Document:

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                                                                   EXHIBIT 10.25

                 SIXTH AMENDMENT AND CONSENT TO CREDIT AGREEMENT
                 -----------------------------------------------

                  SIXTH AMENDMENT AND CONSENT TO CREDIT AGREEMENT (collectively,
this "Amendment"), dated as of March 30, 2001, among CERES GROUP, INC., a
Delaware corporation (the "Borrower"), the lending institutions party to the
Credit Agreement referred to below (the "Banks"), and THE CHASE MANHATTAN BANK,
as Administrative Agent (in such capacity, the "Administrative Agent"). Unless
otherwise indicated, all capitalized terms used herein and not otherwise defined
shall have the respective meanings provided such terms in the Credit Agreement
referred to below.

                              W I T N E S S E T H:
                               - - - - - - - - - -

                  WHEREAS, the Borrower, the Banks and the Administrative Agent
are parties to a Credit Agreement, dated as of February 17, 1999 (as amended,
modified or supplemented to, but not including, the date hereof, the "Credit
Agreement");

                  WHEREAS, the Borrower desires to incur incremental senior
secured bank financing pursuant to a new term loan facility under the Credit
Agreement described herein (the "New Financing") in the amount and on the terms
and conditions set forth herein, after having determined that same is in its
best interests, which New Financing shall be used to repay and terminate an
equivalent amount of the commitments under the existing Revolving Loan Facility;

                  WHEREAS, the Borrower has requested certain amendments and
consents to the Credit Agreement in connection with the New Financing as
described below; and

                  WHEREAS, subject to the terms and conditions of this
Amendment, the Banks wish to grant certain consents under the Credit Agreement
and the parties hereto wish to amend the Credit Agreement, in each case as
herein provided;

                  NOW, THEREFORE, it is agreed:

I.       Amendments and Consents to Credit Agreement.
         -------------------------------------------

                  1. Notwithstanding anything to the contrary contained in the
Credit Agreement, the Banks hereby acknowledge and agree that the New Financing
may be incurred under the Credit Agreement, as long as:

                  (i) the New Financing shall have been consummated in
         accordance with all applicable law and the relevant New Financing
         Documents therefor (without giving effect

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         to any amendment or modification thereof or waiver with respect thereto
         unless consented to by the Administrative Agent and the Required
         Banks);

                  (ii) on the Sixth Amendment Effective Date and concurrently
         with the incurrence of A-2 Term Loans on such date, (I) $10,000,000
         principal amount of outstanding Revolving Loans shall have been repaid,
         and the Total Revolving Loan Commitment shall have been permanently
         reduced by $10,000,000 and (II) the Administrative Agent shall have
         received evidence in form, scope and substance reasonably satisfactory
         to the Administrative Agent that the matters set forth herein to be
         satisfied on the Sixth Amendment Effective Date have been satisfied on
         the Sixth Amendment Effective Date;

                  (iii) on the Sixth Amendment Effective Date, all necessary and
         material governmental and third party approvals, permits and licenses
         in connection with the New Financing, the transactions contemplated by
         this Amendment and the other New Financing Documents and otherwise
         referred to herein or therein, shall have been obtained and remain in
         effect, and all applicable waiting periods shall have expired without
         any action being taken by any competent authority which restrains,
         prevents or imposes, in the reasonable judgment of the Administrative
         Agent or the Required Banks, materially adverse conditions upon the
         consummation of the New Financing and the transactions contemplated by
         this Amendment; and

                  (iv) on the Sixth Amendment Effective Date, no actions, suits,
         proceedings or investigations by any entity (private or governmental)
         shall be pending or threatened with respect to the New Financing, the
         Credit Agreement or any documentation executed in connection therewith.

                  2. Section 1.01 of the Credit Agreement is hereby amended by
deleting the text "Term Loan Facility" appearing in the introductory sentence to
said Section and inserting the text "A-1 Term Loan Facility, A-2 Term Loan
Facility" in lieu thereof.

                  3. Section 1.01(a) of the Credit Agreement is hereby amended
by deleting each reference to the word "Term" appearing in said Section and
inserting the text "A-1 Term" in lieu thereof.

                  4. Section 1.01 of the Credit Agreement is hereby further
amended by inserting the following text at the end of said Section:

                  "(c) Each Loan under the A-2 Term Loan Facility (each, an "A-2
         Term Loan", and collectively, the "A-2 Term Loans", and together with
         the A-1 Term Loans, the "Term Loans"):

                  (i) shall be incurred by the Borrower pursuant to a single
         drawing on the Sixth Amendment Effective Date and used for the purposes
         described in Section 5.05(d);

                  (ii) shall be denominated in U.S. Dollars;

                                      -2-
<PAGE>   3

                  (iii) may, except as hereafter provided, at the option of the
         Borrower, be incurred and maintained as, and/or converted into, Base
         Rate Loans or Eurodollar Loans, PROVIDED, that all A-2 Term Loans made
         as part of the same Borrowing shall at all times consist of A-2 Term
         Loans of the same Type;

                  (iv) shall not exceed for any Bank at the time of incurrence
         thereof that aggregate principal amount which equals the A-2 Term Loan
         Commitment, if any, of such Bank on the Sixth Amendment Effective Date;
         and

                  (v) once repaid, may not be reborrowed.".

                  5. Section 1.05(a) of the Credit Agreement is hereby amended
by (x) deleting the text "Term" in each place it appears in clause (i) of said
Section and inserting the text "A-1 Term" in lieu thereof, (y) deleting the word
"and" appearing at the end of clause (i) of said Section and inserting a comma
in lieu thereof and (z) inserting the following new clause (iii) at the end of
said Section:

         "and (iii) if A-2 Term Loans, by a promissory note substantially in the
         form of Exhibit B-3 with blanks appropriately completed in conformity
         herewith (each, an "A-2 Term Note" and, collectively, the "A-2 Term
         Notes")".

                  6. Section 1.05(b) of the Credit Agreement is hereby amended
by deleting each reference to the word "Term" appearing in said Section and
inserting the text "A-1 Term" in lieu thereof.

                  7. Section 1.05 of the Credit Agreement is hereby further
amended by (i) redesignating clause (d) of said Section as clause (e), and (ii)
inserting the following new clause (d) immediately following clause (c) of said
Section:

                  "(d) The A-2 Term Note issued to each Bank that has an A-2
         Term Loan Commitment or outstanding A-2 Term Loans shall (i) be
         executed by the Borrower, (ii) be payable to the order of such Bank or
         its registered assigns and be dated the Sixth Amendment Effective Date
         (or, in the case of any A-2 Term Note issued after the Sixth Amendment
         Effective Date, the date of issuance thereof), (iii) be in a stated
         principal amount equal to the A-2 Term Loan Commitment of such Bank on
         the Sixth Amendment Effective Date (or, in the case of any A-2 Term
         Note issued after the Sixth Amendment Effective Date, in a stated
         principal amount equal to the outstanding principal amount of the A-2
         Term Loan of such Bank on the date of the issuance thereof) and be
         payable in the principal amount of A-2 Term Loans evidenced thereby,
         (iv) mature on the A-2 Term Loan Maturity Date, (v) bear interest as
         provided in the appropriate clause of Section 1.08 in respect of the
         Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
         thereby, (vi) be subject to voluntary prepayment as provided in Section
         3.01 and mandatory repayment and prepayment as provided in Section 3.02
         and (vii) be entitled to the benefits of this Agreement and the other
         Credit Documents.".

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<PAGE>   4

                  8. Section 1.07 of the Credit Agreement is hereby amended by
deleting the first sentence of said Section in its entirety and inserting the
following sentence in lieu thereof:

         "All Borrowings of A-1 Term Loans, A-2 Term Loans and Revolving Loans
         under this Agreement shall be incurred by the Borrower from the Banks
         pro rata on the basis of such Banks' A-1 Term Loan Commitments, A-2
         Term Loan Commitments or Revolving Loan Commitments, as the case may
         be.".

                  9. Section 1.09 of the Credit Agreement is hereby amended by
deleting clause (vi) appearing in said Section in its entirety and inserting the
following new clause (vi) in lieu thereof:

                  "(vi) no Interest Period in respect of any Borrowing of A-1
         Term Loans or A-2 Term Loans may be elected that would extend beyond
         any date upon which a mandatory repayment of A-1 Term Loans, or A-2
         Term Loans, as applicable, is required to be made under Section
         3.02(i)(a)(x) or (y), as the case may be, if, after giving effect to
         the election of such Interest Period, the aggregate principal amount of
         such A-1 Term Loans or A-2 Term Loans, as the case may be, maintained
         as Eurodollar Loans with Interest Periods ending after such date would
         exceed the aggregate principal amount of such A-1 Term Loans or A-2
         Term Loans, as the case may be, permitted to be outstanding after such
         mandatory repayment.".

