-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TZDAs1YvEAeUgJT/6wAmzUrmQXsckJ0aIhljCgqGTd0EADZhl4rHjpUiKpO83+Om WCfr92/I0yyCOScZFrs8fQ== 0000950134-98-005896.txt : 19980717 0000950134-98-005896.hdr.sgml : 19980717 ACCESSION NUMBER: 0000950134-98-005896 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19980714 SROS: NONE GROUP MEMBERS: INSURANCE GENPAR (BERMUDA) LP GROUP MEMBERS: INSURANCE GENPAR (BERMUDA) MGP LP GROUP MEMBERS: INSURANCE GENPAR (BERMUDA) MGP LTD GROUP MEMBERS: INSURANCE GENPAR LP GROUP MEMBERS: INSURANCE GENPAR MGP INC GROUP MEMBERS: INSURANCE PARTNERS LP GROUP MEMBERS: INSURANCE PARTNERS OFFSHORE (BERMUDA) LP GROUP MEMBERS: INUSRANCE GENPAR MGP LP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL RESERVE LIFE CORP CENTRAL INDEX KEY: 0000215403 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 341017531 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-36346 FILM NUMBER: 98665485 BUSINESS ADDRESS: STREET 1: 17800 ROYALTON RD CITY: STRONGSVILLE STATE: OH ZIP: 44136 BUSINESS PHONE: 2165722400 MAIL ADDRESS: STREET 1: 17800 ROYALTON RD CITY: STRONGSVILLE STATE: OH ZIP: 44136 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: INSURANCE PARTNERS LP CENTRAL INDEX KEY: 0001012376 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133753044 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 201 MAIN ST CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173908500 MAIL ADDRESS: STREET 1: 201 MAIN STREET CITY: FORT WORTH STATE: TX ZIP: 76102 SC 13D 1 SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (AMENDMENT NO. ____________)(1) CENTRAL RESERVE LIFE CORPORATION - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK (WITHOUT PAR VALUE) - -------------------------------------------------------------------------------- (Title of Class of Securities) 155055-10-6 - -------------------------------------------------------------------------------- (CUSIP Number) Insurance Partners Advisors, L.P. One Chase Manhattan Plaza, 44th Floor New York, New York 10005 Attention: Mr. Bradley E. Cooper Tel. No. (212) 898-8700 - -------------------------------------------------------------------------------- (Name, address and telephone number of person authorized to revise notices and communications) July 3, 1998 - -------------------------------------------------------------------------------- (Date of event which requires filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13(d)-1(g), check the following box [ ]. Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 21 Pages) ____________________ (1) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 CUSIP No. 155055 10 6 13D Page 2 of 21 Pages =============================================================================================================== 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Insurance Partners, L.P. - --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] - --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 -- Contributions from Partners - --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ] REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - --------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ----------------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 4,290,108(1) EACH ----------------------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON -0- WITH ----------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 4,290,108(1) - --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,290,108(1) - --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* Not Applicable - --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 33.3% - --------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN ===============================================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT (1) Includes warrants to acquire an aggregate of 1,399,733 shares of Common Stock. 3 CUSIP No. 155055 10 6 13D Page 3 of 21 Pages =============================================================================================================== 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Insurance GenPar, L.P. - --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] - --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 -- Contributions from Partners - --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ] REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - --------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 4,290,108(1)(2) REPORTING ------------------------------------------------------------------------- PERSON 9 SOLE DISPOSITIVE POWER WITH -0- ------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 4,290,108(1)(2) - --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,290,108(1)(2) - --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 [ ] EXCLUDES CERTAIN SHARES* Not Applicable - --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 33.3% - --------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN ===============================================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT (1) Solely in its capacity as sole general partner of Insurance Partners, L.P. (2) Includes warrants to acquire an aggregate of 1,399,733 shares of Common Stock. 4 CUSIP No. 155055 10 6 13D Page 4 of 21 Pages =============================================================================================================== 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Insurance GenPar MGP, L.P. - --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] - --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 -- Contributions from Partners - --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ] REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - --------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 4,290,108(1)(2) REPORTING ------------------------------------------------------------------------ PERSON 9 SOLE DISPOSITIVE POWER WITH -0- ------------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 4,290,108(1)(2) - --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,290,108(1)(2) - --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 [ ] EXCLUDES CERTAIN SHARES Not Applicable - --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 33.3% - --------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN ===============================================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT (1) Solely in its capacity as sole general partner of Insurance GenPar, L.P., which is the sole general partner of Insurance Partners, L.P. (2) Includes warrants to acquire an aggregate of 1,399,733 shares of Common Stock. 5 CUSIP No. 155055 10 6 13D Page 5 of 21 Pages =============================================================================================================== 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Insurance GenPar MGP, Inc. - --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] - --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 -- Contributions from Partners - --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ] REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - --------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 4,290,108(1)(2) EACH ------------------------------------------------------------------------ REPORTING 9 SOLE DISPOSITIVE POWER PERSON -0- WITH ------------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 4,290,108(1)(2) - --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,290,108(1)(2) - --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 [ ] EXCLUDES CERTAIN SHARES* Not Applicable - --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 33.3% - --------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO ===============================================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT (1) Solely in its capacity as sole general partner of Insurance GenPar MGP, L.P., which is the sole general partner of Insurance GenPar, L.P., which is the sole general partner of Insurance Partners, L.P. (2) Includes warrants to acquire an aggregate of 1,399,733 shares of Common Stock. 6 CUSIP No. 155055 10 6 13D Page 6 of 21 Pages =============================================================================================================== 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Insurance Partners Offshore (Bermuda), L.P. - --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] - --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 -- Contributions from Partners - --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ] REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - --------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - --------------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 2,364,438(1) EACH ------------------------------------------------------------------------ REPORTING 9 SOLE DISPOSITIVE POWER PERSON -0- WITH ------------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 2,364,438(1) - --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,364,438(1) - --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 [ ] EXCLUDES CERTAIN SHARES Not Applicable - --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 19.3% - --------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN ===============================================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT (1) Includes warrants to acquire an aggregate of 772,995 shares of Common Stock. 7 CUSIP No. 155055 10 6 13D Page 7 of 21 Pages =============================================================================================================== 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Insurance GenPar (Bermuda), L.P. - --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] - --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 -- Contributions from Partners - --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ] REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - --------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - --------------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 2,364,438(1)(2) EACH ------------------------------------------------------------------------ REPORTING 9 SOLE DISPOSITIVE POWER PERSON -0- WITH ------------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 2,364,438(1)(2) - --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,364,438(1)(2) - --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 [ ] EXCLUDES CERTAIN SHARES Not Applicable - --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 19.3% - --------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN ===============================================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT (1) Solely in its capacity as sole general partner of Insurance Partners Offshore (Bermuda), L.P. (2) Includes warrants to acquire an aggregate of 772,995 shares of Common Stock. 8 CUSIP No. 155055 10 6 13D Page 8 of 21 Pages =============================================================================================================== 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Insurance GenPar (Bermuda) MGP, L.P. - --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] - --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 -- Contributions from Partners - --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ] REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - --------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - --------------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 2,364,438(1)(2) EACH ------------------------------------------------------------------------ REPORTING 9 SOLE DISPOSITIVE POWER PERSON -0- WITH ------------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 2,364,438(1)(2) - --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,364,438(1)(2) - --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 [ ] EXCLUDES CERTAIN SHARES Not Applicable - --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 19.3% - --------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN ===============================================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT (1) Solely in its capacity as sole general partner of Insurance GenPar (Bermuda), L.P., which is the sole general partner of Insurance Partners Offshore (Bermuda), L.P. (2) Includes warrants to acquire an aggregate of 772,995 shares of Common Stock. 9 CUSIP No. 155055 10 6 13D Page 9 of 21 Pages =============================================================================================================== 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Insurance GenPar (Bermuda) MGP, Ltd - --------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] - --------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 -- Contributions from Partners - --------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ] REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - --------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - --------------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 2,364,438(1)(2) EACH ------------------------------------------------------------------------ REPORTING 9 SOLE DISPOSITIVE POWER PERSON -0- WITH ------------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 2,364,438(1)(2) - --------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,364,438(1)(2) - --------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 [ ] EXCLUDES CERTAIN SHARES Not Applicable - --------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 19.3% - --------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO ===============================================================================================================
* SEE INSTRUCTIONS BEFORE FILLING OUT (1) Solely in its capacity as sole general partner of Insurance GenPar (Bermuda) MGP, L.P., which is the sole general partner of Insurance GenPar (Bermuda), L.P., which is the sole general partner of Insurance Partners Offshore (Bermuda), L.P. (2) Includes warrants to acquire an aggregate of 772,955 shares of Common Stock. 10 CUSIP No. 155055 10 6 13D Page 10 of 21 Pages ITEM 1. SECURITY AND ISSUER. The title of the class of equity securities of Central Reserve Life Corporation (the "Company"), to which this Schedule 13D (this "Statement") relates is the Company's common stock, without par value (the "Common Stock"). The address of the principal executive offices of the Company is located at 17800 Royalton Road, Strongsville, Ohio 44136. ITEM 2. IDENTITY AND BACKGROUND. (a) Pursuant to Rules 13d-1(f)(1)-(2) of Regulation 13D-G of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Statement is filed by (i) Insurance Partners, L.P., a Delaware limited partnership ("IP Delaware"), (ii) Insurance GenPar, L.P., a Delaware limited partnership ("Insurance GenPar"), (iii) Insurance GenPar MGP, L.P., a Delaware limited partnership ("IMGPLP"), (iv) Insurance GenPar MGP, Inc., a Delaware corporation ("IMGPI"), (v) Insurance Partners Offshore (Bermuda), L.P., a Bermuda limited partnership ("IP Bermuda"), (vi) Insurance GenPar (Bermuda), L.P., a Bermuda limited partnership ("Insurance GenPar Bermuda"), (vii) Insurance GenPar (Bermuda) MGP, L.P., a Bermuda limited partnership ("IBMGPLP"), and (viii) Insurance GenPar (Bermuda) MGP, Ltd., a Bermuda corporation ("IBMGP"). IP Delaware, Insurance GenPar, IMGPLP, IMGPI, IP Bermuda, Insurance GenPar Bermuda, IBMGPLP, and IBMGP are sometimes hereinafter collectively referred to as the "Reporting Persons." IP Delaware and IP Bermuda are sometimes hereinafter referred to as "Insurance Partners." The Reporting Persons are making this single, joint filing because they may be deemed to constitute a "group" within the meaning of Section 13(d)(3) of the Exchange Act, although neither the fact of this filing nor anything contained herein shall be deemed an admission by the Reporting Persons that a group exists. (b)-(c) IP DELAWARE IP Delaware is a Delaware limited partnership, formed to invest in securities of insurance entities to be selected by its investment committee. The principal business address of IP Delaware, which also serves as its principal office, is 201 Main Street, Fort Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to Insurance GenPar, the sole general partner of IP Delaware, is set forth below. INSURANCE GENPAR Insurance GenPar is a Delaware limited partnership, the principal business of which is serving as the sole general partner of IP Delaware. The principal business address of Insurance GenPar, which also serves as its principal office, is 201 Main Street, Fort Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to IMGPLP, the sole general partner of Insurance GenPar, is set forth below. IMGPLP IMGPLP is a Delaware limited partnership, the principal business of which is serving as the sole general partner of Insurance GenPar. The principal business address of IMGPLP, which also serves as its principal office, is 201 Main Street, Fort Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to IMGPI, the sole general partner of IMGPLP, is set forth below. IMGPI IMGPI is a Delaware corporation, the principal business of which is serving as the sole general partner of IMGPLP. The principal business address of IMGPI, which also serves as its principal office, is 201 Main Street, Fort Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Exchange Act, the name, residence or business address, and present occupation or employment of each director, executive officer, and controlling person of IMGPI, are as follows: 11 CUSIP No. 155055 10 6 13D Page 11 of 21 Pages
Residence or Principal Occupation Name Business Address or Employment ---- ---------------- ------------- Robert A. Spass One Chase Manhattan Plaza Managing Partner of Insurance Partners Advisors, L.P. 44th Floor New York, New York 10005 Daniel L. Doctoroff 65 East 55th Street Managing Partner of Insurance Partners Advisors, L.P. New York, New York 10022 Steven B. Gruber 65 East 55th Street Managing Partner of Insurance Partners Advisors, L.P. New York, New York 10022
Insurance Partners Advisors, L.P. is a Delaware limited partnership, the principal business of which is performing investment banking services for IP Delaware, IP Bermuda, and their portfolio companies. The principal business address of Insurance Partners Advisors, L.P., is One Chase Manhattan Plaza, 44th Floor, New York, New York 10005. IP BERMUDA IP Bermuda is a Bermuda limited partnership, formed to invest in securities of insurance entities to be selected by its investment committee. The principal business address of IP Bermuda, which also serves as its principal office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX, Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to Insurance GenPar Bermuda, the sole general partner of IP Bermuda, is set forth below. INSURANCE GENPAR BERMUDA Insurance GenPar Bermuda is a Bermuda limited partnership, the principal business of which is serving as the sole general partner of IP Bermuda. The principal business address of Insurance GenPar Bermuda, which also serves as its principal office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX, Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to IBMGPLP, the sole general partner of Insurance GenPar Bermuda, is set forth below. IBMGPLP IBMGPLP is a Bermuda limited partnership, the principal business of which is serving as the sole general partner of Insurance GenPar Bermuda. The principal business address of IBMGPLP, which also serves as its principal office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX, Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to IBMGPI, the sole general partner of IBMGPLP, is set forth below. IBMGPI IBMGPI is a Bermuda corporation, the principal business of which is serving as the sole general partner of IBMGPLP. The principal business address of IBMGPI, which also serves as its principal office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX, Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act, the name, residence or business address, and present occupation or employment of each director, executive officer, and controlling person of IMGPI, are as follows: 12 CUSIP No. 155055 10 6 13D Page 12 of 21 Pages
Residence or Principal Occupation Name Business Address or Employment ---- ---------------- ------------- Robert A. Spass See above See above Daniel L. Doctoroff See above See above Steven B. Gruber See above See above
