<PAGE>
                                                                   EXHIBIT 10.40

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT is effective this 17th day of December, 2002, by
and between CERES GROUP, INC., a Delaware corporation, referred to in this
Agreement as "Employer," and DAVID I. VICKERS, referred to in this Agreement as
"Employee."

                                    RECITALS:

      Employer is engaged in the insurance business and maintains its corporate
office in the City of Strongsville, Ohio; and

      Employer wished to employ Employee, and Employee wishes to be employed by
Employer on the terms, covenants and conditions set forth in this Agreement.

      For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:

      Employer hereby employs Employee and Employee hereby accepts such
employment upon the terms, covenants and conditions hereinafter set forth.

      1.    SERVICES. Employer shall employ Employee as Chief Financial Officer,
            solely subject to the supervision and pursuant to the assignments,
            advices and directions of Employer. Employee's duties and
            responsibilities shall include duties and responsibilities as are
            customarily performed by one holding such a position for Employer
            and/or other similar businesses or enterprises."

            Employee shall devote all Employee's time, attention, knowledge, and
            skill solely and exclusively to the business and interest of
            Employer, and Employer shall be entitled to all of the benefits,
            emoluments, profits or other issues arising from or incident to any
            and all work, services and advice of Employee, and Employee
            expressly agrees that during the term of this Agreement, Employee
            will not be interested, directly or indirectly, in any form, fashion
            or manner, as partner, officer, director, stockholder, advisor,
            employee or in any other form or capacity, in any other business
            similar to Employer's business or any allied trade.

            Employee represents and warrants to Employer that his employment
            hereunder and compliance with the terms and conditions of this
            Agreement will not conflict with or result in the breach of any
            agreement or obligation to which he is a party or may be bound.

      2.    TERM AND TERMINATION. The duration of employment pursuant to this
            Agreement shall be for a period of two (2) years, commencing on
            December 17, 2002 through December 16, 2004; provided, however, that
            this Agreement shall automatically renew for succeeding one (1) year
            terms, unless the Employer provides Employee with at least sixty
            (60) days' advance written notice that this Agreement and Employee's
            employment shall terminate as of the close of business on December
            16 of the then-current original or renewal termination date (as the
            case may be).


<PAGE>

            Termination without cause. Regardless of any provisions of this
            Agreement to the contrary, or which could be construed to the
            contrary, in the event that (a) Employer chooses to terminate this
            Agreement upon sixty (60) days' advance written notice prior to the
            end of the initial term or then-current renewal term, (b) Employee's
            annual salary is reduced, or (c) Employee shall leave the employment
            of Employer at any time other than as a voluntary quit or for
            "cause" (as defined below) or Employee's employment is terminated in
            connection with a "change of control" (as defined below), this
            Agreement shall terminate and Employee shall be entitled to
            severance pay equal to eighteen (18) months of Employee's
            then-current annual salary (less normal administrative deductions),
            payable in eighteen (18) equal monthly installments. Such payments
            shall be in lieu of any other payments from Employer, including,
            without limitation, severance or termination payments contained
            herein or otherwise and Employer shall have no further liability or
            obligation to Employee for compensation or benefits.

            "Change of Control." In the event that Employee's employment is
            terminated in connection with a "change of control" of Employer,
            Employee shall be entitled to receive cash compensation equal to two
            (2) years of Employee's then-current annual salary (less normal
            administrative deductions), payable in lump sum within thirty (30)
            days of such "change of control." Such payment shall be in lieu of
            any other payments from Employer, including, without limitation,
            severance or termination payments contained herein or otherwise and
            Employer shall have no further liability or obligation to Employee
            for compensation or benefits.