                  10. Section 1.13 of the Credit Agreement is hereby amended by
deleting the parenthetical "(and/or outstanding Term Loans, as the case may be)"
appearing in sub-clause (y) of the last sentence thereof and inserting the text
"(and/or outstanding A-1 Term Loans or A-2 Term Loans, as the case may be)" in
lieu thereof.

                  11. Section 2.02(b) of the Credit Agreement is hereby amended
by deleting all references to the text "Term" appearing therein and inserting
the text "A-1 Term" in lieu thereof.

                  12. Section 2.02 is hereby further amended by inserting the
following new sub-clauses (d) and (e) immediately after sub-clause (c) appearing
therein:

                  "(d) The Total Revolving Loan Commitment shall be permanently
         reduced by $10,000,000 upon the Sixth Amendment Effective Date.

                  (e) The Total A-2 Term Loan Commitment shall terminate on the
         Sixth Amendment Effective Date, after giving effect to the incurrence
         of A-2 Term Loans on such date."

                  13. Section 3.01 of the Credit Agreement is hereby amended by
(i) deleting the text "Term Loans" appearing in sub-clause (i) of said Section
and inserting the text "A-1 Term Loans, A-2 Term Loans" in lieu thereof, (ii)
inserting the text "of the respective Facility" immediately after the text
"Scheduled Repayments", appearing in sub-clause (iv) thereof, (iii) deleting the
text "; and" appearing at the end of clause (iii) and inserting a comma in lieu
thereof, (iv) deleting the period appearing at the end of clause (iv) and
inserting the text "; and" in lieu

                                      -4-
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thereof and (v) inserting the following new clause (v) immediately after clause
(iv) appearing therein:

         "(v) each prepayment of principal of Term Loans pursuant to this
         Section 3.01 shall be applied to the A-1 Term Loans and A-2 Term Loans
         on a pro rata basis (based upon the then outstanding principal amount
         of A-1 Term Loans and A-2 Term Loans)."

                  14. Section 3.02(i)(a) of the Credit Agreement is hereby
amended by (i) inserting the text "(x)" immediately prior to the text "On each
date set forth below" appearing in said Section, (ii) deleting the word "Term"
appearing in said Section and inserting the text "A-1 Term" in lieu thereof,
(iii) deleting the text "Scheduled Repayment" in each place it appears in said
Section and inserting the text "A-1 Term Loan Scheduled Repayment" in lieu
thereof and (iv) inserting the following new clause (y) at the end of said
Section:

                  "(y) In addition to any other mandatory repayments pursuant to
         this Section 3.02, on each date set forth below, the Borrower shall be
         required to repay the principal amount of A-2 Term Loans as is set
         forth opposite such date (each such repayment, as the same may be
         reduced pursuant to Section 2.03, 3.01 and/or 3.02(ii)(a), an "A-2 Term
         Loan Scheduled Repayment"):

A-2 Term Loan Scheduled Repayment Date                  Amount
--------------------------------------                  ------

June 17, 2002                                            $332,500
September 17, 2002                                       $332,500
December 17, 2002                                        $332,500
March 17, 2003                                           $332,500
June 17, 2003                                            $332,500
September 17, 2003                                       $332,500
December 17, 2003                                        $332,500
March 17, 2004                                           $332,500
June 17, 2004                                            $635,000
September 17, 2004                                       $635,000
December 17, 2004                                        $635,000
March 17, 2005                                           $635,000
June 17, 2005                                          $1,200,000
September 17, 2005                                     $1,200,000
December 17, 2005                                      $1,200,000
March 17, 2006                                        $1,200,000"

                                      -5-
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                  15. Section 3.02(i)(b) of the Credit Agreement is hereby
amended by deleting the references to "Term Loans" appearing therein and
inserting the text "A-1 Term Loans" in lieu thereof.

                  16. Section 3.02(ii)(a) of the Credit Agreement is hereby
amended by (i) deleting the text "Term Loans" appearing therein and inserting
the text "A-1 Term Loans or A-2 Term Loans, as applicable" in lieu thereof, and
(ii) deleting the text "Scheduled Repayments" appearing therein, and inserting
the text "A-1 Scheduled Repayments" or "A-2 Scheduled Repayments, as applicable"
in lieu thereof.

                  17. Section 5.05 of the Credit Agreement is hereby amended by
(i) deleting the text "Term Loans" appearing in clause (a) thereof and inserting
the text "A-1 Term Loans" in lieu thereof, and (ii) inserting the following new
clause (d) at the end of said Section:

                  "(d) The proceeds of all A-2 Term Loans shall be utilized by
         the Borrower on the Sixth Amendment Effective Date to repay an
         equivalent principal amount of outstanding Revolving Loans."

                  18. Section 5 of the Credit Agreement is hereby amended by
inserting the following new Section 5.25 at the end of said Section:

                  "5.25 New Financing. At the time of consummation thereof, the
         New Financing shall have been consummated in all material respects in
         accordance with the terms of the relevant New Financing Documents
         therefor and all applicable laws. At the time of consummation thereof,
         all necessary and material governmental and third party consents and
         approvals, permits and licenses in connection with the New Financing
         and the transactions contemplated by this Amendment and New Financing
         Documents therefor and all applicable laws have been obtained, given,
         filed or taken and are or will be in full force and effect (or
         effective judicial relief with respect thereto has been obtained). All
         applicable waiting periods with respect thereto have or, prior to the
         time when required, will have, expired without, in all such cases, any
         action being taken by any competent authority which restrains,
         prevents, or imposes in the reasonable judgment of the Administrative
         Agent or the Required Banks, materially adverse conditions upon the New
         Financing and the transactions contemplated by this Amendment. At the
         time of the consummation of the New Financing and immediately after
         giving effect thereto, no Default or Event of Default exists."

                  19. The definition of "Maturity Date" appearing in Section 9
of the Credit Agreement is hereby amended by inserting the text "A-1 Term Loan
Maturity Date, A-2" immediately prior to the text "Term Loan" in said
definition.

                  20. The definition of "Note" appearing in Section 9 of the
Credit Agreement is hereby amended by inserting the text "A-1 Term Note, A-2"
immediately prior to the text "Term Note" appearing in said definition.

                                      -6-
<PAGE>   7

                  21. The definition of "Total Commitment" appearing in Section
9 of the Credit Agreement is hereby amended by inserting the text "A-1 Term Loan
Commitment, the Total A-2" immediately prior to the text "Term Loan Commitment"
appearing in said definition.

                  22. The definition of "Transaction" appearing in Section 9 of
the Credit Agreement is hereby amended by inserting the text "A-1" prior to the
text "Term Loans" appearing therein.

                  23. Section 9 of the Credit Agreement is hereby further
amended by (i) deleting the definitions of "Commitment", "Facility", "Initial
Borrowing Date", "Required Banks", "Scheduled Repayment", "Term Loan", "Term
Loan Commitment", "Term Loan Maturity Date", "Term Note" and "Total Term Loan
Commitment" appearing therein in their entirety and (ii) inserting in the
appropriate alphabetical order the following new definitions:

                  "A-1 Term Loan" shall have the meaning provided in Section
         1.01(a).

                  "A-1 Term Loan Commitment" shall mean, with respect to each
         Bank, the amount set forth opposite such Bank's name in Schedule I
         directly below the column entitled "A-1 Term Loan Commitment," as the
         same may be terminated pursuant to Sections 2.02, 2.03 and/or 8.

                  "A-1 Term Loan Facility" shall mean the Facility evidenced by
         the Total A-1 Term Loan Commitment.

                  "A-1 Term Loan Maturity Date" shall mean February 17, 2005.

                  "A-1 Term Loan Scheduled Repayment" shall have the meaning
         provided in Section 3.02(i)(a)(x).

                  "A-1 Term Note" shall have the meaning provided in Section
         1.05(a).

                  "A-2 Term Loan" shall have the meaning provided in Section
         1.01(c).

                  "A-2 Term Loan Commitment" shall mean, with respect to each
         Bank, the amount set forth opposite such Bank's name in Schedule I
         directly below the column entitled "A-2 Term Loan Commitment," as the
         same may be terminated pursuant to Sections 2.02, 2.03 and/or 8.

                  "A-2 Term Loan Facility" shall mean the Facility evidenced by
         the Total A-2 Term Loan Commitment.

                  "A-2 Term Loan Maturity Date" shall mean March 17, 2006.

                  "A-2 Term Loan Scheduled Repayment" shall have the meaning
         provided in Section 3.02(i)(a)(y).

                  "A-2 Term Note" shall have the meaning provided in Section
         1.05(a).

                                      -7-
<PAGE>   8

                  "Commitment" shall mean any of the commitments of any Bank,
         I.E., whether the A-1 Term ---- Loan Commitment, the A-2 Term Loan
         Commitment or the Revolving Loan Commitment.

