UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q

[X]               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended March 31, 1997
                                                --------------
                                       OR

[ ]             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number             001-10997
                      ----------------------------------------------
                               INTEGON CORPORATION
          -----------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                 13-3559471
     -------------------------               ------------------------
  (State or other jurisdiction of               (I.R.S. Employer
  incorporation or organization)                Identification No.)

           500 West Fifth Street, Winston-Salem, North Carolina 27152
          -----------------------------------------------------------
              (Address of principal executive offices) (Zip Code)

                                 (910) 770-2000
          -----------------------------------------------------------
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

Yes   X               No
     ---

         As of April 30,  1997,  there were  15,736,121  shares  outstanding  of
Integon Corporation's Common Stock.

                                     Page 1
<PAGE>
                      INTEGON CORPORATION AND SUBSIDIARIES


                               INDEX TO FORM 10-Q



PART I - FINANCIAL INFORMATION
                                                                        Page
                                                                       ------
Item 1.  Financial Statements.
     Balance Sheets - March 31, 1997 and December 31, 1996.........       3
     Statements of Operations - Three Months Ended March 31,
         1997 and 1996.............................................       4
     Statements of Cash Flows - Three Months Ended March 31,
         1997 and 1996.............................................       5
     Notes to Financial Statements.................................       6


Item 2.  Management's Discussion and Analysis of Financial
                Condition and Results of Operations................      10


PART II - OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K.........................      18



                                     Page 2
<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.
<TABLE>
<CAPTION>
                     INTEGON CORPORATION AND SUBSIDIARIES
                                BALANCE SHEETS
                                 (Unaudited)
                (Dollars in thousands, except per share data)

                                                                            March 31,          December 31,
                                                                              1997                 1996
                                                                          ------------         ------------
<S>                                                                       <C>                  <C>
ASSETS
Investments:
Fixed maturities available for sale--at market
    (amortized cost $636,131 and $522,452) ...........................   $   625,104         $   521,311
Other long-term investments ..........................................         2,815               2,743
Short-term investments ...............................................         5,720                --
                                                                         -----------          -----------
                                                                             633,639             524,054
Cash and cash equivalents ............................................        27,816              43,838
Reinsurance receivable ...............................................       176,839             185,077
Premiums due and uncollected (less allowance for
    doubtful accounts of $5,282 and $5,282) ..........................       250,661             248,537
Prepaid reinsurance premiums .........................................        52,584              48,909
Accounts receivable, primarily financing receivables
   (less allowance for doubtful accounts of $1,398 and $1,112) .......        39,602              32,957
Accrued investment income ............................................         9,290               8,933
Deferred policy acquisition costs ....................................        52,215              55,106
Property and equipment (less accumulated depreciation
    of $12,705 and $10,808) ..........................................        70,303              68,271
Goodwill (less accumulated amortization of $14,648 and $13,885) ......       106,193             106,957
Deferred income taxes ................................................        29,328              22,044
Other assets .........................................................        31,807              12,116
                                                                         -----------         -----------
                                                                         $ 1,480,277         $ 1,356,799
                                                                         ===========         ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums ....................................................   $   374,194         $   364,081
Loss and loss adjustment expenses payable ............................       523,554             478,031
Accrued expenses and other liabilities ...............................       149,007             104,536
Short-term debt ......................................................        10,000              44,000
Notes payable ........................................................       150,705             150,760
                                                                         -----------         -----------
                                                                           1,207,460           1,141,408
                                                                         -----------         -----------
Company-obligated mandatorily redeemable capital securities
  of subsidiary trust holding solely Integon Corporation
  Junior Subordinated Deferrable Interest Debentures .................       100,000                --
                                                                         -----------         -----------

STOCKHOLDERS' EQUITY
$3.875 Convertible Preferred Stock--$.01 par value
  per share, 1,437,500 shares authorized, issued and
  outstanding ........................................................            14                 14
Common Stock--$.01 par value per share, authorized--
  35,000,000 shares; issued--17,303,321 and
  17,271,707 shares ..................................................           173                173
Class A Non-Voting Common Stock--$.01 par value per
  share, authorized 20,000,000 shares; issued and
  outstanding--none ..................................................          --                 --
Additional paid-in capital ...........................................       147,891            147,891
Net unrealized depreciation of securities ............................        (7,080)              (700)
Retained earnings ....................................................        69,640            105,834
Treasury stock--at cost, 1,567,200 shares ............................       (37,821)           (37,821)
                                                                           ----------         ----------
                                                                             172,817             215,391
                                                                           ----------         ----------
                                                                           $1,480,277         $1,356,799
                                                                           ==========         ==========
</TABLE>
        The accompanying notes are an integral part of these statements.

                                     Page 3
<PAGE>
Item 1.  Financial Statements.  (continued)
<TABLE>
<CAPTION>
                                    INTEGON CORPORATION AND SUBSIDIARIES
                                          STATEMENTS OF OPERATIONS
                                                 (Unaudited)
                                    (In thousands, except per share data)

                                                                             Three Months Ended
                                                                                March 31,
                                                                          ----------------------
                                                                             1997         1996
                                                                          ---------    ---------
<S>                                                                       <C>          <C>
REVENUES
Net premiums written ..................................................   $ 202,554    $ 194,262
                                                                          =========    =========

Premiums earned .......................................................   $ 196,117    $ 164,815
Net investment income .................................................       9,043        7,753
Net realized investment gains (loss) ..................................        (481)       2,077
Other income ..........................................................       4,540        4,175
                                                                          ---------    ---------
                                                                            209,219      178,820
BENEFITS AND EXPENSES
Loss and loss adjustment expenses .....................................     199,238      130,558
Policy acquisition and other underwriting expenses ....................      51,143       34,971
Other expenses ........................................................       4,747        4,049
Amortization of goodwill ..............................................         764          769
Interest expense ......................................................       3,767        3,631
                                                                          ---------    ---------
                                                                            259,659      173,978
                                                                          ---------    ---------
INCOME (LOSS) FROM OPERATIONS BEFORE FEDERAL
INCOME TAX (BENEFIT) AND DISTRIBUTIONS ON
CAPITAL SECURITIES OF SUBSIDIARY TRUST                                      (50,440)       4,842
Federal income tax (benefit) ..........................................     (18,042)       1,457
                                                                          ---------    ---------
Income (loss) before distributions on capital
securities of subsidiary ..............................................     (32,398)       3,385
Distributions on capital securities of
subsidiary trust, net of federal income
tax benefit of $533 ...................................................        (990)        --
                                                                          ---------    ---------
     NET INCOME (LOSS) ................................................     (33,388)       3,385
Preferred stock dividends .............................................       1,393        1,393
                                                                          ---------    ---------
Net income (loss) available to common shareholders ....................   $ (34,781)   $   1,992
                                                                          =========    =========
EARNINGS PER COMMON SHARE
Primary ...............................................................   $   (2.21)   $     .13
                                                                          =========    =========
Fully diluted .........................................................   $   (2.21)   $     .13
                                                                          =========    =========
Weighted average common shares outstanding:
  Primary .............................................................      15,736       15,903
                                                                          =========    =========
  Fully diluted .......................................................      15,736       15,903
                                                                          =========    =========
Dividends declared per share ..........................................   $     .09    $     .09
                                                                          =========    =========
</TABLE>
        The accompanying notes are an integral part of these statements.

                                     Page 4
<PAGE>
Item 1.  Financial Statements.  (continued)
<TABLE>
<CAPTION>
                                      INTEGON CORPORATION AND SUBSIDIARIES
                                            STATEMENTS OF CASH FLOWS
                                                  (Unaudited)
                                                 (In thousands)

                                                                     Three Months Ended
                                                                           March 31,
                                                                 -------------------------
                                                                    1997            1996
                                                                 ----------     ----------
<S>                                                             <C>          <C>
Cash Flows from Operating Activities
Net income (loss) ............................................   $ (33,388)   $   3,385

Adjustments to reconcile net income to net cash provided
   by operating activities:
     Net realized investment (gains) losses ..................         481       (2,077)
     Depreciation and amortization ...........................       2,769        2,242
     Net amortization of discounts and premiums ..............         255          170
     Provision for deferred federal income taxes (benefit) ...      (3,849)         281
     Net decrease in reinsurance assets ......................       4,563       11,409
     Increase in premiums due and uncollected ................      (2,124)     (20,953)
     Net (increase) decrease in deferred policy acquisition
        costs ................................................       2,891       (5,454)
        Net increase in accounts and notes receivable,
           accrued investment income and other assets ........     (11,198)      (4,199)
     Increase in unearned premiums ...........................      10,113       27,442
     Increase in loss and loss adjustment expenses payable ...      45,523        6,008
        Net increase in accrued expenses and other liabilities      15,705       10,192
                                                                 ---------    ---------

        Net cash flows provided by operating activities
        from continuing operations ...........................      31,741       28,446
                                                                 ---------    ---------
Cash Flows from Investing Activities
Investment securities sold ...................................     267,386      112,247
Investment securities matured, called or redeemed ............       4,276        2,917
Investment securities purchased ..............................    (395,725)    (126,684)
Other, net ...................................................          10         (727)
                                                                 ---------    ---------
     Net cash flows used in investing activities .............    (124,053)     (12,247)
                                                                 ---------    ---------
Cash Flows from Financing Activities
Net increase (decrease) in short-term debt ...................     (34,000)       2,000
Proceeds from Company-obligated mandatorily redeemable
     capital securities of subsidiary trust ..................     100,000         --
Common stock dividends .......................................      (1,415)      (1,415)
Preferred stock dividends ....................................      (1,393)      (1,393)
Decrease in notes payable ....................................         (55)         (72)
Increase in book cash overdrafts .............................      13,153        3,405
                                                                 ---------    ---------
    Net cash flows provided by financing activities ..........      76,290        2,525
                                                                 ---------    ---------
Net increase (decrease) in cash and cash equivalents .........     (16,022)      18,724
    Cash and cash equivalents at beginning of period .........      43,838       21,046
                                                                 ---------    ---------
Cash and cash equivalents at end of period ...................   $  27,816    $  39,770
                                                                 =========    =========

Supplemental Disclosures of Cash Flows Information
Interest paid during the period ..............................   $   3,421    $   3,274
Federal income taxes paid during the period ..................        --            950
</TABLE>
        The accompanying notes are an integral part of these statements.

                                     Page 5
<PAGE>
Item 1.  Financial Statements. (continued)


                      INTEGON CORPORATION AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 1997

                                   (Unaudited)

Note 1 - Accounting Policies

The  accompanying   unaudited   consolidated  financial  statements  of  Integon
Corporation  and  subsidiaries  (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim periods.

In  the  opinion  of  management,   these  financial   statements   include  all
adjustments,  including  all normal  recurring  accruals,  necessary  for a fair
presentation  of the  consolidated  financial  position  at March  31,  1997 and
December 31, 1996 and the consolidated  results of operations and cash flows for
the periods ended March 31, 1997 and 1996.