            "Change of control" shall mean the occurrence of any of the
            following events:

                  (i)   a tender offer shall be made and consummated for the
                        ownership of 50.1% or more of the outstanding voting
                        securities of Employer;

                  (ii)  Employer shall be merged or consolidated with another
                        corporation and, as a result of such merger or
                        consolidation, less than 50.1% of the outstanding voting
                        securities of the surviving or continuing corporation
                        shall be owned in the aggregate by the former
                        stockholders of Employer as the same shall have existed
                        immediately prior to such merger or consolidation; or

                  (iii) Employer shall sell substantially all of its operating
                        assets to another corporation which is not a
                        wholly-owned subsidiary;

                  (iv)  a person, within the meaning of Section 3(a)(9) or of
                        Section 13(d)(3) (as in effect on the date hereof) of
                        the Exchange Act shall acquire, other than by reason of
                        inheritance, (50.1%) or more of the outstanding voting
                        securities of Employer (whether directly, indirectly,
                        beneficially or of record).

                  In determining whether a Change of Control has occurred,
                  gratuitous transfers made by a person to an affiliate of such
                  person (as determined by the Board of Directors of Employer),
                  whether by gift, devise or otherwise, shall not be taken into
                  account. For purposes of this Agreement,


                                       2
<PAGE>

                  ownership of voting securities shall take into account and
                  shall include ownership as determined by applying the
                  provisions of Rule 13d-3(d)(1)(i) as in effect on the date
                  hereof pursuant to the Exchange Act."

            Termination for "cause." Notwithstanding any other provisions of
            this Agreement to the contrary, Employee's employment and this
            Agreement may be terminated by the Employer at any time without
            further compensation or severance pay or fringe benefits for
            "cause."

            For purposes of this paragraph, "cause" shall mean if Employee (1)
            has refused, failed or neglected to perform duties or render
            services hereunder or has performed or rendered them incompetently;
            (2) has been dishonest or committed a fraud or breach of trust or
            engaged in illegal or wrongful conduct substantially detrimental to
            the business or reputation of Employer; (3) has developed or pursued
            interests substantially adverse to Employer; (4) has been charged
            with, indicted for, or convicted of, a crime that constitutes a
            felony; or (5) has otherwise materially breached this Agreement.

            If, in the opinion of the Board of Employer, Employee's employment
            shall become subject to termination for "cause," the Board shall
            give Employee written notice to that effect which notice shall
            describe the matter or matters constituting such "cause." In the
            case of clauses (b) and (d) above, such notice shall constitute
            notice of termination of Employee's employment and Employee's
            employment will terminate immediately. In the case of clauses (a),
            (c) and (e) above, if, within 15 days of receipt of such notice,
            Employee has not substantially eliminated, resolved or cured each
            such matter or matters to the satisfaction of the Board in its sole
            discretion, then Employer shall have the right to give Employee
            notice that Employee's employment will terminate immediately.

            Voluntary Quit. Notwithstanding any other provision of this
            Agreement, Employee shall have the right to voluntarily quit
            Employee's employment and terminate this Agreement by giving sixty
            (60) days' advance written notice to Employer at the address
            provided herein. Notwithstanding any other provision of this
            Agreement, if Employee shall so voluntarily quit and terminate this
            Agreement, Employer shall have no further obligations pursuant to
            the terms of this Agreement, except to pay to Employee accrued
            salary to the date of termination.

      3.    COMPENSATION.

            Base Compensation. During this Agreement, Employer shall pay
            Employee (according to Employer's normal payroll procedures) and
            Employee agrees to accept from Employer, in full payment for
            services under this Agreement, a salary set by the Board of
            Directors and Employee shall receive annual reviews and merit
            increases. Employee's initial salary shall be $250,000 which shall
            be increased to $290,000 effective April 1, 2003.

            Bonuses. Employee shall also participate in Employer's bonus plan
            for officers or such other incentive compensation or plans as may be
            established by the Board


                                       3
<PAGE>

            of Directors of Employer (the "Officer Bonus Plan"). Employee's
            bonus shall be payable as soon as it reasonably can be determined.
            Notwithstanding the foregoing, Employee shall be entitled to defer
            the receipt of his salary and/or bonus pursuant to procedures
            adopted or plans maintained by Employer.

