-----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, AZJZ0kii9iA0wMxK5TITsZYCeS4LtM0K6pPGchV2wM0j/PZGQY0WhcbpVesztXMk FTz31NEyJUpCrHMFbl+Bxg== 0000950152-98-006251.txt : 19980803 0000950152-98-006251.hdr.sgml : 19980803 ACCESSION NUMBER: 0000950152-98-006251 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19980729 SROS: NONE 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/A SEC ACT: SEC FILE NUMBER: 005-36346 FILM NUMBER: 98673071 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: TURKEY VULTURE FUND XIII LTD CENTRAL INDEX KEY: 0000935886 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 7001 CENTER STREET CITY: MENTOR STATE: OH ZIP: 44060 BUSINESS PHONE: 2169511111 MAIL ADDRESS: STREET 2: 7001 CENTER ST CITY: MENTOR STATE: OH ZIP: 44060 SC 13D/A 1 CENTRAL RESERVE LIFE/TURKEY VULTURE FUND--SC 13D/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 5 )* Central Reserve Life Corporation - ------------------------------------------------------------------------------- (Name of Issuer) Shares of Common Stock - ------------------------------------------------------------------------------- (Title of Class of Securities) 155055-10-6 - ------------------------------------------------------------------------------- (CUSIP Number) Marc C. Krantz, Kohrman Jackson & Krantz P.L.L., 1375 East 9th Street, Cleveland, Ohio 44114, 216-736-7204 - ------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive 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 which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. NOTE: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *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 ("Act") 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). Page 1 of 9 Pages 2 CUSIP No. 155055-10-6 SCHEDULE 13D Page 2 of 9 Pages --------------------- -------- -------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Turkey Vulture Fund XIII, Ltd. --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ X ] (b) [ ] 3 SEC USE ONLY --------------------------------------------------------------------- 4 SOURCE OF FUNDS WC,BK,AF --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Ohio --------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 1,781,365(1) SHARES -------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH -------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER Person With 1,781,365(1) -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,781,365(1) --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ X ](2) --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 14.0%(1) --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* O --------------------------------------------------------------------- 1 Assumes the exercise of the Equity Warrant and the Guaranty Warrants. 2 See Item 5 herein. 3 CUSIP No. 155055-10-6 This Amendment No. 5 to Schedule 13D Statement is filed on behalf of Turkey Vulture Fund XIII, Ltd., an Ohio limited liability company (the "Fund"), for the purpose of reporting the acquisition of (i) a warrant (the "Equity Warrant") to purchase 360,455 shares of Common Stock, without par value ("Shares"), of Central Reserve Life Corporation, an Ohio corporation ("CRLC"); (ii) a warrant to purchase 60,000 Shares (the "July 1 Guaranty Warrant") and (iii) 720,910 Shares. Item 3. Source and Amount of Funds or Other Consideration. Item 3 of Schedule 13D is hereby amended and supplemented as follows: The Equity Warrant and Shares reported herein as being acquired, are being purchased with a combination of working capital of the Fund and $2.0 million contributed to the Fund by Richard M. Osborne, sole Manager of the Fund. Mr. Osborne borrowed the $2.0 million from Fifth Third Bank ("FTB") on July 5, 1998. In connection with such loan, Mr. Osborne executed a Promissory Note in favor of FTB, dated July 5, 1998 (the "Note"), which matures June 30, 1999. The Note, attached hereto as Exhibit 7.3, bears interest at the prime rate announced by FTB from time to time and is secured by certain securities owned by affiliates of Mr. Osborne. The July 1 Guaranty Warrant was issued in consideration of the Guaranty of Mr. Osborne (described more fully in Item 4 to Amendment No. 4 to Schedule 13D filed by the Fund on December 26, 1997 and herein referred to as the "Guaranty"). Item 4. Purpose of Transaction. Item 4 of Schedule 13D is hereby amended and supplemented as follows: Strategic Acquisition Partners, LLC ("SAP") assigned to the Fund Partners' right to purchase the Shares and Warrants reported herein as being acquired by the Fund, which right arose under the Amended and Restated Stock Purchase Agreement by and between, Partners, Insurance Partners, L.P., Insurance Partners Offshore, L.P. and CRLC, dated as of March 30, 1998. Mr. Osborne was elected to the Board of Directors of CRLC on July 3, 1998. Item 5. Interest in Securities of the Issuer. Item 5 of Schedule 13D is hereby amended and supplemented as follows: (a) According to the most recently available filing with the Securities and Exchange Commission by CRLC and information known to the Fund, there are 11,495,172 Shares outstanding. If the Equity Warrant, the July 1 Guaranty Warrant and the Fund's warrant to purchase 240,000 Shares, issued in connection with the Guaranty (together with the July 1 Guaranty Warrant, the "Guaranty Warrants") were fully exercised, there would be 12,155,627 Shares outstanding (the "Outstanding Shares"). Page 3 of 9 Pages 4 CUSIP No. 155055-10-6 The Fund beneficially owns 1,781,365 Shares, assuming full exercise of the Equity Warrant and the Guaranty Warrants, or approximately 14.0% of the Outstanding Shares. As sole Manager of the Fund, Mr. Osborne may be deemed to beneficially own all such Shares. Pursuant to the Voting Agreement dated as of July 1, 1998 (the "Closing Date") by and among CRLC; Insurance Partners, L.P. ("IP Delaware"); Insurance Partners Offshore (Bermuda), L.P. ("IP Bermuda" and together with IP Delaware, "Insurance Partners"); SAP; Peter W. Nauert; Michael A. Cavataio; Mercantile Bank of Northern Illinois, Trustee of the Conseco Stock Option Director Plan FBO Michael Cavataio #08590033; Mercantile Bank of Northern Illinois, Trustee of the Conseco Stock Option Director Plan FBO Michael Cavataio #08590034; Karon Hill; Val Rajic; Marc C. Krantz; Krantz Family Limited Partnership; Medical Mutual of Ohio; United Payors and United Providers, Inc.; Howard R. Conant; Joseph Cusimano IRA; Leg Partners SBIC, L.P. and the Fund (collectively, the "Stockholders"), and attached hereto as Exhibit 7.8 (the "Voting Agreement"), the Stockholders have agreed to cause the Board of Directors of CRLC 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 Shares owned by the IP Group on the Closing Date, (b) three individuals designated by Insurance Partners, so long as the IP Group owns Shares equal to at least 50%, but less than 75% of the Shares owned by the IP Group on the Closing Date, (c) two individuals designated by Insurance Partners, so long as the IP Group owns Shares equal to at least 25%, but less than 50%, of the Shares owned by the IP Group on the Closing Date, and (d) one individual designated by Insurance Partners, so long as the IP Group owns Shares equal to at least 10%, but less than 25%, of the Shares 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 Shares equal to at least 50% of the Shares owned by the SAP Group on the Closing Date, and (b) one individual designated by SAP, so long as the SAP Group owns Shares equal to at least 10%, but less than 50% of the Shares 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 Shares equal to at least 25% of the Shares 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 Securities Exchange Act of 1934 (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 CRLC shall not voluntarily be delisted from the Nasdaq National Market System, Inc. Page 4 of 9 Pages 5 CUSIP No. 155055-10-6 except in connection with a going private transaction or if CRLC 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 CRLC 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 Stockholders and their respective transferees, granted each of IP Delaware, SAP and the Fund a proxy to vote the Shares held by such person, in the event such person fails to vote its Shares in accordance with the foregoing provisions of this paragraph. This description of the Voting Agreement is not and does not purport to be complete and is qualified in its entirety by reference to the Voting Agreement. In addition, the Voting Agreement provides that the Stockholders will, as promptly as