The  operating  results  for the  three  months  ended  March  31,  1997 are not
necessarily  indicative  of the results to be expected  for the full year ending
December 31, 1997.

Note 2 - Financing Activity

On February 10, 1997, Integon Capital I, a newly created wholly-owned subsidiary
trust of the Company,  issued $100.0  million of 10 3/4% capital  securities due
February  15,  2027 (the  "Capital  Securities"),  the  proceeds  of which  were
invested in 10 3/4% junior  subordinated  debentures of the Company due February
15, 2027.

The sole asset of Integon Capital I consists of $103.1 million of 10 3/4% junior
subordinated  debentures  of Integon  Corporation  due February  15,  2027.  The
obligations  of Integon  Capital I under the Capital  Securities, are fully and
unconditionally guaranteed by the Company.

Holders  of  the  Capital  Securities  are  entitled  to  receive   preferential
cumulative cash  distributions  accruing from the date of original  issuance and
payable  semi-annually  in  arrears on  February  15 and August 15 of each year,
commencing  August 15,  1997,  at the annual rate of 10 3/4% of the  liquidation
amount of

                                     Page 6
<PAGE>
Item 1. Financial Statements. (continued)

$1,000 per Capital Security.  The distribution rate and the distribution payment
dates and other payment dates for the Capital  Securities will correspond to the
payments  and payment  dates on the junior  subordinated  debentures  of Integon
Corporation.  Distributions  on the Capital  Securities  are  deferrable  at the
Company's  option  for  up to  five  years.  The  Company,  subject  to  certain
exceptions,  may not pay  dividends on its capital  stock  during such  deferral
periods.

For financial reporting  purposes,  Integon Capital I is treated as a subsidiary
of the Company and,  accordingly,  its accounts are included in the consolidated
financial statements of the Company. The Capital Securities are presented in the
consolidated balance sheet of the Company as a separate line item directly above
stockholders' equity under the caption "Company-obligated mandatorily redeemable
capital securities of subsidiary trust holding solely Integon Corporation junior
subordinated deferrable interest debentures."  The Company records distributions
payable on the Capital Securities as "Distributions on capital securities of
subsidiary trust" in its consolidated statement of income.

The Company paid $10.75  million of the  proceeds  from the  transaction  into a
reserve account which will be used to pay the first two interest payments on the
Capital  Securities.  The  remaining  net  proceeds to the Company  were used to
contribute $50.0 million to the domestic  insurance  subsidiaries in the form of
certificates  of  contribution  bearing  interest  at 10  3/4%  per  annum,  not
compounded,  reduce  the  Company's  short-term  debt by $32.0  million  and for
general corporate purposes.

Underwriting  fees and other costs of $4.0  million  relating to the issuance of
the Capital Securities have been deferred.  Such costs are being amortized using
the interest-rate method.

Note 3 - Stock Option and Incentive Plans

At March 31, 1997, the Company had two stock-based compensation plans, which are
described  below.  The Company  applies APB 25 and  related  Interpretations  in
accounting  for  these  plans.  Accordingly,   no  compensation  cost  has  been
recognized  for stock options  issued under either the 1992 Stock Option Plan or
the Amended and Restated Omnibus Long-Term  Performance  Incentive  Compensation
Plan. Had compensation cost for stock-based  compensation  under these two plans
been  determined  consistent  with Statement of Financial  Accounting  Standards
("SFAS") Number 123, the Company's net income and earnings per share on

                                     Page 7
<PAGE>
Item 1.  Financial Statements. (continued)

a pro forma  basis for the  three  months  ended  March 31,  would  have been as
follows:

                                                              1997         1996
                                                              ----         ----
     Pro forma net income...............................  $  (33,607)   $ 3,291
     Pro forma primary earnings per share...............     $ (2.22)    $  .12
     Pro forma fully diluted earnings per share.........     $ (2.22)    $  .12

Note 4 - Earnings per Share

In February  1997,  the  Financial  Accounting  Standards  Board issued SFAS 128
"Earnings  per Share"  ("SFAS  128")  which  changes  the method of  calculating
earnings per share.  SFAS 128 requires the  presentation of "basic" earnings per
share and  "diluted"  earnings  per share on the face of the  income  statement.
Basic  earnings  per share is computed by dividing  the net income  available to
common  shareholders by the weighted average shares of outstanding common stock.
The  calculation of diluted  earnings per share is similar to basic earnings per
share except that the denominator  includes  dilutive  common stock  equivalents
such as stock  options and  warrants.  The  statement is effective for financial
statements for periods ending after December 31, 1997, and early adoption is not
permitted. The pro forma basic earnings per share and diluted earnings per share
calculated in accordance  with SFAS 128 for the three months ended March 31, are
as follows:
                                                           1997           1996
                                                           ----           ----

     Pro forma basic earnings per share..............     $(2.21)         $.13
     Pro forma diluted earnings per share............     $(2.21)         $.13

Note 5 - Loss and Loss Adjustment Expenses Payable

Loss and loss adjustment  expenses payable represent the estimated  liability on
claims  reported to the Company plus  reserves  for claims  incurred but not yet
reported and the estimated  settlement  expenses  related to these  claims.  The
liabilities  for claims and related  settlement  expenses are  determined  using
"case basis" evaluations and statistical analysis and represent estimates of the
ultimate  net cost of all  losses  incurred  through  the  balance  sheet  date.
Although considerable variability is inherent in such estimates,

                                     Page 8
<PAGE>
Item 1.  Financial Statements. (continued)

management   believes  that  the  liabilities  for  unpaid  claims  and  related
settlement expenses are adequate; however, there can be no assurance that future
adjustments to loss and loss adjustment  expenses  payable will not be required.
The  estimates  are  reviewed  by  management   and,  as  adjustments  to  these
liabilities  become  necessary,   such  adjustments  are  reflected  in  current
operations.  

During the three  months ended March 31, 1997,  the Company  increased  loss and
loss adjustment  expense  payable by $42.0 million.  This increase was primarily
related to automobile liability coverages.

Note 6 - Subsequent Events

On April 28, 1997, Integon Corporation  announced that an investment banker will
be retained to review all strategic alternatives  available,  including the sale
of the Company,  after recording a loss of $2.21 per share for the quarter ended
March 31, 1997.

                                     Page 9
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations.

General

The following  discussion and analysis  should be read in  conjunction  with the
consolidated financial statements and related notes on pages 3 through 9 of this
Quarterly  Report on Form  10-Q.  The  reader is  presumed  to have read or have
access to Integon Corporation's 1996 Annual Report on Form 10-K.

Results of Continuing Operations

Three  Months  Ended March 31, 1997  ("1997")  Compared  with Three Months Ended
March 31, 1996 ("1996")

     Net premiums  written  increased 4.3% from $194.3 million in 1996 to $202.6
million in 1997. Price increases taken during the fourth quarter of 1996 and the
first quarter of 1997 have had the effect of slowing premium growth. Nonstandard
automobile  insurance net premiums written increased from $176.8 million in 1996
to $180.2  million in 1997 or 1.9% due primarily to growth in the Company's more
mature operating states.  Specialty auto products net premiums written increased
47.3% from $11.0  million in 1996 to $16.2 million in 1997.  Premiums  earned on
all lines of  business  increased  19.0% from  $164.8  million in 1996 to $196.1
million in 1997 and reflects  primarily  the  increase in net  premiums  written
during 1996 compared to 1995.

     Loss and loss  adjustment  expenses  increased 52.6% from $130.6 million in
1996 to  $199.2  million  in 1997.  The  loss  ratio,  defined  as loss and loss
adjustment expenses as a percentage of premiums earned,  increased from 79.2% in
1996 to 101.6% in 1997 due  primarily  to an increase to loss  reserves of $42.0
million following a comprehensive review and analysis by the Company's actuarial
staff and independent  consulting  actuaries.  During the first quarter of 1997,
the Company experienced  greater than anticipated  physical damage loss activity
related to the 1996 accident year.  Furthermore,  after an in-depth review,  the
Company  determined  that reserves  primarily  related to  automobile  liability
coverages needed to be strengthened.

                                    Page 10
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations. (continued)

     The  Company's  estimate of loss  reserves,  including  reserves for claims
incurred but not  reported,  are subject to  variability  and,  accordingly  may
develop  differently than projected.  These estimates are reviewed by management
and, as adjustments to these  liabilities  become necessary such adjustments are
reflected in current operations.

     Policy acquisition and other underwriting  expenses increased $16.1 million
from $35.0 million in 1996 to $51.1 million in 1997. The expense ratio,  defined
as policy  acquisition  and  other  underwriting  expenses  as a  percentage  of
premiums earned,  increased from 21.2% in 1996 to 26.1% in 1997. The increase in
the  expense  ratio  was  due  primarily  to  a  write-off  of  deferred  policy
acquisition  costs of $3.7  million  due to the  increase  in the loss ratio for
accident  year  1996  and due to an  increase  in  personnel-related  and  other
information  systems  costs.  Such costs were incurred  primarily to enhance the
Company's operations, and also included expenditures for modifications necessary
to accommodate the Year 2000.

     Net  investment  income  increased  16.6% from $7.8 million in 1996 to $9.0
million in 1997 as a result of the $108.7 million  increase in average  invested
assets.  This higher  level of  invested  assets was  partially  offset by lower
yields.  The pre-tax yield of the portfolio was 5.9% in 1997 compared to 6.1% in
1996.  The  percentage  of cash  and  invested  assets  invested  in  tax-exempt
securities  was 21.2% and 21.3% in 1997 and 1996,  respectively.  In addition to
the variances discussed above, there were pre-tax net realized investment losses
of $.5 million in 1997 compared to pre-tax net realized investment gains of $2.1
million in 1996.

     Other income less other  expenses  decreased  from income of $.1 million in
1996 to an expense of $.2 million in 1997 due  primarily to a decline in premium
finance income.

     Interest  expense  increased 3.8% from $3.6 million in 1996 to $3.8 million
in 1997 due to increased short-term borrowings.

                                    Page 11
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations.  (Continued)

         Federal  income  taxes  decreased  $19.5  million from $1.5 million tax
expense  in 1996 to an $18.0  million  tax  benefit  in 1997 due to a loss  from
operations  before  federal  income tax. The effective tax rate  increased  from
30.1% in 1996 to 35.8% in 1997 due primarily to the underwriting loss in 1997.

         The  deferred  tax asset in the  amount of $29.3  million  has not been
reduced by a valuation allowance.  Based on available  information,  the Company
has concluded it is more likely than not that all of the deferred tax asset will
be realized. In evaluating the need for a valuation allowance, refunds available
for carryback of losses to offset taxable income in prior years were  considered
as well as future taxable income.

         Distributions on capital  securities of subsidiary trust resulted in an
after-tax  charge of $.9 million in 1997,  representing  the Company's  minority
interest in the  earnings of Integon  Capital I, a  single-purpose  wholly-owned
subsidiary  trust.  The  charge is due to the  obligations  incurred  by Integon
Capital I on the Capital Securities issued February 10, 1997. See Note 2.