                  "Facility" shall mean any of the credit facilities established
         under this Agreement, I.E., the A-1 Term Loan Facility, the A-2 Term
         Loan Facility and the Revolving Loan Facility.

                  "Initial Borrowing Date" shall mean the date upon which the
         A-1 Term Loans are initially incurred hereunder.

                  "New Financing" shall mean the additional financing provided
         to the Borrower by The CIT Group/Equipment Financing, Inc. on the Sixth
         Amendment Effective Date.

                  "New Financing Documents" shall mean and include the Sixth
         Amendment and the other documents and instruments entered into in
         connection with the New Financing, in each case as the same may be
         amended, modified and/or supplemented from time to time.

                  "Required Banks" shall mean Non-Defaulting Banks, the sum of
         whose outstanding A-1 Term Loans, A-2 Term Loans and Revolving Loan
         Commitment (or, if after the Total Revolving Loan Commitment has been
         terminated, outstanding Revolving Loans) constitute a majority of the
         sum of (i) the total outstanding A-1 Term Loans of Non-Defaulting
         Banks, (ii) the total outstanding A-2 Term Loans of Non-Defaulting
         Banks and (iii) the Total Revolving Loan Commitment less the aggregate
         Revolving Loan Commitments of Defaulting Banks, if any, or, if after
         the Total Revolving Loan Commitment has been terminated, the total
         outstanding Revolving Loans of Non-Defaulting Banks).

                  "Scheduled Repayment" shall mean any A-1 Term Loan Scheduled
         Repayment and A-2 Term Loan Scheduled Repayment.

                  "Sixth Amendment" shall mean the Sixth Amendment and Consent
         to this Agreement, dated as of March __, 2001.

                  "Sixth Amendment Effective Date" shall have the meaning
         provided in the Sixth Amendment.

                  "Term Loan" shall mean each A-1 Term Loan and each A-2 Term
         Loan.

                  "Term Loan Commitment" shall mean either or both of the A-1
         Term Loan Commitment or the A-2 Term Loan Commitment, as the context
         may require.

                  "Term Loan Facility" shall mean the A-1 Term Loan Facility and
         the A-2 Term Loan Facility.

                                      -8-
<PAGE>   9

                  "Term Note" shall mean each A-1 Term Note and each A-2 Term
         Note.

                  "Total A-1 Term Loan Commitment" shall mean the sum of the A-1
         Term Loan Commitments of each of the Banks.

                  "Total A-2 Term Loan Commitment" shall mean the sum of the A-2
         Term Loan Commitments of each of the Banks.

                  24. Annexes I and II to the Credit Agreement are hereby
amended by deleting same in their entirety and inserting the attached Annexes I
and II in lieu thereof.

                  25. Exhibit A to the Credit Agreement is hereby amended by
inserting the text "of [A-1 Term Loans][A-2 Term Loans] [Revolving Loans]"
immediately prior to the text "under the Credit Agreement" appearing in the
introductory sentence.

                  26. Exhibit B-1 to the Credit Agreement is hereby amended by
deleting same in its entirety and inserting the attached Exhibit B-1 in lieu
thereof.

                  27. The Credit Agreement is hereby further amended by adding
Exhibit B-3 thereto in the form of Exhibit B-3 attached hereto.

                  28. Exhibit G to the Credit Agreement is hereby amended by
deleting same in its entirety and inserting the attached Exhibit G in lieu
thereof.

II.      Miscellaneous Provisions.
         ------------------------

                  1. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that:

                  (a) no Default or Event of Default exists as of the Sixth
         Amendment Effective Date, both before and after giving effect to this
         Amendment;

                  (b) all of the representations and warranties contained in the
         Credit Agreement or the other Credit Documents are true and correct in
         all material respects on the Sixth Amendment Effective Date both before
         and after giving effect to this Amendment, with the same effect as
         though such representations and warranties had been made on and as of
         the Sixth Amendment Effective Date (it being understood that any
         representation or warranty made as of a specific date shall be true and
         correct in all material respects as of such specific date); and

                  (c) at the time of the consummation of the New Financing (and
         immediately after giving effect thereto), the consummation of same
         shall not (i) contravene any provision of any applicable law, statute,
         rule or regulation or any applicable order, writ, injunction or decree
         of any court or governmental instrumentality, (ii) conflict or be
         inconsistent with or result in any breach of the terms, covenants,
         conditions or provisions of, or constitute a default under, or result
         in the creation or imposition of (or the obligation to create or
         impose) any Lien upon any of the material properties or assets of

                                      -9-
<PAGE>   10

         the Borrower or any of its Subsidiaries pursuant to the terms of any
         indenture, mortgage, deed of trust, credit agreement or loan agreement,
         or any other material agreement, contract or instrument to which the
         Borrower or any of its Subsidiaries is a party or by which it or any of
         its material property or assets is bound or to which it may be subject
         or (iii) violate any provision of the certificate of incorporation,
         by-laws, certificate of limited partnership, limited partnership
         agreement or any equivalent organizational document of the Borrower or
         any of its Subsidiaries.

                  2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.

                  3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Administrative Agent.

                  4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.

                  5. This Amendment shall become effective on the date (the
"Sixth Amendment Effective Date") when each of the following conditions shall
have been satisfied:

                  (i) the Administrative Agent shall have received for the
         account of each relevant Bank the appropriate A-1 Term Note and A-2
         Term Note for such Bank, in the amount, maturity and as otherwise
         provided in Section 1.05 of the Credit Agreement (as amended hereby);

                  (ii) the Administrative Agent shall have received from the
         Borrower certified copies of resolutions of the Board of Directors of
         the Borrower with respect to the matters set forth in this Amendment
         and such resolutions shall be satisfactory to the Administrative Agent;

                  (iii) all corporate and legal proceedings and all instruments
         and agreements in connection with the transactions contemplated by this
         Amendment and the other New Financing Documents shall be satisfactory
         in form and substance to the Administrative Agent and the Required
         Banks, and the Administrative Agent shall have received all information
         and copies of all documents and papers, including records of corporate
         proceedings, governmental approvals, good standing certificates and
         bring-down telegrams or facsimiles, if any, which the Administrative
         Agent may have reasonably requested in connection therewith, such
         documents and papers where appropriate to be certified by proper
         corporate or governmental authorities;

                                      -10-
<PAGE>   11

                  (iv) the Administrative Agent shall have received from
         ______________, special counsel to the Borrower an opinion addressed to
         the Administrative Agent, the Collateral Agent and each of the Banks
         and dated the Sixth Amendment Effective Date in form and substance
         satisfactory to the Administrative Agent and the Required Banks, and
         covering such matters incident to this Amendment and the transactions
         contemplated herein as the Administrative Agent may reasonably request;
         and

                  (v) the Borrower shall have reimbursed the Administrative
Agent and The CIT Group/Equipment Financing, Inc. for all reasonable
out-of-pocket expenses incurred in connection with the negotiation, preparation,
execution, delivery, and closing documents for the New Financing, including
reasonable expenses in connection with due diligence relating to the New
Financing, the fees and expenses of counsel, consultants and appraisers retained
by the Administrative Agent or The CIT Group/Equipment Financing, Inc.

                  (vi) the Borrower and each Bank (including, without limitation
         each Bank with an A-2 Term Loan Commitment) shall have signed a
         counterpart hereof (whether the same or different counterparts) and
         shall have delivered (including by way of facsimile transmission) the
         same to White & Case LLP, 1155 Avenue of the Americas, New York, NY
         10036 Attention: Hazem Derhalli (facsimile number 212-354-8113).

                  Unless the Administrative Agent has received actual notice
from any Bank that the conditions contained above have not been met with
satisfaction, upon the satisfaction of the condition described in clause (vi) of
the immediately preceding sentence and upon the Administrative Agent's good
faith determination that the other conditions described above have been met, the
Sixth Amendment Effective Date shall be deemed to have occurred, regardless of
any subsequent determination that one or more of the conditions thereto had not
been met (although the occurrence of the Sixth Amendment Effective Date shall
not release the Borrower from any liability for failure to satisfy one or more
of the applicable conditions specified above).

                  6. So long as the Sixth Amendment Effective Date occurs, the
Borrower shall pay to each Bank with an A-2 Term Loan Commitment, a
non-refundable arrangement fee equal to 1.00% of the aggregate principal amount
of its A-2 Term Loans (as defined herein) outstanding on the Sixth Amendment
Effective Date. All fees payable pursuant to the immediately preceding sentence
shall be paid to the Administrative Agent within one Business Day after the
Sixth Amendment Effective Date, which fees shall be distributed by the
Administrative Agent to the relevant Banks in the amounts specified in the
immediately preceding sentence.

                  7. From and after the Sixth Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to the
Credit Agreement and the Pledge Agreement shall be deemed to be references to
the Credit Agreement or the Pledge Agreement, as the case may be, as modified
hereby.

                                      * * *

                                      -11-
<PAGE>   12

                  IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.