practicable after the Closing Date, vote in favor of an amendment to CRLC'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 Stockholder may effect, cause to be effected, or permit any voluntary or involuntary sale, assignment, or transfer ("Transfer") of any Shares 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 (the "Securities Act"), unless the transferee agrees to be bound by the provisions of the Voting Agreement and the Stockholders Agreement (as defined below) 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 will 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 Shares. In addition, CRLC and the Stockholders 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 7.10. Pursuant to the Stockholders Agreement, each of the Stockholders is provided certain rights in respect of its outstanding Shares in the event of certain sales of Shares by other Stockholders. Specifically, if Insurance Partners disposes of Shares representing more than 20% of the outstanding Shares, the IP Group has the right to require each non-selling Stockholder (each, a "Co-Seller") to transfer a portion of its Shares 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 Shares held by the IP Group. All Shares 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 Shares being sold by the IP Group. The Stockholders Agreement further provides that if any Stockholder desires to effect a transfer of Shares (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 Shares, then the selling Stockholder must make an offer to each Co-Seller to include in the proposed Page 5 of 9 Pages 6 CUSIP No. 155055-10-6 sale a portion of such Co-Seller's Shares which represents the same percentage of such Co-Seller's fully diluted Shares as the Shares being sold by the selling Stockholder represent of its fully diluted Shares. Because of the Voting Agreement and Stockholders Agreement, the Fund and the other Stockholders may be deemed to be a group within the meaning of Section 13(d)(3) of the Exchange Act. If the Stockholders are deemed to be a group within the meaning of Section 13(d)(3) of the Exchange Act, the Fund may be deemed to beneficially own 12,351,000 Shares, or approximately 76.5% of the Shares that would be outstanding if each Stockholder had exercised their respective outstanding rights to purchase Shares. The Fund disclaims beneficial ownership of the Shares held by the other Stockholders. (b) Except as set forth in the Voting Agreement and the Stockholders Agreement, Mr. Osborne, as sole Manager of the Fund, has sole power to vote, or to direct the voting of, and the sole power to dispose or to direct the disposition of, the Shares owned by the Fund. (c) Since the filing of Amendment No. 4, the Fund acquired the Equity Warrant to purchase 360,455 Shares, the July 1 Guaranty Warrant to purchase 60,000 Shares and 720,910 Shares from CRLC on July 3, 1998. (d) Not Applicable. (e) Not Applicable. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. Item 6 of Schedule 13D is hereby amended and supplemented as follows: Reference is hereby made to (i) the Voting Agreement attached hereto as Exhibit 7.8; (ii) the Registration Rights Agreement, dated as of July 1, 1998, by and among CRLC and the Stockholders, and attached hereto as Exhibit 7.9, which provides the Fund and the other Stockholders with certain rights to have their shares registered pursuant to the Securities Act, including the right of the Fund to one demand registration at the expense of CRLC (the "Registration Rights Agreement"); and (iii) the Stockholders Agreement, attached hereto as Exhibit 7.10. Item 7. Material to be Filed as Exhibits. Item 7 of Schedule 13D is hereby amended and supplemented as follows: Exhibit 7.3 -- Promissory Note, dated July 6, 1998, executed by Richard M. Osborne in favor of Fifth Third Bank Page 6 of 9 Pages 7 CUSIP No. 155055-10-6 Exhibit 7.4 -- Pledge Agreement by and between the Richard M. Osborne Trust and Fifth Third Bank, dated as of July 6, 1998 Exhibit 7.5 -- Pledge Agreement by and between Liberty Self Stor, Ltd. and Fifth Third Bank, dated as of July 6, 1998 Exhibit 7.6 -- Third Party Collateral Agreement by and between the Richard M. Osborne Trust and Fifth Third Bank, dated as of July 6, 1998 Exhibit 7.7 -- Third Party Collateral Agreement by and between Liberty Self Stor, Ltd. and Fifth Third Bank, dated as of July 6, 1998 Exhibit 7.8 -- The Voting Agreement Exhibit 7.9 -- The Registration Rights Agreement Exhibit 7.10 -- The Stockholders Agreement Page 7 of 9 Pages 8 CUSIP No. 155055-10-6 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 6, 1998 TURKEY VULTURE FUND XIII, LTD. By: /s/ RICHARD M. OSBORNE ---------------------------------- Richard M. Osborne, Manager Page 8 of 9 Pages 9 CUSIP No. 155055-10-6 Exhibit Index Exhibit 7.3 -- Promissory Note, dated July 6, 1998, executed by Richard M. Osborne in favor of Fifth Third Bank Exhibit 7.4 -- Pledge Agreement by and between the Richard M. Osborne Trust and Fifth Third Bank, dated as of July 6, 1998 Exhibit 7.5 -- Pledge Agreement by and between Liberty Self Stor, Ltd. and Fifth Third Bank, dated as of July 6, 1998 Exhibit 7.6 -- Third Party Collateral Agreement by and between the Richard M. Osborne Trust and Fifth Third Bank, dated as of July 6, 1998 Exhibit 7.7 -- Third Party Collateral Agreement by and between Liberty Self Stor, Ltd. and Fifth Third Bank, dated as of July 6, 1998 Exhibit 7.8 -- The Voting Agreement Exhibit 7.9 -- The Registration Rights Agreement Exhibit 7.10 -- The Stockholders Agreement Page 9 of 9 Pages EX-7.3 2 EXHIBIT 7.3 1 Exhibit 7.3 OHIO AFFILIATES A Fifth Third Bankcorp Bank Note: Retain Customer Copy for your records OFFICER No. 0434 NOTE No. ---- ----------- $2,000,000 July 3, 1998 - ---------- --------------- City: Cleveland, State Ohio (Effective Date) ---- On or before the Due Date below, the undersigned, a (check one) [ ] corporation [ ] partnership [ X ] individual [ ] limited liability company, for value received and if more than one, jointly and severally, promise to pay to the order of Fifth Third Bank of Northeastern Ohio, 1404 East Ninth Street, Cleveland, Ohio 44114 (hereinafter referred to as "Bank") the sum of Two Million and No/100 Dollars (hereinafter referred to as the "Borrowing") plus interest as provided herein, less such amounts as shall have been repaid in accordance with this note. The outstanding balance of this note will appear on a supplement bank record and is not necessarily the face amount of this note. Such record shall be conclusive as to the balance due of this note at any time. The principal sum outstanding shall bear interest per annum at the rate of -0- % greater than the "Prime Rate" (the rate announced by the Bank from time to time) on the above Effective Date. In the event of a change in said Prime Rate, the rate of this note shall be changed immediately to that rate which shall be greater than the new Prime Rate by the amount stated in this clause. Interests shall be computed based on a year of 360 days and charged for the actual number of days elapsed. Prior to the Due Date, Bank may (but is not obligated to) lend to the undersigned such amounts as may from time to time be requested by the undersigned provided that (a) the principal amount borrowed shall not at any time exceed the Borrowing (b) no Event of Default as defined herein shall exist, and (c) amounts advanced and repaid may not reborrowed hereunder.
Interest shall be due and payable: [ ] At maturity on the Due Date set forth below: [ X ] On the 30th day of each [ X ] Month [ ] Quarter beginning July 30, 1998. Principal shall be due and payable on the Due Date set forth below.