         Net income decreased $36.8 million from $3.4 million in 1996 to a loss
of $33.4 million in 1997.

                                    Page 12
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations.  (continued)

Analysis of Financial Condition
         Information  regarding the Company's  investment portfolio at March 31,
1997 is as follows:

                                                            March 31, 1997
Type/Ratings of Investments (1)                Carrying Amount (2)    Percentage
-------------------------------                -------------------    ----------
                                                 (in thousands)
Fixed maturities:
    Government and agencies................       $158,741               24.0%
    Aaa                                            173,934               26.3%
    Aa  ...................................         79,772               12.1%
    A (3)..................................        199,863               30.2%
    Baa                                             10,266                1.6%
                                                  --------              -----
        Total investment grade.............        622,576               94.2%
    Below investment grade.................          2,528                0.4%
                                                  --------              -----
        Subtotal...........................        625,104               94.6%
Other long-term investments................          2,815                0.4%
Short-term investments.....................          5,720                0.9
Cash and cash equivalents..................         27,816                4.1
                                                  --------              -----
        Total invested assets..............       $661,455              100.0%
                                                  ========              =====


(1)      The ratings set forth above are based on the ratings,  if any, assigned
         by Moody's Investors Service, Inc. ("Moody's"). If Moody's ratings were
         unavailable,  the  equivalent  ratings  supplied  by  Standard & Poor's
         Corporation   ("S&P")  or  the   National   Association   of  Insurance
         Commissioners  ("NAIC") were used where  available.  The  percentage of
         rated  securities  that were not  assigned a rating by Moody's at March
         31, 1997 was 6.5%.

(2)      Carrying amount is estimated market value for fixed maturities 
         available for sale.

(3)      The "A" category  includes  $17.7 million of securities  which were not
         rated by Moody's or S&P, but were rated "1" by the NAIC.

                                    Page 13
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations. (continued)

Liquidity and Capital Resources

         Sources of Funds.  The Company's  major sources of operating funds have
been (i)  dividends  from its  subsidiaries,  (ii)  reimbursements  of costs and
expenses in connection  with the management  agreement among the Company and its
subsidiaries  pursuant to which the Company  provides  certain  services to such
subsidiaries,  (iii) tax sharing payments from the operating subsidiaries of the
Company  and (iv)  borrowings  under  credit  facilities.  The  Company  files a
consolidated  federal income tax return  including its subsidiaries and receives
payments  pursuant  to a  tax  sharing  agreement  among  the  Company  and  its
subsidiaries.  Taxes are computed for each subsidiary and paid to the Company as
if such  subsidiary  were filing a tax return on a  stand-alone  basis,  thereby
providing  additional  funds  to the  Company,  because  the  aggregate  of such
payments  generally  exceeds  taxes to be paid by the Company on a  consolidated
basis.  These  sources are expected to be available  for future needs except for
dividends  from the Company's  subsidiaries.  Dividends  will be retained by the
subsidiaries as needed. The Company's  insurance  subsidiaries are limited as to
the amount of  ordinary  dividends  they may pay (see  "Regulation"  below).  In
addition,  in determining the ability of its subsidiaries to pay dividends,  the
Company monitors its subsidiaries'  operating leverage based on the level of net
premiums written to statutory surplus.  Currently, the Company seeks to maintain
its subsidiaries'  ratio of net premiums written to statutory surplus at a level
of approximately 3.0x in accordance with industry standards. The ratio was 3.07x
for the twelve  months  ended March 31,  1997.  On February  13,  1997,  Integon
Corporation  contributed $50.0 million to the domestic insurance subsidiaries in
the form of certificates of contribution.  Interest on the certificates  accrues
at the  rate  of 10 3/4%  per  annum,  not  compounded,  and is due and  payable
semiannually to the extent funds exist pursuant to regulatory requirements.

As of March 31, 1997, Integon Corporation, the parent company, had approximately
$2.5  million  of cash and cash  equivalents  that were  available  for  general
corporate  purposes,  including  debt  service,  dividend  payments  and working
capital.  The  Company  believes  that the  sources  of funds  available  to it,
including the

                                    Page 14
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations. (continued)


$75.0 million  committed  credit  facility  described in "Financing  Activities"
below, are and will be sufficient to satisfy its short-term needs.

The principal  sources of funds for the Company's  subsidiaries are net premiums
collected,  proceeds from investment  income and from investments that have been
sold, matured or repaid and premium financing revenues.

On a consolidated basis, net cash flows provided by operating activities for the
three months ended March 31, 1997 and 1996 were $31.7 million and $28.4 million,
respectively.  Based  on  the  Company's  current  financial  plans,  management
believes that its subsidiaries will continue to realize positive cash flows from
their  operating  activities  and that  the  operating  liquidity  needs of such
subsidiaries can be funded from such cash flow. Statements concerning cash flows
look forward in time. The following important factors, among others, could cause
actual cash flows to differ materially from those set forth in the above forward
looking  statement:  claims frequency,  claims severity,  severe adverse weather
conditions,  the  cost of  automobile  repair,  economic  activity,  competitive
pricing, and the regulatory environment in which the Company operates.

         Uses of Funds. The Company's principal uses of funds are the payment of
corporate  operating  expenses,  taxes, debt service and dividends on Common and
Preferred Stock. During the first quarter of 1997, the Company contributed $50.0
million of capital in the form of  certificates of contribution to the insurance
subsidiaries to maintain the ratio of net premiums written to statutory  surplus
at a level of 3.0x.

The  principal  uses of funds of the Company's  subsidiaries  are the payment of
claims on insurance policies,  the payment of operating expenses, the payment of
interest  on the  certificates  of  contribution,  distributions  on the Capital
Securities,  purchase of investments,  tax sharing payments and dividends to the
Company.

The  Company  and its  subsidiaries  have no  material  commitments  for capital
expenditures.

                                    Page 15
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations. (continued)


         Financing  Activities:  The Company has a committed  credit facility of
$75.0 million. The interest rate charged on this credit facility is based on the
bids of the  participating  lenders and in the case of Eurodollar loans a margin
percentage  ranging  from .55% to .675% is added.  The  facility fee ranges from
 .20% to .35% of the total amount of the facility.

On February 10, 1997, Integon Capital I issued $100.0 million of 10 3/4% capital
securities due February 15, 2027, the proceeds of which were invested in 10 3/4%
junior subordinated  debentures of the Company,  due February 15, 2027. See Note
2 of Notes to Financial Statements.

         Investments.  In accordance with the Company's  investment  policy, the
Company's  investments at March 31, 1997 consisted primarily of investment-grade
securities  (rated  Baa or better by  Moody's  Investor  Services,  Inc.  or the
equivalent).  Consolidated  cash and cash equivalents at March 31, 1997 amounted
to $27.8 million, or 4.1% of total cash and invested assets.

Management has determined  that the entire fixed  maturity  portfolio  should be
classified as "available  for sale".  Fixed  maturity  securities  classified as
"available for sale" are carried at estimated market value. The market value and
amortized  cost of all fixed  maturity  securities at March 31, 1997 were $625.1
million and $636.1 million, respectively.

Management believes that the securities in the Company's investment portfolio at
March 31, 1997 are readily marketable.

         Regulation.  Insurance laws and regulations impose certain restrictions
on the amount of dividends that may be paid by insurance companies.  The maximum
amount of  ordinary  dividends  that a North  Carolina  domiciled  property  and
casualty  insurance  company  may pay at any  point in time  without  regulatory
approval  is the lesser of (a) 10% of the  policyholders'  statutory  surplus of
such property and casualty  insurance company as of the preceding December 31 or
(b) the statutory net income of such property and casualty insurance company for
the preceding calendar year, less the amount of dividends paid during the

                                    Page 16
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations. (continued)


preceding 12 months. The Company's insurance  subsidiaries have made no payments
of ordinary  dividends during the twelve months ended March 31, 1997.  Dividends
will be retained by the subsidiaries as needed.

If the insurance  subsidiaries are not able to pay ordinary  dividends and their
requests for the payment of  extraordinary  dividends  are not  granted,  and if
amounts needed are in excess of the available  funds under the credit  facility,
additional borrowings,  the issuance of additional securities or obtaining other
funds could be necessary to pay debt service,  Common Stock and Preferred  Stock
dividends and other expenses of the Company.

                                    Page 17
<PAGE>
Item 6.         Exhibits and Reports on Form 8-K.

a.  Exhibits

                                                           Filed Herewith (*),
                                                          Nonapplicable (NA), or
                                                  Incorporated by Reference from
                                                  -----------------------------
                                                                    Integon
Exhibit                                                          Registration
Number                                                Exhibit   No. or Report
-------                                               -------   --------------

 10.1    Letter Agreement entered into between            *            NA
         the Company and Steven C. Andrews dated
         February 13, 1997 regarding severance

 10.2    Letter Agreement entered into between            *            NA
         the Company and Donald F. McKee dated
         February 13, 1997 regarding severance

 10.3    Form of Letter Agreement entered into            *            NA
         between the Company and each of John B.Yorke, 
         Arthur S. Lyon, Jr., Brian T. Sheekey,
         John C. Beattie and Kenneth J. Jakubowski
         dated February 13, 1997 regarding severance

 10.4    Amendment No. 2 to the Integon Corporation       *            NA
         1992 Stock Option Plan

 10.5    Integon Corporation Amended and Restated         *            NA
         Omnibus Long-Term Performance Incentive
         Compensation Plan

 10.6    Amendment No. 1 to the Integon Corporation       *            NA
         Amended and Restated Omnibus Long-Term
         Performance Incentive Compensation Plan

                                    Page 18
<PAGE>
Item 6.         Exhibits and Reports on Form 8-K. (continued)

a.       Exhibits

                                                        Filed Herewith (*),
                                                       Nonapplicable (NA), or
                                                  Incorporated by Reference from
                                                  -----------------------------
                                                                     Integon
Exhibit                                                           Registration
Number                                              Exhibit       No. or Report
-------                                             -------       -------------

10.7     Integon Corporation Executive
         Salary Deferral Plan                        *                NA

10.8     Integon Corporation Severance Policy        *                NA

10.9     Integon Corporation Amended and             *                NA
         Restated Annual Incentive Award Plan

11.1     Computation of Earnings per Share           *                NA

27       Financial Data Schedule                     *                NA


b.       Reports on Form 8-K.

The following  reports on Form 8-K were filed during the quarter ended March 31,
1997.

Filing Date             Item No.        Description
-----------            ----------       -----------

January 23, 1997           5            Other Events. Copy of press release
                                        concerning fourth  quarter 1996 results.


January 29, 1997           5            Other Events.  Securities offering by
                                        Integon Capital I.


January 31, 1997           5            Other Events.  Rights Agreement.