(d) None of the entities or persons identified in this Item 2 has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the entities or persons identified in this Item 2 has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) All of the natural persons identified in this Item 2 are citizens of the United States of America. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. As more fully described in Item 6 below, IP Delaware purchased 2,799,466 shares of Common Stock and warrants to purchase 1,399,733 shares of Common Stock for an aggregate purchase price of $15,397,063 and IP Bermuda purchased 1,545,990 shares of Common Stock and warrants to purchase 772,995 shares of Common Stock for an aggregate purchase price of $8,502,945. Such purchases were consummated on July 3, 1998 (the "Closing Date"), but were dated effective July 1, 1998. Both IP Delaware and IP Bermuda used contributions from their respective partners to fund such purchases. ITEM 4. PURPOSE OF TRANSACTION. The Reporting Persons consummated the transaction described herein in order to acquire a significant interest in the Company and for investment purposes. The Reporting Persons intend to review continuously their position in the Company. Depending upon future evaluations of the business prospects of the Company and upon other developments, including, without limitation, general economic and business conditions and stock market conditions, each of the Reporting Persons may retain or from time to time dispose of all or a portion of its holdings, subject to any applicable legal and contractual restrictions on its ability to do so, including, without limitation, any restrictions set forth in the Stockholders Agreement described in Item 6 below, the Voting Agreement described in Item 6 below, the Amended and Restated Articles of Incorporation of the Company, and the Code of Regulations of the Company. In addition, the matters set forth in Item 3 above and Item 6 below are incorporated in this Item 4 by reference as if fully set forth herein. In connection with the consummation of the transactions contemplated by the Stock Purchase Agreement, (a) the following persons tendered their resignations from the board of directors of the Company (the "Board of Directors"): Thomas D. Schulte, David L. Rossio, Val Rajic, and John L. McKean, (b) Robert A. Spass, Bradley E. Cooper, and Mark H. Tabak were nominated by Insurance Partners as directors of the Company and were elected to the Board of Directors and Insurance Partners intends to nominate Andrew A. Boemi as a director of the Company, pursuant to the terms of the Voting Agreement described in Item 6 below, (c) the Company has amended and restated the Code of Regulations of the Company to eliminate the classification of the Board of Directors for purposes of director elections, (d) each of IP Delaware and IP Bermuda purchased warrants to acquire additional shares of Common Stock (as described in Item 3 above) and will likely exercise its warrants in the future, and (e) Peter W. Nauert was elected as Chief Executive Officer of the Company. In addition, the Voting Agreement (as described in Item 6 below) provides that the parties thereto and their transferees shall, as promptly as practicable after the Closing Date, vote in favor of an amendment to the Company's Articles of Incorporation, Code of Regulations, or Bylaws, as the case may be, to eliminate 13 CUSIP No. 155055 10 6 13D Page 13 of 21 Pages cumulative voting in the election of directors. Except as set forth in this Item 4, the Reporting Persons have no present plans or proposals that relate to or that would result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D of the Exchange Act. ITEM 5. INTEREST IN SECURITIES OF ISSUER. (a) IP DELAWARE IP Delaware may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 4,290,108 shares of Common Stock, which constitutes approximately 33.3% of the 12,894,905 shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. INSURANCE GENPAR In its capacity as the sole general partner of IP Delaware, Insurance GenPar may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 4,290,108 shares of Common Stock, which constitutes approximately 33.3% of the 12,894,905 shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. IMGPLP In its capacity as the sole general partner of Insurance GenPar, which is the sole general partner of IP Delaware, IMGPLP may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 4,290,108 shares of Common Stock, which constitutes approximately 33.3% of the 12,894,905 shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. IMGPI In its capacity as the sole general partner of IMGPLP, which is the sole general partner of Insurance GenPar, which is the sole general partner of IP Delaware, IMGPI may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 4,290,108 shares of Common Stock, which constitutes approximately 33.3% of the 12,894,905 shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. IP BERMUDA IP Bermuda may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 2,364,438 shares of Common Stock, which constitutes approximately 19.3% of the 12,268,167 shares of Common Stock deemed outstanding pursuant to Rule 13d(d)(1)(i) of the Exchange Act. INSURANCE GENPAR BERMUDA In its capacity as the sole general partner of IP Bermuda, Insurance GenPar Bermuda may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 2,364,438 shares of Common Stock, which constitutes approximately 19.3% of the 12,268,167 shares of Common Stock deemed outstanding pursuant to Rule 13d(d)(1)(i) of the Exchange Act. IBMGPLP In its capacity as the sole general partner of Insurance GenPar Bermuda, which is the sole general partner of IP Bermuda, IBMGPLP may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 2,364,438 shares of Common Stock, which constitutes approximately 19.3% of the 12,268,167 shares of Common Stock deemed outstanding pursuant to Rule 13d(d)(1)(i) of the Exchange Act. 14 CUSIP No. 155055 10 6 13D Page 14 of 21 Pages IBGPI In its capacity as the sole general partner of IBMGPLP, which is the sole general partner of Insurance GenPar Bermuda, which is the sole general partner of IP Bermuda, IBMGPI may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 2,364,438 shares of Common Stock, which constitutes approximately 19.3% of the 12,268,167 shares of Common Stock deemed outstanding pursuant to Rule 13d(d)(1)(i) of the Exchange Act. The Reporting Persons may be deemed to beneficially own as part of a group (as used in Section 13(d)(3) of the Exchange Act) 6,654,546 shares of Common Stock, which constitutes approximately 48.9% of the shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. Because each of IP Delaware and IP Bermuda is a party to the Voting Agreement (described in Item 6 below), it may, as of July 1, 1998, be deemed to beneficially own as part of a group (as used in Section 13(d)(3) of the Exchange Act), 12,351,000(1) shares of Common Stock, which constitute approximately 76.5% of the shares of Common Stock deemed outstanding pursuant to Rule 13d-3(a)(1)(i) of the Exchange Act. Each of IP Delaware and IP Bermuda disclaims beneficial ownership of all Common Stock owned by Strategic Acquisition Partners, LLC, ("SAP"), Turkey Vulture Fund XIII, Ltd. (the "Fund"), and the Assignees (as defined below). (b) Prior to the closing of the transactions contemplated by the Amended and Restated Stock Purchase Agreement described in Item 6 below, none of the Reporting Persons had any power to vote or direct the vote or to dispose or to direct the disposition of any shares of Common Stock. (c) Except as set forth herein or in the Exhibits filed herewith, none of the Reporting Persons has effected any transactions in shares of Common Stock during the past 60 days. (d) Each of the Reporting Persons affirms that no person other than such Reporting Person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock owned by such Reporting Person. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Pursuant to the Amended and Restated Stock Purchase Agreement dated as of March 30, 1998, by and among the Company, IP Delaware, IP Bermuda, and SAP, as amended by that First Amendment thereto dated June 30, 1998, as further amended by the Indemnification and Closing Agreement dated as of July 1, 1998, among the Company, IP Delaware, IP Bermuda, and each of the persons listed on Schedule 1 thereto (as so amended, the "Stock Purchase Agreement"), the Company agreed to issue and sell to IP Delaware and IP Bermuda, and IP Delaware and IP Bermuda agreed to purchase from the Company, an aggregate of 4,345,456 shares of Common Stock and warrants to purchase an aggregate of 2,172,728 shares of Common Stock. The description of the Stock Purchase Agreement that follows is not, and does not purport to be, complete and is qualified in its entirety by reference to the Stock Purchase Agreement. The Stock Purchase Agreement is incorporated herein by reference to the Stock Purchase Agreement filed by the Company with the Securities and Exchange Commission (the "Commission") as Appendix A of the Company's Proxy Statement, dated May 28, 1998, and filed with the Commission. Pursuant to various assignment agreements, Peter W. Nauert, Michael Cavataio, Mercantile Bank of Northern Illinois, trustee of the Conseco Stock Option Plan F/B/O Michael Cavataio, Karon Hill, Val Rajic, the Fund, Medical Mutual of Ohio, United Payors & United Providers, Inc., Howard R. Conant, Joseph Cusimano, LEG Partners SBIC, L.P., Marc C. Krantz, and Krantz Family Limited Partnership (collectively, the "Assignees"), severally acquired the right to purchase an aggregate of 2,954,544 shares of Common Stock and warrants to acquire 1,477,272 shares of Common Stock. The Stock Purchase Agreement contained certain conditions precedent to the obligations of IP Delaware and IP Bermuda to close the transactions contemplated thereby, including, among others, (i) the termination of the classification of the Board of Directors as provided by Section 10.12 of the Stock Purchase Agreement, (ii) the resignation of a number of directors of the Company sufficient to permit the election of directors designated for election to the Board of Directors pursuant to the Voting Agreement as provided by Section 10.13 of the Stock Purchase Agreement, (iii) the election of Peter W. Nauert as Chief Executive Officer of the Company as provided by Section 10.14 of the Stock Purchase Agreement, and (iv) the execution and delivery of each of the Registration Rights Agreement, the Voting Agreement, and the Stockholders Agreement as provided by Section 10.1 of the Stock Purchase Agreement. In connection with the Stock Purchase Agreement, the Company, IP Delaware, IP Bermuda, and each of the Assignees entered into the Registration Rights Agreement dated as of July 1, 1998 (the "Registration Rights Agreement"). The description of the Registration Rights Agreement that follows is not, and does not purport to be, complete and is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which is attached hereto as Exhibit 2. Pursuant to the Registration Rights Agreement, the parties thereto, who are the holders of at least $5,000,000 of the then current market value of the outstanding Common Stock, have the right, subject to certain limitations set forth in the Registration Rights Agreement, to request that the Company at any time register under the Securities Act of 1933, as amended (the "Securities Act"), at the Company's expense, all or any part of the shares of Common Stock owned by such parties (a "Demand Registration"). The Company has agreed to pay for all registration expenses for (i) two Demand Registrations initiated by IP Delaware, (ii) one Demand Registration initiated by the Fund, and (iii) one Demand Registration initiated by SAP. Each of the parties to the Registration Rights Agreement has certain piggyback registration rights in connection with registrations by the Company under the Securities Act. - -------------- (1) Includes 2,799,466 shares of Common Stock and warrants to acquire 1,399,733 shares of Common Stock (which are immediately exercisable) owned by IP Delaware. Includes 1,545,990 shares of Common Stock and warrants (which are immediately exercisable) to acquire 772,995 shares of Common Stock owned by IP Bermuda. Also, includes (i) 2,954,244 shares of Common Stock and warrants to acquire 1,477,272 shares of Common Stock owned severally by the Assignees, (ii) 1,000 shares of Common Stock and guarantee warrants (which are immediately exercisable) to acquire 660,000 shares of Common Stock owned by Peter W. Nauert, and (iii) 400,000 shares of Common Stock and guarantee warrants (which are immediately exercisable) to acquire 340,000 shares of Common Stock owned by the Fund. 15 CUSIP No. 155055 10 6 13D Page 15 of 21 Pages In connection with the Stock Purchase Agreement, the Company, IP Delaware, IP Bermuda, and each of the Assignees entered into the Voting Agreement dated as of July 1, 1998 (the "Voting Agreement"). The description of the Voting Agreement that follows is not, and does not purport to be, complete and is qualified in its entirety by reference to the Voting Agreement, a copy of which is attached hereto as Exhibit 1. Pursuant to the Voting Agreement, each of the parties thereto and their respective transferees who execute the Voting Agreement shall cause the Board of Directors to consist of nine directors, some or all, as applicable, of whom shall consist of the following individuals: (i)(a) four individuals designated by Insurance Partners, so long as IP Delaware, IP Bermuda, their respective affiliates, the respective officers, directors, and employees of the foregoing, and the respective limited partners of IP Delaware and IP Bermuda (collectively, the "IP Group") own Common Stock equal to at least 75% of the Common Stock owned by the IP Group on the Closing Date, (b) three individuals designated by Insurance Partners, so long as the IP Group owns Common Shares equal to at least 50%, but less than 75% of the Common Stock owned by the IP Group on the Closing Date, (c) two individuals designated by Insurance Partners, so long as the IP Group owns Common Stock equal to at least 25%, but less than 50%, of the Common Stock owned by the IP Group on the Closing Date, and (d) one individual designated by Insurance Partners, so long as the IP Group owns Common Stock equal to at least 10%, but less than 25%, of the Common Stock owned by the IP Group on the Closing Date; (ii)(a) two individuals designated by SAP, so long as SAP and its affiliates (the "SAP Group") own Common Stock equal to at least 50% of the Common Stock owned by the SAP Group on the Closing Date, and (b) one individual designated by SAP, so long as the SAP Group owns Common Stock equal to at least 10%, but less than 50% of the Common Stock owned by the SAP Group on the Closing Date; and (iii) one individual designated by the Fund, so long as the Fund and its affiliates (the "Osborne Group"), own Common Stock equal to at least 25% of the Common Stock owned by the Osborne Group on the Closing Date; (iv) John F. Novatney, Jr. until the earlier to occur of (A) December 31, 1999 or (B) the first date as of which the Company does not have a class of equity securities registered under the Exchange Act; (v) Fred Lick, Jr. until the earlier to occur of (A) December 31, 1999, (B) the first date as of which the Company does not have a class of equity securities registered under the Exchange Act or (C) expiration of the remaining term of his employment agreement with the Company, as amended; provided that so long as the Company has a class of equity securities registered under the Exchange Act, at least two directors remaining on the Board of Directors shall be "independent" as such term is defined under applicable Nasdaq National Market System, Inc. standards (such directors are referred to herein as "Independent Directors"); provided that none of Insurance Partners, SAP, or the Fund shall be required to designate an individual that constitutes an Independent Director so long as two individuals who constitute Independent Directors are nominated to serve as directors and Insurance Partners, SAP, and the Fund vote for their election; and provided further that the Company shall not voluntarily be delisted from the Nasdaq National Market System, Inc. except in connection with a going private transaction or if the Company becomes listed on another national securities exchange. Under Nasdaq National Market System, Inc. standards, the term "independent director" means a person other than an officer or employee of the Company or its subsidiaries or any other individual having a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Under the Voting Agreement, each of the parties thereto and their respective transferees who execute the Voting Agreement, granted each of IP Delaware, SAP and the Fund a proxy to vote the shares of Common Stock held by such person, in the event such person fails to vote its Common Stock in accordance with the foregoing provisions of this paragraph. In addition, the Voting Agreement provides that the parties thereto and their transferees who execute the Voting Agreement shall, as promptly as practicable after the closing date of the Stock Purchase Agreement, vote in favor of an amendment to the Company's Articles of Incorporation, Code of Regulations, or Bylaws, as the case may be, to eliminate cumulative voting in the election of directors. The Voting Agreement further provides that no party thereto or their transferees who execute the Voting Agreement may effect, cause to be effected, or permit any voluntary or involuntary sale, assignment, or transfer ("Transfer") of any shares of Common Stock or any interest therein, except for Transfers pursuant to an effective registration statement or pursuant to Rule 144 under the Securities Act of 1933, as amended, unless the transferee agrees to be bound by the provisions of the Voting Agreement and the Stockholders Agreement and such Transfer is, where applicable, made in compliance with the terms of the Stockholders Agreement. Any Transfer not complying with the provisions of the Voting Agreement shall be void ab initio, shall not be effective for any purpose, and any purported transferee of such a Transfer shall not acquire any right or interest in such Common Stock. 16 CUSIP No. 155055 10 6 13D Page 16 of 21 Pages In connection with the Stock Purchase Agreement, the Company, IP Delaware, IP Bermuda, and each of the Assignees entered into the Stockholders Agreement dated as of July 1, 1998 (the "Stockholders Agreement"). The description of the Stockholders Agreement that follows is not, and does not purport to be, complete and is qualified in its entirety by reference to the Stockholders Agreement, a copy of which is attached hereto as Exhibit 3. Pursuant to the Stockholders Agreement, each of Insurance Partners, SAP, the Fund, and their respective transferees who become parties thereto ("Shareholder Parties") are provided certain rights in respect of its outstanding Common Stock in the event of certain sales of Common Stock by other Shareholder Parties. Specifically, if Insurance Partners disposes of Common Stock representing more than 20% of the outstanding Common Stock, the IP Group has the right to require each non-selling Shareholder Party (each, a "Co-Seller") to transfer a portion of its Common Stock which represents the same percentage of the fully diluted Common Stock held by such Co-Seller as the Common Stock being disposed of by the IP Group represent of the fully diluted Common Stock held by the IP Group. All Common Stock transferred pursuant to the foregoing provision of the Stockholders Agreement will be sold at the same price and time and otherwise be treated identically with the Common Stock being sold by the IP Group. The Stockholders Agreement further provides that if any Shareholder Party desires to effect a transfer of Common Stock (other than a transfer in an underwritten public offering pursuant to an effective registration statement under the Securities Act) representing more than 20% of the outstanding Common Stock, then the selling Shareholder Party must make an offer to each Co-Seller to include in the proposed sale a portion of such Co-Seller's Common Stock which represents the same percentage of such Co-Seller's fully diluted Common Stock as the Common Stock being sold by the selling Shareholder Party represent of its fully diluted Common Stock. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Incorporated by reference to Amended and Restated Stock Purchase Agreement dated as of March 30, 1998, Appendix A of the Company's among Central Reserve Life Corporation, Strategic Acquisition Partners, Proxy Statement dated May 28, LLC, Insurance Partners, L.P., and Insurance Partners Offshore (Bermuda), 1998. L.P. Incorporated by reference to Form of Common Stock Purchase Warrant. Exhibit A of Appendix A of the Company's Proxy Statement dated May 28, 1998. 1 Voting Agreement dated as of July 1, 1998, by and among Central Reserve Life Corporation, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., and each of the security holders listed on the signature pages thereto. 2 Registration Rights Agreement dated as of July 1, 1998, by and among Central Reserve Life Corporation, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., and each of the persons and entities set forth on the signature pages thereto. 3 Stockholders Agreement dated as of July 1, 1998, by and among Central Reserve Life Corporation, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., and each of the security holders listed on the signature pages thereto.
17 CUSIP No. 155055 10 6 13D Page 17 of 21 Pages 4 Indemnification and Closing Agreement dated as of July 1, 1998, by and among Central Reserve Life Corporation, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., and each of the persons identified on Schedule 1 thereto. 5 Agreement of Understanding dated July 3, 1998, among Central Reserve Life Corporation, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., and Strategic Acquisition Partners, LLC.
18 CUSIP No. 155055 10 6 13D Page 18 of 21 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete, and correct. Dated: July ___, 1998. INSURANCE PARTNERS, L.P., a Delaware limited partnership By: Insurance GenPar, L.P., a Delaware limited partnership, its General Partner By: Insurance GenPar MGP, L.P., a Delaware limited partnership, its General Partner By: Insurance GenPar MGP, Inc., a Delaware corporation, its General Partner By: /s/ ROBERT A. SPASS -------------------------------------------------------------------- Name: Robert A. Spass Title: President INSURANCE GENPAR, L.P., a Delaware limited partnership By: Insurance GenPar MGP, L.P., a Delaware limited partnership, its General Partner By: Insurance GenPar MGP, Inc., a Delaware corporation, its General Partner By: /s/ ROBERT A. SPASS -------------------------------------------------------------------- Name: Robert A. Spass Title: President
19 CUSIP No. 155055 10 6 13D Page 19 of 21 Pages INSURANCE GENPAR MGP, L.P., a Delaware limited partnership By: Insurance GenPar MGP, Inc., a Delaware corporation, its General Partner By: /s/ ROBERT A. SPASS -------------------------------------------------------------------- Name: Robert A. Spass Title: President INSURANCE GENPAR MGP, INC., a Delaware corporation By: /s/ ROBERT A. SPASS -------------------------------------------------------------------- Name: Robert A. Spass Title: President INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. By: Insurance GenPar (Bermuda), L.P., a Bermuda limited partnership, its General Partner By: Insurance GenPar (Bermuda) MGP, L.P., a Bermuda limited partnership, its General Partner By: Insurance GenPar (Bermuda) MGP, Ltd., a Bermuda corporation, its General Partner By: /s/ ROBERT A. SPASS -------------------------------------------------------------------- Name: Robert A. Spass Title: President
20 CUSIP No. 155055 10 6 13D Page 20 of 21 Pages INSURANCE GENPAR (BERMUDA), L.P., a Bermuda limited partnership By: Insurance GenPar (Bermuda) MGP, L.P., a Bermuda limited partnership, its General Partner By: Insurance GenPar (Bermuda) MGP, Ltd., a Bermuda corporation, its General Partner By: /s/ ROBERT A. SPASS -------------------------------------------------------------------- Name: Robert A. Spass Title: President INSURANCE GENPAR (BERMUDA) MGP, L.P., a Bermuda limited partnership By: Insurance GenPar (Bermuda) MGP, Ltd., a Bermuda corporation, its General Partner By: /s/ ROBERT A. SPASS -------------------------------------------------------------------- Name: Robert A. Spass Title: President INSURANCE GENPAR (BERMUDA) MGP, LTD., a Bermuda corporation By: /s/ ROBERT A. SPASS -------------------------------------------------------------------- Name: Robert A. Spass Title: President
21 CUSIP No. 155055 10 6 13D Page 21 of 21 Pages EXHIBIT INDEX
Page on which Exhibit appears No. Document Amended and Restated Stock Purchase Agreement dated as of March Incorporated by reference to 30, 1998, among Central Reserve Life Corporation, Strategic Appendix A of the Company's Acquisition Partners, LLC, Insurance Partners, L.P., and Proxy Statement dated May 28, Insurance Partners Offshore (Bermuda), L.P. 1998. Form of Common Stock Purchase Warrant. Incorporated by reference to Exhibit A of Appendix A of the Company's Proxy Statement dated May 28, 1998. 1 Voting Agreement dated as of July 1, 1998, by and among Central Reserve Life Corporation, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., and each of the security holders listed on the signature pages thereto. 2 Registration Rights Agreement dated as of July 1, 1998, by and among Central Reserve Life Corporation, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., and each of the persons and entities set forth on the signature pages thereto. 3 Stockholders Agreement dated as of July 1, 1998, by and among Central Reserve Life Corporation, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., and each of the security holders listed on the signature pages thereto. 4 Indemnification and Closing Agreement dated as of July 1, 1998, by and among Central Reserve Life Corporation, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., and each of the persons identified on Schedule 1 thereto. 5 Agreement of Understanding dated July 3, 1998, among Central Reserve Life Corporation, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., and Strategic Acquisition Partners, LLC.