To secure repayment of this note and all modifications, extensions and renewals thereof, and all other Obligations (as herein defined) of the undersigned to Bank, the undersigned grants Bank a security interest in all of the undersigned's now owned or hereafter acquired interests in all property in which Bank is, at any time, granted a lien for any Obligation and all property in possession of Bank including, without limitation, money, securities, instruments, documents, letters of credit, chattel paper, or other property delivered to Bank in transit, for safekeeping, or for collection of exchange for other property, all distributions, dividends, warrants, securities or other rights in addition to such property, all rights to payment from and claims against Bank and all proceeds thereof, and all real and personal property described below ("Collateral"). The undersigned agrees to immediately deliver such additional dividends warrants, securities or other property or rights thereto to Bank immediately upon receipt as additional Collateral and until delivery to hold same in trust for Bank. The undersigned agrees that the Bank may, at any time, call for additional Collateral satisfactory to it. All documents executed in connection with this note and all Collateral, including without limitation the following, further secure the Obligations: - ------------------------------------------------------------------------------- Collateral listed on Exhibit A attached hereto - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- The Obligations secured by the Collateral (herein, "Obligations") shall include this note and each and every liability of the undersigned jointly or severally to Bank and all affiliates of Fifth Third Bancorp however created, direct or contingent, due or to become due whether now existing or hereafter arising, participated in whole or in part, created by trust agreement, lease, overdraft, agreement, or otherwise, in any manner by the undersigned. The undersigned also grants Bank a security interest in all of the Collateral as agent for all affiliates of Fifth Third Bancorp for all Obligations of the undersigned to such affiliates. Said security 2 interest shall not be enforced to the extent prohibited by the Truth in Lending Act as implemented by Federal Reserve Regulation Z. The undersigned certifies that the proceeds of this loan are to be used for business purposes. If this note is a renewal, in whole or in part, of a previous Obligation, the acceptance by Bank of this note shall not effectuate a payment but rather a continuation of the previous Obligation. Bank may charge, and the undersigned agrees to pay, on the above Effective Date, a note processing fee in an amount determined by Bank. Events of Default: This note, and all other Obligations of the undersigned to Bank, shall be and become immediately due and payable at the option of the Bank, without any demand or notice whatsoever, upon the occurrence of any of the following described events, each of which shall constitute an Event of Default: 1) Any failure to take any payment when due of the principal or interest on this note, the occurrence of any event of default as therein defined on any other Obligation of the undersigned, or a default in the Obligations under any security documents. 2) The death or dissolution of the undersigned, of an endorsers or guarantor, or if the undersigned is a partnership, the death or dissolution of a general partner. 3) Any failure to submit to Bank current financial information upon request. 4) The creation of any lien (except a lien to Bank) or the issuance of an attachment against or seizure of any of the property of, or the entry of a judgment against, the undersigned. 5) In the judgment of Bank, any adverse change occurs in the ability of the undersigned to repay the Obligations, or the Bank deems itself insecure. 6) An assignment for the benefit of the creditors of, or the commencement of any bankruptcy, receivership, insolvency, reorganization, or liquidation proceedings by or against the undersigned or any endorser or guarantor hereof. 7) The institution of any garnishment proceedings by attachment, levy or otherwise, against any Collateral, any deposit balance maintained or any property deposited with the Bank by the undersigned or any endorser or guarantor hereof. 8) Bank has called for additional security and the undersigned has not furnished satisfactory additional security on demand. Upon the occurrence of an Event of Default herein described Bank may, at its option cease making advances hereunder, declare this note and all other Obligations of the undersigned, to be fully due and payable in their aggregate amount together with accrued interest plus any applicable prepayment premiums, fees and charges. In addition to any other remedy permitted by law, the Bank may at any time, without notice, apply the Collateral to this note or such other Obligations, whether due or not, and Bank may, at its option, proceed to enforce and protect its rights by an action at law or in equity or by any other appropriate proceedings. Notwithstanding any other legal or equitable rights of Bank, Bank in the Event of Default, is (a) hereby irrevocably appointed and constituted attorney-in-fact, with full power of substitution, to exercise all rights of ownership with respect to Collateral including, not limited to, the right to collect all income of other distributions arising therefrom and to exercise all voting rights connected with Collateral; and (b) is hereby given full power to collect, sell, assign, transfer and deliver all of said Collateral or any part thereof, or any substitutes therefor, or an additions thereto through any private or public sale without either demand or notice to the undersigned, or any advertisement, the same being hereby expressly waived, at which sale Bank is authorized to purchase said property or any part thereof, free from any right of redemption on the part of the undersigned, which is hereby expressly waived and released. In case of sale for any cause, after deducting all costs and expenses of every kind, Bank may apply, as it shall deem proper, the residue of the proceeds of such sale toward the payment of any one or more of all of the Obligations of the undersigned, whether due or not, to Bank, after such application and the return of any surplus, the undersigned agrees to be and remains liable to Bank for any and every deficiency after application as aforesaid upon this and any other Obligation. The undersigned shall pay all costs of collection incurred by Bank, including its attorney's fees, if this note is referred to an attorney for collection, whether or not payment is obtained before entry of judgment, which costs and fees are Obligations secured by the Collateral. If any payment is not paid when due (whether by acceleration or otherwise) or within 10 days thereafter, the undersigned agrees to pay to Bank a late payment fee as provided for in any loan agreement or 5% of the payment amount, whichever is greater, with a minimum fee of $20.00. After an Event of Default, the undersigned agrees to pay to Bank a fixed charge of $25.00 or the - 2 - 3 undersigned agrees that Bank may, without notice, increase the above stated interest by 6%, whichever is greater. Under no circumstances shall said interest rate be raised to a rate which shall be in excess of the maximum rate of interest allowable under the state and/or federal usury laws in force at the time of such change. The undersigned may prepay all or part of this note, which prepaid amounts shall be applied to the amounts due in reverse order of their due dates. Upon such prepayments including involuntary prepayment by acceleration, the undersigned shall pay a premium of 2% of the maximum principal amount permitted under this note. Partial prepayments shall not excuse any subsequent payment due. ENTIRE AGREEMENT: The undersigned agrees that there are no conditions or understandings which are not expressed in this note and the documents referred to herein. WAIVER: No failure on the part of Bank to exercise any of its rights hereunder shall be deemed a waiver of any such rights or of any default. Demand, presentment, protest, and notice of dishonor, notice of protest, and notice of default are hereby waived. Each of the undersigned, including but not limited to all co-makers and accommodation makers of this note, hereby waives all suretyship defenses including but not limited to all defenses based upon impairment of collateral and all suretyship defenses described in Section 3-605 of the Uniform Commercial Code, as revised in 1990 (the "UCC"). Such waiver is entered to the full extent permitted by Section 3-605(i) of the UCC. JURY WAIVER: THE UNDERSIGNED, AND ANY ENDORSER OR GUARANTOR HEREOF, WAIVE THE RIGHT TO A TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY. The declaration of invalidity of any provision of this note shall not affect any part of the remainder of the provisions. [ X ] This note is supplemented by the terms and conditions of a commitment letter dated July 3, 1998 between the undersigned and Bank. Warrant of attorney: The undersigned, jointly and severally, authorize any attorney-at-law to appear in any court of record after maturity of this note, whether by acceleration or otherwise, to waive the issuance and service of process and to confess judgment against them in favor of the Holder for the principal sum due hereon together with interest, charges, court costs and attorney's fees, and to waive and release all errors, rights of appeals, exemptions and stays of execution. The undersigned also agrees that the attorney acting for the undersigned as set forth in this paragraph may be compensated by Bank for such services, and the undersigned waive any conflict of interest caused by such representation and compensation arrangement. This warrant of attorney to confess judgment shall be construed under the laws of the State of Ohio. WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE. DUE DATE June 30, 1999 /s/ RICHARD M. OSBORNE ------------------------- -------------------------- ADDRESS 7001 Center Street Richard M. Osborne ------------------------- -------------------------- Mentor, Ohio 44060 ------------------------- -------------------------- - 3 - EX-7.4 3 EXHIBIT 7.4 1 Exhibit 7.4 A FIFTH THIRD BANCORP BANK PLEDGE AGREEMENT (SECURITIES) This PLEDGE AGREEMENT ("Agreement") is made this 6th day of July, 1998, by and between Richard M. Osborne Under Trust Dated January 13, 1995, Richard M. Osborne, Trustee,("Pledgor"), and Fifth Third Bank, 1404 East Ninth Street, Cleveland, Ohio 44114 ("Pledgee"). 