                                  CERES GROUP, INC.

                                  By:        /s/ Larry E. Wharton
                                     -----------------------------------------
                                     Title:   Vice President and Treasurer

                                  THE CHASE MANHATTAN BANK,
                                     Individually and as Administrative Agent

                                  By:        /s/ Helen L. Newcomb
                                     -----------------------------------------
                                     Title:   Vice President

                                  DRESDNER BANK AG NEW YORK AND GRAND CAYMAN
                                     BRANCHES

                                  By:        /s/ Jonathan Wallin
                                     -----------------------------------------
                                     Title:   Vice President

                                  By:        /s/ J. Michael Leffler
                                     -----------------------------------------
                                     Title:   Senior Vice President

                                  KEYBANK NATIONAL ASSOCIATION

                                  By:        /s/ Sherrie I. Manson
                                     -----------------------------------------
                                     Title:   Vice President

                                  FIRSTAR BANK MILWAUKEE, N.A.

                                  By:        /s/
                                     -----------------------------------------
                                     Title:

                                  FLEET NATIONAL BANK

                                  By:        /s/
                                     -----------------------------------------
                                      Title:

<PAGE>   13

                                  The CIT Group/Equipment Financing, Inc.

                                  By:         /s/ Patrick N. Riley
                                     -----------------------------------------
                                     Title:    Senior Credit Analyst

<PAGE>   14

                                                                         ANNEX I
                                                                         -------

                         LIST OF BANKS AND COMMITMENTS
                         -----------------------------

<TABLE>
<CAPTION>
                                                   A-1 Term                  A-2 Term                 Revolving
Bank                                           Loan Commitment            Loan Commitment          Loan Commitment
----                                           ---------------            ---------------          ---------------
<S>                                                  <C>                             <C>                <C>
The Chase Manhattan Bank                             $12,000,000                     $0.00              $1,500,000

KeyBank                                               $4,000,000                     $0.00                $500,000

Dresdner Bank AG,                                    $12,000,000                     $0.00              $1,000,000
New York Branch and
Grand Cayman Branch

Firstar Bank Milwaukee, N.A.                          $4,000,000                     $0.00              $1,000,000

Fleet National Bank                                   $8,000,000                     $0.00              $1,000,000

The CIT Group/Equipment
Financing, Inc.                                                                $10,000,000

Total                                                $40,000,000               $10,000,000              $5,000,000
=====                                                ===========               ===========              ==========
</TABLE>

<PAGE>   15

                                                                        ANNEX II
                                                                        --------

<TABLE>
<CAPTION>

<S>                                                                             <C>
Chase Manhattan Bank                                                             270 Park Avenue
                                                                                 New York, NY  10017
                                                                                 Telephone:  212-270-7527
                                                                                 Telecopier:  212-270-1511
                                                                                 Attention:  Peter Platten

KeyBank, N.A.                                                                    Mailcode:OH-01-27-0606
                                                                                 127 Public Square
                                                                                 Cleveland, OH  44106
                                                                                 Telephone:  216-689-3443
                                                                                 Telecopier:  216-689-4981
                                                                                 Attention:  Sharon Weinstein

Dresdner Bank AG, New York Branch and Grand                                      75 Wall Street
Cayman Branch                                                                    New York, NY  10005
                                                                                 Telephone:  212-429-2000
                                                                                 Telecopier:  212-429-2127
                                                                                 Attention:  Lloyd Stevens

Firstar Bank Milwaukee, N.A.                                                     777 East Wisconsin Avenue
                                                                                 P.O. Box 532
                                                                                 Milwaukee, WI  53201
                                                                                 Telephone:  414-765-6932
                                                                                 Telecopier:  414-765-6236
                                                                                 Attention:  Azad Virani

BankBoston, N.A.                                                                 100 Federal Street
                                                                                 Boston, MA  02110
                                                                                 Telephone:  617-434-1514
                                                                                 Telecopier:  617-434-1537
                                                                                 Attention:  Elise Brenneman

The CIT Group/Equipment Financing, Inc.                                          900 Ashwood Place
                                                                                 Suite 600
                                                                                 Atlanta, GA  30338
                                                                                 Telephone:  973-535-3575
                                                                                 Telecopier  973-740-5252
                                                                                 Attention:  Charles L. Miller
                                                                                 Telephone:  770-551-7988
                                                                                 Telecopier  770-206-5255
                                                                                 Attention:  Patrick Riley
</TABLE>

<PAGE>   16

                                                                     EXHIBIT B-1
                                                                     -----------

                              FORM OF A-1 TERM NOTE
                              ---------------------

U.S. $____________________                                New York, New York

                                                          --------- --, ----

                  FOR VALUE RECEIVED, CERES GROUP, INC., a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of [_______________] (the
"Bank"), in lawful money of the United States of America in immediately
available funds, at the Administrative Agent's Payment Office (as defined in the
Credit Agreement) initially located at 270 Park Avenue, New York, New York 10017
on the A-1 Term Loan Maturity Date (as defined in the Credit Agreement) the
principal sum of ___________________ DOLLARS ($___________) or, if less, the
unpaid principal amount of all A-1 Term Loans (as defined in the Credit
Agreement) made by the Bank pursuant to the Agreement, payable at such times and
in such amounts as are specified in the Credit Agreement.

                  The Borrower promises also to pay interest on the unpaid
principal amount of each A-1 Term Loan made by the Bank in like money at said
office from the date hereof until paid at the rates and at the times provided in
Section 1.08 of the Agreement.

                  This Note is one of the A-1 Term Notes referred to in the
Credit Agreement, dated as of February 17, 1999, among the Borrower, the lending
institutions from time to time party thereto (including the Bank) and The Chase
Manhattan Bank, as Administrative Agent (as amended, restated, modified and/or
supplemented from time to time, the "Credit Agreement") and is entitled to the
benefits thereof and of the other Credit Documents (as defined in the Credit
Agreement). This Note is secured by and entitled to the benefits of the Pledge
Agreement (as defined in the Credit Agreement). As provided in the Credit
Agreement, this Note is subject to voluntary prepayment and mandatory repayment
prior to the A-1 Term Loan Maturity Date, in whole or in part.

                  In case an Event of Default (as defined in the Credit
Agreement) shall occur and be continuing, the principal of and accrued interest
on this Note may be declared to be due and payable in the manner and with the
effect provided in the Credit Agreement.

                  The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.

<PAGE>   17

                  THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

                                            CERES GROUP, INC.

                                            By   _______________________________
                                                 Title:

<PAGE>   18

                                                                     EXHIBIT B-3
                                                                     -----------

                              FORM OF A-2 TERM NOTE

U.S. $____________________                            New York, New York

                                                      --------- --, ----

                  FOR VALUE RECEIVED, CERES GROUP, INC., a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of [_______________] (the
"Bank"), in lawful money of the United States of America in immediately
available funds, at the Administrative Agent's Payment Office (as defined in the
Credit Agreement) initially located at 270 Park Avenue, New York, New York 10017
on the A-2 Term Loan Maturity Date (as defined in the Credit Agreement) the
principal sum of ___________________ DOLLARS ($___________) or, if less, the
unpaid principal amount of all A-2 Term Loans (as defined in the Credit
Agreement) made by the Bank pursuant to the Agreement, payable at such times and
in such amounts as are specified in the Credit Agreement.

                  The Borrower promises also to pay interest on the unpaid
principal amount of each A-2 Term Loan made by the Bank in like money at said
office from the date hereof until paid at the rates and at the times provided in
Section 1.08 of the Agreement.

                  This Note is one of the A-2 Term Notes referred to in the
Credit Agreement, dated as of February 17, 1999, among the Borrower, the lending
institutions from time to time party thereto (including the Bank) and The Chase
Manhattan Bank, as Administrative Agent (as amended, restated, modified and/or
supplemented from time to time, the "Credit Agreement") and is entitled to the
benefits thereof and of the other Credit Documents (as defined in the Credit
Agreement). This Note is secured by and entitled to the benefits of the Pledge
Agreement (as defined in the Credit Agreement). As provided in the Credit
Agreement, this Note is subject to voluntary prepayment and mandatory repayment
prior to the A-2 Term Loan Maturity Date, in whole or in part.

                  In case an Event of Default (as defined in the Credit
Agreement) shall occur and be continuing, the principal of and accrued interest
on this Note may be declared to be due and payable in the manner and with the
effect provided in the Credit Agreement.

                  The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.

<PAGE>   19

                                                                     Exhibit B-3
                                                                           Page2

                  THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

                                           CERES GROUP, INC.