EX-99.1 2 VOTING AGREEMENT DATED JULY 1, 1998 1 EXHIBIT 1 VOTING AGREEMENT This VOTING AGREEMENT (the "AGREEMENT") is entered into as of July 1, 1998, 1998, by and among Central Reserve Life Corporation, an Ohio corporation (including its successors, the "COMPANY") and the security holders listed on the signature pages of this Agreement (or who may hereafter become a party hereto pursuant to the terms hereof). WHEREAS, pursuant to the Amended and Restated Stock Purchase Agreement dated as of March 30, 1998, by and among the Company and certain purchasers identified therein (the "STOCK PURCHASE AGREEMENT"), the Company shall issue 7,300,000 shares of common stock, without par value, of the Company and warrants to purchase up to 3,650,000 shares of common stock of the Company (the "WARRANT SHARES"); WHEREAS, upon closing of the transactions contemplated by the Stock Purchase Agreement (the "CLOSING DATE"), the shares purchased thereunder shall constitute a majority of the common stock of the Company; and WHEREAS, the parties desire to regulate certain aspects of their relationship as holders of common stock of the Company. NOW THEREFORE, in consideration of the agreements and covenants herein contained and for other good and valuable consideration, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. As used in this Agreement, the following terms shall have the following meanings: "AFFILIATE" shall mean, with respect to any Person, any Person who, directly or indirectly, controls, is controlled by, or is under common control with that Person. For purposes of this definition, "control," and "controlled by" and when used with respect to any Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract, or otherwise. "COMMON STOCK" shall mean shares of the Common Stock, without par value per share, of the Company, and any capital stock into which such Common Stock thereafter may be changed. 2 "COMMON STOCK EQUIVALENTS" shall mean, without duplication with any other Common Stock or Common Stock Equivalents, any rights, warrants, options, convertible securities or indebtedness, exchangeable securities or indebtedness, or other rights, exercisable for or convertible or exchangeable into, directly or indirectly, Common Stock and securities convertible or exchangeable into Common Stock, whether at the time of issuance or upon the passage of time or the occurrence of some future event. "DESIGNEE" shall mean an individual designated for election to the Board of Directors by IP Delaware, SAP, or Osborne pursuant to Section 2.1 of this Agreement. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder. "HOLDER" shall mean (i) a securityholder listed on the signature page hereof and (ii) any direct or indirect transferee of any such securityholder who shall become a party to this Agreement by executing a joinder agreement in the form of Exhibit A hereto. "INDEPENDENT DIRECTOR" shall mean a director meeting the standards of an "independent director" as defined in Rule 4200(a) of the rules of the NASD as of the Closing Date. "IP" shall mean, collectively, IP Bermuda and IP Delaware. "IP BERMUDA" shall mean Insurance Partners Offshore (Bermuda), L.P., a Bermuda limited partnership. "IP DELAWARE" shall mean Insurance Partners, L.P., a Delaware limited partnership. "IP GROUP" shall mean IP Delaware, IP Bermuda, their respective Affiliates, the respective officers, directors, and employees (and members of their respective families and trusts for the primary benefit of such family members) of the foregoing, and the respective limited partners of IP Delaware and IP Bermuda. "IP GROUP CLOSING DATE SHARES" shall mean the number of shares of Common Stock owned by the IP Group as of the date of this Agreement as set forth on Exhibit B hereto. "LICK EMPLOYMENT AGREEMENT" shall mean that certain Employment Agreement, dated as of December 15, 1997, between the Company and Fred Lick, Jr. -2- 3 "OSBORNE" shall mean Turkey Vulture Fund, III, Ltd. an Ohio limited liability company. "OSBORNE GROUP" shall mean Osborne, its Affiliates, and their respective officers, directors, and employees (and members of their respective families and trusts for the primary benefit of such family members). "OSBORNE GROUP CLOSING DATE SHARES" shall mean the number of shares of Common Stock owned by the Osborne Group as of the date of this Agreement as set forth on Exhibit B hereto. "PERSON" or "PERSON" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, or government or other agency or political subdivision thereof. "REQUIRED HOLDERS" shall mean Holders who then own beneficially more than 66-2/3% of the aggregate number of shares of Common Stock subject to this Agreement. "SAP" shall mean Strategic Acquisition Partners, LLC, a Nevada limited liability company. "SAP GROUP" shall mean SAP, its Affiliates, and their respective officers, directors, and employees, Peter W. Nauert, Michael A. Cavataio, Karon Hill and Val Rajic (and members of their respective families and trusts for the primary benefit of such family members). "SAP GROUP CLOSING DATE SHARES" shall mean the number of shares of Common Stock owned by the SAP Group as of the date of this Agreement as set forth on Exhibit B hereto. "STOCKHOLDERS AGREEMENT" shall mean that certain Stockholders Agreement, dated as of July 1, 1998, among the Company and the various stockholders party thereto from time to time. -3- 4 ARTICLE II ELECTION OF DIRECTORS SECTION 2.1 Board of Directors. (a) The Holders shall cause the Board of Directors of the Company to consist of nine directors, some or all, as applicable, of whom shall consist of the following individuals: (i) IP Designees. Four individuals designated by IP, so long as the IP Group shall own a number of shares of Common Stock equal to at least 75% of the IP Group Closing Date Shares; three individuals designated by IP, so long as the IP Group shall own a number of shares of Common Stock equal to at least 50%, but less than 75%, of the IP Group Closing Date Shares; two individuals designated by IP, so long as the IP Group shall own a number of shares of Common Stock equal to at least 25%, but less than 50%, of the IP Group Closing Date Shares; and one individual designated by IP, so long as the IP Group shall own a number of shares of Common Stock equal to at least 10%, but less than 25%, of the IP Group Closing Date Shares; (ii) SAP Designees. Two individuals designated by SAP, so long as the SAP Group shall own a number of shares of Common Stock equal to at least 50% of the SAP Closing Date Shares; and one individual designated by SAP, so long as the SAP Group shall own a number of shares of Common Stock equal to at least 10%, but less than 50%, of the SAP Group Closing Date Shares; (iii) Osborne Designee. One individual designated by Osborne, so long as the Osborne Group shall own a number of shares of Common Stock equal to at least 25% of the Osborne Group Closing Date Shares; (iv) Novatney. John Novatney, until the earlier to occur of (A) December 31, 1999, or (B) the first date as of which the Company does not have a class of equity securities registered under either Section 12(b) or 12(g) of the Exchange Act; and (v) Lick. Fred Lick, Jr. until the earlier to occur of (A) December 31, 1999, (B) termination of his employment under the Lick Employment Agreement, or (C) the first date as of which the Company does not have a class of equity securities registered under either Section 12(b) or 12(g) of the Exchange Act; provided, however, that until the first date as of which the Company does not have a class of equity securities either registered under Section 12(b) or 12(g) of the Exchange Act, at least two of the individuals elected to the Board of Directors shall constitute Independent Directors; and provided further, that (i) none of IP, SAP or -4- 5 Osborne shall be required to designate an individual that constitutes an Independent Director so long as two individuals who constitute Independent Directors are nominated to serve as directors and SAP, IP and Osborne vote for their election; provided, that if the Company has cumulative voting with respect to the election of its directors, the SAP Group, IP Group and Osborne Group shall be permitted to vote in favor of the SAP Designees, IP Designees and Osborne Designee as provided in this Section 2.1(a) to the extent necessary to ensure the election of such Designees prior to casting any votes in favor of such Independent Directors; (ii) in the event one or two of the individuals to be designated pursuant to the foregoing provisions must constitute an Independent Director in order to meet the requirements of the immediately preceding proviso, then, first, IP shall designate as one of its designees an individual that constitutes an Independent Director, and, second, SAP shall designate as one of its designees an individual that constitutes an Independent Director. (b) For purposes of the foregoing provisions and Section 2.2, in determining whether any person or group owns a specified number of shares of Common Stock for purposes of comparison to the number of shares owned by a person or group on the Closing Date, appropriate adjustment shall be made in each case to give effect to any stock splits, dividends or combinations. (c) If, prior to his election to the Board of Directors of the Company pursuant to Section 2.1, any designee shall be unable or unwilling to serve as a director of the Company, the Holder or Holders who designated such Designee shall be entitled to nominate a replacement who shall then be a Designee for purposes of this Section 2.1. If, following an election to the Board of Directors of the Company pursuant to Section 2.1, any Designee shall resign or be removed or be unable to serve for any reason prior to the expiration of his term as a director of the Company, the Holder or Holders who designated such Designee shall, within thirty (30) days of such event, notify the Board of Directors of the Company in writing of a replacement Designee, and either (i) the Holders shall vote their shares of Common Stock, at any regular or special meeting called for the purpose of filling positions on the Board of Directors of the Company or in any written consent executed in lieu of such a meeting of stockholders, and shall take all such other actions necessary to ensure the election to the Board of Directors of the Company of such replacement Designee to fill the unexpired term of the Designee who such new Designee is replacing or (ii) the Holders shall cause the Board of Directors to elect such replacement Designee to fill the unexpired term of the Designee who such new Designee is replacing subject to any fiduciary duties of the Board of Directors. If any Holder requests that any Designee designated by such Holder be removed as a Director (with or without cause) by written notice thereof to the Company, then the Company shall take all actions necessary to effect, and each of the Holders shall vote all of its capital stock in favor of, such removal upon such request. -5- 6 (d) Each Holder shall vote its shares of Common Stock at any regular or special meeting of stockholders of the Company or in any written consent executed in lieu of such a meeting of stockholders and shall take all other actions necessary to give effect to the agreements contained in this Agreement (including, without limitation, the election of Designees as directors as described herein) and to ensure that the certificate of incorporation and bylaws as in effect immediately following the date hereof do not, at any time thereafter, conflict in any respect with the provisions of this Agreement. In order to effectuate the provisions of this Section 2.1, each Holder hereby agrees that when any action or vote is required to be taken by such Holder pursuant to this Agreement, such Holder shall use its best efforts to call, or cause the appropriate officers and directors of the Company to call, a special or annual meeting of stockholders of the Company, as the case may be, or execute or cause to be executed a consent in writing in lieu of any such meetings pursuant to applicable law. SECTION 2.2 Continued Listing. Until the three year anniversary of the Closing Date, each Holder shall vote its shares of Common Stock in such manner that the Company shall not be voluntarily delisted from the Nasdaq National Market, except (y) in connection with (1) a transaction that would constitute a "Rule 13e-3 transaction" (as that term is defined under Rule 13e-3 under the Exchange Act as in effect on the date hereof) with respect to the Common Stock or (2) any other transaction that, if it were effected by the Company or an affiliate thereof, would constitute a "Rule 13e-3 transaction" (as so defined) with respect to the Common Stock, or (z) if the Company becomes listed on a national securities exchange. SECTION 2.3 Proxy. Each Holder hereby grants to each of IP Delaware, SAP and Osborne, with full powers of substitution, an irrevocable proxy coupled with an interest as may be necessary to permit each of IP Delaware, SAP and Osborne, to vote the shares of the Holder granting such proxy in accordance with the requirements of Section 2.1 (by written consent or otherwise) in event the Holder fails to vote its shares of Common Stock as required under Section 2.1 within ten (10) days after notice from the party holding such proxy requesting such a vote. SECTION 2.4 Cumulative Voting. As promptly as practicable following the Closing Date, the Holders shall vote in favor of an amendment to the Company's Articles of Incorporation, Code of Regulations or Bylaws, as the case may be, to eliminate cumulative voting in the election of directors, and shall take all additional action as may be necessary under the Ohio General Corporation Law to effect any such amendment, including causing the Company to file such amendment with the Ohio Secretary of State. SECTION 2.5 Proxy Statement. In connection with any annual meeting of the stockholders or special meeting of the stockholders of the Company called for the election of directors, the Company shall prepare and file, if required, with the Securities and Exchange Commission (the "COMMISSION") a proxy statement relating to such meeting -6- 7 (together with any amendments thereof or supplements thereto, the "PROXY STATEMENT") which shall include the recommendation of the Board in favor of electing the directors specified in Section 2.1. Except in the event of termination of this Agreement, no modification or withdrawal of such recommendation shall release the Company of its obligation to submit the election of directors specified in Section 2.1 to its stockholders for their vote in accordance with applicable law. The Company shall use reasonable efforts to assure the election of the directors specified in Section 2.1. ARTICLE III RESTRICTIONS ON TRANSFER SECTION 3.1 Restrictions Upon Transfer. No Holder may effect, cause to be effected or permit any voluntary or involuntary sale, assignment or transfer of any shares of Common Stock or Common Stock Equivalents or any interest therein (a "TRANSFER"), except for Transfers pursuant to an effective registration statement or pursuant to Rule 144 under the Securities Act, unless the transferee agrees to be bound by the provisions of this Agreement and the Stockholders Agreement and such Transfer is, where applicable, made in compliance with the terms of the Stockholders Agreement; provided, that the Warrants and the Warrant Shares shall not be subject to this Agreement upon the Transfer to a beneficial owner other than IP, SAP, or Osborne and their respective affiliates; provided further, that nothing contained herein shall restrict the sale, assignment or transfer of any warrants issued by the Company pursuant to the Credit Agreement dated December 16, 1997 by and between the Company and SAP. Any Transfer not complying with the provisions of this Agreement shall be void ab initio, shall not be effective for any purpose and any purported transferee of such a Transfer shall not acquire any right or interest in such Common Stock or the Company. SECTION 3.2 Restrictive Legends. (a) For the term of this Agreement, each certificate representing the shares of Common Stock or Common Stock Equivalents subject hereto, and each instrument or certificate issued upon exchange or transfer thereof, shall be stamped or otherwise imprinted with the following legend: "THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO TRANSFER RESTRICTIONS, VOTING LIMITATIONS, AND OTHER TERMS AND CONDITIONS CONTAINED IN A VOTING AGREEMENT DATED JULY 1, 1998 BY AND AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY." -7- 8 (b) In addition, each certificate representing shares of Common Stock or Common Stock Equivalents subject hereto and each instrument or certificate issued upon exchange or Transfer thereof shall be stamped or otherwise imprinted with any and all legends required by applicable state and federal securities laws. ARTICLE IV MISCELLANEOUS SECTION 4.1 Term. The term of this Agreement shall begin on the Closing Date and shall remain in effect until the five (5) year anniversary of the Closing Date. SECTION 4.2 Amendment. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company and the Required Holders; provided, that, no such amendment or waiver: (i) that is adverse to any Holder that owns more than 5% of the outstanding Common Stock shall be effective as to that Holder prior to the three (3) year anniversary of the Closing Date without the consent of such Holder or (ii) shall amend Section 2.1(a)(iv), Section 2.1(a)(v), the first proviso of Section 2.1(a) or Section 2.2 unless approved by a majority of the Independent Directors. SECTION 4.3 Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto including any and all subsequent Holders from time to time. SECTION 4.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, as applicable to contracts executed and to be performed entirely in such state. SECTION 4.5 Entire Agreement. Except as provided below, this Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and may not be modified or amended except in writing. SECTION 4.6 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION 4.7 Enforcement. (a) The Holders each acknowledge and agree that irreparable damage will occur if any of the provisions of this Agreement are not complied with in accordance with -8- 9 their specific terms. Accordingly, the Company will be entitled to an injunction to prevent breached of this Agreement and to enforce specifically its provisions in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which the Company may be entitled at law or in equity. (b) No failure or delay on the part of any party in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. SECTION 4.8 Severability. In case any provision of this Agreement shall be held invalid, illegal or unenforceable in any respect for any reason, the validity, legality, and enforceability of any such provision in every other respect and the remaining provisions shall not in any way be affected or impaired thereby. SECTION 4.9 Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier, or registered or certified mail, postage prepaid return receipt requested, addressed as follows (or at such other address as may be substituted by notice given as herein provided): If to the Company: Central Reserve Life Corporation 17800 Royalton Road Strongsville, Ohio 44136 Facsimile No.: (440) 572-4501 Attention: Fred Lick, Jr. If to any Holder, at its address listed on the signature pages hereof or in any joinder agreement. Any notice or communication hereunder shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back, if telexed; when receipt is acknowledged, if telecopied; and five (5) calendar days after mailing if sent by registered or certified mail (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. * * * -9- 10 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed on its behalf by its duly authorized officers, all as of the day and year first above written. CENTRAL RESERVE LIFE CORPORATION By: /s/ FRANK W. GRIMONE -------------------------------------- Name: Frank W. Grimone Title: CFO 11 SIGNATURE PAGE TO VOTING AGREEMENT INSURANCE PARTNERS, L.P. By: Insurance GenPar, L.P., its general partner By: Insurance GenPar MGP, L.P., its general partner By: Insurance GenPar MGP, Inc., its general partner By: /s/ ROBERT SPASS ---------------------------------- Name: Robert Spass -------------------------------- Title: President ------------------------------- Address: One Chase Manhattan Plaza 44th Floor New York, New York 10005 Attention: Bradley E. Cooper Copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Thomas A. Roberts 12 SIGNATURE PAGE TO VOTING AGREEMENT INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. By: Insurance GenPar (Bermuda), L.P., its general partner By: Insurance GenPar MGP (Bermuda), L.P., its general partner By: Insurance GenPar MGP (Bermuda), Inc., its general partner By: /s/ ROBERT SPASS ---------------------------------- Name: Robert Spass -------------------------------- Title: President ------------------------------- Address: One Chase Manhattan Plaza 44th Floor New York, New York 10005 Attention: Bradley & Cooper Copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Thomas A. Roberts 13 SIGNATURE PAGE TO VOTING AGREEMENT STRATEGIC ACQUISITION PARTNERS, LLC