1. Pledge. (a) Pledgor, jointly and severally if more than one, pledges, mortgages, assigns, transfers, delivers, deposits, sets over and confirms as a first priority security interest to Pledgee and its successors and assigns, for itself and as agent for any affiliate of Fifth Third Bancorp, all of Pledgor's right, title and interest in and to the securities listed on Exhibit A attached hereto and all income, dividends and other distributions thereon and the proceeds thereof (collectively, the "Interest"), as collateral security for payment and performance of the following (collectively, the "Obligations"): all loans, advances, indebtedness and other obligations of each of Pledgor and Richard M. Osborne 7001 Center Street, Mentor, Ohio 44060 (if different from Pledgor, hereinafter referred to as "Borrower") owed to Pledgee and/or any affiliate of Fifth Third Bancorp, of every kind and description whether now existing or hereafter arising including without limitation those owed to others and acquired by Pledgee by purchase, assignment or otherwise) and whether direct or indirect, primary or as guarantor or surety, absolute or contingent, liquidated or unliquidated, matured or unmatured, whether or not secured by additional collateral, and all liabilities, obligations and indebtedness arising under this Agreement and all other instruments and agreements evidencing, guarantying or securing any of the foregoing, and all obligations to perform or forbear from performing acts, all amounts represented by letters of credit now or hereafter issued by Pledgee for the benefit of or at the request of Borrower or Pledgor, and all expenses and attorneys' fees incurred by Pledgee under this Agreement or any other document or instrument related thereto or related thereto including but not limited to the following: $2,000,000 Draw Note dated July 6 1998 (b) All dividends and distributions (in the form of cash, property, stock or other securities) arising out of the Interest (collectively "Distributions") shall immediately become subject to the lien and security interest of this Agreement and upon 2 acquisition of any such additional Interest, Pledgor agrees to deliver to Pledgee, all documents evidencing the Interest and any additional documentation requested by Pledgee to perfect and protect Pledgee's interest therein. (c) All certificates evidencing the Interest are herewith delivered to the Secured Party accompanied by assignments executed in blank. 2. Representations and Warranties. Pledgor represents and warrants to Pledgee that: (a) Pledgor is the sole holder of record and sole beneficial owner of the Interest, free and clear of any security interest, pledge, or other lien or encumbrance (collectively "Lien"); (b) Pledgor has the right and requisite authority to pledge, mortgage, assign, transfer, deliver, deposit, set over and confirm the Interest to Pledgee as provided herein; (c) Pledgor has obtained all necessary consents, approvals, authorizations or orders of any person, corporation, partnership, trust, governmental entity, or other entity required for the execution and delivery of this Agreement or the delivery of the Interest to Pledgee as provided herein; and (d) there are no restrictions on the transfer of the Interest except as set forth on the face of any certificate evidencing the Interest. The representations and warranties set forth in this Section 2 shall survive the execution and delivery of this Agreement. 3. Default. Each of the following will be an Event of Default hereunder (herein "Events of Default"): (a) the default in the payment or performance of the Obligations or any part thereof; (b) the occurrence of a default or an Event of Default under any instrument or agreement evidencing, guarantying or securing any of the Obligations; (c) the failure of Pledgor to perform or observe any of the provisions of this Agreement; (d) any misrepresentation by Borrower or Pledgor to Pledgee for the purpose of obtaining credit or an extension of credit; (e) the issuance of a court order lien or attachment against the any part of the Interest; (f) the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Pledgor or Borrower in an involuntary or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of Borrower or Pledgor or 3 for any substantial part of either of their properties, or ordering the wind-up or liquidation of either of their affairs, or the filing and pendency for 60 days without dismissal of a petition initiating an involuntary case under any such bankruptcy, insolvency or other similar law; (g) the commencement by Borrower or Pledgor of a voluntary case under any applicable bankruptcy, insolvency or other similarly law now or hereafter in effect, or the consent by either of them to the entry of an order for relief in an involuntary case under any such law or to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Borrower or Pledgor or of any substantial part of either of their properties, or the making by either of them of any general assignment for the benefit of creditors, or the failure of Borrower or Pledgor generally to pay either of their debts as such debts become due, or the taking of corporate action by Borrower or Pledgor in furtherance of any of the foregoing; (h) the death or dissolution of Borrower, Pledgor or any endorser or guarantor of the Obligations; or (i) the occurrence of any adverse change in the condition or affairs (financially or otherwise) of Borrower, Pledgor or of any endorser, guarantor or surety for any of the Obligations, which in the opinion of Pledgee impairs Pledgee's security or the ability of Pledgee to recover repayment or performance of any Obligations or the Pledgee deems itself insecure. THIS AGREEMENT IS SUBJECT TO, AND PLEDGOR AGREES TO BE BOUND BY, THE ADDITIONAL PROVISIONS SET FORTH ON THE REVERSE SIDE HEREOF, THE SAME BEING INCORPORATED HEREIN BY REFERENCE. Dated this 6th day of July, 1998. PLEDGEE: PLEDGOR: Fifth Third Bank Richard M. Osborne Under Trust Dated January 13, 1995 By: /s/ DAVID T. MERKEL /s/ RICHARD M. OSBORNE, Trustee -------------------------- ------------------------------------ David T. Merkel Richard M. Osborne, Trustee Its: Vice President 4 EXHIBIT A Security Name Shares Certificate Number CUSIP Number GLB Bancorp, Inc. 88,075 C-0089 361778103 Great Lakes Bank 87,875 25 EX-7.5 4 EXHIBIT 7.5 1 Exhibit 7.5 A FIFTH THIRD BANCORP BANK PLEDGE AGREEMENT (SECURITIES) This PLEDGE AGREEMENT ("Agreement") is made this 6th day of July, 1998, by and between Liberty Self Stor, Ltd.,("Pledgor"), and Fifth Third Bank, 1404 East Ninth Street, Cleveland, Ohio 44114 ("Pledgee"). 