                                    Page 19
<PAGE>


                                    SIGNATURE



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                               INTEGON CORPORATION



May 15, 1997                   /s/ Brian T. Sheekey
                                   ----------------
                                   Brian T. Sheekey
                                   (Duly Authorized Officer
                                   and Principal Accounting Officer)



                                    Page 20
<PAGE>
                                INDEX TO EXHIBITS


                                                  Filed Herewith (*),
                                                Nonapplicable (NA), or
                                           Incorporated by Reference from
                                           -------------------------------------
                                                     Integon
Exhibit                                              Registration     Sequential
Number                                    Exhibit    No. or Report   Page Number
-------                                 ---------    -------------   -----------

10.1   Letter Agreement entered into         10.1           *
       between the Company and Steven
       C. Andrews dated February 13,
       1997 regarding severance

10.2   Letter Agreement entered into         10.2           *
       between the Company and Donald
       F. McKee dated February 13,
       1997 regarding severance

10.3   Form of Letter Agreement              10.3           *
       entered into between the Company
       and each of John B. Yorke,
       Arthur S. Lyon,Jr., Brian T. 
       Sheekey, John C Beattie, and
       Kenneth J. Jakubowski dated
       February 13, 1997 regarding severance

10.4   Amendment No. 2 to the Integon        10.4           *
       Corporation 1992 Stock Option Plan

10.5   Integon Corporation Amended and       10.5           *
       Restated Omnibus Long-Term 
       Performance Incentive
       Compensation Plan

10.6   Amendment No. 1 to the Integon        10.6           *
       Corporation Amended and Restated
       OmnibusLong-Term Performance 
       Incentive Compensation Plan


<PAGE>
                          INDEX TO EXHIBITS (continued)


                                                  Filed Herewith (*),
                                                Nonapplicable (NA), or
                                           Incorporated by Reference from
                                           -------------------------------------
                                                     Integon
Exhibit                                              Registration     Sequential
Number                                    Exhibit    No. or Report   Page Number
-------                                 ---------    -------------   -----------

10.7   Integon Corporation Executive        10.7            *
       Salary Deferral Plan

10.8   Integon Corporation                  10.8            *
       Severance Policy

10.9   Integon Corporation Amended          10.9            *
       and Restated Annual 
       Incentive Award Plan

11.1   Computation of Earnings              11.1            *
       Per Share

27     Financial Data Schedule       

<PAGE>
                                  Exhibit 10.1

February 13, 1997


Mr. Steven C. Andrews
Integon Corporation
500  West Fifth Street
Winston-Salem, North Carolina  27152

Dear Mr. Andrews:

     Integon Corporation, a Delaware corporation (the "Company"),  considers the
establishment and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interest of the Company and its  shareholders.
Accordingly,  the Board of Directors of the Company (the "Board") has determined
that appropriate  steps should be taken to reinforce and encourage the continued
attention and  dedication  of members of the  management of the Company to their
assigned  duties  without   distraction  in   circumstances   arising  from  the
possibility of a termination in your employment.
         
     This letter agreement,  which has been approved by the Board sets forth the
severance benefits which the Company agrees will be provided to you in the event
your employment with the Company is terminated.

     1. Agreement to Provide Services; Right To Terminate.
                  
     (i) Except as otherwise  provided in paragraph  (ii) below,  the Company or
you  may  terminate  your  employment  at any  time,  subject  to the  Company's
providing  the  benefits  hereinafter  specified  in  accordance  with the terms
hereof.
     (ii) In the event a tender offer or exchange  offer is made by a Person (as
hereinafter  defined) for more than 50% or more of the combined voting powers of
the Company's then outstanding voting securities  ordinarily having the right to
vote at elections of directors ("Voting Securities"), including shares of common
stock,  par value of $0.01 per share,  of the Company,  or in the event that the
Company enters into  negotiations  with respect to a merger,  consolidation,  or
other  acquisition  of  the  Company,  or of  all  or  substantially  all of the
Company's assets, with a Person, you agree that you will not leave the employ of
the Company (other than as a result of  Disability,  as such term is hereinafter
defined)  and will  render the  services  contemplated  in the  recitals to this
Agreement until such tender offer,  exchange offer,  merger,  consolidation,  or
acquisition  has been  abandoned  or  terminated  or a change in  control of the
Company,  as defined in Section 3 hereof,  has  occurred.  For  purposes of this
Agreement, the term "Person" shall mean and include any individual, corporation,
partnership,  group,  association  or other  "person",  as such  term is used in
Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other
than the Company,  a subsidiary of the Company,  or any employee benefit plan(s)
sponsored by the Company.

     2. Term of Agreement.  This Agreement shall commence on the date hereof and
shall  continue in effect  until  December  31, 1997;  provided,  however,  that
commencing  on January 1, 1998 and each January 1  thereafter,  the term of this
Agreement  shall  automatically  be extended for one  additional  year unless at
least 90 days  prior to such  January  1st date,  the  Company or you shall have
given notice that this Agreement shall not be extended;  and provided,  further,
that this Agreement  shall  continue in effect for a period of twenty-four  (24)
months beyond the term provided herein if a change in control of the Company, as
defined in Section 3 hereof, shall have occurred during such term.

     3. Change in Control. For purposes of this Agreement, a "change in control"
of the Company shall mean a change in control of a nature that would be required
to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in
effect on the date hereof,  pursuant to Section 13 or 15(d) of the Exchange Act;
provided that, without  limitation,  such a change in control shall be deemed to
have  occurred  at such time as (a) any  Person is or  becomes  the  "beneficial
owner"  (as  defined  in  Rule  13d-3  under  the  Exchange  Act),  directly  or
indirectly,  of 50% or more of the combined voting power of the Company's Voting
Securities;  (b) the Company is merged or consolidated with another corporation,
and  as a  result  of  such  merger  or  consolidation,  less  than  50%  of the
outstanding  voting  securities of the surviving or resulting  corporation shall
then be owned in the aggregate by the former  stockholders  of the Company,  (c)
the Company transfers  substantially all of its assets to another corporation or
entity which is not a wholly owned subsidiary of the Company; or (d) individuals
who  constitute the Board on the date hereof (the  "Incumbent  Board") cease for
any reason to constitute at least a majority  thereof,  provided that any person
becoming a director subsequent to the date hereof whose election,  or nomination
for election by the Company's  shareholders,  was approved by a vote of at least
three  quarters of the directors  comprising  the  Incumbent  Board (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such nomination)
shall be, for purposes of this clause (d), considered as though such person were
a member of the Incumbent Board.

     4. Termination  Following Change in Control. If any of the events described
in Section 3 hereof  constituting  a change in control of the Company shall have
occurred,  you shall be entitled to the benefits  provided in paragraph (iv) and
(v) of  Section  5  hereof  upon  the  termination  of  your  employment  within
twenty-four (24) months after such event, unless such termination is (a) because
of your  death  or (b) by the  Company  for  Cause  or  Disability  (as all such
capitalized terms are hereinafter defined).
                  
     (i) Disability.  Termination of your employment based on "Disability" shall
mean  termination  because of your absence from your duties with the Company and
determined pursuant to the provisions of the long-term disability plan in effect
at the time such termination occurs.

     (ii) Cause. Termination by the Company of your employment for "Cause" shall
mean  termination  upon (a) the willful and continued  failure by you to perform
substantially  all of your duties with the Company  (other than any such failure
resulting from your incapacity due to physical or mental illness) after a demand
for substantial  performance is delivered to you by the Chairman of the Board or
the Chief  Executive  Officer of the Company which  specifically  identifies the
manner in which you have not  substantially  performed  your duties,  or (b) the
willful  engaging by you in illegal conduct which is materially and demonstrably
injurious  to the  Company.  For  purposes of this  paragraph  (ii),  no act, or
failure to act,  on your part shall be  considered  "willful"  unless  done,  or
omitted to be done, by you in bad faith and without  reasonable belief that your
action or omission was in, or not opposed to, the best interests of the Company.
Any act, or failure to act, based upon authority  given pursuant to a resolution
duly  adopted by the Board or based upon the advice of counsel  for the  Company
shall be conclusively presumed to be done, or omitted to be done, by you in good
faith  and in the  best  interests  of the  corporation.  It is  also  expressly
understood  that your attention to matters not directly  related to the business
of the Company  shall not provide a basis for  termination  for Cause so long as
the Board has approved your engagement in such activities.  Notwithstanding  the
foregoing,  you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three quarters of the entire membership
of the Board at a meeting  called  and held for the  purpose  (after  reasonable
notice to you and an  opportunity  for you,  together with your  counsel,  to be
heard before the Board), finding that in the good faith opinion of the Board you
were guilty of the conduct set forth above in (a) or (b) of this  paragraph (ii)
and specifying the particulars thereof in detail.

     5. Compensation Upon Termination.
                  
     (i) If your  employment is terminated as a result of your  Disability,  the
Company shall  continue to pay you your base salary for a period of  twenty-four
(24) months following the date of your  termination,  at the rate in effect just
prior to your Disability.  Notwithstanding the foregoing,  the obligation to pay
such  amount  shall be offset by the  amount,  if any,  you may be  entitled  to
receive under the Company's long term disability plan.  Provided  further,  that
nothing set forth herein is intended to otherwise  reduce any benefits  that you
may be entitled to receive under the Company's long term disability plan.

     (ii) If your employment  shall be  involuntarily  terminated by the Company
(excluding  termination  for Cause  and  termination  after a change in  control
subject to paragraph  (iv) hereof) the Company  shall pay you an amount equal to
your base  salary for  eighteen  (18) months at the rate in effect just prior to
the date of termination,  such amount being paid in equal semi-monthly  payments
over the 18 month period  following  the date of your  termination.  The Company
also  shall  pay you an amount in cash  equal to 100% of the  Performance  Award
under  Article  8 of  the  Amended  and  Restated  Integon  Corporation  Omnibus
Long-Term  Performance  Incentive  Compensation Plan ("Omnibus Plan") that would
have been  payable  for the  calendar  year in which  your  termination  occurs,
assuming that the performance  goal for the year had been attained at a level of
100% (the  "targeted  bonus  amount").  Such  amount  shall be  payable in equal
semi-monthly  installments  over the 18 month period  following the date of your
termination.  Further, the Company shall pay you for the period ending 18 months
after the date of your termination any benefits that may be due to you under any
benefit  plan,  program or policy of the Company  intended to benefit  employees
(hereinafter referred to as "Plans") except other severance pay plans.

     (iii) If you voluntarily  terminate your employment,  the Company shall pay
you your salary through the date of termination at the rate in effect just prior
to the date of termination  and shall pay you for all earned but unused vacation
as of the date of  termination.  Thereupon  the  Company  shall  have no further
obligations to you under this Agreement.