By: /s/ VAL RAJIC -------------------------------------- Name: Val Rajic ------------------------------------ Title: President ----------------------------------- Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 Copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606 Attention: Stanley H. Meadows, P.C. 14 SIGNATURE PAGE TO VOTING AGREEMENT /s/ PETER W. NAUERT ----------------------------------------- Peter W. Nauert Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 Copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606 Attention: Stanley H. Meadows, P.C. 15 SIGNATURE PAGE TO VOTING AGREEMENT /s/ MICHAEL A. CAVATAIO ----------------------------------------- Michael A. Cavataio Address: 3125 Ramsgate Road Rockford, Illinois 61114 16 SIGNATURE PAGE TO VOTING AGREEMENT MERCANTILE BANK OF NORTHERN ILLINOIS, TRUSTEE OF THE CONSECO STOCK OPTION DIRECTOR PLAN FBO MICHAEL CAVATAIO #08590033 By: /s/ KATHY A. MOFFATT -------------------------------------- Name: Kathy A. Moffatt ------------------------------------ Title: Trust Officer ----------------------------------- Address: P.O. Box 30 Freeport, Illinois 61032 Copy to: Michael A. Cavataio 3125 Ramsgate Road Rockford, Illinois 61114 17 SIGNATURE PAGE TO VOTING AGREEMENT MERCANTILE BANK OF NORTHERN ILLINOIS, TRUSTEE OF THE CONSECO STOCK OPTION DIRECTOR PLAN FBO MICHAEL CAVATAIO #08590034 By: /s/ KATHY A. MOFFATT -------------------------------------- Name: Kathy A. Moffatt ------------------------------------ Title: Trust Officer ----------------------------------- Address: P.O. Box 30 Freeport, Illinois 61032 Copy to: Michael A. Cavataio 3125 Ramsgate Road Rockford, Illinois 61114 18 SIGNATURE PAGE TO VOTING AGREEMENT /s/ KARON HILL ----------------------------------------- Karon Hill Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 19 SIGNATURE PAGE TO VOTING AGREEMENT /s/ VAL RAJIC ----------------------------------------- Val Rajic Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 20 SIGNATURE PAGE TO VOTING AGREEMENT TURKEY VULTURE FUND XIII, LTD. By: /s/ RICHARD M. OSBORNE -------------------------------------- Name: Richard M. Osborne ------------------------------------ Title: Manager ----------------------------------- Address: 7001 Center Street Mentor, Ohio 44060 Attention: Richard M. Osborne Copy to: Kohrman Jackson & Krantz, P.L.L. 1375 East Ninth Street One Cleveland Center, 20th Floor Cleveland, Ohio 44114 Attention: Marc C. Krantz 21 SIGNATURE PAGE TO VOTING AGREEMENT /s/ MARC C. KRANTZ ----------------------------------------- Marc C. Krantz Address: Kohrman Jackson & Krantz, P.L.L. 1375 East Ninth Street One Cleveland Center, 20th Floor Cleveland, Ohio 44114 22 SIGNATURE PAGE TO VOTING AGREEMENT MEDICAL MUTUAL OF OHIO By: /s/ ROBERT N. TROMBLY ------------------------------------- Name: Robert N. Trombly ----------------------------------- Title: Corporate Secretary ---------------------------------- Medical Mutual of Ohio Address: 2060 East Ninth Street Cleveland, Ohio 44115 Attention: General Counsel 23 SIGNATURE PAGE TO VOTING AGREEMENT UNITED PAYORS AND UNITED PROVIDERS, INC. By: /s/ S. JOSEPH BRUNO ------------------------------------- Name: S. Joseph Bruno ----------------------------------- Title: V.P. and CFO ---------------------------------- Address: 2275 Research Blvd. 6th Floor Rockville, Maryland 20850 Attention: Joe Mott 24 SIGNATURE PAGE TO VOTING AGREEMENT /s/ HOWARD R. CONANT ----------------------------------------- Howard R. Conant Address: c/o Lunn Partners 209 South LaSalle Street Chicago, Illinois 60604 Attention: John Cochrane 25 SIGNATURE PAGE TO VOTING AGREEMENT JOSEPH CUSIMANO IRA By: /s/ JOSEPH CUSIMANO, IRA ------------------------------------- Name: Joseph Cusimano, IRA ----------------------------------- Title: ---------------------------------- Address: c/o Lunn Partners 209 South LaSalle Street Chicago, Illinois 60604 26 SIGNATURE PAGE TO VOTING AGREEMENT LEG PARTNERS SBIC, L.P. By: /s/ LAWRENCE GOLUB ---------------------------------------- Name: President of Golub G.P. II Corporation -------------------------------------- Title: General Partner ------------------------------------- Address: 230 Park Avenue 19th Floor New York, New York 10169 Attention: Lawrence Golub 27 SIGNATURE PAGE TO VOTING AGREEMENT KRANTZ FAMILY LIMITED PARTNERSHIP By: /s/ BYRON S. KRANTZ -------------------------------------- Byron S. Krantz, its General Partner Address: Kohrman Jackson & Krantz, P.L.L. 1375 East Ninth Street One Cleveland Center, 20th Floor Cleveland, Ohio 44114 EX-99.2 3 REGISTRATION RIGHTS AGREEMENT DATED JULY 1, 1998 1 EXHIBIT 2 CENTRAL RESERVE LIFE CORPORATION REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement"), dated as of July 1, 1998, is between CENTRAL RESERVE LIFE CORPORATION, an Ohio corporation (the "Corporation"), and the persons and entities set forth on the signature pages attached hereto (the "Investors"). R E C I T A L S A. The Investors have agreed to purchase common shares, without par value, of the Corporation (the "Common Shares") pursuant to that certain Amended and Restated Stock Purchase Agreement of even date herewith provided that the parties hereto enter into this Agreement. B. The Corporation deems it desirable to enter into this Agreement in order to induce the Investors to purchase the Common Shares pursuant to the Stock Purchase Agreement. AGREEMENTS In consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Definitions. As used in this Agreement. "Commission" means the Securities and Exchange Commission. "Common Shares" means the Common Shares, without par value, of the Corporation. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Person" means a natural person, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or other entity, or a governmental entity or any department, agency or political subdivision thereof. "Public Offering" means any offering by the Corporation of its equity securities to the public pursuant to an effective registration statement under the Securities Act or any comparable statement under any comparable federal statute then in effect. "Registrable Shares" means at any time (i) any Common Shares then outstanding which were issued pursuant to the Stock Purchase Agreement; (ii) any Common Shares then outstanding and held by any Investor (including the Common Shares issuable upon exercise the Warrants (as defined in the Stock Purchase Agreement)); (iii) any Common Shares then outstanding which were issued as, or were issued directly or indirectly upon the conversion or exercise of other securities issued as a dividend or other distribution with respect or in replacement of any shares referred to in 2 (i) or (ii); and (iv) any Common Shares then issuable directly or indirectly upon the conversion or exercise of other securities which were issued as a dividend or other distribution with respect to or in replacement of any shares referred to in (i) or (ii); provided, however, that Registrable Shares shall not include any shares which have been registered pursuant to the Securities Act or which have been sold to the public pursuant to Rule 144 of the Commission under the Securities Act. For purposes of this Agreement, a Person will be deemed to be a holder of Registrable Shares whenever such Person has the then-existing right to acquire such Registrable Shares, whether or not such acquisition actually has been effected. "Securities Act" means the Securities Act of 1933, as amended. "Stock Purchase Agreement" means the Amended and Restated Stock Purchase Agreement dated as of March 30, 1998, by and among the Company, Strategic Acquisition Partners, L.L.C., Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda). 2. Demand Registration. 2.1 Requests for Registration. Subject to the terms of this Agreement, the holders of at least $5,000,000 of the then market value of the outstanding Registrable Shares may, at any time, request registration under the Securities Act of all or part of their Registrable Shares on Form S-1 or any similar long-form registration ("Long- Form Registrations") or, if available, then at the option of the Company, on Form S-2 or S-3 or any similar short-form registration ("Short-Form Registrations"). Within ten (10) days after receipt of any request pursuant to this Section 2.1, the Corporation will give written notice of such request to all other holders of Registrable Shares, subject to Section 2.4, and will include in such registration all Registrable Shares with respect to which the Corporation has received written requests for inclusion within thirty (30) days after delivery of the Corporation's notice. All registrations requested pursuant to this Section 2 are referred to herein as "Demand Registrations." 2.2 Payment of Expenses for Demand Registrations. The Corporation will pay all Registration Expenses (as defined in Section 6 below) for two Demand Registrations initiated by Insurance Partners, L.P., one Demand Registration initiated by Turkey Vulture Fund XIII, Ltd. and one Demand Registration initiated by Strategic Acquisition Partners, L.L.C. (or its principals or affiliates) (including those under Section 2.3) (whether a Long-Form Registration or a Short-Form Registration). A registration will not count as one of the Corporation-paid Demand Registrations until it has become effective and the holders of Registrable Shares are able to register and sell at least 90% of the Registrable Shares requested to be included in such registration (or in the case of a shelf registration, it remains effective for not less than 180 days); provided, however, that in any event the Corporation will pay all Registration Expenses in connection with any registration initiated as a Demand Registration even though such registration shall not count as a Corporation-paid Demand Registration. In a Demand Registration other than the four Demand Registrations referred to in the first sentence of this Section (including those under Section 2.3), the Registration Expenses of such registration shall be borne by the holders of Registrable Shares to be registered thereunder pro rata based on the number of Registrable Shares and other securities requested or permitted to be included in such registration pursuant to the terms of this Agreement. -2- 3 2.3 Short-Form Registrations. Demand Registrations will be Short-Form Registrations whenever the Corporation is permitted to use any applicable short form. The Corporation will use its best efforts to make Short-Form Registrations available for the sale of Registrable Shares. If a Short-Form Registration is to be an underwritten public offering, and if the underwriters for marketing or other reasons request the inclusion in the registration statement of information which is not required under the Securities Act to be included in a registration statement on the applicable form for the Short-Form Registration, the Corporation will provide such information as may be reasonably requested for inclusion by the underwriters in the Short-Form Registration. 2.4 Priority. If a Demand Registration is an underwritten public offering and the managing underwriters advise the Corporation in writing that in their opinion the inclusion of the number of Registrable Shares and other securities requested to be included (by the Corporation or others) creates a substantial risk that the price per Common Share will be reduced, the Corporation will include in such registration, prior to the inclusion of any securities which are not Registrable Shares, the number of Registrable Shares requested to be included which in the opinion of such underwriters can be sold without creating such a risk, pro rata among the respective holders of Registrable Shares on the basis of the number of Registrable Shares owned by such holders, with further successive pro rata allocations among the holders of Registrable Shares if any such holder of Registrable Shares has requested the registration of less than all such Registrable Shares it is entitled to register. 2.5 Restrictions. The Corporation will not be obligated to effect any Demand Registration within 180 days after the effective date of a previous Demand Registration. The Corporation may postpone for up to ninety (90) days the filing or the effectiveness (but not the preparation) of a registration statement for a Demand Registration if the Board of Directors of the Corporation reasonably and in good faith determines that such filing would require a disclosure of a material fact that would have a material adverse effect on the Corporation or any plan by the Corporation to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other significant transaction. In order to postpone the filing of a registration statement pursuant to this Section 2.5, the Corporation shall promptly (but in any event within ten (10) days), upon determining to seek such postponement, deliver to each holder who has requested the registration of all or any part of its Registrable Shares, a certificate signed by an executive officer of the Corporation stating that the Corporation is postponing such filing pursuant to this Section 2.5 and a general statement of the reason for such postponement and an approximation of the anticipated delay. Within twenty (20) days after receiving such certificate, the holders of a majority of the Registrable Shares held who have requested the registration of all or any part of their respective Registrable Shares and for which registration was previously requested may withdraw such demand request by giving written notice to the Corporation; if withdrawn, the demand request shall be deemed not to have been made for all purposes of this Agreement. The Corporation may postpone the filing of a particular registration statement pursuant to this Section 2.5 only once. 2.6 Selection of Underwriters. The holders of at least a majority of the Registrable Shares included in any Demand Registration shall have the right to select the investment banker(s) -3- 4 and manager(s) to administer the offering, subject to the Corporation's approval which will not be unreasonably withheld or delayed, and any existing contract rights of Advest, Inc. 3. Piggyback Registration. 3.1 Right to Piggyback. Whenever the Corporation proposes to register any of its equity securities under the Securities Act (other than pursuant to a Demand Registration hereunder or on Form S-8 or S-4 or any successor form thereto) and the registration form to be used may be used for the registration of any Registrable Shares (a "Piggyback Registration"), the Corporation will give prompt written notice (which shall be given not less than thirty (30) days prior to the effective date of the registration statement) to all holders of the Registrable Shares of its intention to effect such a registration and will include in such registration all Registrable Shares (in accordance with the priorities set forth in Sections 3.2 and 3.3 below) with respect to which the Corporation has received written requests for inclusion within fifteen (15) days after the delivery of the Corporation's notice. 3.2 Priority on Primary Registrations. If a Piggyback Registration is an underwritten primary registration on behalf of the Corporation and the managing underwriters advise the Corporation in writing that in their opinion the number of securities requested to be included in the registration creates a substantial risk that the price per Common Share will be reduced, the Corporation will include in such registration first, the securities that the Corporation proposes to sell, second, the Registrable Shares requested to be included in such registration, pro rata among the holders of such Registrable Shares on the basis of the number of shares which are owned by such holders, and third, other securities requested to be included in such registration. 3.3 Priority on Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Corporation's securities and the managing underwriters advise the Corporation in writing that in their opinion the number of securities requested to be included in the registration creates a substantial risk that the price per Common Share will be reduced, the Corporation will include in such registration first, the securities requested to be included therein by the holders requesting such registration and the Registrable Shares requested to be included in such registration, pro rata among the holders of such securities on the basis of the number of Common Shares or Registrable Shares which are owned by such holders, and second, other securities requested to be included in such registration. 3.4 Other Registrations. If the Corporation has previously filed a registration statement with respect to Registrable Shares pursuant to Section 2 or pursuant to this Section 3, and if such previous registration has not been withdrawn or abandoned, the Corporation will not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-8 or any successor form), whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least 180 days has elapsed from the effective date of such previous registration. 3.5 Selection of Underwriters. In connection with any Piggyback Registration, the holders of at least a majority of the Registrable Shares requested to be registered shall have the right -4- 5 to select the managing underwriters (subject to the approval of the Corporation which shall not be unreasonably withheld or delayed) to administer any offering of the Corporation's securities in which the Corporation does not participate, and the Corporation will have such right in any offering in which it participates. 4. Holdback Agreements. 4.1 Holders' Agreements. Each holder of Registrable Shares agrees not to effect any public sale or distribution of equity securities of the Corporation, or any securities convertible into or exchangeable or exercisable for such securities or make any demand for registration under Sections 2 or 3 hereof, during the seven (7) days prior to, and during the ninety (90) days following, the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration in which Registrable Shares are included (except as part of such underwritten registration), unless the underwriters managing the registered public offering otherwise agree. Nothing herein shall prevent a holder of Registrable Shares that is a partnership from making a distribution of Registrable Shares to its partners, a holder of Registrable Shares that is a trust from making a distribution of Registrable Shares to its beneficiaries or a holder of Registrable Shares that is a corporation from making a distribution of Registrable Shares to its stockholders, provided that the transferees of such Registrable Shares agree to be bound by the provisions of this Agreement to the extent the transferor would be so bound. 4.2 Corporation's Agreements. The Corporation agrees (i) not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven (7) days prior to, and during the ninety (90) days following, the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form), unless the underwriters managing the registered public offering otherwise agree, (ii) to use all reasonable efforts to cause each holder of at least five percent (5%) (on a fully diluted basis) of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities to agree not to effect any public sale or distribution of any such securities during such period (except as part of such underwritten registration, if otherwise permitted), unless the underwriters managing the registered public offering otherwise agree, subject to the registration obligations of the Company under the Common Share Purchase Warrants and (iii) if requested by the underwriters managing the registered public offering, to use all reasonable efforts to cause each other holder of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, purchased from the Corporation at any time (other than in a registered public offering) to agree not to effect any public sale or distribution of any such securities during such period (except as part of such underwritten registration, if otherwise permitted), unless the underwriters managing the registered public offering otherwise agree, subject to the registration obligations of the Company under the Common Share Purchase Warrants. 