repaid in seventeen
(17) quarterly installments, commencing March 1, 2004, and continuing on the
first Business Day of each succeeding June, September, December and March
thereafter. From March 1, 2004 through December 1, 2004, each payment shall be
in the principal amount of Three Hundred Twelve Thousand Five Hundred Dollars
($312,500). On March 1, 2005, the payment shall be in the principal amount of
Three Hundred Seventy Five Thousand Dollars ($375,000). From June 1, 2005
through March 1, 2006, each payment shall be in the principal amount of Six
Hundred Eighty Seven Thousand Five Hundred Dollars ($687,500). From June 1, 2006
through December 1, 2006, each payment shall be in the principal amount of Three
Hundred Seventy Five Thousand Dollars ($375,000). From March 1, 2007 through
December 1, 2007, each payment shall be in the principal amount of Five Hundred
Sixty Two Thousand Five Hundred Dollars ($562,500), with any remaining principal
balance payable in full on March 1, 2008.”

      1.3 Section 7.3(f) of the Credit Agreement entitled “Dividends; Management
Fee” is hereby amended by inserting the following sentence at the end of such
section:

          “Notwithstanding anything to the contrary set forth in
Section 7.3(f)(D), on and after May 2, 2005, the Borrower shall be permitted to
pay consideration of up to an aggregate amount of $10,000,000 to redeem or
otherwise purchase shares of its outstanding Capital Stock; provided that, if at
any time after May 2, 2005 the Borrower has paid consideration in an aggregate
amount of $10,000,000 for the redemption or other purchase of shares of its
Capital Stock, then all future redemptions and other purchases of its Capital
Stock shall be subject to the provisions set forth in Section 7.3(f)(D);
provided further, that if during any calendar year the Borrower has paid
consideration pursuant to the provisions of this sentence in an aggregate amount
which is less than $2,000,000, then the amount of consideration paid during such
calendar year shall be included when calculating the permitted redemptions under
Section 7.3(f)(D) for the current calendar year; provided further, that if
during any calendar year the Borrower has paid consideration pursuant to the
provisions of this sentence in an aggregate amount which is equal to or greater
than $2,000,000, then neither the Borrower nor any of its Subsidiaries shall be
permitted to make any further redemptions during such calendar year.”

      1.4 Section 7.4(a) of the Credit Agreement entitled “Minimum Consolidated
Fixed Charge Coverage Ratio” is hereby deleted in its entirety and the following
inserted in lieu thereof:

      "(a) Minimum Consolidated Fixed Charge Coverage Ratio.

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          The Borrower shall not permit the Consolidated Fixed Charge Coverage
Ratio as of the end of any fiscal quarter to be less than 1.50 to 1.00, in each
case, for the Testing Period ending as of such fiscal quarter end.”

Section 2. REPRESENTATIONS AND WARRANTIES.

      To induce the Lender to enter into this Amendment, each of the Borrower
and the Subsidiary Guarantors hereby represents and warrants to the Lender that,
on the date hereof and after giving effect to this Amendment: (a) the Borrower
and the Subsidiary Guarantors have the power and authority, and the legal right,
to make, deliver and perform under this Amendment, and have taken all necessary
action to authorize the execution, delivery and performance of this Amendment;
(b) this Amendment has been duly executed and delivered on behalf of the
Borrower and the Subsidiary Guarantors; (c) no consent or authorization of,
filing with or other act by or in respect of any Governmental Authority is
required in connection with the execution, delivery, performance, validity or
enforceability of this Amendment; (d) this Amendment constitutes a legal, valid
and binding obligation of the Borrower and the Subsidiary Guarantors enforceable
against them in accordance with its terms, subject to the qualification that the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the enforcement of
creditors’ rights generally and by general equity principles (whether such
enforcement is sought by proceedings in law or equity); (e) no Event of Default
or Default has occurred and is continuing on the date hereof; and (f) the
representations and warranties set forth in the Loan Documents are true, correct
and complete in all material respects on the date of this Amendment to the same
extent as though made on and as of such date, except for any representation or
warranty limited by its terms to a specific date and taking into account any
amendments to the Disclosure Schedule made after the Closing Date and prior to
the date of this Amendment. This Amendment shall constitute a “Loan Document”
for purposes of the Credit Agreement.

Section 3. CONDITIONS PRECEDENT.

      The effectiveness of this Amendment is subject to the conditions precedent
that the Lender shall have received: (a) a fully executed copy of this
Amendment; (b) from the Borrower, a fee in the amount of Forty Thousand and
No/100 Dollars ($40,000); and (c) from the Borrower and each Subsidiary
Guarantor, an officer certificate in a form reasonably satisfactory to the
Lender.

Section 4. MISCELLANEOUS.

      4.1 All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Credit Agreement.

      4.2 Except as expressly amended by this Amendment, all terms and
conditions of the Credit Agreement shall remain in full force and effect.

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      4.3 This Amendment may be executed in any number of counterparts each of
which shall be regarded as an original and all of which taken together shall
constitute but one and the same instrument.

      IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed effective as of the day and year first above written.

            CERES GROUP, INC.
      By:   /s/ David I. Vickers         Title: EVP and CFO             

            NATIONAL CITY BANK,
as Agent and as Lender and successor in interest to
The CIT Group/Equipment Financing, Inc.
      By:   /s/ Michael Kelley         Title: SVP             

            CERES ADMINISTRATORS, LLC
      By:   /s/ David I. Vickers         Title: CFO             

            CERES HEALTH CARE, INC.
      By:   /s/ David I. Vickers         Title: CFO             

            CONTINENTAL GENERAL CORPORATION
      By:   /s/ David I. Vickers         Title: CFO             

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            WESTERN RESERVE ADMINISTRATIVE SERVICES, INC.
      By:   /s/ David I. Vickers         Title: CFO             

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