            Expenses. During the first ninety (90) days of the initial term of
            this Agreement (unless extended by the Board in its sole
            discretion), Employee is authorized to incur reasonable expenses for
            travel between his current home in Chicago, Illinois and Employer's
            headquarters in Strongsville, Ohio. Employer shall reimburse
            Employee for such expenses after receipt of a written statement from
            Employee that itemizes such expenses in reasonable detail, together
            with all receipts related to such expenses.

            If, at the direction of the Board, Employee relocates and moves his
            home near Employer's headquarters, Employer would reimburse Employee
            for the costs of such relocation in accordance with Employer's
            existing relocation policy.

            In addition, Employer agrees that it will reimburse Employee for any
            and all necessary, customary and usual business expenses incurred by
            Employee, subject to Employer's then-current policies regarding such
            expenses.

            Benefits. In addition to the above salary and reimbursement,
            Employee shall be provided all fringe benefits on the same basis
            that Employer normally provides to a regular full-time employee
            holding Employee's position with Employer, including, but not
            limited to, health/dental insurance, life insurance, holidays,
            vacations (etc.)."

            Options. Upon approval by the Compensation Committee, Employer shall
            grant to Employee a nonqualified option to purchase one hundred
            thousand (100,000) shares of Employer's common stock pursuant to
            Employer's 1998 Key Employee Share Incentive Plan ("Share Option").
            The Share Option shall have an exercise price equal to $1.95 per
            share. All of the shares underlying the Share Option shall vest on
            the third anniversary of the effective date of this Agreement if
            Employee is still employed by Employer on such date; provided,
            however, the shares shall also vest in full upon a "change of
            control" of Employer as that term is defined in Section 2 above. The
            Share Option shall expire ten (10) years from the date of this
            Agreement. The Share Option shall be on the terms and conditions
            contained in a Nonqualified Stock Option Agreement in the form
            attached hereto as Annex A.

4.       COVENANTS.

            Non-Disclosure. Employee further specifically agrees that Employee
            will not, at any time during the term of this Agreement and for
            three (3) years following the termination of this Agreement for any
            reason, in any manner, either directly or indirectly, communicate to
            any person, firm or corporation any information of any kind
            concerning any matters affecting or relating to the business of
            Employer, including, without the limiting the generality of the
            foregoing, the lists or names of any of its policyholders or
            customers or agents, the prices it obtains or has

                                       4
<PAGE>

            obtained or at which it sells or has sold its products, or any other
            information of, about or concerning the business of Employer, its
            manner of operation, its plans, processes or other data of any kind,
            nature or description without regard to whether any or all of the
            foregoing matters would be deemed confidential, material,
            proprietary or important, and significantly affect the effective and
            successful conduct of the business of Employer, and its goodwill,
            and that any breach of the terms of this paragraph is a material
            breach of this Agreement.

            Non-Competition. During Employee's employment hereunder and, in the
            event of a change of control or termination of Employee's employment
            for any reason other than for "cause" (under Section 2) or a
            voluntary quit, for a period of one (1) year, Employee shall not
            engage, directly or indirectly, whether as an owner, partner,
            employee, officer, director, agent, consultant or otherwise, in any
            location where Employer or any of its subsidiaries is engaged in
            business after the date hereof and prior to the termination of
            Employee's employment, in a business the same or similar to, any
            business now, or at any time after the date hereof and prior to
            Employee's termination, conducted by Employer or any of its
            subsidiaries, provided, however, that the mere ownership of 5% or
            less of the stock of a company whose shares are traded on a national
            securities exchange or are quoted on the National Association of
            Securities Dealers Automated Quotation System shall not be deemed
            ownership which is prohibited hereunder.