1. Pledge. (a) Pledgor, jointly and severally if more than one, pledges, mortgages, assigns, transfers, delivers, deposits, sets over and confirms as a first priority security interest to Pledgee and its successors and assigns, for itself and as agent for any affiliate of Fifth Third Bancorp, all of Pledgor's right, title and interest in and to the securities listed on Exhibit A attached hereto and all income, dividends and other distributions thereon and the proceeds thereof (collectively, the "Interest"), as collateral security for payment and performance of the following (collectively, the "Obligations"): all loans, advances, indebtedness and other obligations of each of Pledgor and Richard M. Osborne, 7001 Center Street, Mentor, Ohio 44060 (if different from Pledgor, hereinafter referred to as "Borrower") owed to Pledgee and/or any affiliate of Fifth Third Bancorp, of every kind and description whether now existing or hereafter arising including without limitation those owed to others and acquired by Pledgee by purchase, assignment or otherwise) and whether direct or indirect, primary or as guarantor or surety, absolute or contingent liquidated or unliquidated, matured or unmatured, whether or not secured by additional collateral, and all liabilities, obligations and indebtedness arising under this Agreement and all other instruments and agreements evidencing, guarantying or securing any of the foregoing, and all obligations to perform or forbear from performing acts, all amounts represented by letters of credit now or hereafter issued by Pledgee for the benefit of or at the request of Borrower or Pledgor, and all expenses and attorneys' fees incurred by Pledgee under this Agreement or any other document or instrument related thereto or related thereto including but not limited to the following: $2,000,000 Draw Note. (b) All dividends and distributions (in the form of cash, property, stock or other securities) arising out of the Interest (collectively "Distributions") shall immediately become subject to the lien and security interest of this Agreement and upon 2 acquisition of any such additional Interest, Pledgor agrees to deliver to Pledgee, all documents evidencing the Interest and any additional documentation requested by Pledgee to perfect and protect Pledgee's interest therein. (c) All certificates evidencing the Interest are herewith delivered to the Secured Party accompanied by assignments executed in blank. 2. Representations and Warranties. Pledgor represents and warrants to Pledgee that: (a) Pledgor is the sole holder of record and sole beneficial owner of the Interest, free and clear of any security interest, pledge, or other lien or encumbrance (collectively "Lien"); (b) Pledgor has the right and requisite authority to pledge, mortgage, assign, transfer, deliver, deposit, set over and confirm the Interest to Pledgee as provided herein; (c) Pledgor has obtained all necessary consents, approvals, authorizations or orders of any person, corporation, partnership, trust, governmental entity, or other entity required for the execution and delivery of this Agreement or the delivery of the Interest to Pledgee as provided herein; and (d) there are no restrictions on the transfer of the Interest except as set forth on the face of any certificate evidencing the Interest. The representations and warranties set forth in this Section 2 shall survive the execution and delivery of this Agreement. 3. Default. Each of the following will be an Event of Default hereunder (herein "Events of Default"): (a) the default in the payment or performance of the Obligations or any part thereof; (b) the occurrence of a default or an Event of Default under any instrument or agreement evidencing, guarantying or securing any of the Obligations; (c) the failure of Pledgor to perform or observe any of the provisions of this Agreement; (d) any misrepresentation by Borrower or Pledgor to Pledgee for the purpose of obtaining credit or an extension of credit; (e) the issuance of a court order lien or attachment against the any part of the Interest; (f) the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Pledgor or Borrower in an involuntary or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of Borrower or Pledgor or for any substantial part of 3 either of their properties, or ordering the wind-up or liquidation of either of their affairs, or the filing and pendency for 60 days without dismissal of a petition initiating an involuntary case under any such bankruptcy, insolvency or other similar law; (g) the commencement by Borrower or Pledgor of a voluntary case under any applicable bankruptcy, insolvency or other similarly law now or hereafter in effect, or the consent by either of them to the entry of an order for relief in an involuntary case under any such law or to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Borrower or Pledgor or of any substantial part of either of their properties, or the making by either of them of any general assignment for the benefit of creditors, or the failure of Borrower or Pledgor generally to pay either of their debts as such debts become due, or the taking of corporate action by Borrower or Pledgor in furtherance of any of the foregoing; (h) the death or dissolution of Borrower, Pledgor or any endorser or guarantor of the Obligations; or (i) the occurrence of any adverse change in the condition or affairs (financially or otherwise) of Borrower, Pledgor or of any endorser, guarantor or surety for any of the Obligations, which in the opinion of Pledgee impairs Pledgee's security or the ability of Pledgee to recover repayment or performance of any Obligations or the Pledgee deems itself insecure. THIS AGREEMENT IS SUBJECT TO, AND PLEDGOR AGREES TO BE BOUND BY, THE ADDITIONAL PROVISIONS SET FORTH ON THE REVERSE SIDE HEREOF, THE SAME BEING INCORPORATED HEREIN BY REFERENCE. Dated this 6th day of July, 1998. PLEDGEE: PLEDGOR: Fifth Third Bank Liberty Self Stor, Ltd. By: /s/ DAVID T. MERKEL By: /s/ RICHARD M. OSBORNE, MG MBR ------------------------- ------------------------------------- David T. Merkel Richard M. Osborne, Managing Its: Vice President Member 4 EXHIBIT A Security Name Shares Pacific Gateway Properties 500,000 EX-7.6 5 EXHIBIT 7.6 1 Exhibit 7.6 5/3 A FIFTH THIRD BANCORP BANK THIRD PARTY COLLATERAL AGREEMENT City Cleveland State Ohio July 6, 1998 In order to induce Fifth Third Bank of Northeastern Ohio 1404 East Ninth St., Cleveland, OH 44114 and any affiliate of Fifth Third Bancorp (collectively, "Bank") to make, continue, renew or extend a loan, loans or other financial accommodations to Richard M. Osborne 7001 Center Street, Mentor, Ohio 44060 ("Debtor"), and in consideration thereof, the undersigned hereby consents and agrees that the property (real or personal) described below (collectively, the "Collateral"), of which the undersigned is the owner, may be and is hereby pledged to Bank, for itself and as agent for any affiliate of Fifth Third Bancorp, by the undersigned as collateral security for the following (collectively, the "Obligations"): all loans, advances, indebtedness and other obligations of debtor owed to Bank and/or any affiliate of Fifth Third Bancorp, of every kind and description whether now existing or hereafter arising including without limitation those owed to others and acquired by Bank (by purchase, assignment or otherwise) and whether direct or indirect, primary or as guarantor or surety, absolute or contingent, liquidated or unliquidated, matured or unmatured, whether or not secured by additional collateral, and all liabilities, obligations and indebtedness arising all instruments and agreements evidencing, guarantying or securing any of the foregoing, and all obligations to perform or forbear from performing acts, all amounts represented by letters of credit now or hereafter issued by Bank for the benefit of or at the request of Debtor and all expenses and attorneys' fees incurred by Bank under any other document or instrument related thereto or related to any of the foregoing, including but not limited to the following: $2,000,000 Draw Note dated July 6 1998. The undersigned agrees that the Collateral may be received, held and/or disposed of by Bank subject and pursuant to all the terms and conditions of any and all notes, mortgages, contracts or agreements heretofore or hereafter signed by Debtor or the undersigned in any capacity whatsoever, and Bank is hereby authorized and empowered to take any and all action with respect to the Collateral as authorized by the terms of any such note, 2 mortgage, contract or other agreement, all without notice to the undersigned, except as otherwise provided by law. The undersigned further agrees that the Collateral has been pledged with the same force and effect as if the Collateral were owned by Debtor. Without limiting Bank's powers and rights in dealing with the Collateral under the terms and conditions of any note, mortgage, contract or agreement, Bank is hereby authorized to act solely upon the instructions of Debtor relative to the sale or other disposition of the Collateral, or any substitutions therefor, or any proceeds thereof, and the receipt or acquittance of Debtor for the Collateral or any part thereof, or any substitutions therefor, or any proceeds thereof, shall be a valid and sufficient release and discharge of Bank's liability to the undersigned. The