                                           By   _______________________________
                                                Title:

<PAGE>   20

                                                                       EXHIBIT G
                                                                       ---------

                   FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
                   -------------------------------------------

                                                         DATE:  ________, ____

                  Reference is made to the Credit Agreement described in Item 2
of Annex I annexed hereto (as such Credit Agreement may hereafter be amended,
modified or supplemented from time to time, the "Credit Agreement"). Unless
defined in Annex I attached hereto, terms defined in the Credit Agreement are
used herein as therein defined. _____________ (the "Assignor") and
______________ (the "Assignee") hereby agree as follows:

                  1. The Assignor hereby sells and assigns to the Assignee
without recourse and without representation or warranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obligations
under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I (the "ASSIGNED SHARE") of all of the
outstanding rights and obligations under the Credit Agreement relating to the
Tranches indicated in Item 4 of Annex I, including, without limitation, (x) in
the case of any assignment of all or any portion of outstanding A-1 Term Loans,
all rights and obligations with respect to the Assigned Share of all then
outstanding A-1 Term Loans, (y) in the case of any assignment of all or any
portion of outstanding A-2 Term Loans, all rights and obligations with respect
to the Assigned Share of all then outstanding A-2 Term Loans and (z) in the case
of any assignment of all or any portion of the Total Revolving Loan Commitment,
all rights and obligations with respect to the Assigned Share of the Total
Revolving Loan Commitment and of all then outstanding Revolving Loans and
Letters of Credit. After giving effect to such sale and assignment, the
Assignee's Revolving Loan Commitment and the amount of the outstanding A-1 Term
Loans and A-2 Term Loans owing to the Assignee will be as set forth in Item 4 of
Annex I.

                  2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the other Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any of its Subsidiaries or the performance or observance by the
Borrower or any of its Subsidiaries of any of its obligations under the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto.

                  3. The Assignee (i) represents and warrants that it is duly
authorized to enter into and perform the terms of this Assignment and Assumption
Agreement; (ii) confirms that it has received a copy of the Credit Agreement and
the other Credit Documents, together with copies of the financial statements
referred to therein and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption Agreement; (iii) agrees that it will, independently
and without reliance upon the

<PAGE>   21

                                                                       Exhibit G
                                                                          Page 2

Administrative Agent, the Assignor or any other Bank and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Credit Agreement;
(iv) appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement and
the other Credit Documents as are delegated to the Administrative Agent by the
terms thereof, together with such powers as are reasonably incidental thereto;
(v) confirms that it is (I) a Bank, (II) a parent company and/or an affiliate of
the Assignor which is at least 50% owned by the Assignor or its parent company,
(III) in the event the Assignor is a fund that invests in bank loans, a fund
that invests in bank loans and is managed by the same investment advisor of the
Assignor or by an affiliate of such investment advisor or (IV) an Eligible
Transferee under Section 11.04(b) of the Credit Agreement; [and] (vi) agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of the Credit Agreement are required to be performed by it as a
Bank[; and (vii) attaches the forms described in Section 11.04(b) of the Credit
Agreement].(1)

                  4. Following the execution of this Assignment and Assumption
Agreement by the Assignor and the Assignee, an executed original hereof
(together with all attachments) will be delivered to the Administrative Agent.
The effective date of this Assignment and Assumption Agreement shall be (x) the
date upon which all of the following conditions have been satisfied: (i) the
execution hereof by the Assignor and the Assignee, (ii) the consent hereto by
the Administrative Agent and the Borrower to the extent required by Section
11.04(b) of the Credit Agreement, (iii) the receipt by the Administrative Agent
of the assignment fee referred to in Section 11.04(b) of the Credit Agreement,
and (iv) the recordation of the assignment effected hereby on the Register by
the Administrative Agent as provided in Section 6.12 of the Credit Agreement, or
(y) such later date as is otherwise specified in Item 5 of Annex I hereto (the
"Settlement Date").

                  5. Upon the delivery of a fully executed original hereof to
the Administrative Agent, as of the Settlement Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Assumption Agreement, have the rights and obligations of a Bank thereunder and
under the other Credit Documents and (ii) the Assignor shall, to the extent
provided in this Assignment and Assumption Agreement, relinquish its rights and
be released from its obligations under the Credit Agreement and the other Credit
Documents.

                  6. It is agreed that upon the effectiveness hereof, the
Assignee shall be entitled to (x) all interest on the Assigned Share of the A-1
Term Loans, A-2 Term Loans and/or Revolving Loans at the rates specified in Item
6 of Annex I and (y) all Commitment Fees (if applicable) on the Assigned Share
of the Total Revolving Loan Commitment at the rate specified in Item 7 of Annex
I, which, in each case, accrue on and after the Settlement Date, such interest
and, if applicable, Commitment Fee, to be paid by the Administrative Agent upon
receipt thereof from

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

(1)   If the Assignee is a U.S. Bank organized under the laws of a
      jurisdiction outside the United States.

<PAGE>   22

                                                                       Exhibit G
                                                                          Page 3

the Borrower directly to the Assignee. It is further agreed that all payments of
principal made on the Assigned Share of the A-1 Term Loans, A-2 Term Loans
and/or Revolving Loans which occur on and after the Settlement Date will be paid
directly by the Administrative Agent to the Assignee. Upon the Settlement Date,
the Assignee shall pay to the Assignor an amount specified by the Assignor in
writing which represents the Assigned Share of the principal amount of the A-1
Term Loans, A-2 Term Loans and/or Revolving Loans which are outstanding on the
Settlement Date, net of any closing costs. The Assignor and the Assignee shall
make all appropriate adjustments in payments under the Credit Agreement for
periods prior to the Settlement Date directly between themselves.

                  7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

<PAGE>   23

                                                                       Exhibit G
                                                                          Page 4

                  IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written, such execution
also being made on Annex I hereto.

                                                     [NAME OF ASSIGNOR],
                                                     as Assignor

                                                     By_________________________
                                                        Title:

                                                     [NAME OF ASSIGNEE],
                                                     as Assignee

                                                     By_________________________
                                                        Title:
Acknowledged and Agreed:

[THE CHASE MANHATTAN BANK,
   as Administrative Agent

By__________________________
  Title:

CERES GROUP, INC.

By____________________________
    Title:](2)

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

(2)   The consent of each of the Administrative Agent and, so long as no Default
      or Event of Default is then in existence, the Borrower is required in
      connection with any assignment to an Eligible Transferee pursuant to
      clause (y) of Section 11.04(b) of the Credit Agreement (which consent, in
      either case, shall not be unreasonably withheld or delayed).

<PAGE>   24

                                                                         ANNEX I
                                                                         -------

                  ANNEX TO ASSIGNMENT AND ASSUMPTION AGREEMENT
                  --------------------------------------------

1.       The Borrower:      Ceres Group, Inc. (the "Borrower")

2.       Name and Date of Credit Agreement:

         Credit Agreement, dated as of February 17, 1999, among the Borrower,
         the lenders from time to time party thereto (the "Banks") and THE CHASE
         MANHATTAN BANK, as Administrative Agent, as amended, restated, modified
         and/or supplemented from time to time.

3.       Date of Assignment Agreement:

4.       Amounts (as of date of item #3 above):

<TABLE>
<CAPTION>

           ======================= ==================== ======================== ============================
                                       Outstanding      Outstanding                 Total Revolving Loan
                                      Principal of      Principal of                     Commitment
                                     A-1 Term Loans     A-2 Term Loans
           ----------------------- -------------------- ------------------------ ----------------------------
         <S>                       <C>                 <C>                       <C>
           a.  Aggregate Amount    $___________         $_______                 $_______
               for all Banks
           ----------------------- -------------------- ------------------------ ----------------------------
           b.  Assigned Share      ____%                _____%                   ____%
           ----------------------- -------------------- ------------------------ ----------------------------
           c.  Amount of           $_____               $_______                 $_______
               Assigned Share
           ======================= ==================== ======================== ============================
</TABLE>

<TABLE>
<CAPTION>
<S>                                             <C>
5.       Settlement Date:

6.       Rate of Interest                            As set forth in Section 1.08 of the Credit Agreement
         to the Assignee:                            (unless otherwise agreed to by the Assignor and the
                                                     Assignee)(3)
</TABLE>

---------------------------------------
(3)   The Borrower and the Administrative Agent shall direct the entire amount
      of the interest to the Assignee at the rate set forth in Section 1.08 of
      the Credit Agreement, with the Assignor and the Assignee effecting any
      agreed upon sharing of interest through payments by the Assignee to the
      Assignor.

<PAGE>   25
                                                                         Annex I
                                                                          Page 2

<TABLE>
<CAPTION>
<S>                                             <C>
7.       Commitment Fees                             As set forth in Section 2.01(a) of the Credit
         to the Assignee:                            Agreement (unless otherwise agreed to by the Assignor and
                                                     the Assignee)(4)

8.       Notice:

                  ASSIGNEE:

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

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

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

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

                  Attention:
                  Telephone:
                  Facsimile:
                  Reference:

                  ASSIGNOR:

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

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

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

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

                  Attention:
                  Telephone:
                  Facsimile:
                  Reference:
</TABLE>

---------------------------------
(4)   Insert "Not Applicable" in lieu of text if no portion of the Total
      Revolving Loan Commitment is being assigned. Otherwise, the Borrower and
      the Administrative Agent shall direct the entire amount of the Commitment
      Fees to the Assignee at the rate set forth in Section 2.01(a) of the
      Credit Agreement, with the Assignor and the Assignee effecting any agreed
      upon sharing of the Commitment Fees through payment by the Assignee to the
      Assignor.