            Non-Solicitation. Employee agrees that regardless of any termination
            of this Agreement, during or at the end of this Agreement or any
            renewal thereof, Employee will not, for a period of one (1) year
            thereafter, (i) hire, retain or recruit any of Employer's insurance
            agents for the purpose of performing services for Employee or
            another insurance company, or (ii) contact or solicit, directly or
            indirectly, any person, firm or entity connected with Employer,
            including its customers or clients, for the purpose of diverting
            work or business from the Employer.

            No termination of this Agreement shall terminate the rights and
            obligations of the parties under this Section, but such rights and
            obligations shall serve such termination in accordance with the
            terms of this Section.

      5.    NON-DISPARAGEMENT. Following the termination of this Agreement for
            any reason, Employee hereby agrees and acknowledges that Employee
            will continue to have a duty of loyalty to Employer, and to the
            officers, directors, shareholders and employees of Employer, and in
            recognition of that duty of loyalty, Employee agrees that Employee
            shall not indulge in any conduct which may reflects adversely upon,
            nor make any statements disparaging of, Employer, or the officers,
            directors, shareholders or employees of Employer.

      6.    REMEDIES. Employee agrees that the remedy at law for any violation
            or threatened violation by Employee of Sections 4 and 5 will be
            inadequate and that, accordingly, Employer shall be entitled to
            injunctive relief in the event of a violation or threatened
            violation without being required to post bond or other surety. The
            foregoing remedies shall be in addition to, and not in limitation
            of,


                                       5
<PAGE>

            any other rights or remedies to which Employer is or may be entitled
            at law, or in equity, or under this Agreement.

      7.    DEATH. Notwithstanding any other provisions of this Agreement, this
            Agreement shall be deemed automatically terminated upon death. In
            such event, Employer shall pay to Employee's personal representative
            or executor any compensation accrued but unpaid as of such date.
            Upon the payment of such accrued compensation, Employer shall have
            no further obligations under this Agreement, including, but not
            limited to, an obligation to pay a salary, severance or termination
            pay or any other form of compensation, or to provide any further
            fringe benefits of any kind or nature.

      8.    ENTIRE AGREEMENT. This written Agreement contains the sole and
            entire agreement between the parties and shall supersede any and all
            other agreements, whether oral or written, between the parties. The
            parties acknowledge and agree that neither of them has made any
            representation with respect to the subject matter of this Agreement
            or any representations inducing its execution and delivery, except
            such representations as are specifically set forth in this writing,
            and the parties acknowledge that they have relied on their own
            judgment in entering into the same. The parties further acknowledge
            that any statements or representations that may have been made by
            either of them to the other are void and of no effect and that
            neither of them has relied on such statements or representations in
            connection with its dealings with the other.

      9.    CONFIDENTIALITY. The terms of this Agreement are to be confidential,
            and Employee shall disclose its terms only to Employee's attorney,
            tax advisor and/or spouse, if any, subject to disclosure that may be
            necessary to comply with applicable law or in the event of a dispute
            leading to mediation and/or arbitration.

      10.   WAIVER/MODIFICATION. It is agreed that no waiver or modification of
            this Agreement or of any covenant, condition or limitation contained
            in it shall be valid unless it is in writing and duly executed by
            the party to be charged with it, and that no evidence of any waiver
            or modification shall be offered or received in evidence in any
            proceeding, arbitration or litigation between the parties arising
            out of or affecting this Agreement, or the rights or obligations of
            any party under it, unless such waiver or modification is in
            writing, duly executed as above. The parties agree that the
            provisions of this paragraph may not be waived, except by a duly
            executed writing.

      11.   ARBITRATION. If a dispute of any kind arises from or relates in any
            manner to this Agreement or the breach thereof, and if such dispute
            cannot be settled through direct discussions, the parties agree to
            endeavor to first settle the dispute in an amicable manner by
            mediation administered by and through the American Arbitration
            Association in accordance with its Commercial Mediation Rules before
            resorting to arbitration. Thereafter, any unresolved controversy or
            claim arising from or relating to this Agreement or breach thereof
            shall be settled by arbitration administered by and through the
            American Arbitration Association in accordance with its Commercial
            Arbitration Rules, provided however that only one arbitrator shall
            be appointed, which arbitrator shall be an attorney licensed in


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<PAGE>

            the State of Ohio or an active or retired judge, having experience
            in employment contracts, and judgment on the award rendered by the
            arbitrator may be entered in any court having jurisdiction thereof.