5. Registration Procedures. Whenever the holders of Registrable Shares have requested that any Registrable Shares be registered pursuant to this Agreement, the Corporation will use its best efforts to effect the registration and sale of such Registrable Shares in accordance with the intended method of disposition thereof and, pursuant thereto, the Corporation will as expeditiously as possible: -5- 6 (a) prepare and file with the Commission a registration statement with respect to such Registrable Shares and use its best efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus, or any amendments or supplements thereto, the Corporation will furnish copies of all such documents proposed to be filed to the counsel or counsels for the sellers of the Registrable Shares covered by such registration statement); (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus(es) used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than nine months and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (c) furnish to each seller of Registrable Shares and the underwriters such number of copies of such registration statement, each amendment and supplement thereto, the prospectus(es) included in such registration statement (including each preliminary prospectus) and such other documents as such seller or underwriter may reasonably request in order to facilitate the disposition of the Registrable Shares; (d) use its best efforts to register or qualify such Registrable Shares under such other securities or blue sky laws of such jurisdictions as any seller or underwriter reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller or underwriter to consummate the disposition in such jurisdictions of the Registrable Shares (provided that the Corporation will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph or (ii) consent to general service of process in any such jurisdiction); (e) promptly notify each seller of such Registrable Shares, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Corporation will prepare a supplement or amendment to such prospectus or registration statement so that, as thereafter delivered to the purchasers of such Registrable Shares, such prospectus or registration statement will not contain any untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; (f) cause all such Registrable Shares to be (i) listed on each securities exchange on which similar securities issued by the Corporation are then listed, (ii) authorized to be quoted and/or listed (to the extent applicable) on the NASD Automated Quotation System or The Nasdaq National Market if the Registrable Shares so qualify, or (iii) if no similar securities issued by the Corporation are then listed on a securities exchange, a securities exchange selected by the holders of at least a majority of the Registrable Shares included in such registration; -6- 7 (g) provide a transfer agent and registrar for all such Registrable Shares not later than the effective date of such registration statement; (h) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of at least a majority of the Registrable Shares being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Shares (including, but not limited to, effecting a stock split or a combination of shares). (i) make available for inspection by any seller of Registrable Shares, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Corporation, and cause the Corporation's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (j) advise each seller of such Registrable Shares, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission or any state securities or other regulatory authority suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for such purpose and promptly use all best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued; (k) at least forty eight (48) hours prior to the filing of any registration statement or prospectus, or any amendment or supplement to such registration statement or prospectus, furnish a copy thereof to each seller of such Registrable Shares and refrain from filing any such registration statement, prospectus, amendment or supplement to which counsel selected by the holders of at least a majority of the Registrable Shares being registered shall have reasonably objected on the grounds that such document does not comply in all material respects with the requirements of the Securities Act or the rules and regulations thereunder, unless, in the case of an amendment or supplement, in the opinion of counsel for the Corporation the filing of such amendment or supplement is reasonably necessary to protect the Corporation from any liabilities under any applicable federal or state law and such filing will not violate applicable laws; (l) at the request of any seller of such Registrable Shares in connection with an underwritten offering, furnish on the date or dates provided for in the underwriting agreement: (i) an opinion of counsel, addressed to the underwriters and the sellers of Registrable Shares, covering such matters as such underwriters and sellers may reasonably request, including such matters as are customarily furnished in connection with an underwritten offering and (ii) a letter or letters from the independent certified public accountants of the Corporation addressed to the underwriters and the sellers of Registrable Shares, covering such matters as such underwriters and sellers may reasonably request, in which letter(s) such accountants shall state, without limiting the generality of the foregoing, that they are independent certified public accountants within the meaning of the Securities Act and that in their opinion the financial statements and other financial data of the Corporation included in the registration statement, the prospectus(es), -7- 8 or any amendment or supplement thereto, comply in all material respects with the applicable accounting requirements of the Securities Act; (m) make generally available to the Corporation's securityholders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than thirty (30) days after the end of the twelve (12) month period beginning with the first day of the Corporation's first fiscal quarter commencing after the effective date of a registration statement, which earnings statement shall cover such twelve (12) month period, and which requirement will be deemed to be satisfied if the Corporation timely files complete and accurate information on Forms 10-Q, 10-K, and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act; (n) If requested by the managing underwriter or any seller promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or any seller reasonably requests to be included therein, including, without limitation, with respect to the Registrable Shares being sold by such seller, the purchase price being paid therefor by the underwriters and with respect to any other terms of the underwritten offering of the Registrable Shares to be sold in such offering, and promptly make all required filings of such prospectus supplement or post-effective amendment; (o) cooperate with each seller and each underwriter participating in the disposition of such Registrable Shares and their respective counsel in connection with any filings required to be made with the NASD; (p) during the period when the prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act; and (q) notify each seller of Registrable Shares promptly of any request by the Commission for the amending or supplementing of such registration statement or prospectus or for additional information. 6. Registration Expenses. 6.1 Corporation's Expenses. Except as provided in Section 2.2 hereof, all expenses incident to the Corporation's performance of or compliance with this Agreement, including, but not limited to, all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Corporation and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Corporation (all such expenses being herein called "Registration Expenses"), will be borne by the Corporation. In addition, the Corporation will pay its internal expenses (including, but not limited to, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance obtained by the Corporation; the expenses and fees for listing the securities to be registered on each securities exchange, expenses -8- 9 incurred in obtaining any comfort letters, and all fees and expenses associated with filings required to be made with the NASD. 6.2 Holder's Expenses. Except as provided in Section 2.2 hereof, in connection with any registration statement in which Registrable Shares are included, the Corporation will reimburse the holders of Registrable Shares covered by such registration for the reasonable cost and expenses incurred by such holders in connection with such registration, including, but not limited to, reasonable fees and disbursements of one counsel chosen by the holders of at least a majority of such Registrable Shares. 7. Indemnification. 7.1 By the Corporation. The Corporation agrees to indemnify and reimburse, to the fullest extent permitted by law, each holder of Registrable Shares, its officers and directors and each Person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including, but not limited to, attorney's fees) caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus, or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact, required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are directly caused by statements or omissions made in reliance on and in strict conformity with the information furnished in writing to the Corporation by such holder expressly for use therein or by such holder's failure to deliver a copy of the prospectus or any amendments or supplements thereto after the Corporation has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Corporation will indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the extent customary. The payments required by this Section 7.1 will be made periodically during the course of the investigation or defense, as and when bills are received or expenses incurred, subject to an obligation of repayment in the event such indemnity is determined not to be owed. 7.2 By Each Holder. In connection with any registration statement in which a holder of Registrable Shares is participating, each such holder will furnish to the Corporation in writing such information as the Corporation reasonably requests for use in connection with any such registration statement, preliminary prospectus or prospectus, or any amendment or supplement thereto and, to the extent permitted by law, will indemnify the Corporation, its directors and officers and each Person who controls the Corporation (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus, or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information so furnished in writing by such holder specifically for inclusion in the registration statement or prospectus; provided, that the obligation to indemnify will be several, and not joint and several, among such sellers of Registrable Shares, and the liability of each such seller of Registrable Shares will be in proportion to, and provided further -9- 10 that such liability will be limited to, the net amount received by such seller from the sale of Registrable Shares pursuant to such registration statement; further provided, however, that such seller of Registrable Shares shall not be liable in any such case to the extent that prior to the filing of any such registration statement or prospectus or amendment thereof or supplement thereto, such seller has furnished in writing to the Corporation information expressly for use in such registration statement or prospectus or any amendment thereof or supplement thereto that corrected or made not misleading information previously furnished to the Corporation. 7.3 Procedure. Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying Person of any claim with respect to which it seeks indemnification (provided that the failure to give such notice shall not limit the rights of such Person except to the extent such failure to provide notice materially prejudices the indemnifying Person) and (ii) unless in such indemnified Person's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying Person to assume the defense of such claim with counsel reasonably satisfactory to the indemnified Person; provided, however, that any Person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (x) the indemnifying party has agreed to pay such fees or expenses, or (y) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Person. If such defense is not assumed by the indemnifying party as permitted hereunder, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably delayed or withheld). If such defense is assumed by the indemnifying party pursuant to the provisions hereof, such indemnifying party shall not settle or otherwise compromise the applicable claim unless (i) such settlement or compromise contains a full and unconditional release of the indemnified party or (ii) the indemnified party otherwise consents in writing. An indemnifying Person who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying Person with respect to such claim, unless in the reasonable judgment of any indemnified Person a conflict of interest may exist between such indemnified Person and any other of such indemnified parties with respect to such claim. 7.4 Each party hereto agrees that, if for any reason the indemnification provisions contemplated by Section 7.1 or 7.2 are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages, or expenses (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, liabilities, claims, damages, or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the actions which resulted in the losses, liabilities, claims, damages, or expenses as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or -10- 11 omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7.4 were determined by pro rata allocation (even if the holders or any underwriters or all of them were treated as one Person for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 7.4, The amount paid or payable by an indemnified party as a result of the losses, liabilities, claims, damages, or expenses (or actions in respect thereafter referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or, except as provided in Section 7.3, defending any such action or claim. Notwithstanding the provisions of this Section 7.4, no holder shall be required to contribute an amount greater than the dollar amount by which the net proceeds received by such holder with respect to the sale of any Registrable Shares exceeds the amount of damages which such holder has otherwise been required to pay by reason of any and all untrue or alleged untrue statements of material fact or omissions or alleged omissions of material fact made in any registration statement, prospectus, or preliminary prospectus or any amendment thereof or supplement thereto, related to such sale of Registrable Shares. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The holders' obligations in this Section 7.4 to contribute shall be several in proportion to the amount of Registrable Shares registered by them and not joint. If indemnification is available under this Section 7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Sections 7.1 and 7.2 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration provided for in this Section 7.4 subject, in the case of the holders, to the limited dollar amounts get forth in Section 7.2. 7.5 Survival. The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified Person or any officer, director or controlling Person of such indemnified Person and will survive the transfer of securities. The Corporation also agrees to make such provisions as are reasonably requested by any indemnified Person for contribution to such Person in the event the Corporation's indemnification is unavailable for any reason. 8. Compliance with Rule 144 and Rule 144A. At the request of any holder of Registrable Shares who proposes to sell securities in compliance with Rule 144 of the Commission, the Corporation will (i) forthwith furnish to such holder a written statement of compliance with the filing requirements of the Commission as set forth in Rule 144, as such rule may be amended from time to time and (ii) make available to the public and such holders such information as will enable the holders of Registrable Shares to make sales pursuant to Rule 144. Unless the Corporation is subject to Section 13 or 15(d) of the Exchange Act, the Corporation will provide to the holder of Registrable Shares and to any prospective purchaser of Registrable Shares under Rule 144A of the Commission, the information described in Rule 144A(d)(4) of the Commission. 9. Participation in Underwritten Registrations. No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell its securities on the basis provided in any underwriting arrangements approved by such Person or Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents -11- 12 reasonably required under the terms of such underwriting arrangements; provided, that no holder of Registrable Shares shall be required to make any representations or warranties in connection with any registration other than as to (i) such holder's ownership of his or its Registrable Shares to be sold or transferred free and clear of all liens, claims, and encumbrances, (ii) such holder's power and authority to effect such transfer, and (iii) such matters pertaining to the compliance with securities laws as may be reasonably requested; provided, further, that the obligation of such holder to indemnify pursuant to any such underwriting arrangements shall be several, not joint and several, among such holders selling Registrable Shares, and the liability of each such holder will be in proportion to, and provided further that such liability will be limited to, the net amount received by such holder from the sale of his or its Registrable Shares pursuant to such registration. 10. Miscellaneous. 10.1 No Inconsistent Agreements. The Corporation will not hereafter enter into any agreement with respect to its securities which is inconsistent with the rights granted to the holders of Registrable Shares in this Agreement. 10.2 Adjustments Affecting Registrable Shares. The Corporation will not take any action, or permit any change to occur, with respect to its securities which would adversely affect the ability of the holders of Registrable Shares to include such Registrable Shares in a registration undertaken pursuant to this Agreement or which would adversely affect the marketability of such Registrable Shares in any such registration, including, but not limited to, effecting a stock split or combination of shares. 10.3 Other Registration Rights. Except as provided in this Agreement, the Corporation will not hereafter grant to any Person or Persons the right to request the Corporation to register any equity securities of the Corporation, or any securities convertible or exchangeable into or exercisable for such securities, without the prior written consent of the holders of at least a majority of the Registrable Shares. 10.4 Remedies. Any Person having rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law, in equity, or otherwise. 10.5 Amendments and Waivers. Except as otherwise expressly provided herein, the provisions of this Agreement may be amended or waived at any time only by the written agreement of the Corporation and the holders of at least a majority of the Registrable Shares; provided, however, that the provisions of this Agreement may not be amended or waived without the consent of the holders of all the Registrable Shares adversely affected by such amendment or waiver if such amendment or waiver adversely affects a portion of the Registrable Shares but does not so adversely affect all of the Registrable Shares. Any waiver, permit, consent or approval of any kind or character on the part of any such holders of any provision or condition of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in writing. -12- 13 Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of Registrable Securities and the Corporation. 10.6 Successors and Assigns. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto, whether so expressed or not. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of the Investors or holders of Registrable Shares are also for the benefit of, and enforceable by, any subsequent holders of such Registrable Shares. 10.7 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 10.8 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience of reference only and do not constitute a part of and shall not be utilized in interpreting this Agreement. 10.9 Notices. Any notices required or permitted to be sent hereunder shall be delivered personally or mailed, certified mail, return receipt requested, or delivered by overnight courier service to the following addresses, or such other address as any Person designates by written notice to the Corporation, and shall be deemed to have been given upon delivery, if delivered personally, three days after mailing, if mailed, or one business day after delivery to the courier, if delivered by overnight courier service: If to the Corporation, to: Central Reserve Life Corporation 17800 Royalton Road Strongsville, Ohio 44136 with a copy to: Latham & Watkins 5800 Sears Tower 233 S. Wacker Drive Chicago, Illinois Attention: Mark D. Gerstein If to the Investors, to the addresses set forth on the Signature pages hereto. If to holders of the Registrable Shares other than the Investors, to the addresses set forth on the stock record books of the Corporation. -13- 14 10.10 Governing Law. All questions concerning the construction, validity and interpretation of this Agreement, and the performance of the obligations imposed by this Agreement, shall be governed by the laws of the State of Ohio applicable to contracts made and wholly to be performed in that state. 10.11 Final Agreement. This Agreement, together with the Stock Purchase Agreement and all other agreements entered into by the parties hereto pursuant to the Stock Purchase Agreement, constitutes the complete and final agreement of the parties concerning the matters referred to herein, and supersedes all prior agreements and understandings. 10.12 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and such counterparts together shall constitute one instrument. 