<PAGE>   26
                                                                         Annex I
                                                                          Page 3

9.       Payment Instructions:

                  ASSIGNEE:

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

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

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

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

                  Attention:
                  Reference:

                  ASSIGNOR:

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

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

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

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

                  Attention:
                  Reference:

Accepted and Agreed:

[NAME OF ASSIGNEE]                          [NAME OF ASSIGNOR]

By________________________          By__________________________

--------------------------          ----------------------------
(Print Name and Title)              (Print Name and Title)<PAGE>   1

                                                                   EXHIBIT 10.26

                                CERES GROUP, INC.

                     1998 KEY EMPLOYEE SHARE INCENTIVE PLAN

         1. GENERAL. This 1998 Key Employee Share Incentive Plan ("Plan")
provides key employees of Ceres Group, Inc. ("CERES") or subsidiary corporations
of CERES with the opportunity to acquire or expand their equity interest in
CERES by making available for award or purchase common shares, without par
value, of CERES ("Common Shares"), through the granting of nontransferable
options to purchase Common Shares ("Options") and the granting of
nontransferable options to receive payments based on the appreciation of Common
Shares ("SARs"). Options and SARs are collectively referred to herein as
"Grants"; an individual grant of Options is individually referred to herein as a
"Grant". CERES intends that key employees may be granted, simultaneously or from
time to time, Stock Options that qualify as incentive stock options ("Incentive
Stock Options" under Section 422 of the Internal Revenue Code of 1986, as
amended ("Code") or stock options that do not so qualify ("Non-qualified Stock
Options"). No provision of the Plan is intended or shall be construed to grant
employees alternative rights in any Incentive Stock Option granted under the
Plan so as to prevent such Option from qualifying under Section 422 of the Code.

         2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide
incentives to key employees of CERES or of subsidiary corporations of CERES, by
encouraging such employees to acquire a larger share ownership in the CERES,
thereby increasing their proprietary interest in CERES's business and enhancing
their personal financial interest in its success. For purposes of the Plan, a
"subsidiary corporation" consists of any corporation fifty percent (50%) of the
shares of which are directly or indirectly owned or controlled by CERES.

         3. EFFECTIVE DATE OF THE PLAN. The Plan shall have a stated effective
date of October 1, 1998. However, the Plan is and shall be effective upon its
adoption by the Board of Directors, subject to approval by holders of a majority
of the total votes cast on a proposal to approve the Plan at a meeting of the
shareholders at which a quorum is present. If the Plan is not so approved within
twelve (12) months after the date the Plan is adopted by the Board of Directors,
the Plan and any Grants made hereunder shall be null and void. However, if the
Plan is approved, no further shareholder approval shall be required with respect
to the making of Grants pursuant to the Plan, except as provided in Section 11
hereof.

         4. ADMINISTRATION OF THE PLAN. The Plan will be administered by the
Compensation Committee of the Board of Directors of CERES ("Committee") which
shall consist of not less than three members. None of the Committee members
shall be employees of CERES or its subsidiary corporations nor be eligible to
receive an Option while serving as a member of the Committee. Each of the
Committee members shall be a "Non-Employee Director" within the meaning of Rule
16b-3 promulgated by the Securities and Exchange

<PAGE>   2

Commission under the Securities Exchange Act of 1934, or any successor
definition adopted by the Securities Exchange Commission, and each shall be an
"outside director" within the meaning of Section 162(m) of the Code. The Board
may also select one or more qualified Directors to serve as alternate members of
the Committee, who may take the place of any absent member or members at any
meeting of the Committee. The Committee shall be authorized to administer the
Plan in accordance with its terms and may adopt, amend or repeal such rules and
regulations as the Committee may desire concerning the conduct of its affairs.
The interpretation and construction by the Committee of any provision of the
Plan or of any Grant under it and the administration of the Plan by the
Committee shall be final.

         A majority of the Committee shall constitute a quorum. The acts of a
majority of the members present at any meeting at which a quorum is present (or
acts unanimously approved in writing by the members of the Committee) shall
constitute binding acts of the Committee. No member of the Board of Directors or
the Committee shall be liable for any action taken or omitted, or any
determination made, in good faith in connection with the Plan.

         Subject to the terms and conditions of the Plan, the Committee is
authorized and empowered:

         (a)      To select the key employees to whom Grants may be made;

         (b)      To determine the number of Common Shares to be covered by any
                  Grant;

         (c)      To prescribe the terms and conditions of any Grants made under
                  the Plan, and the form and agreement used in connection with
                  the grant of Options and SARs;

         (d)      To determine the time or times when Options and SARs will be
                  granted and when they will terminate in whole or in part;

         (e)      To determine the time or times when Options and SARs that are
                  granted may be exercised;

         (f)      To determine, at the time a Stock Option is granted under the
                  Plan, whether such Option is an Incentive Stock Option
                  entitled to the benefits of Section 422 of the Code;

         (g)      To establish any other Option agreement provisions not
                  inconsistent with the terms and conditions of the Plan or,
                  where the Stock Option is an Incentive Stock Option, with the
                  terms and conditions of Section 422 of the Code; and

         (h)      To determine whether SARs will be made part of any Grants
                  consisting of Options, and to approve any SARs made part of
                  any such Grants pursuant to Section 8 hereof.

                                     Page 2
<PAGE>   3

         5. PERSONS ELIGIBLE FOR GRANTS. Grants may be made from time to time
to those key employees and directors of CERES or of a subsidiary corporation
who are designated by the Committee in its sole and exclusive discretion. Key
employees may include, but shall not necessarily be limited to, employees who
are also members of the Board of Directors (excluding members of the
Committee), officers of CERES, and officers of any subsidiary corporation.
However, Stock Options intended to qualify as Incentive Stock Options shall
only be granted to employees while actually employed by CERES or a subsidiary
corporation. The Committee may grant more than one Option, with or without
SARs, to the same key employee. No Option will be granted to any key employee
during any period of time when such key employee is on a leave of absence.

         6. SHARES SUBJECT TO THE PLAN; ADJUSTMENTS TO OPTIONS; GRANTS. Upon the
approval of the Plan by the shareholders, Two Million (2,000,000) presently
authorized but unissued Common Shares of CERES shall be reserved, allotted and
set aside for issuance under the Plan, subject to the next sentence and Section
7(h). If a SAR is granted in tandem with an Option pursuant to Section 8 and
such SAR is thereafter exercised in whole or in part, then such Option or the
portion thereof to which the duly exercised SAR relates shall be deemed to have
been exercised for purposes of such Option, but the Common Shares which were
issuable to such Option or the portion thereof to which the duly exercised SAR
relates may be made available for reoffering under the Plan to any eligible key
employee.

         If, at any time subsequent to the date of adoption of the Plan by the
Board of Directors, the number of Common Shares are increased or decreased, or
changed into or exchanged for a different number or kind of shares of stock or
other securities of CERES or of another corporation (whether as a result of a
stock split, stock dividend, combination or exchange of shares, exchange for
other securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization or otherwise): (i) there shall automatically be
substituted for each Common Share subject to an unexercised Stock Option or SAR
(in whole or in part) granted under the Plan, the number and kind of shares of
stock or other securities into which each outstanding Common Share shall be
changed or for which each such Common Share shall be exchanged; and (ii) the
option price per Common Share or unit of securities shall be increased or
decreased proportionately so that the aggregate purchase price for the
securities subject to a Stock Option or SAR shall remain the same as immediately
prior to such event. In addition to the foregoing, the Committee shall be
entitled in the event of any such increase, decrease or exchange of Common
Shares to make other adjustments to the securities subject to a Stock Option or
SAR, the provisions of the Plan, and to any related Stock Option or SAR
agreements (including adjustments which may provide for the elimination of
fractional shares), where necessary to preserve the terms and conditions of any
Grants hereunder.

         7. STOCK OPTION PROVISIONS.

         (a) GENERAL. The Committee may grant to key employees (also referred to
as "optionees") nontransferable Stock Options that either qualify as Incentive
Stock Options under Section 422 of the Code or do not so qualify. However, any
Stock Option that is an Incentive Stock Option shall only be granted within ten
(10) years from the earlier of (i) the date this Plan

                                     Page 3
<PAGE>   4

is adopted by the Board of Directors of CERES; or (ii) the date this Plan is
approved by the shareholders of CERES.