      12.   GOVERNING LAW. The parties agree that it is their intention and
            covenant that this Agreement be construed in accordance with and
            under and pursuant to the laws of the State of Ohio.

      13.   SUCCESSORS AND ASSIGNS. Employee may not assign any rights or
            obligations under this Agreement without the prior written consent
            of Employer. This Agreement shall be binding upon and inure to the
            benefit of Employee and his lawful heirs, guardians, executors,
            administrators, and permitted successors and assigns.

            Employer may not assign any rights or obligations under this
            Agreement without the prior written consent of Employee except to
            the surviving corporation in connection with a merger or
            consolidation involving Employer or to the purchaser of assets in
            connection with a sale of all or substantially all of its assets, so
            long as the assignee expressly assumes Employer's rights or
            obligations. This Agreement shall be binding upon and inure to the
            benefit of Employer and its permitted successors and assigns.

            This Agreement does not create, and shall not be construed as
            creating, any rights enforceable by any person not a party to this
            Agreement, except as provided in this Section 13.

      14.   RETURN OF PROPERTY. Upon termination of this Agreement for any
            reason, Employee shall immediately return any property of Employer,
            including, but not limited to, any equipment, credit cards,
            advertising materials, booklets, training guides or any other such
            similar information, materials or documents that Employee has in
            Employee's possession or control.

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

      16.   SEVERABILITY. If any clause, paragraph, or section of this Agreement
            be held invalid or unenforceable, the remaining provisions of this
            Agreement shall not be affected thereby and shall be valid and
            remain enforceable to the extent permitted by law. Moreover, if any
            one or more of the provisions in this Agreement shall for any reason
            by held to be excessively broad as to duration, geographical scope,
            activity, or subject, it shall be construed by limiting and reducing
            it, so as to be enforceable to the extent compatible with then
            applicable law.

      17.   NOTICES: All notices required to be provided under the terms of this
            Agreement shall be sent by United States mail, certified, return
            receipt requested, and to the following addresses:


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<PAGE>

            TO EMPLOYER:
            Ceres Group, Inc.
            17800 Royalton Road
            Strongsville, Ohio 44136

            TO EMPLOYEE:
            David I. Vickers
            197 Lawndale Avenue
            Elmhurst, Illinois  60126

      ACKNOWLEDGMENT BY EMPLOYEE: BY SIGNING THIS AGREEMENT, I AFFIRM THAT I
      HAVE CAREFULLY READ AND CONSIDERED ALL OF THE TERMS AND CONDITIONS OF THIS
      AGREEMENT AND THAT SUCH TERMS AND CONDITIONS ARE UNDERSTOOD, ACCEPTED AND
      AGREED.

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

EMPLOYER:                                         EMPLOYEE:
CERES GROUP, INC.                                 DAVID I. VICKERS

By:   /s/ Thomas J. Kilian                           /s/ David I. Vickers
   -------------------------------                -----------------------------
Its: CEO and President


                                       8
<PAGE>

                                     ANNEX A

                      NON-QUALIFIED STOCK OPTION AGREEMENT

                           UNDER THE CERES GROUP, INC.

                     1998 KEY EMPLOYEE SHARE INCENTIVE PLAN

      This Non-Qualified Stock Option Agreement ("Agreement") is made on March
4, 2003, by and between Ceres Group, Inc., a Delaware corporation ("Ceres" or
the "Company"), and David I. Vickers ("Optionee").