     (iv) Subject to Section 8 hereof,  if, within twenty-four (24) months after
a change in control of the Company shall have occurred,  as defined in Section 3
above,  your  employment  shall be  terminated  (other  than as a result of your
death) (a) by the Company other than for Cause or Disability, or (b) voluntarily
by you, then, you shall be entitled,  without regard to any contrary  provisions
of any Plans, to the benefits as provided below:
                           
     (A) the Company shall pay your base salary  through the date of termination
at the rate in effect just prior to the date of your  termination or the rate in
effect immediately prior to the change in control, whichever is higher, plus any
benefits or awards (including both the cash and stock components) which pursuant
to the terms of any Plans have been earned or become payable, but which have not
yet been paid to you  (including  amounts which  previously had been deferred at
your request); and
                           
     (B) as  severance  pay  and in  lieu  of any  further  salary  for  periods
subsequent to the date of termination, the Company shall pay to you an amount in
cash equal to the lesser of 1 1/2 times your base salary and any targeted  bonus
amount  (except to the extent the  targeted  bonus  amount has already been paid
pursuant to the change in control  provisions of the Omnibus Plan) or 2.99 times
your  "annualized  includible  compensation  for  the  base  period"  minus  any
parachute  (as defined in Section  280G(d) (1) of the  Internal  Revenue code of
1986 (the "Code") payable one-third at the time of termination, one-third at the
end of twelve (12) months following the date of your termination,  and one-third
at the end of eighteen (18) months following the date of your  termination.  The
Company  shall  also  pay  you  the  value  of  the  non-compete  set  forth  in
subparagraph (v) below.

     (v) Except as otherwise provided herein, the amount of any payment provided
for in this Section 5 shall not be reduced, offset or subject to recovery by the
Company by reason of any compensation  earned by you as the result of employment
by  another  employer  after  the  date  of  your  termination,   or  otherwise.
Notwithstanding  the  foregoing,  you agree for a period of eighteen (18) months
after the date of your termination in connection with a change in control,  that
you will not, as individual,  proprietor,  partner, joint venturer,  shareholder
(other than in a publicly traded company, provided that you do not own more than
3% of the securities of such company),  investor,  consultant,  advisor, broker,
director,  officer,  agent,  employee,  trustee,  beneficiary  or in  any  other
capacity  whatsoever,  directly or indirectly engage in, or participate with any
other  person  or entity  to  engage  in,  any  business  or  activity,  whether
consisting of a single  transaction,  or a series of  transactions or continuous
activity,  similar to or  competitive  with the primary  business or activity in
which the Company engages during the term of this Agreement and in consideration
for such  non-competition  agreement by you, the Company shall pay you $846,150,
payable  one-third six months after the date of your  termination,  one-third 12
months after the date of your termination and one-third 18 months after the date
of your  termination;  provided,  however  that  should  you  engage in any such
business or activity, the Company's sole remedy therefor shall be termination of
your payment  rights under this  paragraph 5, which  obligation  shall be deemed
released and  discharged  on the date that you first engage in any such business
or activity.

     6. Successors; Binding Agreement.
                 
     (i) Upon your written request,  the Company will seek to have any Successor
(as  hereinafter  defined),  by agreement in form and substance  satisfactory to
you,  assent to the  fulfillment  by the Company of its  obligations  under this
Agreement.  "Successor"  shall  mean any  Person  that  succeeds  to, or has the
practical  ability to control (either  immediately or with the passage of time),
the Company's business directly, by merger or consolidation,  or indirectly,  by
purchase of the Company's Voting Securities or otherwise.

     (ii) This  Agreement  shall inure to the benefit of and be  enforceable  by
your personal or legal representatives,  executors, administrators,  successors,
heirs,  distributees,  devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had  continued to live,  all such
amounts,  unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee,  legatee or other designee or, if there
be no such designee, to your estate.
         
     7. Fees and  Expenses.  The  Company  shall pay all legal fees and  related
expenses incurred by you as a result of (i) your termination  following a change
in  control  of the  Company  (including  all such  fees and  expenses,  if any,
incurred in contesting or disputing any such  termination  or incurred by you in
seeking  advice  with  respect to the  matters set forth in Section 8 hereof) or
(ii) your  seeking to obtain or enforce  any right or benefit  provided  by this
Agreement.

     8. Taxes.

     (i) All payments to be made to you under this  Agreement will be subject to
required withholding of federal, state and local income and employment taxes.

     (ii) Notwithstanding  anything in the foregoing to the contrary,  if any of
the payments  provided for in this  Agreement,  together with any other payments
which  you have the  right to  receive  from the  Company,  would  constitute  a
"parachute payment" (as defined in Section 280G(b)(2) of the Code), the payments
pursuant to this Agreement  shall be reduced  (reducing first the payments under
Section  5(iv)(B))  to the  largest  amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code.

     9. Survival.  The respective  obligations of, and benefits afforded to, the
Company  and you as  provided  in  Sections  5,  6(ii),  7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.

     10.  Notice.  For the  purposes  of this  Agreement,  notices and all other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed  to have been  duly  given  when  delivered  or  mailed by United  States
registered mail, return receipt requested, postage prepaid and addressed, in the
case  of the  Company,  to the  address  set  forth  on the  first  page of this
agreement or, in the case of the undersigned  employee, to the address set forth
below his signature,  provided that all notices to the Company shall be directed
to the attention of the  President of the Company,  with a copy to the Secretary
of the Company,  or to such other address as either party may have  furnished to
the other in writing in  accordance  herewith,  except  that notice of change of
address shall be effective only upon receipt.
         
     11. Miscellaneous.  No provision of this Agreement may be modified,  waived
or discharged  unless such  modification,  waiver or discharge is agreed to in a
writing signed by you and by the General  Counsel (or in the case of the General
Counsel,  the President) of the Company. No waiver by either party hereto at any
time of any breach by the other  party  hereto of, or of  compliance  with,  any
condition  or  provision  of this  Agreement to be performed by such other party
shall be deemed a waiver of similar or  dissimilar  provisions  or conditions at
the same or at any prior or subsequent  time. No agreements or  representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have  been  made by  either  party  which  are not  expressly  set forth in this
Agreement.  The validity,  interpretation,  construction and performance of this
Agreement shall be governed by the laws of the State of North Carolina.
         
     12. Validity.  The invalidity or  unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

     13. Arbitration.  Any dispute or controversy arising under or in connection
with  this  Agreement  shall be  settled  exclusively  by  arbitration  in North
Carolina  by three  arbitrators  in  accordance  with the rules of the  American
Arbitration  Association  then  in  effect.  Judgment  may  be  entered  on  the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek  specific  performance  of your right to be paid until
the date of your  termination  during the pendency of any dispute of controversy
arising under or in connection with this  Agreement.  The Company shall bear all
costs  and  expenses  arising  in  connection  with any  arbitration  proceeding
pursuant to this Section 13.

     14.  Employee's  Commitment.  You agree that  subsequent  to your period of
employment with the Company, you will not at any time communicate or disclose to
any  unauthorized  person,  without  the  written  consent of the  Company,  any
proprietary  processes of the Company or any  subsidiary of the Company or other
confidential information concerning their business,  affairs, products, supplies
or customers which, if disclosed,  would have a material adverse effect upon the
business or operations of the Company and its subsidiaries, taken as a whole; it
being  understood,  however,  that the  obligations of this Section 14 shall not
apply  to  the  extent  that  the   aforesaid   matters  (a)  are  disclosed  in
circumstances  where you are legally  required to do so or (b) become  generally
known to and available for use by the public otherwise than by your wrongful act
or omission.

     15.  Related  Agreements.  To the extent  that any  provision  of any other
agreement between the Company, or any of its subsidiaries,  and you shall limit,
qualify  or be  inconsistent  with any  provision  of this  Agreement,  then for
purposes of this Agreement,  while the same shall remain in force, the provision
of this Agreement shall control and such provision of such other agreement shall
be deemed to have been superseded,  and to be of no force or effect,  as if such
other agreement had been formally  amended to the extent necessary to accomplish
such purpose.  This  Agreement  specifically  supersedes and replaces the letter
agreement dated January 1, 1996.

     16. Counterparts.  This Agreement may be executed in several  counterparts,
each of which shall be deemed to be an original but all of which  together  will
constitute one and the same instrument.

     If this letter  correctly  sets forth our  agreement on the subject  matter
hereof,  kindly  sign  below and return to the  Secretary  of the  Company  this
letter, which will then constitute our agreement on this subject.
                                   
                                        Sincerely,


                                        INTEGON CORPORATION


                                        By:  /s/ John B. Yorke
                                             -----------------
                                             John B. Yorke
                                             Vice President, General Counsel



Agreed to this 19th day of February, 1997.


/s/ Steven C. Andrews
----------------------
Steven C. Andrews

End Exhibit 10.1
<PAGE>
                                  Exhibit 10.2

February 13, 1997


Mr. Donald F. McKee
Integon Corporation
500  West Fifth Street
Winston-Salem, North Carolina  27152

Dear Mr. McKee:

     Integon Corporation, a Delaware corporation (the "Company"),  considers the
establishment and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interest of the Company and its  shareholders.
Accordingly,  the Board of Directors of the Company (the "Board") has determined
that appropriate  steps should be taken to reinforce and encourage the continued
attention and  dedication  of members of the  management of the Company to their
assigned  duties  without   distraction  in   circumstances   arising  from  the
possibility of a termination in your employment.

     This letter agreement,  which has been approved by the Board sets forth the
severance benefits which the Company agrees will be provided to you in the event
your employment with the Company is terminated.

      1.  Agreement to Provide Services; Right To Terminate.
             
     (i) Except as otherwise  provided in paragraph  (ii) below,  the Company or
you  may  terminate  your  employment  at any  time,  subject  to the  Company's
providing  the  benefits  hereinafter  specified  in  accordance  with the terms
hereof.

     (ii) In the event a tender offer or exchange  offer is made by a Person (as
hereinafter  defined) for more than 50% or more of the combined voting powers of
the Company's then outstanding voting securities  ordinarily having the right to
vote at elections of directors ("Voting Securities"), including shares of common
stock,  par value of $0.01 per share,  of the Company,  or in the event that the
Company enters into  negotiations  with respect to a merger,  consolidation,  or
other  acquisition  of  the  Company,  or of  all  or  substantially  all of the
Company's assets, with a Person, you agree that you will not leave the employ of
the Company (other than as a result of  Disability,  as such term is hereinafter
defined)  and will  render the  services  contemplated  in the  recitals to this
Agreement until such tender offer,  exchange offer,  merger,  consolidation,  or
acquisition  has been  abandoned  or  terminated  or a change in  control of the
Company,  as defined in Section 3 hereof,  has  occurred.  For  purposes of this
Agreement, the term "Person" shall mean and include any individual, corporation,
partnership,  group,  association  or other  "person",  as such  term is used in
Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other
than the Company,  a subsidiary of the Company,  or any employee benefit plan(s)
sponsored by the Company.