         (b) STOCK OPTION PRICE. The option price per Common Share which may be
purchased under the Plan shall be determined by the Committee at the time of
Grant, but shall not be less than one hundred percent (100%) of the fair market
value of a Common Share, determined as of the date such Option is granted;
however, if a key employee to whom an Incentive Stock Option is granted is, at
the time of the grant of such Option, an "owner," as defined in Section
422(b)(6) of the Code (modified as provided in Section 424 (d) of the Code) of
more than ten percent (10%) of the total combined voting power of all classes of
stock of CERES or any subsidiary corporation (a "Substantial Shareholder"), the
price per Common Share of such option, as determined by the Committee, shall not
be less than one hundred ten percent (110%) of the fair market value of a Common
Share on the date such Option is granted. The option price per Common Share
under each Stock Option granted pursuant to the Plan that is not an Incentive
Stock Option shall be determined by the Committee at the time of Grant. The fair
market value of a Common Share shall be determined in accordance with procedures
to be established by the Committee; provided, that so long as Common Shares are
traded or exchanged on the NASDAQ National Market, the fair market value of a
Common Share for any given date shall be considered the average of the bid and
asked prices quoted on that date. The day on which the Committee approves the
granting of an Option shall be considered the date on which such Option is
granted.

         (c) PERIOD OF OPTION. The Committee shall determine when each Stock
Option is to expire. However, no Stock Option (including without limitation, an
Incentive Stock Option) may be exercisable for a period of more than ten (10)
years from the date it is granted. Further, no Incentive Stock Option granted to
an employee who is a Substantial Shareholder at the time of the grant of such
Option shall be exercisable after the expiration of five (5) years from the date
of grant of such Option.

         (d) LIMITATION ON EXERCISE AND TRANSFER OF OPTIONS. Only the key
employee to whom an Option is granted may exercise such Option, except in those
cases where a guardian or other legal representative has been duly appointed for
such key employee, and except as otherwise provided in the case of such key
employee's death. No Option granted hereunder shall be transferable by an
optionee other than by will or the laws of descent and distribution; provided,
however, that if so provided in the instrument evidencing the Option, the
Compensation Committee may permit an optionee to transfer the Option during his
lifetime to one or more members of his family or to one or more trusts for the
benefit of one or more members of his family so long as no consideration is paid
for such transfer and such transfer would not result in the loss of any
exemption under Rule 16b-3 for any Option that the Compensation Committee does
not permit to be so transferred. The transferee of an Option shall be subject to
all restrictions, terms, and conditions applicable to the Option prior to its
transfer, except that the Option shall not be further transferable inter vivos
by the transferee. The Compensation Committee may impose on any transferable
Option and on the Common Shares to be issued upon the exercise of the Option
such limitations and conditions as the Committee

                                     Page 4
<PAGE>   5

deems appropriate. No Option granted hereunder can be pledged or hypothecated,
nor shall any such Option be subject to execution, attachment or similar
process.

         (e) EMPLOYMENT; HOLDING PERIOD REQUIREMENTS FOR CERTAIN OPTIONS. The
Committee may condition the exercise of any Option granted hereunder upon the
continued employment of the optionee by CERES or by a subsidiary corporation,
and may make any such Option immediately exercisable. However, the Committee
will require that, from and after the date of grant of any Incentive Stock
Option until the date three (3) months prior to the date such Option is
exercised, such optionee must be an employee of the Company or of a subsidiary
corporation, but always subject to the right of CERES or any subsidiary
corporation to terminate such optionee's employment of such during such period.
Each Option shall be subject to such additional restrictions as to the time and
method of exercise as shall be prescribed by the Committee. Upon satisfaction of
such requirements, if any, an Option or the appropriate portion thereof may be
exercised in whole or in part from time to time during the option period;
however, such exercise right(s) shall be limited to blocks of at least one
hundred (100) Common Shares.

         (f) PAYMENT OF OPTION PRICE. An Option shall be exercised by an
optionee giving written notice to CERES of his/her intention to exercise the
same, accompanied by full payment of the purchase price in cash or by check, or,
with the consent of the Committee, in whole or in part with a surrender of
Common Shares having a fair market value on the date of exercise equal to that
portion of the purchase price for which payment in cash or check is not made.
The Committee may, in its sole discretion, approve other methods of exercise for
an Option or payment of the option price, provided that no such method shall
cause any option granted under the Plan as an Incentive Stock Option to not
qualify under Section 422 of the Code or cause any Common Share issued in
connection with the exercise of an option not to be a fully paid and
non-assessable Common Share.

         (g) CERTAIN REISSUANCES OF STOCK OPTIONS. To the extent Common Shares
are surrendered by an optionee in connection with the exercise of an Option in
accordance with Section 7(f), the Committee may in its sole discretion grant new
Options to such optionee (to the extent Common Shares remain available for
Grants), subject to the following terms and conditions:

         (i)      The number of Common Shares issuable pursuant to the new
                  Options shall be equal to the number of Common Shares being
                  surrendered by the optionee;

         (ii)     The option price per Common Share shall be equal to the fair
                  market value of a Common Share, on the date of exercise of
                  those Options whose exercise caused such Grant; and

         (iii)    The terms and conditions of such Options shall in all other
                  respects replicate the terms and conditions of those Options
                  whose exercise caused such Grant, except to the extent such
                  terms and conditions are determined

                                     Page 5
<PAGE>   6

                  to not be wholly consistent with the general provisions of
                  this Section 7, or in conflict with the remaining provisions
                  of the Plan.

         (h) CANCELLATION AND REPLACEMENT OF STOCK OPTIONS; REALLOCATION OF
UNUSED COMMON SHARES. The Committee may at any time or from time to time permit
the voluntary surrender by an optionee who is the holder of any outstanding
Stock Options under the Plan, where such surrender is conditioned upon the
granting to such optionee of new Stock Options for such number of shares as the
Committee shall determine, or may require such a voluntary surrender as a
condition precedent to the grant of new Stock Options. The Committee shall
determine the terms and conditions of new Stock Options, including the prices at
and periods during which they may be exercised, in accordance with the
provisions of this Plan, all or any of which may differ from the terms and
conditions of the Stock Options surrendered. Any such new Stock Options shall be
subject to all the relevant provisions of this Plan. The Common Shares subject
to any Stock Option so surrendered, and/or any Common Shares subject to any
Stock Option that has lapsed, been forfeited, or been cancelled and extinguished
in connection with the exercise of an SAR, shall no longer be charged against
the limitation provided in Section 6 of this Plan and may again become shares
subject to the Plan. The granting of new Stock Options in connection with the
surrender of outstanding Stock Options under this Plan shall be considered for
the purposes of the Plan as the granting of new Stock Options and not an
alteration, amendment or modification of the Plan or of the Stock Options being
surrendered. Common Shares that are not purchased through the exercise of
Options that terminate or lapse may be used for further Grants under the Plan.

         (i) LIMITATION ON EXERCISABLE INCENTIVE STOCK OPTIONS. The aggregate
fair market value of the Common Shares first becoming subject to exercise as
Incentive Stock Options by a key employee during any given calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). Such aggregate
fair market value shall be determined as of the date such Option is granted,
taking into account, in the order in which granted, any other incentive stock
options granted by CERES or by a parent or subsidiary corporation.

         8. SHARE APPRECIATION RIGHTS. A key employee may be granted the right
to receive a payment based on the increase in the value of Common Shares
occurring after the date of such Grant. Such rights shall be known as SARs. SARs
may (but need not) be granted to a key employee in tandem with, and exercisable
in lieu of exercising, a Grant of Options. SARs will be granted upon terms and
conditions specified by the Committee receiving such Grant, or by a subsidiary
corporation if such subsidiary corporation is the employer of the key employee
receiving such Grant. No optionee is entitled to a Grant of SARs solely as a
result of the grant of an Option to him. Any SAR if granted in tandem with a
Grant of Options, may only be exercised by the holder thereof with respect to
all, or a portion, of the Options to which such tandem SAR applies. When granted
in tandem with an Option, a SAR shall provide that the holder of an Option shall
have the right to receive an amount equal to one hundred percent (100%) of the
excess, if any, of the fair market value of the Common Shares covered by such
Option, determined as of the date of exercise of such SAR by the Committee (in
the same manner as such value is determined for purposes of the granting of
Stock Options), over the price to be paid for such Common Shares under such
Option. Such amount will be payable by either

                                     Page 6
<PAGE>   7

the Company or the subsidiary corporation, whichever such corporation is the
employer of the employee, in one or more of the following manners, as determined
by the Committee:

         (a)      cash (or check);

         (b)      Common Shares having a fair market value equal to such amount;
                  or

         (c)      a combination of cash (or check) and Common Shares.