10.13 No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be used against any Person. [Remainder of page intentionally left blank. Signature pages follow.] -14- 15 The parties hereto have executed this Agreement on the date first above written. THE CORPORATION: CENTRAL RESERVE LIFE CORPORATION By: /s/ FRANK W. GRIMONE -------------------------------- Name: Frank W. Grimone Title: CFO 16 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT INSURANCE PARTNERS, L.P. By: Insurance GenPar, L.P., its General Partner By: Insurance GenPar MGP, L.P. its General Partner By: Insurance GenPar MGP, Inc., its General Partner By: /s/ ROBERT SPASS ----------------------------- Name: Robert Spass --------------------------- Title: President -------------------------- Address: One Chase Manhattan Plaza 44th Floor New York, New York 10005 Attention: Bradley & Cooper Copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Thomas A. Roberts 17 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. By: Insurance Genpar (Bermuda), L.P., its General Partner By: Insurance GenPar MGP (Bermuda), L.P., its General Partner By: Insurance GenPar MGP (Bermuda), Inc., its General Partner By: /s/ ROBERT SPASS ---------------------------------------- Name: Robert Spass -------------------------------------- Title: President ------------------------------------- Address: One Chase Manhattan Plaza 44th Floor New York, New York 10005 Attention: Bradley & Cooper Copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Thomas A. Roberts 18 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT /s/ PETER W. NAUERT ----------------------------------- Peter W. Nauert Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 Copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606 Attention: Stanley H. Meadows, P.C. 19 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT /s/ MICHAEL A. CAVATAIO ----------------------------------- Michael A. Cavataio Address: 3125 Ramsgate Road Rockford, Illinois 61114 20 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT MERCANTILE BANK OF NORTHERN ILLINOIS, TRUSTEE OF THE CONSECO STOCK OPTION DIRECTOR PLAN FBO MICHAEL CAVATAIO #08590033 By: /s/ KATHY A. MOFFATT ------------------------------------------- Name: Kathy A. Moffatt ----------------------------------------- Title: Trust Officer ---------------------------------------- Address: P.O. Box 30 Freeport, Illinois 61032 Copy to: Michael A. Cavataio 3125 Ramsgate Road Rockford, Illinois 61114 21 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT MERCANTILE BANK OF NORTHERN ILLINOIS, TRUSTEE OF THE CONSECO STOCK OPTION DIRECTOR PLAN FBO MICHAEL CAVATAIO #08590034 By: /s/ KATHY A. MOFFATT ---------------------------------------------- Name: Kathy A. Moffatt -------------------------------------------- Title: Trust Officer ------------------------------------------- Address: P.O. Box 30 Freeport, Illinois 61032 Copy to: Michael A. Cavataio 3125 Ramsgate Road Rockford, Illinois 61114 22 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT /s/ KARON HILL ----------------------------------- Karon Hill Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 23 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT /s/ VAL RAJIC ----------------------------------- Val Rajic Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 24 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT TURKEY VULTURE FUND XIII, LTD. By: /s/ RICHARD M. OSBURNE ------------------------------- Name: Richard M. Osburne ----------------------------- Title: Manager ---------------------------- Address: 7001 Center Street Mentor, Ohio 44060 Attention: Richard M. Osborne Copy to: Kohrman, Jackson & Krantz P.L.L. 1375 East Ninth Street One Cleveland Center, 20th Floor Cleveland, Ohio 44114 Attention: Marc C. Krantz 25 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT /s/ MARC C. KRANTZ ----------------------------------- Marc C. Krantz Address: Kohrman, Jackson & Krantz P.L.L. 1375 East Ninth Street One Cleveland Center, 20th Floor Cleveland, Ohio 44114 26 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT KRANTZ FAMILY LIMITED PARTNERSHIP By: /s/ BYRON S. KRANTZ ---------------------------------------- Byron S. Krantz, its General Partner Address: Kohrman, Jackson & Krantz P.L.L. 1375 East Ninth Street One Cleveland Center, 20th Floor Cleveland, Ohio 44114 27 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT MEDICAL MUTUAL OF OHIO By: /s/ ROBERT N. TROMBLY --------------------------------- Name: Robert N. Trombly ------------------------------- Title: Corporate Secretary ------------------------------ Address: 2060 East Ninth Street Cleveland, Ohio 44115 Attention: General Counsel 28 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT UNITED PAYORS AND UNITED PROVIDERS, INC. By: /s/ S. J. BRUNO ------------------------------------- Name: S. J. Bruno ----------------------------------- Title: V.P. and CPO ---------------------------------- Address: 2275 Research Blvd. 6th Floor Rockville, Maryland 20850 Attention: Joe Mott 29 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT /s/ HOWARD R. CONANT ----------------------------------- Howard R. Conant Address: c/o Lunn Partners 209 South LaSalle Street Chicago, Illinois 60604 Attention: John Cochrane 30 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT JOSEPH CUSIMANO IRA By: /s/ JOSEPH CUSIMANO, IRA ------------------------------- Name: Joseph Cusimano, IRA ----------------------------- Title: ---------------------------- Address: c/o Lunn Partners 209 South LaSalle Street Chicago, Illinois 60604 Attention: John Cochrane 31 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT LEG PARTNERS SBIC, L.P. By: /s/ LAWRENCE GOLUB -------------------------------- Name: President of Golub GP II Corporation ------------------------------ Title: General Partner ----------------------------- Address: 230 Park Avenue 19th Floor New York, New York 10169 Attention: Lawrence Golub EX-99.3 4 STOCKHOLDER AGREEMENT DATED JULY 1, 1998 1 EXHIBIT 3 ================================================================================ STOCKHOLDERS AGREEMENT by and among CENTRAL RESERVE LIFE CORPORATION and THE SECURITY HOLDERS LISTED ON THE SIGNATURE PAGES HEREOF Dated as of July 1, 1998 ================================================================================ 2 TABLE OF CONTENTS ARTICLE I DEFINITIONS 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . 3 1.3 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE II CERTAIN OTHER ACTIVITIES; FIDUCIARY DUTIES 2.1 Other Activities of the Holders; Fiduciary Duties . . . . . . . . . 4 ARTICLE III TRANSFERS OF SECURITIES 3.1 Drag Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . 4 3.2 Tag Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3.3 Certain Events Not Deemed Transfers . . . . . . . . . . . . . . . . 6 3.4 Replacement of Securities . . . . . . . . . . . . . . . . . . . . . 6 3.5 Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE IV TERMINATION 4.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE V MISCELLANEOUS 5.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5.2 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 8 5.5 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . 8 5.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.7 No Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . . . 8
3 STOCKHOLDERS AGREEMENT THIS STOCKHOLDERS AGREEMENT (this "AGREEMENT") dated as of July 1, 1998, is entered into by and among Central Reserve Life Corporation, an Ohio corporation (including its successors, the "COMPANY"), and the security holders listed on the signature pages of this Agreement. NOW, THEREFORE, for and in consideration of the premises, mutual covenants, and agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. As used in this Agreement, the following terms shall have the following meanings: "ACCREDITED INVESTOR" shall mean an "Accredited Investor," as defined in Regulation D, or any successor rule then in effect. "AFFILIATE" shall mean, with respect to any Person, any Person who, directly or indirectly, controls, is controlled by, or is under common control with that Person. For purposes of this definition, "CONTROL," and "CONTROLLED BY" when used with respect to any Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract, or otherwise. "AGREEMENT" shall mean this Agreement, as such from time to time may be amended. "COMMON STOCK" shall mean shares of the Common Stock, without par value per share, of the Company, and any capital stock into which such Common Stock thereafter may be changed. "COMMON STOCK EQUIVALENTS" shall mean, without duplication with any other Common Stock or Common Stock Equivalents, any rights, warrants, options, convertible securities or indebtedness, exchangeable securities or indebtedness, or other rights, exercisable for or convertible or exchangeable into, directly or indirectly, Common Stock and securities convertible or exchangeable into Common Stock, whether at the time of issuance or upon the passage of time or the occurrence of some future event. "COMPANY" shall have the meaning set forth in the introductory paragraph hereof. 4 "CO-SELLER" shall have the meaning set forth in Section 3.1. "FULLY-DILUTED COMMON STOCK" shall mean, at any time, the then outstanding Common Stock plus (without duplication) all shares of Common Stock issuable, whether at such time or upon the passage of time or the occurrence of future events, upon the exercise, conversion, or exchange of all then outstanding Common Stock Equivalents. "HOLDER" shall mean (i) a securityholder listed on the signature page hereof and (ii) any direct or indirect transferee of any such securityholder who shall become a party to this Agreement. "IP BERMUDA" shall mean Insurance Partners Offshore (Bermuda), L.P., a Bermuda limited partnership. "IP DELAWARE" shall mean Insurance Partners, L.P., a Delaware limited partnership. "IP GROUP" shall mean IP Delaware, IP Bermuda, their respective Affiliates, the respective officers, directors, and employees (and members of their respective families and trusts for the primary benefit of such family members) of any of the foregoing, and any Person that is a limited partner of IP Delaware or IP Bermuda. "LEGAL HOLIDAY" shall have the meaning set forth in Section 5.2. "PARTICIPATION OFFER" shall have the meaning set forth in Section 3.2. "PERSON" or "PERSON" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, or government or other agency or political subdivision thereof. "REGULATION D" shall mean Regulation D promulgated under the Securities Act by the SEC. "REQUIRED HOLDERS" shall mean Holders who then own beneficially more than 66 2/3% of the aggregate number of shares of Common Stock subject to this Agreement. "SEC" shall mean the Securities and Exchange Commission. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder. -2- 5 "SIGNIFICANT DRAG SALE" shall have the meaning set forth in Section 3.1. "SIGNIFICANT TAG SALE" shall have the meaning set forth in Section 3.2. "SUBSIDIARY" of any Person shall mean (i) a corporation a majority of whose outstanding shares of capital stock or other equity interests with voting power, under ordinary circumstances, to elect directors, is at the time, directly or indirectly, owned by such Person, by one or more subsidiaries of such Person, or by such Person and one or more subsidiaries of such Person, and (ii) any other Person (other than a corporation) in which such Person, a subsidiary of such Person, or such Person and one or more subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has (x) at least a majority ownership interest or (y) the power to elect or direct the election of the directors or other governing body of such Person. "TRANSFER" shall mean any disposition of any Common Stock or any interest therein that would constitute a "sale" thereof within the meaning of the Securities Act. 1.2 Rules of Construction. Unless the context otherwise requires: (a) a term shall have the meaning assigned to it; (b) "OR" is not exclusive; (c) words in the singular shall include the plural, and words in the plural shall include the singular; (d) provisions apply to successive events and transactions; (e) the words "HEREOF," "HEREIN," "HEREUNDER," and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (f) words in the neuter or masculine gender shall include the feminine, masculine, and neuter genders; (g) all references to Articles and Sections refer to Articles and Sections of this Agreement; and (h) "INCLUDE" and derivatives thereof shall mean "including, without limitation." 1.3 Other Definitions. Certain capitalized terms used in this Agreement, but not defined in this Article I, shall have the meanings set forth elsewhere in this Agreement. ARTICLE II CERTAIN OTHER ACTIVITIES; FIDUCIARY DUTIES 2.1 Other Activities of the Holders; Fiduciary Duties. It is understood and accepted that the Holders and their Affiliates have interests in other business ventures which may be in conflict with the activities of the Company and its Subsidiaries and that, subject to applicable law, nothing in this Agreement shall limit the current or future business activities of the Holders whether or not such activities are competitive with those of the Company and its Subsidiaries. Nothing in this Agreement, express or implied, shall relieve any officer or director of the Company or any of its Subsidiaries, or any Holder, of any fiduciary or other duties or obligations they may have to the Company's stockholders. -3- 6 ARTICLE III TRANSFERS OF SECURITIES 3.1 Drag Along Rights. 3.1.1 Applicability. In connection with any Transfer by members of the IP Group of shares of Common Stock and/or Common Stock Equivalents representing more than twenty percent (20%) of the outstanding shares of Common Stock (provided, that for the purposes of such calculation, the following shares of Common Stock shall be deemed to be issued and outstanding: (i) any shares of Common Stock to be Transferred that are to be issued pursuant to the exercise or conversion of any Common Stock Equivalents and (ii) any shares of Common Stock underlying any Common Stock Equivalents that are to be Transferred) in any one transaction or series of related transactions (a "SIGNIFICANT DRAG SALE"), the IP Group shall have the right to require each non-selling Holder (each, a "CO-SELLER") to Transfer a portion of its Common Stock and/or Common Stock Equivalents which represents the same percentage of the Fully-Diluted Common Stock held by such Co-Seller as the shares of Common Stock and/or Common Stock Equivalents being disposed of by the IP Group represent of the Fully-Diluted Common Stock held by the IP Group. (For example, if the IP Group is selling sixty-five percent (65%) of its Fully-Diluted Common Stock position, each Co-Seller shall be required to sell sixty-five percent (65%) of its Fully-Diluted Common Stock position.) All Common Stock Transferred by Holders pursuant to this Section 3.1 shall be sold at the same price and time and otherwise treated identically with the Common Stock being sold by the IP Group in all respects. 3.1.2 Notice of Significant Drag Sale. IP Delaware, on behalf of the IP Group, shall give each Co-Seller at least thirty (30) days' prior written notice of any Significant Drag Sale as to which the IP Group intends to exercise its rights under this Section 3.1. If the IP Group elects to exercise its rights under this Section 3.1, the Co-Sellers shall take such actions as may be reasonably required and otherwise cooperate in good faith with the IP Group in connection with consummating the Significant Drag Sale (including the voting of any Common Stock or other voting capital stock of the Company to approve such Significant Drag Sale). At the closing of such Significant Drag Sale, each Co-Seller shall deliver certificates for all shares of Common Stock to be sold by such Co-Seller, duly endorsed for transfer, with the signature guaranteed, to the purchaser against payment of the appropriate purchase price. 3.2 Tag Along Rights. 3.2.1 Applicability. In the event any Holder desires to effect a Transfer (other than a Transfer in an underwritten public offering pursuant to an effective registration statement under the Securities Act) of shares of Common Stock and/or Common Stock Equivalents representing more than twenty percent (20%) of the outstanding shares of Common Stock (provided, that for the purposes of such calculation, the following -4- 7 shares of Common Stock shall be deemed to be issued and outstanding: (i) any shares of Common Stock to be Transferred that are to be issued pursuant to the exercise or conversion of any Common Stock Equivalents and (ii) any shares of Common Stock underlying any Common Stock Equivalents that are to be Transferred) in any one transaction or series of related transactions (a "SIGNIFICANT TAG SALE"), and the IP Group does not elect to exercise its rights (if any) under Section 3.1, then at least thirty (30) days prior to the closing of such Significant Tag Sale, such Holder shall make an offer (the "PARTICIPATION OFFER") to each Co-Seller to include in the proposed Significant Tag Sale a portion of its Common Stock and/or Common Stock Equivalents which represents the same percentage of such Co-Seller's Fully-Diluted Common Stock as the shares of Common Stock and/or Common Stock Equivalents being sold by such Holder represent of its Fully-Diluted Common Stock; provided, however, that, if the consideration to be received by such Holder includes any securities, only Co-Sellers who have certified to the reasonable satisfaction of such Holder that they are Accredited Investors shall be entitled to participate in such transfer, unless the transferee consents otherwise. 3.2.2 Terms of Participation Offer. The Participation Offer shall describe the terms and conditions of the proposed Significant Tag Sale and shall be conditioned upon (i) the consummation of the transactions contemplated in the Participation Offer with the transferee named therein, and (ii) each Co-Seller's execution and delivery of all agreements and other documents as the Holder is required to execute and deliver in connection with such Significant Tag Sale (provided that the Co-Seller shall not be required to make any representations or warranties in connection with such sale or transfer other than representations and warranties as to (A) such Co-Seller's ownership of his or its Common Stock to be sold or transferred free and clear of all liens, claims, and encumbrances, (B) such Co-Seller's power and authority to effect such transfer, and (C) such matters pertaining to compliance with securities laws as the transferee may reasonably require). If any Co-Seller shall accept the Participation Offer, the Holder shall reduce, to the extent necessary, the number of shares of Common Stock it otherwise would have sold in the proposed transfer so as to permit those Co-Sellers who have accepted the Participation Offer to sell the number of shares of Common Stock that they are entitled to sell under this Section 3.2, and the Holder and such Co-Sellers shall transfer the number of shares of Common Stock specified in the Participation Offer to the proposed transferee in accordance with the terms of such transfer as set forth in the Participation Offer. 3.3 Certain Events Not Deemed Transfers. In no event shall any exchange, reclassification, or other conversion of shares into any cash, securities, or other property pursuant to a merger or consolidation of the Company or any Subsidiary with, or any sale or transfer by the Company or any Subsidiary of all or substantially all its assets to, any Person constitute a Significant Drag Sale or a Significant Tag Sale for purposes of Section 3.1 or 3.2; provided, however, that all of Holders of Common Stock receive the same consideration per share in such exchange, reclassification, or conversion. In addition, Sections 3.1 and 3.2 shall -5- 8 not apply to any transfer, sale, or disposition of shares of Common Stock solely among Holders. 3.4 Replacement of Securities. If a mutilated certificate representing Common Stock is surrendered to the Company or if the Holder of a certificate representing Common Stock claims and submits an affidavit or other evidence, satisfactory to the Company, to the effect that any such certificate has been lost, destroyed, or wrongfully taken, the Company shall issue a replacement certificate if the Company's requirements are met. If required by the Company, such securityholder must provide an indemnity bond, or other form of indemnity, sufficient in the judgment of the Company to protect the Company against any loss which may be suffered; provided, however, that no indemnity bond or other form of indemnity shall be required from a Holder who is an Accredited Investor. 3.5 Restrictive Legend. Each certificate representing Common Stock issued to each Holder or a subsequent transferee shall include a legend in substantially the following form: THIS SECURITY IS SUBJECT TO CERTAIN RIGHTS AND RESTRICTIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF JULY 1, 1998, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES. ARTICLE IV TERMINATION 4.1 Termination. The provisions of this Agreement shall terminate on July 1, 2003. ARTICLE V MISCELLANEOUS 5.1 Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier, or registered or certified mail, postage prepaid, return receipt requested, addressed as follows (or at such other address as may be substituted by notice given as herein provided): If to the Company: Central Reserve Life Corporation 17800 Royalton Road Strongsville, Ohio 44136 Facsimile No.: (440) 572-4501 Attention: Fred Lick, Jr. If to any Holder, at its address listed on the signature pages hereof. -6- 9 Any notice or communication hereunder shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back, if telexed; when receipt is acknowledged, if telecopied; and five (5) calendar days after mailing if sent by registered or certified mail (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. 