     2. Term of Agreement.  This Agreement shall commence on the date hereof and
shall  continue in effect  until  December  31, 1997;  provided,  however,  that
commencing  on January 1, 1998 and each January 1  thereafter,  the term of this
Agreement  shall  automatically  be extended for one  additional  year unless at
least 90 days  prior to such  January  1st date,  the  Company or you shall have
given notice that this Agreement shall not be extended;  and provided,  further,
that this Agreement  shall  continue in effect for a period of twenty-four  (24)
months beyond the term provided herein if a change in control of the Company, as
defined in Section 3 hereof, shall have occurred during such term.

     3. Change in Control. For purposes of this Agreement, a "change in control"
of the Company shall mean a change in control of a nature that would be required
to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in
effect on the date hereof,  pursuant to Section 13 or 15(d) of the Exchange Act;
provided that, without  limitation,  such a change in control shall be deemed to
have  occurred  at such time as (a) any  Person is or  becomes  the  "beneficial
owner"  (as  defined  in  Rule  13d-3  under  the  Exchange  Act),  directly  or
indirectly,  of 50% or more of the combined voting power of the Company's Voting
Securities;  (b) the Company is merged or consolidated with another corporation,
and  as a  result  of  such  merger  or  consolidation,  less  than  50%  of the
outstanding  voting  securities of the surviving or resulting  corporation shall
then be owned in the aggregate by the former  stockholders  of the Company,  (c)
the Company transfers  substantially all of its assets to another corporation or
entity which is not a wholly owned subsidiary of the Company; or (d) individuals
who  constitute the Board on the date hereof (the  "Incumbent  Board") cease for
any reason to constitute at least a majority  thereof,  provided that any person
becoming a director subsequent to the date hereof whose election,  or nomination
for election by the Company's  shareholders,  was approved by a vote of at least
three  quarters of the directors  comprising  the  Incumbent  Board (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such nomination)
shall be, for purposes of this clause (d), considered as though such person were
a member of the Incumbent Board.

     4. Termination  Following Change in Control. If any of the events described
in Section 3 hereof  constituting  a change in control of the Company shall have
occurred,  you shall be entitled to the benefits  provided in paragraph (iv) and
(v) of  Section  5  hereof  upon  the  termination  of  your  employment  within
twenty-four (24) months after such event, unless such termination is (a) because
of your  death  or (b) by the  Company  for  Cause  or  Disability  (as all such
capitalized terms are hereinafter defined).
                
     (i) Disability.  Termination of your employment based on "Disability" shall
mean  termination  because of your absence from your duties with the Company and
determined pursuant to the provisions of the long-term disability plan in effect
at the time such termination occurs.

     (ii) Cause. Termination by the Company of your employment for "Cause" shall
mean  termination  upon (a) the willful and continued  failure by you to perform
substantially  all of your duties with the Company  (other than any such failure
resulting from your incapacity due to physical or mental illness) after a demand
for substantial  performance is delivered to you by the Chairman of the Board or
the Chief  Executive  Officer of the Company which  specifically  identifies the
manner in which you have not  substantially  performed  your duties,  or (b) the
willful  engaging by you in illegal conduct which is materially and demonstrably
injurious  to the  Company.  For  purposes of this  paragraph  (ii),  no act, or
failure to act,  on your part shall be  considered  "willful"  unless  done,  or
omitted to be done, by you in bad faith and without  reasonable belief that your
action or omission was in, or not opposed to, the best interests of the Company.
Any act, or failure to act, based upon authority  given pursuant to a resolution
duly  adopted by the Board or based upon the advice of counsel  for the  Company
shall be conclusively presumed to be done, or omitted to be done, by you in good
faith  and in the  best  interests  of the  corporation.  It is  also  expressly
understood  that your attention to matters not directly  related to the business
of the Company  shall not provide a basis for  termination  for Cause so long as
the Board has approved your engagement in such activities.  Notwithstanding  the
foregoing,  you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three quarters of the entire membership
of the Board at a meeting  called  and held for the  purpose  (after  reasonable
notice to you and an  opportunity  for you,  together with your  counsel,  to be
heard before the Board), finding that in the good faith opinion of the Board you
were guilty of the conduct set forth above in (a) or (b) of this  paragraph (ii)
and specifying the particulars thereof in detail.

      5.  Compensation Upon Termination.

     (i) If your  employment is terminated as a result of your  Disability,  the
Company shall  continue to pay you your base salary for a period of  twenty-four
(24) months following the date of your  termination,  at the rate in effect just
prior to your Disability.  Notwithstanding the foregoing,  the obligation to pay
such  amount  shall be offset by the  amount,  if any,  you may be  entitled  to
receive under the Company's long term disability plan.  Provided  further,  that
nothing set forth herein is intended to otherwise  reduce any benefits  that you
may be entitled to receive under the Company's long term disability plan.

     (ii) If your employment  shall be  involuntarily  terminated by the Company
(excluding  termination  for Cause  and  termination  after a change in  control
subject to paragraph  (iv) hereof) the Company  shall pay you an amount equal to
your base  salary for  eighteen  (18) months at the rate in effect just prior to
the date of termination,  such amount being paid in equal semi-monthly  payments
over the 18 month period  following  the date of your  termination.  The Company
also  shall  pay you an amount in cash  equal to 100% of the  Performance  Award
under  Article  8 of  the  Amended  and  Restated  Integon  Corporation  Omnibus
Long-Term  Performance  Incentive  Compensation Plan ("Omnibus Plan") that would
have been  payable  for the  calendar  year in which  your  termination  occurs,
assuming that the performance  goal for the year had been attained at a level of
100% (the  "targeted  bonus  amount").  Such  amount  shall be  payable in equal
semi-monthly  installments  over the 18 month period  following the date of your
termination.  Further, the Company shall pay you for the period ending 18 months
after the date of your termination any benefits that may be due to you under any
benefit  plan,  program or policy of the Company  intended to benefit  employees
(hereinafter referred to as "Plans") except other severance pay plans.

     (iii) If you voluntarily  terminate your employment,  the Company shall pay
you your salary through the date of termination at the rate in effect just prior
to the date of termination  and shall pay you for all earned but unused vacation
as of the date of  termination.  Thereupon  the  Company  shall  have no further
obligations to you under this Agreement.

     (iv) Subject to Section 8 hereof,  if, within twenty-four (24) months after
a change in control of the Company shall have occurred,  as defined in Section 3
above,  your  employment  shall be  terminated  (other  than as a result of your
death) (a) by the Company other than for Cause or Disability, or (b) voluntarily
by you, then, you shall be entitled,  without regard to any contrary  provisions
of any Plans, to the benefits as provided below:

     (A) the Company shall pay your base salary  through the date of termination
at the rate in effect just prior to the date of your  termination or the rate in
effect immediately prior to the change in control, whichever is higher, plus any
benefits or awards (including both the cash and stock components) which pursuant
to the terms of any Plans have been earned or become payable, but which have not
yet been paid to you  (including  amounts which  previously had been deferred at
your request); and

     (B) as  severance  pay  and in  lieu  of any  further  salary  for  periods
subsequent to the date of termination, the Company shall pay to you an amount in
cash equal to the lesser of 1 1/2 times your base salary and any targeted  bonus
amount  (except to the extent the  targeted  bonus  amount has already been paid
pursuant to the change in control  provisions of the Omnibus Plan) or 2.99 times
your  "annualized  includible  compensation  for  the  base  period"  minus  any
parachute  (as defined in Section  280G(d) (1) of the  Internal  Revenue code of
1986 (the "Code") payable one-third at the time of termination, one-third at the
end of twelve (12) months following the date of your termination,  and one-third
at the end of eighteen (18) months following the date of your  termination.  The
Company  shall  also  pay  you  the  value  of  the  non-compete  set  forth  in
subparagraph (v) below.

     (v) Except as otherwise provided herein, the amount of any payment provided
for in this Section 5 shall not be reduced, offset or subject to recovery by the
Company by reason of any compensation  earned by you as the result of employment
by  another  employer  after  the  date  of  your  termination,   or  otherwise.
Notwithstanding  the  foregoing,  you agree for a period of eighteen (18) months
after the date of your termination in connection with a change in control,  that
you will not, as individual,  proprietor,  partner, joint venturer,  shareholder
(other than in a publicly traded company, provided that you do not own more than
3% of the securities of such company),  investor,  consultant,  advisor, broker,
director,  officer,  agent,  employee,  trustee,  beneficiary  or in  any  other
capacity  whatsoever,  directly or indirectly engage in, or participate with any
other  person  or entity  to  engage  in,  any  business  or  activity,  whether
consisting of a single  transaction,  or a series of  transactions or continuous
activity,  similar to or  competitive  with the primary  business or activity in
which the Company engages during the term of this Agreement and in consideration
for such  non-competition  agreement by you, the Company shall pay you $663,600,
payable  one-third six months after the date of your  termination,  one-third 12
months after the date of your termination and one-third 18 months after the date
of your  termination;  provided,  however  that  should  you  engage in any such
business or activity, the Company's sole remedy therefor shall be termination of
your payment  rights under this  paragraph 5, which  obligation  shall be deemed
released and  discharged  on the date that you first engage in any such business
or activity.

     6. Successors; Binding Agreement.

     (i) Upon your written request,  the Company will seek to have any Successor
(as  hereinafter  defined),  by agreement in form and substance  satisfactory to
you,  assent to the  fulfillment  by the Company of its  obligations  under this
Agreement.  "Successor"  shall  mean any  Person  that  succeeds  to, or has the
practical  ability to control (either  immediately or with the passage of time),
the Company's business directly, by merger or consolidation,  or indirectly,  by
purchase of the Company's Voting Securities or otherwise.
                  
     (ii) This  Agreement  shall inure to the benefit of and be  enforceable  by
your personal or legal representatives,  executors, administrators,  successors,
heirs,  distributees,  devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had  continued to live,  all such
amounts,  unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee,  legatee or other designee or, if there
be no such designee, to your estate.

     7. Fees and  Expenses.  The  Company  shall pay all legal fees and  related
expenses incurred by you as a result of (i) your termination  following a change
in  control  of the  Company  (including  all such  fees and  expenses,  if any,
incurred in contesting or disputing any such  termination  or incurred by you in
seeking  advice  with  respect to the  matters set forth in Section 8 hereof) or
(ii) your  seeking to obtain or enforce  any right or benefit  provided  by this
Agreement.

     8. Taxes.

     (i) All payments to be made to you under this  Agreement will be subject to
required withholding of federal, state and local income and employment taxes.

     (ii) Notwithstanding  anything in the foregoing to the contrary,  if any of
the payments  provided for in this  Agreement,  together with any other payments
which  you have the  right to  receive  from the  Company,  would  constitute  a
"parachute payment" (as defined in Section 280G(b)(2) of the Code), the payments
pursuant to this Agreement  shall be reduced  (reducing first the payments under
Section  5(iv)(B))  to the  largest  amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code.

     9. Survival.  The respective  obligations of, and benefits afforded to, the
Company  and you as  provided  in  Sections  5,  6(ii),  7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.
        