In the case of SARs granted in tandem with Options, in no event may any person
exercise any such SARs unless (i) such person is then permitted to exercise the
Options with respect to which such SARs relate, and (ii) the fair market value
of the Common Shares covered by the tandem Options, determined as provided
above, exceeds the option price of such Common Shares. Upon the exercise of any
SARs, the Stock Option, or that portion thereof to which such SARs relate, shall
be canceled and automatically extinguished. A SAR granted in tandem with a Stock
Option hereunder shall be made a part of the Stock Option agreement to which
such SAR relates, in a form approved by the Committee and not inconsistent with
this Plan. The granting of a Stock Option or SAR shall impose no obligation upon
the optionee to exercise such Stock Option or SAR. The obligation of CERES or a
subsidiary corporation to satisfy SARs shall not be funded or secured in any
manner. No SAR granted hereunder shall be transferable by the key employee
granted such SAR, other than by will or the laws of descent and distribution.

         After the Grant of an SAR, an optionee intending to rely on an
exemption from Section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") shall be required to hold such SAR for six (6) months from the
date the price for such SAR is fixed to the date of cash settlement.
Additionally, in order to remain exempt from Section 16(b) of the Exchange Act,
an SAR must be exercised by an optionee subject to such Section only during the
period beginning on the third business day following the release of a summary
statement of CERES's quarterly or annual sales and earnings and ending on the
twelfth business day following said date.

         9. TERMINATION OF EMPLOYMENT. If a key employee ceases to be an
employee of CERES and every subsidiary corporation, for a reason other than
death, retirement, or permanent and total disability, his/her Grants shall,
unless extended by the Committee on or before his/her date of termination of
employment, terminate on the effective date of such termination of employment.
Neither the key employee nor any other person shall have any right after such
date to exercise all or any part of his Stock Options or SARs.

         If termination of employment is due to death or permanent and total
disability, then outstanding Stock Options and SARs may be exercised within the
one (1) year period ending on the first anniversary of such death or permanent
and total disability. In the case of death, such outstanding Stock Options and
SARs shall be exercised by such key employee's estate, or the person designated
by such key employee by will, or as otherwise designated by the laws of descent
and distribution. Notwithstanding the foregoing, in no event shall any Option or
SAR be exercisable after the expiration of the option period, and in the case of
exercises made

                                     Page 7
<PAGE>   8

after a key employee's death, not to any greater extent than the key employee
would have been entitled to exercise such Option or SAR at the time of his
death.

         Subject to the discretion of the Committee, if a key employee
terminates employment with CERES and all subsidiary corporations because of
normal or early retirement under the Retirement Plan for Employees of Ceres
Group, Inc. (or any successor retirement plan), any then-outstanding Options or
SARs held by such key employee shall lapse at the earlier of the end of the term
of such Option or SAR, or ninety (90) days after such retirement or permanent
and total disability.

         If a key employee of CERES or one of its subsidiary corporations is
granted a leave of absence because of sickness or the need to enter military
service, his/her employment with CERES or such subsidiary corporation shall not
be considered terminated, and he/she shall be deemed an employee of CERES or
such subsidiary corporation during such leave of absence or any extension
thereof granted by CERES or such subsidiary corporation.

         10. CHANGE IN CONTROL. Upon the occurrence of a Change in Control (as
defined below), notwithstanding any other provisions hereof or of any agreement
to the contrary, all Options and SARs granted under this Plan shall immediately
vest and become exercisable in full.

         For purposes of this Plan, a Change in Control shall be deemed to have
occurred if: (i) a tender offer shall be made and consummated for the ownership
of 25% or more of the outstanding voting securities of CERES; (ii) CERES shall
be merged or consolidated with another corporation and, as a result of such
merger or consolidation, less than 75% of the outstanding voting securities of
the surviving or resulting corporation shall be owned in the aggregate by the
former shareholders of CERES as the same shall have existed immediately prior to
such merger or consolidation; (iii) CERES shall sell substantially all of its
operating assets to another corporation which is not a wholly owned subsidiary;
or (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, twenty-five percent (25%) or more of the outstanding
voting securities of CERES (whether directly, indirectly, beneficially or of
record). In determining whether a Change in Control has occurred, gratuitous
transfers made by a person to an affiliate of such person (as determined by the
Board of Directors of CERES), whether by gift, devise or otherwise, shall not be
taken into account. For purposes of this Plan, 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.

         11. AMENDMENT, SUSPENSION AND TERMINATION. The Committee is authorized
to interpret this Plan and from time to time adopt any rules and regulations for
carrying out this Plan that it may deem advisable. Subject to the approval of
the Board of Directors of CERES, the Committee may at any time amend, modify,
suspend or terminate this Plan. In no event, however, without the approval of
shareholders, shall any action of the Committee or the Board of Directors result
in:

                                     Page 8
<PAGE>   9

         (a)      Materially amending, modifying or altering the eligibility
                  requirements provided in Section 5 hereof;

         (b)      Materially increasing, except as provided in Section 6 hereof,
                  the maximum number of shares subject to Grants; or

         (c)      Materially increasing the benefits accruing to participants
                  under this Plan, except to conform this Plan and any
                  agreements made hereunder to changes in the Code or governing
                  law.

         12. INVESTMENT REPRESENTATION; APPROVALS AND LISTING. The Committee may
condition any Grant hereunder upon receipt of the following investment
representation from the optionee:

         "I agree that any Common Shares of Ceres Group, Inc. that I may acquire
         by virtue of this Option or SAR shall be acquired for investment
         purposes only and not with a view to distribution or resale, and may
         not be transferred, sold, assigned, pledged, hypothecated or otherwise
         disposed of by me unless (i) a registration statement or post-effective
         amendment to a registration statement under the Securities Act of 1933,
         as amended, with respect to said Common Shares has become effective so
         as to permit the sale or other disposition of said shares by me; or
         (ii) there is presented to Ceres Group, Inc.. an opinion of counsel
         satisfactory to Ceres Group, Inc. to the effect that the sale or other
         proposed disposition of said Common Shares by me may lawfully be made
         otherwise than pursuant to an effective registration statement or
         post-effective amendment to a registration statement relating to the
         said Shares under the Securities Act of 1933, as amended."

         CERES shall not be required to issue any certificate or certificates
for Common Shares upon the exercise of any Option or SAR granted under this Plan
prior to (i) the obtaining of any approval from any governmental agency which
the Committee shall, in its sole discretion, determine to be necessary or
advisable; (ii) the admission of such shares to listing on any national
securities exchange on which the Common Shares may be listed or any other system
for trading Common Shares (including, without limitation, the NASDAQ National
Market); (iii) the completion of any registration or other qualifications of the
Common Shares under any state or federal law or ruling or regulations of any
governmental body which the Committee shall, in its sole discretion, determine
to be necessary or advisable or the determination by the Committee, in its sole
discretion, that any registration or other qualification of the Common Shares is
not necessary or advisable; and (iv) the obtaining of an investment
representation from the optionee in the form stated above or in such other form
as the Committee, in its sole discretion, shall determine to be adequate.

         13. GENERAL PROVISIONS. The form and substance of Option agreements and
SAR agreements made hereunder, whether granted at the same or different times,
need not be identical. Nothing in this Plan or in any agreement shall confer
upon any key employee any right to continue in the employ of CERES or any of its
subsidiary corporations, to be entitled to any remuneration or benefits not set
forth in this Plan or such Grant, or to interfere with or limit the

                                     Page 9
<PAGE>   10

right of CERES or any subsidiary corporation to terminate his employment at any
time, with or without cause. Nothing contained in this Plan or in any Option
agreement or SAR shall be construed as entitling any optionee to any rights of a
shareholder as a result of the grant of an Option or an SAR, until such time as
Common Shares are actually issued to such optionee pursuant to the exercise of
such Option or SAR. The successors and assigns of CERES may assume this Plan.
The liability of CERES under this Plan and any sale made hereunder is limited to
the obligations set forth herein with respect to such sale and no term or
provision of this Plan shall be construed to impose any liability on CERES in
favor of any employee with respect to any loss, cost or expense which the
employee may incur in connection with or arising out of any transaction in
connection with this Plan. The expense of administering the Plan shall be borne
by CERES. The Plan, and all options and actions taken thereunder and any
agreements relating thereto shall be governed by, and controlled in accordance
with the laws of CERES's state of incorporation, without regard to its conflicts
of law principles or statute. The captions and section numbers appearing in this
Plan are inserted only as a matter of convenience; they do not define, limit,
construe or describe the scope or intent of the provisions of this Plan.

         TERMINATION OF THE PLAN. This Plan shall terminate on the tenth (10th)
anniversary of its effective date, as determined in accordance with Section 3 of
this Plan, but no later than September 30, 2008. This Plan may be terminated
earlier in accordance with Section 11 of this Plan. After the Plan terminates,
no Options or SARs shall be granted hereunder. All Options and SARs outstanding
at the time of termination of the Plan shall continue in full force and effect
according to their terms and the terms and conditions of the Plan.

                                    Page 10

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