      Ceres and Optionee agree that the option granted by this Agreement does
not qualify as an "incentive stock option" ("ISO") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). Ceres makes
this grant of an option pursuant to the Ceres Group, Inc., 1998 Key Employee
Share Incentive Plan ("Plan"). The option granted by this Agreement shall be
subject to all the provisions of the Plan, which are incorporated herein by
reference, and shall be subject to the following provisions of this Agreement:

      1.    NUMBER OF COMMON SHARES AND OPTION PRICE. Ceres hereby grants
Optionee an option ("Option") to purchase 100,000 shares of the Company's $0.001
par value common stock ("Common Shares") for a purchase price ("Option Price")
of $1.95 (One dollar and Ninety-five cents) per Common Share.

      2.    GENERAL TERMS, PERIOD, VESTING AND EXERCISABILITY.

(a)   The term of the Option and the term of this Agreement shall commence on
the date hereof ("Date of Grant") and shall terminate upon the expiration of ten
(10) years from the Date of Grant ("Maximum Term") if not terminated or
extinguished earlier by operation of this Agreement or the terms of the Plan.
Upon termination of the Optionee's employment (regardless of reason) with Ceres
or one of its subsidiary corporations, as the case may be, all Options evidenced
by this Agreement that remain outstanding but are not then vested and
exercisable shall terminate and expire. Upon termination of the Optionee's
employment with Ceres or a subsidiary company other than by death or permanent
and total disability and more than three (3) months prior to the end of the
Maximum Term, those Options evidenced by this Agreement that are vested and
exercisable shall terminate and expire three (3) months following the date such
employment terminates. Upon termination of the Optionee's employment with Ceres
or a subsidiary company, by death or permanent and total disability and more
than one (1) year prior to the end of the Maximum Term, those Options evidenced
by this Agreement that are vested and exercisable shall terminate and expire one
(1) year following the date of such death or permanent and total disability (as
determined by the Compensation Committee of the Board of Directors of Ceres).
Options that terminate, expire or lapse on a given date shall do so on such date
at 5:00 p.m., Cleveland, Ohio time.

(b)   The Option shall vest and first become exercisable on December 17, 2005
and shall terminate on December 17, 2012.

(c)   Notwithstanding any contrary provisions of this Agreement and subject only
to the terms of the Plan, the Compensation Committee of the Board of Directors
of Ceres ("Committee") in
<PAGE>

its sole discretion may cancel and extinguish this Agreement, incident to or as
a result of any reorganization, merger, consolidation, recapitalization,
dissolution or similar restructuring or corporate event involving Ceres, by
paying to the Optionee (or other party then in rightful possession of the
Option) the value of said Option (to the extent then vested and exercisable),
determined as of the date of such restructuring or corporate event and based on
the excess, if any, of the fair market value of Common Shares over the Option
Price.

            3.    METHOD OF EXERCISE: The Option shall be exercisable from time
to time by written notice (in substantially the form attached hereto as Exhibit
A) to the Company that shall:

      (a)   state that the Option is thereby being exercised, the number of
            Common Shares with respect to which the Option is being exercised,
            each person in whose name any certificates for the Common Shares
            should be registered and his or her address and social security
            number;

      (b)   be signed by the person or persons entitled to exercise the Option
            and, if the Option is being exercised by anyone other than the
            Optionee, be accompanied by proof satisfactory to counsel for Ceres
            of the right of such person or persons to exercise the Option under
            the Plan and all applicable laws and regulations; and

      (c)   be accompanied by such representations, warranties or agreements
            with respect to the investment intent of such person or persons
            exercising the Option as Ceres may reasonably request in form and
            substance satisfactory to counsel for Ceres.

            4.    PAYMENT OF OPTION PRICE. Upon exercise of the Option, Ceres
shall deliver a certificate or certificates for such Common Shares to the
specified person or persons at the specified time upon receipt of the full
purchase price for such Common Shares by any method of payment authorized by the
Plan.