     10.  Notice.  For the  purposes  of this  Agreement,  notices and all other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed  to have been  duly  given  when  delivered  or  mailed by United  States
registered mail, return receipt requested, postage prepaid and addressed, in the
case  of the  Company,  to the  address  set  forth  on the  first  page of this
agreement or, in the case of the undersigned  employee, to the address set forth
below his signature,  provided that all notices to the Company shall be directed
to the attention of the  President of the Company,  with a copy to the Secretary
of the Company,  or to such other address as either party may have  furnished to
the other in writing in  accordance  herewith,  except  that notice of change of
address shall be effective only upon receipt.

     11. Miscellaneous.  No provision of this Agreement may be modified,  waived
or discharged  unless such  modification,  waiver or discharge is agreed to in a
writing signed by you and by the General  Counsel (or in the case of the General
Counsel,  the President) of the Company. No waiver by either party hereto at any
time of any breach by the other  party  hereto of, or of  compliance  with,  any
condition  or  provision  of this  Agreement to be performed by such other party
shall be deemed a waiver of similar or  dissimilar  provisions  or conditions at
the same or at any prior or subsequent  time. No agreements or  representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have  been  made by  either  party  which  are not  expressly  set forth in this
Agreement.  The validity,  interpretation,  construction and performance of this
Agreement shall be governed by the laws of the State of North Carolina.

     12. Validity.  The invalidity or  unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

     13. Arbitration.  Any dispute or controversy arising under or in connection
with  this  Agreement  shall be  settled  exclusively  by  arbitration  in North
Carolina  by three  arbitrators  in  accordance  with the rules of the  American
Arbitration  Association  then  in  effect.  Judgment  may  be  entered  on  the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek  specific  performance  of your right to be paid until
the date of your  termination  during the pendency of any dispute of controversy
arising under or in connection with this  Agreement.  The Company shall bear all
costs  and  expenses  arising  in  connection  with any  arbitration  proceeding
pursuant to this Section 13.

     14.  Employee's  Commitment.  You agree that  subsequent  to your period of
employment with the Company, you will not at any time communicate or disclose to
any  unauthorized  person,  without  the  written  consent of the  Company,  any
proprietary  processes of the Company or any  subsidiary of the Company or other
confidential information concerning their business,  affairs, products, supplies
or customers which, if disclosed,  would have a material adverse effect upon the
business or operations of the Company and its subsidiaries, taken as a whole; it
being  understood,  however,  that the  obligations of this Section 14 shall not
apply  to  the  extent  that  the   aforesaid   matters  (a)  are  disclosed  in
circumstances  where you are legally  required to do so or (b) become  generally
known to and available for use by the public otherwise than by your wrongful act
or omission.

     15.  Related  Agreements.  To the extent  that any  provision  of any other
agreement between the Company, or any of its subsidiaries,  and you shall limit,
qualify  or be  inconsistent  with any  provision  of this  Agreement,  then for
purposes of this Agreement,  while the same shall remain in force, the provision
of this Agreement shall control and such provision of such other agreement shall
be deemed to have been superseded,  and to be of no force or effect,  as if such
other agreement had been formally  amended to the extent necessary to accomplish
such purpose.  This  Agreement  specifically  supersedes and replaces the letter
agreement dated January 1, 1996.

     16. Counterparts.  This Agreement may be executed in several  counterparts,
each of which shall be deemed to be an original but all of which  together  will
constitute one and the same instrument.

     If this letter  correctly  sets forth our  agreement on the subject  matter
hereof,  kindly  sign  below and return to the  Secretary  of the  Company  this
letter, which will then constitute our agreement on this subject.
                                 
                                        Sincerely,


                                        INTEGON CORPORATION


                                        By:  /s/ John B. Yorke
                                             -----------------
                                             John B. Yorke
                                             Vice President, General Counsel


Agreed to this 20th day of February, 1997.
               ----       ---------

/s/ Donald F. McKee
-------------------
Donald F. McKee

End Exhibit 10.2
<PAGE>
                                  Exhibit 10.3

February 13, 1997


Mr. John B. Yorke
Integon Corporation
500  West Fifth Street
Winston-Salem, North Carolina  27152

Dear Mr. Yorke:

     Integon Corporation, a Delaware corporation (the "Company"),  considers the
establishment and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interest of the Company and its  shareholders.
Accordingly,  the Board of Directors of the Company (the "Board") has determined
that appropriate  steps should be taken to reinforce and encourage the continued
attention and  dedication  of members of the  management of the Company to their
assigned  duties  without   distraction  in   circumstances   arising  from  the
possibility of a termination in your employment.
         
     This letter agreement,  which has been approved by the Board sets forth the
severance benefits which the Company agrees will be provided to you in the event
your employment with the Company is terminated.

     1. Agreement to Provide Services; Right To Terminate.
                  
     (i) Except as otherwise  provided in paragraph  (ii) below,  the Company or
you  may  terminate  your  employment  at any  time,  subject  to the  Company's
providing  the  benefits  hereinafter  specified  in  accordance  with the terms
hereof.

     (ii) In the event a tender offer or exchange  offer is made by a Person (as
hereinafter  defined) for more than 50% or more of the combined voting powers of
the Company's then outstanding voting securities  ordinarily having the right to
vote at elections of directors ("Voting Securities"), including shares of common
stock,  par value of $0.01 per share,  of the Company,  or in the event that the
Company enters into  negotiations  with respect to a merger,  consolidation,  or
other  acquisition  of  the  Company,  or of  all  or  substantially  all of the
Company's assets, with a Person, you agree that you will not leave the employ of
the Company (other than as a result of  Disability,  as such term is hereinafter
defined)  and will  render the  services  contemplated  in the  recitals to this
Agreement until such tender offer,  exchange offer,  merger,  consolidation,  or
acquisition  has been  abandoned  or  terminated  or a change in  control of the
Company,  as defined in Section 3 hereof,  has  occurred.  For  purposes of this
Agreement, the term "Person" shall mean and include any individual, corporation,
partnership,  group,  association  or other  "person",  as such  term is used in
Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other
than the Company,  a subsidiary of the Company,  or any employee benefit plan(s)
sponsored by the Company.

     2. Term of Agreement.  This Agreement shall commence on the date hereof and
shall  continue in effect  until  December  31, 1997;  provided,  however,  that
commencing  on January 1, 1998 and each January 1  thereafter,  the term of this
Agreement  shall  automatically  be extended for one  additional  year unless at
least 90 days  prior to such  January  1st date,  the  Company or you shall have
given notice that this Agreement shall not be extended;  and provided,  further,
that this Agreement  shall  continue in effect for a period of twenty-four  (24)
months beyond the term provided herein if a change in control of the Company, as
defined in Section 3 hereof, shall have occurred during such term.
         
     3. Change in Control. For purposes of this Agreement, a "change in control"
of the Company shall mean a change in control of a nature that would be required
to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in
effect on the date hereof,  pursuant to Section 13 or 15(d) of the Exchange Act;
provided that, without  limitation,  such a change in control shall be deemed to
have  occurred  at such time as (a) any  Person is or  becomes  the  "beneficial
owner"  (as  defined  in  Rule  13d-3  under  the  Exchange  Act),  directly  or
indirectly,  of 50% or more of the combined voting power of the Company's Voting
Securities;  (b) the Company is merged or consolidated with another corporation,
and  as a  result  of  such  merger  or  consolidation,  less  than  50%  of the
outstanding  voting  securities of the surviving or resulting  corporation shall
then be owned in the aggregate by the former  stockholders  of the Company;  (c)
the Company transfers  substantially all of its assets to another corporation or
entity which is not a wholly owned subsidiary of the Company; or (d) individuals
who  constitute the Board on the date hereof (the  "Incumbent  Board") cease for
any reason to constitute at least a majority  thereof,  provided that any person
becoming a director subsequent to the date hereof whose election,  or nomination
for election by the Company's  shareholders,  was approved by a vote of at least
three  quarters of the directors  comprising  the  Incumbent  Board (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such nomination)
shall be, for purposes of this clause (d), considered as though such person were
a member of the Incumbent Board.

     4. Termination  Following Change in Control. If any of the events described
in Section 3 hereof  constituting  a change in control of the Company shall have
occurred,  you shall be entitled to the benefits  provided in paragraph  (iv) of
Section 5 hereof upon the termination of your employment within twenty-four (24)
months after such event, unless such termination is (a) because of your death or
(b) by the  Company  for Cause or  Disability  or (c) by you other than for Good
Reason (as all such capitalized terms are hereinafter defined).
                  
     (i) Disability.  Termination of your employment based on "Disability" shall
mean  termination  because of your absence from your duties with the Company and
determined pursuant to the provisions of the long-term disability plan in effect
at the time such termination occurs.
                
     (ii) Cause. Termination by the Company of your employment for "Cause" shall
mean  termination  upon (a) the willful and continued  failure by you to perform
substantially  all of your duties with the Company  (other than any such failure
resulting from your incapacity due to physical or mental illness) after a demand
for substantial  performance is delivered to you by the Chairman of the Board or
the Chief  Executive  Officer of the Company which  specifically  identifies the
manner in which you have not  substantially  performed  your duties,  or (b) the
willful  engaging by you in illegal conduct which is materially and demonstrably
injurious  to the  Company.  For  purposes of this  paragraph  (ii),  no act, or
failure to act,  on your part shall be  considered  "willful"  unless  done,  or
omitted to be done, by you in bad faith and without  reasonable belief that your
action or omission was in, or not opposed to, the best interests of the Company.
Any act, or failure to act, based upon authority  given pursuant to a resolution
duly  adopted by the Board or based upon the advice of counsel  for the  Company
shall be conclusively presumed to be done, or omitted to be done, by you in good
faith  and in the  best  interests  of the  corporation.  It is  also  expressly
understood  that your attention to matters not directly  related to the business
of the Company  shall not provide a basis for  termination  for Cause so long as
the Board has approved your engagement in such activities.  Notwithstanding  the
foregoing,  you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three quarters of the entire membership
of the Board at a meeting  called  and held for the  purpose  (after  reasonable
notice to you and an  opportunity  for you,  together with your  counsel,  to be
heard before the Board), finding that in the good faith opinion of the Board you
were guilty of the conduct set forth above in (a) or (b) of this  paragraph (ii)
and specifying the particulars thereof in detail.