5.2 Legal Holidays. A "LEGAL HOLIDAY" used with respect to a particular place of payment is a Saturday, a Sunday, or a day on which banking institutions at such place are not required to be open. If a payment date is a Legal Holiday at such place, payment may be made at such place on the next succeeding day that is not a Legal Holiday, and no interest on the amount of such payment shall accrue for the intervening period. 5.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. 5.4 Successors and Assigns. Whether or not an express assignment has been made pursuant to the provisions of this Agreement, provisions of this Agreement that are for the Holders' benefit as the holders of any Common Stock are also for the benefit of, and enforceable by, all subsequent holders of Common Stock, except as otherwise expressly provided herein. This Agreement shall be binding upon the Company, each Holder, and their respective successors and assigns. 5.5 Duplicate Originals. All parties may sign any number of copies of this Agreement. Each signed copy shall be an original, but all of them together shall represent the same agreement. 5.6 Severability. In case any provision in this Agreement shall be held invalid, illegal, or unenforceable in any respect for any reason, the validity, legality, and enforceability of any such provision in every other respect and the remaining provisions shall not in any way be affected or impaired thereby. 5.7 No Waivers; Amendments. 5.7.1 No failure or delay on the part of the Company or any Holder in exercising any right, power, or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or any Holder at law, in equity, or otherwise. -7- 10 5.7.2 Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company and the Required Holders; provided that no amendment or waiver that is adverse to any Holder that owns more than 5% of the outstanding Common Stock shall be effective as to that Holder prior to the three year anniversary of the date hereof without such Holder's consent. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] -8- 11 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. CENTRAL RESERVE LIFE CORPORATION By: /s/ FRANK W. GRIMONE ------------------------------------ Name: Frank W. Grimone Title: CFO 12 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT INSURANCE PARTNERS, L.P. By: Insurance GenPar, L.P., its general partner By: Insurance GenPar MGP, L.P., its general partner By: Insurance GenPar MGP, Inc., its general partner By: /s/ ROBERT SPASS ------------------------------------- Name: Robert Spass ----------------------------------- Title: President ---------------------------------- Address: One Chase Manhattan Plaza 44th Floor New York, New York 10005 Attention: Bradley E. Cooper Copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Thomas A. Roberts 13 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. By: Insurance GenPar (Bermuda), L.P., its general partner By: Insurance GenPar MGP (Bermuda), L.P., its general partner By: Insurance GenPar MGP (Bermuda), Inc., its general partner By: /s/ ROBERT SPASS ------------------------------------- Name: Robert Spass ----------------------------------- Title: President ---------------------------------- Address: One Chase Manhattan Plaza 44th Floor New York, New York 10005 Attention: Bradley & Cooper Copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Thomas A. Roberts 14 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT STRATEGIC ACQUISITION PARTNERS, LLC By: /s/ VAL RAJIC --------------------------------- Name: Val Rajic ------------------------------- Title: President ------------------------------ Address: 1750 East Golf Road Suite 210 Chicago, Illinois 60173 Copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606 Attention: Stanley H. Meadows, P.C. 15 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT /s/ PETER W. NAUERT -------------------------------------------- Peter W. Nauert Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 Copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606 Attention: Stanley H. Meadows, P.C. 16 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT /s/ MICHAEL A. CAVATAIO --------------------------------------------- Michael A. Cavataio Address: 3125 Ramsgate Road Rockford, Illinois 61114 17 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT MERCANTILE BANK OF NORTHERN ILLINOIS, TRUSTEE OF THE CONSECO STOCK OPTION DIRECTOR PLAN FBO MICHAEL CAVATAIO #08590033 By: /s/ KATHY A. MOFFATT --------------------------------------- Name: Kathy A. Moffatt ------------------------------------- Title: Trust Officer ------------------------------------ Address: P.O. Box 30 Freeport, Illinois 61032 Copy to: Michael A. Cavataio 3125 Ramsgate Road Rockford, Illinois 61114 18 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT MERCANTILE BANK OF NORTHERN ILLINOIS, TRUSTEE OF THE CONSECO STOCK OPTION DIRECTOR PLAN FBO MICHAEL CAVATAIO #08590034 By: /s/ KATHY A. MOFFATT --------------------------------------- Name: Kathy A. Moffatt ------------------------------------- Title: Trust Officer ------------------------------------ Address: P.O. Box 30 Freeport, Illinois 61032 Copy to: Michael A. Cavataio 3125 Ramsgate Road Rockford, Illinois 61114 19 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT /s/ KARON HILL --------------------------------------------- Karon Hill Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 20 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT /s/ VAL RAJIC --------------------------------------------- Val Rajic Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 21 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT TURKEY VULTURE FUND XIII, LTD. By: /s/ RICHARD M. OSBURNE ------------------------------------------ Name: Richard M. Osburne ---------------------------------------- Title: Manager --------------------------------------- Address: 7001 Center Street Mentor, Ohio 44060 Attention: Richard M. Osborne Copy to: Kohrman Jackson & Krantz, P.L.L. 1375 East Ninth Street One Cleveland Center, 20th Floor Cleveland, Ohio 44114 Attention: Marc C. Krantz 22 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT /s/ MARC C. KRANTZ --------------------------------------------- Marc C. Krantz Address: Kohrman Jackson & Krantz, P.L.L. 1375 East Ninth Street One Cleveland Center, 20th Floor Cleveland, Ohio 44114 23 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT KRANTZ FAMILY LIMITED PARTNERSHIP By: /s/ BYRON S. KRANTZ ------------------------------------------ Byron S. Krantz, its General Partner Address: Kohrman Jackson & Krantz, P.L.L. 1375 East Ninth Street One Cleveland Center, 20th Floor Cleveland, Ohio 44114 24 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT MEDICAL MUTUAL OF OHIO By: /s/ ROBERT N. TROMBLY ---------------------------------------- Name: Robert N. Trombly -------------------------------------- Title: Corporate Secretary ------------------------------------- Address: 2060 East Ninth Street Cleveland, Ohio 44115 Attention: General Counsel 25 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT UNITED PAYORS AND UNITED PROVIDERS, INC. By: /s/ S. JOSEPH BRUNO ---------------------------------------- Name: S. Joseph Bruno -------------------------------------- Title: Vice President and CFO ------------------------------------- Address: 2275 Research Blvd. 6th Floor Rockville, Maryland 20850 Attention: Joe Mott 26 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT /s/ HOWARD R. CONANT --------------------------------------------- Howard R. Conant Address: c/o Lunn Partners 209 South LaSalle Street Chicago, Illinois 60604 Attention: John Cochrane 27 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT JOSEPH CUSIMANO IRA By: /s/ JOSEPH CUSIMANO --------------------------------------- Name: Joseph Cusimano, IRA ------------------------------------- Title: ------------------------------------ Address: c/o Lunn Partners 209 South LaSalle Street Chicago, Illinois 60604 28 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT LEG PARTNERS SBIC, L.P. By: /s/ LAWRENCE GOLUB --------------------------------------- Name: President of Golub GP II Corporation ------------------------------------- Title: General Partner ------------------------------------ Address: 230 Park Avenue 19th Floor New York, New York 10169 Attention: Lawrence Golub EX-99.4 5 INDEMNIFICATION CLOSING AGREEMENT 1 EXHIBIT 4 INDEMNIFICATION AND CLOSING AGREEMENT This Indemnification and Closing Agreement (this "Agreement") is made and entered into as of July 1, 1998, by Central Reserve Life Corporation (the "Company"), Insurance Partners, L.P. ("IP Delaware"), Insurance Partners Offshore (Bermuda), L.P. ("IP Bermuda"), and each of the other persons identified on Schedule 1 to this Agreement (the foregoing persons, other than the Company, being referred to herein, collectively, as the "Purchasers", with each being a "Purchaser"). RECITALS: WHEREAS, the Company, IP Delaware, IP Bermuda and Strategic Acquisition Partners ("SAP") are parties to an Amended and Restated Stock Purchase Agreement dated as of March 30, 1998 (the "Stock Purchase Agreement"); WHEREAS, pursuant to one or more assignment and assumption agreements (whether one or more, the "SAP Assignments"), SAP has assigned its rights to acquire securities of the Company under the Stock Purchase Agreement to certain assignees and each such person has accepted such assignment and assumed certain obligations under the Stock Purchase Agreement; WHEREAS, pursuant to the Stock Purchase Agreement and, in certain instances, the SAP Assignments, the respective Purchasers have agreed to purchase certain shares of common stock of the Company and warrants to purchase common stock of the Company on the terms and subject to the conditions set forth in the Stock Purchase Agreement; WHEREAS, United Benefit Life Insurance Company ("UBL") has asserted certain claims against the Company and filed the UBL Lawsuit (as defined below) against the Company; WHEREAS, the claims asserted by UBL and the UBL Lawsuit have resulted in a breach of the representation and warranty of the Company set forth in the first sentence of Section 4.8 of the Stock Purchase Agreement; WHEREAS, Article X of the Stock Purchase Agreement sets forth certain conditions to the respective obligations of the Purchasers to effect the closing contemplated by the Stock Purchase Agreement, including Section 10.1 which provides, in the first sentence thereof, that the representations and warranties 2 of the Company shall be accurate in all material respects as if made on and as of the Closing Date; WHEREAS, the Purchasers have asserted that the above-referenced closing condition in the first sentence of Section 10.1 of the Stock Purchase Agreement has not been met due to the existence of the UBL claims and UBL Lawsuit and are not willing to effect the closing contemplated by the Stock Purchase Agreement due to the failure of such condition to be met unless certain matters related thereto are addressed by the Company to the satisfaction of the Purchasers, including an agreement by the Company that any losses arising from the breach of the Stock Purchase Agreement resulting from such claims and the UBL Lawsuit will be indemnified by the Company under the Stock Purchase Agreement; WHEREAS, the Company has not agreed that the above-referenced closing condition in the first sentence of Section 10.1 of the Stock Purchase Agreement has not been met, but is, nevertheless, willing to address certain matters raised by the Purchasers in order to effect the closing contemplated by the Stock Purchase Agreement; NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows: 1. Definitions. As used herein the following terms shall have the following meanings: "AVERAGE CLOSING PRICE" shall mean: (i) in the case of any Judgment, the average closing price for the Common Stock for the 10 trading days following the public announcement of the Judgment; (ii) in the case of a Settlement, the average closing price for the Common Stock for the 10 trading days following the public announcement of the Settlement; and (iii) in all other cases, the average closing price for the Common Stock for the 10 trading days immediately following the calendar quarter in which obligations that give rise to an indemnification claim by a Purchaser are incurred by the Company. "COMMON STOCK" shall mean shares of the Common Stock, without par value per share, of the Company, and any capital stock into which such Common Stock thereafter may be changed. 2 3 "INDEMNIFICATION ESCROW AGENT" shall mean the indemnification escrow agent designated by IP Delaware pursuant to Section 4 of this Agreement. "INDEMNIFICATION ESCROW AGREEMENT" shall mean the Indemnification Escrow Agreement to be entered into by IP Delaware, IP Bermuda, the Company and the Indemnification Escrow Agreement, in the form attached hereto as Exhibit A. "JUDGMENT" shall mean any judgment, order, decree, award or similar action by any court, arbitration panel or any regulatory, administrative or other agency, commission or tribunal. "PURCHASED SECURITIES" shall mean, as of any specified date with respect to any Purchaser, (i) the shares of Common Stock that were issued by the Company pursuant to the Stock Purchase Agreement that are then owned by such Purchaser, (ii) the shares of Common Stock then outstanding that were issued upon the exercise of any Warrants that are then owned by such Purchaser, and (iii) the Warrants that were issued by the Company pursuant to the Stock Purchase Agreement that are then owned by such Purchaser. "SETTLEMENT" shall mean any settlement, compromise or other resolution of any claim, action, suit, arbitration, inquiry, proceeding or investigation, but shall not include a Judgment. "UBL LETTER" shall mean that certain letter, dated June 1, 1998, between the Company and UBL. "UBL LAWSUIT" shall mean the lawsuit commenced against the Company by UBL relating to the transactions and other matters contemplated by the UBL Letter, as such lawsuit may be amended, modified, substituted or replaced from time to time. "UBL MATTER" shall mean any third-party claim against the Company or any of its Subsidiaries that arises out of, relates to or is based upon the allegations that are the subject matter of the UBL Lawsuit. "WARRANTS" shall mean the "Common Shares Purchase Warrants" to be acquired by the Purchasers pursuant to the Stock Purchase Agreement permitting the Purchasers to purchase up to 3,650,000 shares of Common Stock in the aggregate at an exercise price of $5.50 per share. 3 4 2. Indemnification. Notwithstanding anything in the Stock Purchase Agreement to the contrary, the Company agrees as follows: (a) the indemnification obligations of the Company shall apply to any and all loss, diminution in value, damage, cost, expense, fine, penalty, suit, action claim, deficiency, liability or obligation caused by or arising from any UBL Matter (collectively, "UBL Losses"); (b) the provisions of Section 12.4 "Limitations" of the Stock Purchase Agreement shall not apply to any UBL Loss; and (c) for purposes of determining the amount of indemnifiable losses of a Purchaser for which the Company shall be liable under the indemnification provisions of the Stock Purchase Agreement, there shall be taken into account any diminution in the value of such Purchaser's Purchased Securities that results from any payment of amounts to any Purchaser in respect of any indemnifiable losses of such Purchaser under the Stock Purchase Agreement. In the event that the aggregate amount paid or payable by the Company to the Purchasers in respect of its indemnification obligations with respect to UBL Losses shall exceed $10,000,000, the Company may, at its option, pay all or any portion of such excess by delivering shares of Common Stock to the respective Purchasers, pro rata, subject to the following requirements: (i) such shares shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and shall be free of all liens, claims, security interests and other encumbrances, and (ii) such issuance shall not conflict with, constitute a default under or violate (A) any of the terms, conditions or provisions of the charter, by-laws or similar governing documents of the Company, (B) any of the terms, conditions or provisions of any document, agreement or other instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound, (C) any applicable law, rule or regulation, or (D) any judgment, writ, injunction, decree, order or ruling of any court or governmental authority binding on the Company or any of its subsidiaries. For purposes of the preceding sentence, the number of shares of Common Stock to be issued to the Purchasers in respect of any cash payments otherwise due shall be determined by dividing such cash payments by the Average Closing Price. 4 5 3. Segregation of Funds. Contemporaneously with the execution and delivery of this Agreement, the Company shall deposit with a national bank in a separate account for the benefit of the Purchasers, and in order to secure the Company's indemnification obligations under the Stock Purchase Agreement, as modified by this Agreement, $10,000,000 in cash. The Company shall maintain such deposit in a separate account with a national bank for such purposes until the earlier to occur of (i) the execution and delivery of the Indemnification Escrow Agreement, (ii) the payment of any amounts payable pursuant to any Judgments or Settlements of all pending UBL Matters, and (iii) the dismissal, with prejudice to the plaintiffs, of all pending UBL Matters and, in the case of clause (ii) or clause (iii), all indemnification obligations of the Company in respect of UBL Losses shall have been paid in full. 4. Indemnification Escrow Agreement. IP Delaware shall designate the Indemnification Escrow Agent. Unless Judgments shall have been rendered, or settlements effected, relating to all pending UBL Matters and all amounts payable in connection therewith shall have been paid in full or all pending UBL Matters shall have been dismissed with prejudice to the plaintiffs, the Company and the Purchasers shall enter into the Indemnification Escrow Agreement, with such changes in or additions to as the Indemnification Escrow Agent shall reasonably request, promptly following the designation of the Indemnification Escrow Agent. Contemporaneously with the execution and delivery of the Indemnification Escrow Agreement by the Company, the Company shall deposit with the Indemnification Escrow Agent $10,000,000 in cash to be held by the Indemnification Escrow Agent in accordance with the terms of the Indemnification Escrow Agreement. 5. Agreement With Respect to Closing Condition. Each Purchaser hereby acknowledges and agrees that for purposes of determining whether the condition to closing set forth in the first sentence of Section 10.1 of the Stock Purchase Agreement has been met, the existence of the UBL Lawsuit shall not be considered. 6. Certain UBL Items. Without the prior written consent of IP Delaware and IP Bermuda, the Company shall (i) not alter, amend, waive or modify in any respect the UBL Letter, (ii) effect any Settlement of any UBL Matter, or (iii) enter into any agreement or arrangement with UBL relating to any of the transactions, matters or arrangements specified in the UBL Letter or contemplated thereby. 5 6 7. Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, the Company, each Purchaser, and their respective successors and assigns. 8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. 9. Duplicate Originals. All parties may sign any number of copies of this Agreement. Each signed copy shall be an original, but all of them together shall represent the same agreement. 10. Severability. In case any provision in this Agreement shall be held invalid, illegal, or unenforceable in any respect for any reason, the validity, legality, and enforceability of any such provision in every other respect and the remaining provisions shall not in any way be affected or impaired thereby. 11. Amendments. Any modification or amendment to, or waiver of, any provision of this Agreement may be made only by an instrument in writing executed by the Company and Purchasers holding a majority of the Purchased Securities. 12. Headings. The descriptive section headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. 