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                                                                   EXHIBIT 10.42


                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT is effective this 18th day of August, 2003,
by and between CERES GROUP, INC., a Delaware corporation, referred to in this
Agreement as "Employer," and BRADLEY A. WOLFRAM, 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 Executive Vice
                  President and Chief Operating Officer of Employer's major
                  medical division, 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, 5% or more 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 August 18, 2003 through August 17, 2005;
                  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 August 1 of the
                  then-current original or renewal termination date (as the case
                  may be).


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                  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 twelve (12) months of Employee's then-current
                  annual salary (less normal administrative deductions), payable
                  in twelve (12) 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 eighteen (18) months 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,


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                        shall not be taken into account. For purposes of this
                        Agreement, 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
                  (a) has refused, failed or neglected to perform duties or
                  render services hereunder or has performed or rendered them
                  incompetently; (b) 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; (c) has developed or pursued interests substantially
                  adverse to Employer; (d) has been charged with, indicted for,
                  or convicted of, a crime that constitutes a felony; or (e) 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.

                  In the event Employee voluntarily terminates his employment
                  with Employer during the first twelve (12) months of
                  employment, Employee shall reimburse Employer, on a pro rata
                  basis, all relocation benefits previously paid to him.
                  Employee will also reimburse Employer, on a pro rata basis,
                  the amount of Employee's Signing Bonus, as defined in Section
                  3.

         3.       COMPENSATION.

                  Base Compensation. During this Agreement, Employer shall pay
                  Employee (according to Employer's normal payroll procedures)
                  and Employee agrees to


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                  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 $200,000 per annum.

                  Signing Bonus. Upon execution of this Agreement, Employer
                  shall pay Employee a one-time signing bonus of $25,000.00 (the
                  "Signing Bonus").

                  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 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 four (4) months 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 South Beloit,
                  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,
                  including normal expenses associated with the sale of
                  Employee's home.

                  In the event Employee sells his home in Illinois and has not
                  closed on his home in Ohio, Employer agrees that it will
                  reimburse Employee for the cost of temporary housing in Ohio
                  for a total of two (2) months, not to exceed $2,000.00 per
                  month.

                  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, paid time off ("PTO") (etc.). Employee will be
                  entitled to four (4) weeks of PTO per year.

                  Options. Upon approval by the Compensation Committee, Employer
                  shall grant to Employee a nonqualified option to purchase
                  fifty thousand (50,000) 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 the closing price on the first day of
                  employment. 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;


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                  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. During Employee's employment by Employer,
                  Employee will enjoy access to Employer's "confidential
                  information" and "trade secrets." For the purposes of this
                  Agreement, "confidential information" shall mean information
                  which is not publicly available including, without limitation,
                  information concerning customers, material sources, suppliers,
                  financial projections, marketing plans and operation methods,
                  Employee's access to which derives solely from Employee's
                  employment with Employer. For purposes of this Agreement,
                  "trade secrets" shall mean Employer's processes, methodologies
                  and techniques known only to those employees of Employer who
                  need to know such secrets in order to perform their duties on
                  behalf of Employer. Employer takes numerous steps, including
                  these provisions, to protect the confidentiality of its
                  confidential information and trade secrets, which it considers
                  unique, valuable and special assets.

                  Employee, recognizing Employer's significant investment of
                  time, effort and money in developing and preserving its
                  confidential information and trade secrets, shall not, during
                  his employment hereunder and for a period of three (3) years
                  after the end of Employee's employment hereunder, use for his
                  direct or indirect personal benefit any of Employer's
                  confidential information or trade secrets. During the term of
                  this Agreement and for a period of three (3) years after the
                  end of Employee's employment hereunder, Employee shall not
                  disclose to any person any of Employer's confidential
                  information or trade secrets.


                  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


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                  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 reflect 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, 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 of the Employee. 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


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                  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 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.


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         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:

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

                  TO EMPLOYEE:
                  Bradley A. Wolfram
                  15556 Carries Lane
                  South Beloit, IL  61080

         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.                            BRADLEY A. WOLFRAM

By:      /s/ David I. Vickers                By:  /s/ Bradley A. Wolfram
   --------------------------------------        -----------------------------

Printed Name:  David I. Vickers              Printed Name: Bradley A. Wolfram
             ----------------------------                  -------------------

Its:  Executive Vice President and Chief
     ------------------------------------
         Financial Officer
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