undersigned authorizes Bank at any time, without notice to the undersigned, to transfer or cause to be transferred into Bank's name, or the name of its nominee or nominees, any or all of the Collateral. The Bank is hereby given full power at any time, without notice to the undersigned, to collect, sell, assign, transfer and deliver all of the Collateral or any part thereof, or any substitutes therefor, or any additions thereto, through any stock exchange or broker's board or broker, or at private or public sale, without either demand on or notice to the undersigned, or any advertisement, the same being hereby expressly waived, at which sale Bank is authorized to purchase the Collateral, or any part thereof, free from any right of redemption on the part of the undersigned which is hereby expressly waived and released. In case of sale for any cause, after deducting all costs and expenses of every kind, Bank may apply the residue of the proceeds of such sale as it shall deem proper toward the payment of any one or more or all of the Obligations of Debtor to Bank, whether due or not due, returning the remainder, if any, to the undersigned, so long as the Collateral is not pledged to secure the indebtedness of the undersigned or any other party. Bank is hereby irrevocably appointed and constituted attorney in fact for the undersigned, with full power of substitution, to collect all dividends, interest, rents, royalties, and to exercise all voting rights connected with or arising out of the Collateral. No delay on Bank's part in exercising any power of sale, lien, option or other right with respect to the Collateral, and no 3 notice or demand which may be given to or made upon the undersigned by Bank with respect to any power of sale, lien, option or other right with respect to the Collateral, shall constitute a waiver thereof, or limit or impair Bank's right to take any action or to exercise any power of sale, lien option, or any other right with respect to the Collateral without notice or demand, or prejudice Bank's rights as against the undersigned in any respect. In addition, no action taken by Bank with respect to the Collateral shall in any way impair or limit Bank's right to exercise any or all rights or remedies Bank may otherwise have against Debtor with respect to any Obligations. This Agreement shall not, in any manner, be construed as a compromise of any Obligations. The pledge of, and security interest in, the Collateral by the undersigned to Bank are absolute, unconditional and continuing and will remain in full force and effect until the Obligations have been fully paid and satisfied. The pledge of, and security interest in, the Collateral will extend to an cover renewals of the Obligations and any number of extensions of time for payment thereof and will not be affected by any surrender, exchange, acceptance or release by the Bank of any other pledge or any security held by it for any of the Obligations. Notice of acceptance of the pledge and security interest, notice of extensions of credit to the Debtor from time to time, notice of default, diligence, presentment, protest, demand for payment, notice of demand or protest, notice of making, renewing or extending any of the Obligations and any defense based upon a failure of Bank to comply with the notice requirements of the applicable version of Uniform Commercial Code are hereby waived. Bank, at any time and from time to time, without the consent of the undersigned, may change the manner, place or terms of payment of or interest rates on, or change or extend the time of payment of, or renew or alter, any of the Obligations, without impairing or releasing the liabilities of the undersigned of its obligations to continue to pledge or grant a security interest in the Collateral. Bank in its sole discretion may determine the reasonableness of the period which may elapse prior to the making of demand for any payment upon the Debtor or any guarantor and it need not pursue any of its remedies against any other party before having recourse against the Collateral. DESCRIPTION OF COLLATERAL Collateral listed on Exhibit A attached hereto. As used herein "undersigned", if there be more than one, shall 4 mean "all of the undersigned or each of any of them", and in such case they are jointly and severally bound. If the "undersigned" be more than one, Bank may release from the obligations hereof the Collateral of one or more of the undersigned, and no such release shall in any way affect or modify the rights of Bank with respect to the Collateral of any other undersigned which has not been released. The undersigned hereby acknowledges and consents that in security documents executed and delivered to Bank in connection herewith, the undersigned may be referred to as "Debtor" or "Borrower", whether or not the undersigned is a maker of any promissory note or any endorser or guarantor thereof. WITNESS the due execution hereof as of the date set forth above. ADDRESS: OWNER(S) OF COLLATERAL 7001 Center Street Liberty Self Stor, Ltd. Mentor, Ohio 44060 /s/ RICHARD M. OSBORNE, MG MBR ---------------------------------- Richard M. Osborne, Managing Member EX-7.7 6 EXHIBIT 7.7 1 Exhibit 7.7 A FIFTH THIRD BANCORP BANK THIRD PARTY COLLATERAL AGREEMENT City Cleveland State Ohio July 6, 1998 In order to induce Fifth Third Bank of Northeastern Ohio 1404 East Ninth St., Cleveland, OH 44114 and any affiliate of Fifth Third Bancorp (collectively, "Bank") to make, continue, renew or extend a loan, loans or other financial accommodations to Richard M. Osborne 7001 Center Street, Mentor, Ohio 44060 ("Debtor"), and in consideration thereof, the undersigned hereby consents and agrees that the property (real or personal) described below (collectively, the "Collateral"), of which the undersigned is the owner, may be and is hereby pledged to Bank, for itself and as agent for any affiliate of Fifth Third Bancorp, by the undersigned as collateral security for the following (collectively, the "Obligations"): all loans, advances, indebtedness and other obligations of debtor owed to Bank and/or any affiliate of Fifth Third Bancorp, of every kind and description whether now existing or hereafter arising including without limitation those owed to others and acquired by Bank (by purchase, assignment or otherwise) and whether direct or indirect, primary or as guarantor or surety, absolute or contingent, liquidated or unliquidated, matured or unmatured, whether or not secured by additional collateral, and all liabilities, obligations and indebtedness arising all instruments and agreements evidencing, guarantying or securing any of the foregoing, and all obligations to perform or forbear from performing acts, all amounts represented by letters of credit now or hereafter issued by Bank for the benefit of or at the request of Debtor and all expenses and attorneys' fees incurred by Bank under any other document or instrument related thereto or related to any of the foregoing, including but not limited to the following: $2,000,000 Draw Note dated July 1998. The undersigned agrees that the Collateral may be received, held and/or disposed of by Bank subject and pursuant to all the terms and conditions of any and all notes, mortgages, contracts or agreements heretofore or hereafter signed by Debtor or the undersigned in any capacity whatsoever, and Bank is hereby authorized and empowered to take any and all action with respect to the Collateral as authorized by the terms of any such note, 2 mortgage, contract or other agreement, all without notice to the undersigned, except as otherwise provided by law. The undersigned further agrees that the Collateral has been pledged with the same force and effect as if the Collateral were owned by Debtor. Without limiting Bank's powers and rights in dealing with the Collateral under the terms and conditions of any note, mortgage, contract or agreement, Bank is hereby authorized to act solely upon the instructions of Debtor relative to the sale or other disposition of the Collateral, or any substitutions therefor, or any proceeds thereof, and the receipt or acquittance of Debtor for the Collateral or any part thereof, or any substitutions therefor, or any proceeds thereof, shall be a valid and sufficient release and discharge of Bank's liability to the undersigned. The undersigned authorizes Bank at any time, without notice to the undersigned, to transfer or cause to be transferred into Bank's name, or the name of its nominee or nominees, any or all of the Collateral. The Bank is hereby given full power at any time, without