6 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. CENTRAL RESERVE LIFE CORPORATION By: /s/ FRED LICK, JR. --------------------------------------- Name: Fred Lick, Jr. ------------------------------------- Title: Chairman ------------------------------------ 7 8 SIGNATURE PAGE TO INDEMNIFICATION AND CLOSING AGREEMENT NAMES OF PURCHASER: INSURANCE PARTNERS, L.P., a Delaware limited partnership By: Insurance GenPar, L.P., its general partner By: Insurance GenPar MGP, Inc. By: /s/ B. COOPER ------------------------ Name: Bradley Cooper ---------------------- Title: First V.P. --------------------- INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. By: Insurance GenPar (Bermuda), L.P., its general partner By: Insurance GenPar (Bermuda) MGP, Inc. By: /s/ B. COOPER ------------------------ Name: Bradley Cooper ---------------------- Title: First V.P. --------------------- 8 9 SIGNATURE PAGE TO INDEMNIFICATION AND CLOSING AGREEMENT NAMES OF PURCHASERS: ------------------------------------------ Peter W. Nauert ------------------------------------------ Michael Cavataio MERCANTILE BANK OF NORTHERN ILLINOIS, trustee of The Conseco Stock Option Plan F/B/O Michael Cavataio By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ ------------------------------------------ Karon Hill ------------------------------------------ Val Rajic TURKEY VULTURE FUND, LTD. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ MEDICAL MUTUAL OF OHIO By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 9 10 UNITED PAYORS & UNITED PROVIDERS, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ ------------------------------------------ Howard R. Conant ------------------------------------------ Joseph Cusimano IRA LEG PARTNERS SBIC, L.P. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ ------------------------------------------ Marc C. Krantz KRANTZ FAMILY LIMITED PARTNERSHIP By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 10 11 JOINDER AGREEMENT Reference is made to that certain Indemnification and Closing Agreement ("Indemnification Agreement"), dated as of July 1, 1998, among Central Reserve Life Corporation, Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P., a copy of which is attached hereto. The undersigned, Strategic Acquisition Partners, LLC in order to become the beneficiary of the rights granted by the Indemnification Agreement, hereby agrees that by the undersigned's execution hereof, the undersigned is a party to the Indemnification Agreement, subject to all of the restrictions, conditions and obligations applicable to purchasers set forth in the Indemnification Agreement. This Joinder Agreement shall take effect and shall become a part of the Indemnification Agreement immediately upon execution. Executed as of July 1, 1998. Strategic Acquisition Partners, LLC By: /s/ VAL RAJIC ------------------------------- Name: Val Rajic ----------------------------- Title: President ---------------------------- ACCEPTED Central Reserve Life Corporation By: /s/ VAL RAJIC ------------------------------ Name: Val Rajic ---------------------------- Title: Executive Vice President --------------------------- Dated: July 1, 1998 12 STRATEGIC ACQUISITION PARTNERS, LLC By: /s/ VAL RAJIC -------------------------------- Name: Val Rajic ------------------------------ Title: President ----------------------------- Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 Copy to: McDermott, Will & Emery 227 West Monroe Street Chicago, Illinois 60606 Attention: Stanley H. Meadows, P.C. 13 EXHIBIT A INDEMNIFICATION ESCROW AGREEMENT THIS INDEMNIFICATION ESCROW AGREEMENT ("Agreement") is made and entered into between Central Reserve Life Corporation (the "Company"), Insurance Partners, L.P. ("IP Delaware"), Insurance Partners Offshore (Bermuda), L.P. ("IP Bermuda"), and each of the other persons identified on Schedule 1 to this Agreement (the foregoing persons, other than the Company, being referred to herein, collectively, as the "Purchasers", with each being a "Purchaser"), and _________________ ("Escrow Agent"). RECITALS WHEREAS, the Company, IP Delaware, IP Bermuda and Strategic Acquisition Partners ("SAP") are parties to an Amended and Restated Stock Purchase Agreement dated as of March 30, 1998 (the "Stock Purchase Agreement"); WHEREAS, pursuant to one or more assignment and assumption agreements (whether one or more, the "SAP Assignments"), SAP has assigned a its rights to acquire securities of the Company under the Stock Purchase Agreement to certain assignees and each such person has accepted such assignment and assumed certain obligations under the Stock Purchase Agreement; WHEREAS, pursuant to the Stock Purchase Agreement and, in certain instances, the SAP Assignment, the respective Purchasers have agreed to purchase certain shares of common stock of the Company and warrants to purchase common stock of the Company on the terms and subject to the conditions set forth in the Stock Purchase Agreement; WHEREAS, the Company and the Purchasers have entered into an Indemnification and Closing Agreement, dated as of July ___, 1998 (the "I/C Agreement"); WHEREAS, the I/C Agreement provides for the execution and delivery of this Agreement by the parties hereto and the delivery by the Company of $10,000,000 in cash to the Escrow Agent, such funds to be held by the Escrow Agent in accordance with the terms hereof (the "Escrow Property"); NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 14 ARTICLE 1 ESCROW AGENT 1.1 APPOINTMENT. The Escrow Agent is hereby appointed depositary and escrow agent for the Company and the Purchasers with respect to the property to be held in escrow pursuant to the provisions hereof. 1.2 BINDING OBLIGATIONS. Except for this Agreement, the Escrow Agent is not a party to, nor is it bound by nor need it give any consideration to the terms or provisions of, any agreement between the Company or the Purchasers. The only duties and responsibilities of the Escrow Agent shall be to hold the Escrow Property as escrow agent according to the provisions of this Agreement and to dispose of and deliver the Escrow Property as provided in this Agreement. The Escrow Agent shall not be responsible or liable in any manner whatsoever for the sufficiency, correctness, genuineness, or validity of the subject matter of the escrow, or any part thereof. 1.3 ACTS OF ESCROW AGENT. The Escrow Agent may in good faith act or refrain from acting hereunder with respect to any matter referred to herein in full reliance upon and by and with the advice of counsel which may be selected by the Escrow Agent. The Escrow Agent may rely upon any documents which may be submitted to it in connection with its duties hereunder and which it reasonably believes to be genuine and to have been signed or presented by the proper party or parties and the Escrow Agent shall have no liability or responsibility with respect to the form of execution or validity thereof except as otherwise herein specifically set forth. Each Purchaser agrees to indemnify the Escrow Agent against any expenses or liabilities incurred by the Escrow Agent as a result of acts taken in good faith by the Escrow Agent at the express direction of such Purchaser; the Company agrees to indemnify the Escrow Agent against any expenses or liabilities incurred by the Escrow Agent as a result of acts taken in good faith by the Escrow Agent at the express direction of the Company. The Escrow Agent shall not be liable for anything which it may do or refrain from doing in connection herewith, except its own gross negligence or willful misconduct. 1.4 DISPUTES BETWEEN THE PARTIES. In the event a dispute arises from conflicting demands by the Purchasers, on the one hand, and the Company, on the other hand, being 2 15 made upon the Escrow Property or any property held by the Escrow Agent hereunder, the Escrow Agent shall have, in addition to all other remedies which it may have at law or in equity, the right to refuse to comply with any such demand without liability for such refusal, until the matter in dispute has been settled in accordance with the terms hereof, and it has received evidence thereof satisfactory to it. In the event a dispute between the parties hereto cannot be resolved by agreement among them, the Escrow Agent may institute an interpleader action in a court of competent jurisdiction with respect to the amount of the Escrow Property in dispute. 1.5 LITIGATION. Except as provided in Section 4.2, the Escrow Agent shall not be required to institute legal proceedings of any kind. In the event litigation is instituted that (a) requires additional duties of the Escrow Agent, (b) requires court appearances by or on behalf of the Escrow Agent, or (c) requires the Escrow Agent to incur expenses or make disbursements in the resolution of contested claims against the Escrow Property, the Company shall indemnify and hold harmless the Escrow Agent from all loss, cost, damages, expenses, and attorneys' fees suffered or incurred by the Escrow Agent in connection therewith. The Escrow Agent shall be reimbursed for all other expenses incurred in acting as Escrow Agent, such expenses to be paid by the Company. ARTICLE 2 DELIVERY OF PROPERTY The Escrow Agent hereby acknowledges receipt of the Escrow Property from the Company and agrees to carry out the duties contained herein pursuant to the provisions of this Agreement. ARTICLE 3 DISBURSEMENT OF ESCROW PROPERTY The Escrow Property shall be released to the Company upon the earlier to occur of the following: (i) the payment of any amounts payable pursuant to any Judgments or Settlements of all pending UBL Matters (as each such term is defined in the I/C Agreement), and (ii) the dismissal, with 3 16 prejudice to the plaintiffs, of all pending UBL Matters and, in the case of clause (i) or clause (ii), all indemnification obligations of the Company in respect of UBL Losses (as defined in the I/C Agreement) shall have been paid in full. Notwithstanding the foregoing, on the four year anniversary date of this Agreement (such date being hereinafter referred to as the "Release Date"), such portion of the Escrow Property not then subject to claims by the Purchasers as provided in Article 4 hereof shall be released to the Company. ARTICLE 4 CLAIMS AGAINST ESCROW Any claims by the Purchasers against the Escrow Property for indemnification in respect of UBL Losses under the Stock Purchase Agreement (as modified by the I/C Agreement) shall be made as follows: 4.1 NOTIFICATION. (a) Any Purchaser may notify the Escrow Agent in writing, in accordance with paragraph (b) below, of any indemnification claims in respect of UBL Losses. (b) Any notice delivered pursuant to paragraph (a) above shall consist of a description of the claim or claims and shall state either (i) the amount of each claim or (ii) the maximum amount of each claim against the Escrow Property, but that the exact amount cannot be definitely determined at such time. The Escrow Agent shall promptly notify the Company in writing that a Purchaser has made a claim against the Escrow Property and such notification shall be accompanied by a photocopy of the notice received by the Escrow Agent from the Purchaser regarding such claim. 4.2 CONTEST. The Company may contest any such claim by giving the Escrow Agent and such Purchaser written notice of such contest within 30 business days after receipt by the Company of notice of such claim from the Escrow Agent. If the Company notifies the Escrow Agent and such Purchaser that it contests a claim in accordance with this Section 4.2, the Escrow Agent shall continue to hold the Escrow Property pending resolution of the dispute in accordance with the terms hereof. The Company and such Purchaser shall have 30 days from the date of receipt by the 4 17 Purchaser of such notice or such longer period as the parties may agree upon within which to resolve privately such contest. If the Company and such Purchaser cannot reach a resolution within such time period, Escrow Agent shall, within 10 days following the expiration of such time period, file a suit in a court of competent jurisdiction seeking an adjudication of the claim of such Purchaser. The Escrow Agent shall continue to hold the Escrow Property pending court adjudication of the dispute. ARTICLE 5 INVESTMENT AND INTEREST 5.1 INVESTMENT. The Escrow Agent shall invest any funds constituting part of the Escrow Property in such (a) obligations of the United States Government or any agency thereof, (b) commercial paper of companies incorporated or organized under the laws of the United States or one of the States thereof and in each case having a rating assigned to such commercial paper by Standard & Poor's Corporation or Moody's Investor Services, Inc. equal to the highest rating assigned by such organization, (c) U.S. dollar-denominated certificates of deposit issued by any bank, trust company or national banking association incorporated in the United States and having a combined capital and surplus and retained earnings of at least $100,000,000, (d) interest bearing accounts of any bank, trust company or national banking association incorporated in the United States and having a combined capital and surplus and retained earnings of at least $100,000,000, or (e) money market mutual funds, as shall be specified in written instructions signed by IP Delaware. The Escrow Property does not form a part of the capital or assets of the Escrow Agent, and will not be subject to the claims of its creditors or depositors. Escrow Agent hereby agrees that during the term of this Agreement, the Escrow Property shall be physically segregated from the other assets of the Escrow Agent, and held for the exclusive benefit of the Company and the Purchasers. 5.2 INTEREST. All interest earned with respect to the investment of the Escrow Property by the Escrow Agent during the period of these escrow arrangements shall accrue and be held by the Escrow Agent. Upon any distribution of any part of the Escrow Property to any person, all interest earned and accrued with respect to such part of the Escrow 5 18 Property shall be distributed along with such part of the Escrow Property to such person. For tax purposes, the Escrow Property shall be treated as property of the Company, and interest earned on the Escrow Property prior to the distribution thereof shall, for tax purposes, be deemed to be income of the Company. All tax reporting by the Company, the Purchasers and the Escrow Agent shall be consistent with the foregoing treatment. ARTICLE 6 FEES AND CHARGES For its ordinary services hereunder, the Escrow Agent shall receive a fee of $_________, payable by the Company. However, in the event Escrow Agent is required to institute litigation to resolve a dispute under Article 4, the Escrow Agent's fees and expenses shall be paid as provided in Section 1.5. ARTICLE 7 MISCELLANEOUS 7.1 NOTICES. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier, or registered or certified mail, postage prepaid, return receipt requested, addressed as follows (or at such other address as may be substituted by notice given as herein provided): If to the Company: Central Reserve Life Corporation 17800 Royalton Road Strongsville, Ohio 44136 Facsimile No.: [__________________] Attention: [__________________] 6 19 If to Escrow Agent: Attn: Fax: If to any Purchaser, at its address listed on the signature pages hereof or as otherwise notified to the Company. Any notice or communication hereunder shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back, if telexed; when receipt is acknowledged, if telecopied; and five (5) calendar days after mailing if sent by registered or certified mail (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). 7.2 INVALID PROVISIONS. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable, this Agreement shall be construed and enforced as of such illegal, invalid, or unenforceable provision had never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. 7.3 ENTIRETY AND AMENDMENTS. This Agreement supersedes all prior documents, understandings, or agreement, oral or written, relating to the subject matter hereof and constitutes the entire understanding between the parties with respect to the subject matter hereof. Any modification or amendment to, or waiver of, any provision of this Agreement may be made only by an instrument in writing executed by the party against whom enforcement is sought. 7.4 HEADINGS. The descriptive section headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. 7.5 CHOICE OF LAW. This Agreement, including, without limitation, the interpretation, construction, validity and enforceability thereof, shall be governed by the laws (other than the conflict of laws rules) of the State of New York. 7 20 7.6 PARTIES BOUND. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 7.7 INSOLVENCY. The bankruptcy or insolvency of the Company or any Purchaser shall not affect or prevent performance by the Escrow Agent of its obligations and instructions hereunder. 7.8 INSPECTION OF RECORDS. The Company and each Purchaser may examine the records pertaining to the Escrow Property during the business hours of the Escrow Agent; such examination shall be permitted, however, only in the presence of an officer of the Escrow Agent. 7.9 MULTIPLE COUNTERPARTS. This Agreement may be executed in a number of identical counterparts, each of which shall for all purposes by deemed an original, and all of which together shall constitute but one and the same instrument. [Remainder of page intentionally left blank.] 8 21 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. CENTRAL RESERVE LIFE CORPORATION By: --------------------------------- Name: ------------------------------- Title: ------------------------------ 9 22 SIGNATURE PAGE TO INDEMNIFICATION ESCROW AGREEMENT NAMES OF PURCHASERS: INSURANCE PARTNERS, L.P., a Delaware limited partnership By: Insurance GenPar, L.P., its general partner By: Insurance GenPar MGP, Inc. By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. By: Insurance GenPar (Bermuda), L.P., its general partner By: Insurance GenPar (Bermuda) MGP, Inc. By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- 10 23 SIGNATURE PAGE TO INDEMNIFICATION ESCROW AGREEMENT NAMES OF PURCHASERS: ---------------------------------------------- Peter W. Nauert ---------------------------------------------- Michael Cavataio MERCANTILE BANK OF NORTHERN ILLINOIS, trustee of The Conseco Stock Option Plan F/B/O Michael Cavataio By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- ---------------------------------------------- Karon Hill ---------------------------------------------- Val Rajic TURKEY VULTURE FUND, LTD. By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- MEDICAL MUTUAL OF OHIO By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- 11 24 UNITED PAYORS & UNITED PROVIDERS, INC. By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- ---------------------------------------------- Howard R. Conant ---------------------------------------------- Joseph Cusimano IRA LEG PARTNERS SBIC, L.P. By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- ---------------------------------------------- Marc C. Krantz KRANTZ FAMILY LIMITED PARTNERSHIP By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- 12 25 SIGNATURE PAGE TO INDEMNIFICATION ESCROW AGREEMENT ESCROW AGENT: By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- 13 EX-99.5 6 AGREEMENT OF UNDERSTANDING 1 EXHIBIT 5 AGREEMENT OF UNDERSTANDING Dated July 3, 1998 Reference is hereby made to the Amended and Restated Stock Purchase Agreement (the "Purchase Agreement") dated as of March 30, 1998, by and among Strategic Acquisition Partners, LLC ("SAP"), Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P. (collectively, "Purchasers") and Central Reserve Life Corporation (the "Company"). Whereas, in connection with the consummation of the transactions contemplated by the Purchase Agreement, the Company and Purchasers have entered into that certain Indemnification and Closing Agreement ("Indemnification Agreement") dated as of July 1, 1998. Whereas, the Company and the Purchasers wish to clarify their intent with respect to the Indemnification Agreement. Now, therefore, the parties hereto hereby acknowledge and agree as follows: 1. The Indemnification Agreement constitutes an amendment to the Purchase Agreement. 2. The assignees of SAP referred to in the Indemnification Agreement are not parties to the Purchase Agreement and are not intended to be parties to the Indemnification Agreement. 3. The Indemnification Agreement shall be valid and binding among the Company and the Purchasers. 4. The parties hereto shall take all such necessary and further action as may be reasonably requested by any party hereto to implement the terms of this Agreement of Understanding. 2 INSURANCE PARTNERS, L.P. By: Insurance GenPar L.P., its general partner By: Insurance GenPar MGP, L.P., its General Partner By: Insurance GenPar MGP, Inc., its General Partner By: /s/ BRADLEY E. COOPER ----------------------------- Name: Bradley E. Cooper Title: First Vice President INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. By: Insurance GenPar (Bermuda) L.P., its general partner By: Insurance GenPar (Bermuda) MGP, L.P., its general Partner By: Insurance GenPar (Bermuda) MGP, Inc., its general Partner By: /s/ BRADLEY E. COOPER ---------------------------------- Name: Bradley E. Cooper Title: First Vice President 3 STRATEGIC ACQUISITION PARTNERS, LLC By: /s/ VAL RAJIC --------------------------------- Name: Val Rajic ------------------------------- Title: PRESIDENT ------------------------------ CENTRAL RESERVE LIFE CORPORATION By: /s/ VAL RAJIC --------------------------------- Name: Val Rajic ------------------------------- Title: EXECUTIVE VICE PRESIDENT ------------------------------ -----END PRIVACY-ENHANCED MESSAGE-----