            5.    TRANSFERABILITY. The Option shall not be transferable or
assignable by the Optionee except as expressly provided by the Plan. The Option
shall be exercisable (subject to any other applicable restrictions on exercise)
only by the Optionee for his or her own account, except that (a) in the event of
the death of the Optionee, the Option shall be exercisable (subject to any other
applicable restrictions on exercise) only by the Optionee's estate (acting
through its fiduciary) or by the Optionee's duly authorized legal
representative; (b) in the event of the permanent and total disability of the
Optionee, the Option shall be exercisable by the Optionee's authorized
representative (unless the Optionee has legal capacity); and (c) in the event of
a divorce or other marriage dissolution resulting in a change in ownership of
some or all of the Options covered by this Agreement, the Option shall be
exercisable only by the ex-spouse of the Optionee within the three (3) month
period ending on the date of such change in ownership.

            6.    RESTRICTIONS ON EXERCISE. The Option is subject to all
restrictions in this Agreement or in the Plan. As a condition of any exercise of
the Option, Ceres may require the Optionee or his successor to make any
representation and warranty to comply with any applicable law or regulation or
to confirm any factual matters reasonably requested by counsel for Ceres.


                                       2
<PAGE>

            7.    TAXES. The Optionee hereby agrees to pay to Ceres, in
accordance with the terms of the Plan, any federal, state or local taxes of any
kind required by law to be withheld with respect to the Option granted
hereunder. If the Optionee does not make such payment, Ceres shall have the
right to deduct from any payment of any kind otherwise due to the Optionee from
Ceres, any federal, state or local taxes of any kind required by law to be
withheld with respect to the Option or the Common Shares to be purchased by the
Optionee under this Agreement.

            8.    NO CONTRACT OF EMPLOYMENT. Neither the Plan nor this
Agreement, nor any other action taken by Ceres or any committee or
representative thereof, shall constitute or otherwise evidence a contract of
employment, regardless whether express or implied, between the Optionee and
Ceres.

            9.    DEFINITIONS. Unless otherwise defined in this Agreement,
capitalized terms will have the same meanings given them in the Plan.

            10.   AMENDMENT AND CONTROLLING LAW. This Agreement may be amended
or modified at any time, but only by a written instrument signed by the parties
hereto (or their successors and assigns). This Agreement is to be governed and
construed according to the laws of the state of incorporation of Ceres, without
regard to its conflicts of law principles or statutes.


                                        CERES GROUP, INC.

DATE OF GRANT: MARCH 4, 2003            By: /s/ Kathleen L. Mesel
                                           -------------------------------------
                                           Kathleen L. Mesel
                                           Secretary


 - - - - - - - - - - - - - (Return signed page 3 only)- - - - - - - - - - - - -


                             ACCEPTANCE OF AGREEMENT

      The Optionee hereby: (a) acknowledges receiving a copy of the Plan, which
is attached to this Non-Qualified Stock Option Agreement, and represents that
he/she is familiar with all provisions of the Plan; (b) accepts this
Non-Qualified Stock Option Agreement and the Option granted under this Agreement
subject to all provisions of the Plan and this Agreement; and (c) agrees to
accept as binding, conclusive and final all decisions or interpretations of
Ceres.

Date:
     -------------------------               -----------------------------------
                                                      Signature

                                             -----------------------------------
                                                      Printed Name
                                                      Optionee


                                       3
<PAGE>

                                    EXHIBIT A


                     Exercise of Non-Qualified Stock Option

TO:
Secretary
Ceres Group, Inc.
17800 Royalton Road
Strongsville, Ohio  44136

Dear Secretary:

      The undersigned Optionee hereby exercises the Non-qualified Stock Option
granted to him/her pursuant to the Non-Qualified Stock Option Agreement dated
May 1, 2001, between Ceres Group, Inc. and the Optionee with respect to
________________ Common Shares covered by said Option, and tenders herewith
$__________________________ in payment of the purchase price thereof by delivery
of

-------------------------------------------------------.


      The name and registered address on such certificate should be:

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

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

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

      The Optionee's social security number is: ______-_____-______.




Dated:
      ----------------------------          -----------------------------------
                                                     Optionee



                                       4