notice to the undersigned, to collect, sell, assign, transfer and deliver all of the Collateral or any part thereof, or any substitutes therefor, or any additions thereto, through any stock exchange or broker's board or broker, or at private or public sale, without either demand on or notice to the undersigned, or any advertisement, the same being hereby expressly waived, at which sale Bank is authorized to purchase the Collateral, or any part thereof, free from any right of redemption on the part of the undersigned which is hereby expressly waived and released. In case of sale for any cause, after deducting all costs and expenses of every kind, Bank may apply the residue of the proceeds of such sale as it shall deem proper toward the payment of any one or more or all of the Obligations of Debtor to Bank, whether due or not due, returning the remainder, if any, to the undersigned, so long as the Collateral is not pledged to secure the indebtedness of the undersigned or any other party. Bank is hereby irrevocably appointed and constituted attorney in fact for the undersigned, with full power of substitution, to collect all dividends, interest, rents, royalties, and to exercise all voting rights connected with or arising out of the Collateral. No delay on Bank's part in exercising any power of sale, lien, option or other right with respect to the Collateral, and no 3 notice or demand which may be given to or made upon the undersigned by Bank with respect to any power of sale, lien, option or other right with respect to the Collateral, shall constitute a waiver thereof, or limit or impair Bank's right to take any action or to exercise any power of sale, lien option, or any other right with respect to the collateral without notice or demand, or prejudice Bank's rights as against the undersigned in any respect. In addition, no action taken by Bank with respect to the Collateral shall in any way impair or limit Bank's right to exercise any or all rights or remedies Bank may otherwise have against Debtor with respect to any Obligations. This Agreement shall not, in any manner, be construed as a compromise of any Obligations. The pledge of, and security interest in, the Collateral by the undersigned to Bank are absolute, unconditional and continuing and will remain in full force and effect until the Obligations have been fully paid and satisfied. The pledge of, and security interest in, the Collateral will extend to an cover renewals of the Obligations and any number of extensions of time for payment thereof and will not be affected by any surrender, exchange, acceptance or release by the Bank of any other pledge or any security held by it for any of the Obligations. Notice of acceptance of the pledge and security interest, notice of extensions of credit to the Debtor from time to time, notice of default, diligence, presentment, protest, demand for payment, notice of demand or protest, notice of making, renewing or extending any of the Obligations and any defense based upon a failure of Bank to comply with the notice requirements of the applicable version of Uniform Commercial Code are hereby waived. Bank, at any time and from time to time, without the consent of the undersigned, may change the manner, place or terms of payment of or interest rates on, or change or extend the time of payment of, or renew or alter, any of the Obligations, without impairing or releasing the liabilities of the undersigned of its obligations to continue to pledge or grant a security interest in the Collateral. Bank in its sole discretion may determine the reasonableness of the period which may elapse prior to the making of demand for any payment upon the Debtor or any guarantor and it need not pursue any of its remedies against any other party before having recourse against the Collateral. DESCRIPTION OF COLLATERAL Collateral listed on Exhibit A attached hereto. As used herein "undersigned", if there be more than one, shall 4 mean "all of the undersigned or each of any of them", and in such case they are jointly and severally bound. If the "undersigned" be more than one, Bank may release from the obligations hereof the Collateral of one or more of the undersigned, and no such release shall in any way affect or modify the rights of Bank with respect to the Collateral of any other undersigned which has not been released. The undersigned hereby acknowledges and consents that in security documents executed and delivered to Bank in connection herewith, the undersigned may be referred to as "Debtor" or "Borrower", whether or not the undersigned is a maker of any promissory note or any endorser or guarantor thereof. WITNESS the due execution hereof as of the date set forth above. ADDRESS: OWNER(S) OF COLLATERAL 7001 Center Street Richard M. Osborne Under Trust Mentor, Ohio 44060 Dated January 13, 1995 /s/ RICHARD M. OSBORNE, Trustee --------------------------------- Richard M. Osborne, Trustee 5 EXHIBIT A Security Name Shares Certificate Number CUSIP Number GLB Bancorp, Inc. 88,075 C-0089 361778103 Great Lakes Bank 87,875 25 Pacific Gateway Properties 500,000 EX-7.8 7 EXHIBIT 7.8 1 Exhibit 7.8 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. 2 "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. "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. -2- 3 "LICK EMPLOYMENT AGREEMENT" shall mean that certain Employment Agreement, dated as of December 15, 1997, between the Company and Fred Lick, Jr. "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 Osborne shall be required to -4- 5 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 Board of Directors shall elect such replacement Designee to fill the unexpired term of the Designee who such new Designee is replacing. 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. (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 -5- 6 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 Company shall amend its Articles of Incorporation, Code of Regulations or Bylaws, as the case may be, to eliminate cumulative voting in the election of directors. 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 (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 -6- 7 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." (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. -7- 8 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 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. -8- 9 (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: ___________ 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: ___________ 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/ MARCH 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 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 23 SIGNATURE PAGE TO VOTING 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 24 SIGNATURE PAGE TO VOTING 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 25 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 26 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 27 SIGNATURE PAGE TO VOTING AGREEMENT LEG PARTNERS SBIC, L.P. By: /S/ LAWRENCE GOLUB ------------------ Name: President of Golub GPII Corporation Title: General Partner Address: 230 Park Avenue 19th Floor New York, New York 10169 Attention: Lawrence Golub 28 EXHIBIT A JOINDER AGREEMENT Reference is made to (i) that certain Voting Agreement, dated as of _________, 1998, among Central Reserve Life Corporation, an Ohio corporation (the "COMPANY"), and the persons signatory thereto (as amended and in effect from time to time, the "VOTING AGREEMENT"), a copy of which is attached hereto, and (ii) that certain Stockholders Agreement, dated as of ___________, 1998, among the Company and the persons signatory thereto (as amended and in effect from time to time, the "STOCKHOLDERS AGREEMENT"), copy of which is attached hereto. The undersigned, _________________________ [print name], in order to become the owner or holder of __________ shares of common stock of the Company, hereby agrees that by the undersigned's execution hereof, the undersigned is a party to the Voting Agreement and the Stockholders Agreement subject to all of the restrictions, conditions and obligations applicable to stockholders set forth in such agreements. This Joinder Agreement shall take effect and shall become a part of each such agreement immediately upon execution. Executed as of the date set forth below. Signature:_________________________ __________ Address:___________________________ __________ ___________________________ __________ ___________________________ __________ Date: ___________________________ __________ ACCEPTED: CENTRAL RESERVE LIFE CORPORATION By:_____________________________ 29 EXHIBIT B ================================================================================ INVESTOR CLOSING DATE SHARES ================================================================================ Insurance Partners, L.P. 2,769,164 - -------------------------------------------------------------------------------- Insurance Partners Offshore (Bermuda), L.P. 1,576,292 - -------------------------------------------------------------------------------- Peter W. Nauert 933,636 - -------------------------------------------------------------------------------- Michael A. Cavataio 130,316 - -------------------------------------------------------------------------------- Mercantile Bank of Northern Illinois, Trustee of the Conseco Stock Option Plan FBO Michael Cavataio #08590033 37,764 #08590034 13,738 - -------------------------------------------------------------------------------- Karon Hill 100,000 - -------------------------------------------------------------------------------- Val Rajic 100,000 - -------------------------------------------------------------------------------- Strategic Acquisition Partners, LLC -0- - -------------------------------------------------------------------------------- Turkey Vulture Fund XIII, Ltd. 720,910 - -------------------------------------------------------------------------------- Medical Mutual of Ohio 363,636 - -------------------------------------------------------------------------------- United Payors and United Providers, Inc. 181,818 - -------------------------------------------------------------------------------- Howard R. Conant 90,909 - -------------------------------------------------------------------------------- Joseph Cusimano IRA 90,909 - -------------------------------------------------------------------------------- LEG Partners SBIC, L.P. 181,818 - -------------------------------------------------------------------------------- Marc C. Krantz 4,546 - -------------------------------------------------------------------------------- Krantz Family Limited Partnership 4,544 ================================================================================ EX-7.9 8 EXHIBIT 7.9 1 Exhibit 7.9 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 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. 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 2 a dividend or other distribution with respect or in replacement of any shares referred to in (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 -2- 3 in such registration pursuant to the terms of this Agreement. 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. -3- 4 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) 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. -4- 5 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 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 -5- 6 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: 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); 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; 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; 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); 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; 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 -6- 7 Registrable Shares included in such registration; provide a transfer agent and registrar for all such Registrable Shares not later than the effective date of such registration statement; 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). 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; 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; 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; 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 -7- 8 in their opinion the financial statements and other financial data of the Corporation included in the registration statement, the prospectus(es), or any amendment or supplement thereto, comply in all material respects with the applicable accounting requirements of the Securities Act; 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; 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; 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; 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 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 that such liability will be limited to, the net -9- 10 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 judgmen 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 omission. The parties hereto agree that it would -10- 11 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. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each -12- 13 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:________________________ 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: Address: One Chase Manhattan Plaza 44th Floor New York, New York 10005 Attention: Bradley & Cooper Copy to: Weil, Goshal & 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. 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 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. JOSEPH BRUNO ------------------- Name: S. Joseph Bruno Title: Vice President and CFO 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 GPII Corporation Title: General Partner Address: 230 Park Avenue 19th Floor New York, New York 10169 Attention: Lawrence Golub EX-7.10 9 EXHIBIT 7.10 1 =============================================================================== Exhibit 7.10 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. 4 "COMPANY" shall have the meaning set forth in the introductory paragraph hereof. "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. -2- 5 "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. "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 -3- 6 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. -4- 7 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 -5- 8 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 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 -6- 9 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 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. -7- 10 If to any Holder, at its address listed on the signature pages hereof. 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. -8- 11 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. 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] -9- 12 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 13 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: ____________ 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 14 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:_____________ 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 15 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT STRATEGIC ACQUISITION PARTNERS, LLC By: /s/ PETER W. NAUERT ------------------------- Name: Peter W. Nauert ----------------------- Title: ---------------------- 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. 16 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. 17 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT /s/ MICHAEL A. CAVATAIO ------------------------------ Michael A. Cavataio Address: 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 #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 19 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 20 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT /s/ KARON HILL ---------------------------- Karon Hill Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 21 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT /s/ VAL RAJIC ---------------------------- Val Rajic Address: 1750 East Golf Road Suite 210 Schaumburg, Illinois 60173 22 SIGNATURE PAGE TO STOCKHOLDERS 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 23 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT MARCH C. KRANTZ --------------- Marc C. Krantz 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 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 -22- 25 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 26 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 27 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 28 SIGNATURE PAGE TO STOCKHOLDERS 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 29 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT LEG PARTNERS SBIC, L.P. By:/s/ LAWRENCE GOLUB ---------------------------- Name: Lawrence Golub -------------------------- Title: General Partner ------------------------- Address: 230 Park Avenue 19th Floor New York, New York 10169 Attention: Lawrence Golub -----END PRIVACY-ENHANCED MESSAGE-----