     (iii) Good Reason.  Termination by you of your employment for "Good Reason"
shall mean termination based on:

     (A) a  substantial  change  in your  status  (other  than any  such  change
primarily  attributable  to the fact that the  Company may no longer be publicly
owned) or a  significant  alteration  of your job  responsibilities  (except  in
connection with the termination of your employment for Cause or Disability or as
a result of your death or by you other than for Good Reason);
         
     (B) a  reduction  by  the  Employer  in  your  base  salary  as  in  effect
immediately prior to the change in control;

     (C) the  failure  by the  Company  to  continue  in  effect  any  Plan  (as
hereinafter defined) in which you are participating at the time of the change in
control  of the  Company  (or Plans  providing  you with at least  substantially
similar  benefits)  other than as a result of the normal  expiration of any such
Plan in  accordance  with its terms as in  effect  at the time of the  change in
control,  or the taking of any  action,  or the  failure to act,  by the Company
which would adversely  affect your continued  participation in any of such Plans
on at least as favorable a basis to you as is the case on the date of the change
in control or which would  materially  reduce your  benefits in the future under
any of such Plans or deprive you of any material  benefit  enjoyed by you at the
time of the change in control;

     (D) the failure by the Company to provide and credit you with the number of
paid  vacation  days to  which  you are then  entitled  in  accordance  with the
Company's normal vacation policy as in effect immediately prior to the change in
control;

     (E) the Company's  requiring you to be based  anywhere  other than within a
radius of 20 miles of the city where your office is located immediately prior to
the change in control except for required travel on the Company's business to an
extent  substantially  consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control;
        
     (F) the failure by the Company to obtain from any Successor (as hereinafter
defined) the assent to this Agreement contemplated by Section 6 hereof;

     (G) any  refusal  by the  Company  to  continue  to allow  you to attend to
matters or engage in  activities  not  directly  related to the  business of the
Company which,  prior to the change in control,  you were permitted to attend to
or engage in.

     For purposes of this  Agreement,  "Plan" shall mean any  compensation  plan
such as the Annual  Incentive  Award  Plan,  Omnibus  Plan (each as  hereinafter
defined),  or any  employee  benefit  plan such as a profit  sharing,  vacation,
medical,  dental,  vision,  disability,  accident,  life  insurance  plan  or  a
relocation  plan or policy or any other  plan,  program or policy of the Company
intended to benefit employees.

     5. Compensation Upon Termination.

     (i) If your  employment is terminated as a result of your  Disability,  the
Company shall  continue to pay you your base salary for a period of  twenty-four
(24) months following the date of your  termination,  at the rate in effect just
prior to your Disability.  Notwithstanding the foregoing,  the obligation to pay
such  amount  shall be offset by the  amount,  if any,  you may be  entitled  to
receive under the Company's long term disability plan.  Provided  further,  that
nothing set forth herein is intended to otherwise  reduce any benefits  that you
may be entitled to receive under the Company's long term disability plan.
                
     (ii) If your employment  shall be  involuntarily  terminated by the Company
(excluding  termination  for Cause  and  termination  after a change in  control
subject to paragraph  (iv) hereof) the Company  shall pay you an amount equal to
your base  salary for twelve (12) months at the rate in effect just prior to the
date of termination,  such amount being paid in equal semi-monthly payments over
the 12 month period  following  the date of your  termination.  The Company also
shall pay you an amount  in cash  equal to 100% of the value of the award  under
the Annual  Incentive  Award Plan that would have been  payable for the calendar
year in which your  termination  occurs,  assuming that the performance goal for
the year had been  attained at a level of 100% (the  "targeted  bonus  amount").
Such  amount  shall be payable in equal  semi-monthly  installments  over the 12
month period following your date of termination.  Further, the Company shall pay
you for the  period  ending 12 months  after  the date of your  termination  any
benefits  that may be due to you under  any Plan,  except  other  severance  pay
plans. In addition, the Company shall pay you up to an additional six (6) months
of your base  salary in the event you are not  employed at the end of the twelve
(12) month period referenced above provided that you have used your best efforts
to  obtain  comparable  employment.   Such  payments  shall  be  made  in  equal
installments on a semi-monthly basis for up to six (6) months for so long as you
remain  unemployed  and continue to use your best  efforts to obtain  comparable
employment.  If you become employed during such additional six (6) month period,
you will be entitled to continue to receive the difference between the severance
pay and the base salary of the new job, if any, for the remainder of the six (6)
month period. Notwithstanding, the foregoing, if the Company determines that the
value of the  non-compete  described in  subparagraph  (v) below is greater than
eighteen  months of base salary plus the targeted bonus amount for one year, the
Company shall pay you the value of the non-compete in lieu of any base salary
and the targeted bonus amount.

     (iii) If you voluntarily  terminate your employment,  the Company shall pay
you your salary through the date of termination at the rate in effect just prior
to the date of termination  and shall pay you for all earned but unused vacation
as of the date of  termination.  Thereupon  the  Company  shall  have no further
obligations to you under this Agreement.
                  
     (iv) Subject to Section 8 hereof,  if, within twenty-four (24) months after
a change in control of the Company shall have occurred,  as defined in Section 3
above,  your  employment  shall be  terminated  (other  than as a result of your
death) (a) by the Company other than for Cause or Disability,  or (b) by you for
Good  Reason,  then,  you shall be  entitled,  without  regard  to any  contrary
provisions of any Plans, to the benefits as provided below:

     (A) the Company shall pay your base salary  through the date of termination
at the rate in effect just prior to the date of your  termination or the rate in
effect immediately prior to the change in control, whichever is higher, plus any
benefits or awards (including both the cash and stock components) which pursuant
to the terms of any Plans have been earned or become payable, but which have not
yet been paid to you  (including  amounts which  previously had been deferred at
your request); and

     (B) as  severance  pay  and in  lieu  of any  further  salary  for  periods
subsequent to the date of termination, the Company shall pay to you an amount in
cash equal to your base salary for twelve (12) months at the rate in effect just
prior to the date of termination,  such amount being paid in equal  semi-monthly
payments over the 12 month period  following the date of your  termination.  The
Company  also  shall pay you the  targeted  bonus  amount in equal  semi-monthly
payments over the 12 month period  following your date of termination.  Further,
the Company shall pay you for the period ending 12 months after the date of your
termination  any  benefits  that may be due to you under any Plan  except  other
severance pay plans.  Further, the Company shall pay you an amount in cash equal
to any  award  under  the  Amended  and  Restated  Integon  Corporation  Omnibus
Long-Term  Performance  Incentive  Compensation  Plan (the "Omnibus  Plan") that
exceeds the maximum award that may be paid out under the Omnibus Plan during any
performance  period. In addition,  the Company shall pay you up to an additional
six (6) months of your base salary in the event you are not  employed at the end
of the twelve (12) month period  referenced  above  provided  that you have used
your best efforts to obtain comparable  employment.  Such payments shall be made
in equal  installments  on a semi-monthly  basis for up to six (6) months for so
long as you remain  unemployed  and  continue to use your best efforts to obtain
comparable  employment.  If you become  employed  during such additional six (6)
month period, you will be entitled to continue to receive the difference between
the  severance pay and the base salary of the new job, if any, for the remainder
of the six (6) month  period.  Notwithstanding,  the  foregoing,  if the Company
determines that the value of the non-compete described in subparagraph (v) below
is greater than  eighteen  months of base salary plus the targeted  bonus amount
for one year, the Company shall pay you the value of the  non-compete in lieu of
any base salary and the targeted bonus amount.

     (v) Except as otherwise provided herein, the amount of any payment provided
for in this Section 5 shall not be reduced, offset or subject to recovery by the
Company by reason of any compensation  earned by you as the result of employment
by  another  employer  after  the  date  of  your  termination,   or  otherwise.
Notwithstanding  the foregoing,  you agree for a period of eighteen months after
the  date of your  termination  provided  for  above,  that  you  will  not,  as
individual,  proprietor,  partner, joint venturer,  shareholder (other than in a
publicly  traded  company,  provided  that  you do not own  more  than 3% of the
securities of such company),  investor,  consultant,  advisor, broker, director,
officer,  agent,  employee,  trustee,  beneficiary  or  in  any  other  capacity
whatsoever,  directly or  indirectly  engage in, or  participate  with any other
person or entity to engage in, any business or activity, whether consisting of a
single transaction,  or a series of transactions or continuous activity, similar
to or  competitive  with the  primary  business or activity in which the Company
engages  during the term of this  Agreement;  provided,  however that should you
engage in any such  business or activity,  the  Company's  sole remedy  therefor
shall be  termination  of your  payment  rights  under this  paragraph  5, which
obligation  shall be deemed  released and  discharged on the date that you first
engage in any such business or activity.

     6. Successors; Binding Agreement.

     (i) Upon your written request,  the Company will seek to have any Successor
(as  hereinafter  defined),  by agreement in form and substance  satisfactory to
you,  assent to the  fulfillment  by the Company of its  obligations  under this
Agreement.  "Successor"  shall  mean any  Person  that  succeeds  to, or has the
practical  ability to control (either  immediately or with the passage of time),
the Company's business directly, by merger or consolidation,  or indirectly,  by
purchase of the Company's Voting Securities or otherwise.
                  
     (ii) This  Agreement  shall inure to the benefit of and be  enforceable  by
your personal or legal representatives,  executors, administrators,  successors,
heirs,  distributees,  devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had  continued to live,  all such
amounts,  unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee,  legatee or other designee or, if there
be no such designee, to your estate.
         
     7. Fees and  Expenses.  The  Company  shall pay all legal fees and  related
expenses incurred by you as a result of (i) your termination  following a change
in  control  of the  Company  (including  all such  fees and  expenses,  if any,
incurred in contesting or disputing any such  termination  or incurred by you in
seeking  advice  with  respect to the  matters set forth in Section 8 hereof) or
(ii) your  seeking to obtain or enforce  any right or benefit  provided  by this
Agreement.

     8.  Taxes.  All  payments  to be made to you under this  Agreement  will be
subject  to  required  withholding  of  federal,  state  and  local  income  and
employment taxes.

     9. Survival.  The respective  obligations of, and benefits afforded to, the
Company  and you as  provided  in  Sections  5,  6(ii),  7, 8, 13 and 14 of this
Agreement shall survive termination of this Agreement.
         
     10.  Notice.  For the  purposes  of this  Agreement,  notices and all other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed  to have been  duly  given  when  delivered  or  mailed by United  States
registered mail, return receipt requested, postage prepaid and addressed, in the
case  of the  Company,  to the  address  set  forth  on the  first  page of this
agreement or, in the case of the undersigned  employee, to the address set forth
below his signature,  provided that all notices to the Company shall be directed
to the attention of the  President of the Company,  with a copy to the Secretary
of the Company,  or to such other address as either party may have  furnished to
the other in writing in  accordance  herewith,  except  that notice of change of
address shall be effective only upon receipt.
        
     11. Miscellaneous.  No provision of this Agreement may be modified,  waived
or discharged  unless such  modification,  waiver or discharge is agreed to in a
writing signed by you and by the General  Counsel (or in the case of the General
Counsel,  the Chief Executive Officer) of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or of  compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at  the  same  or  at  any  prior  or   subsequent   time.   No   agreements  or
representations,  oral or  otherwise,  express or implied,  with  respect to the
subject matter hereof have been made by either party which are not expressly set
forth  in  this  Agreement.  The  validity,  interpretation,   construction  and
performance  of this  Agreement  shall be  governed  by the laws of the State of
North Carolina.

     12. Validity.  The invalidity or  unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
        
     13. Arbitration.  Any dispute or controversy arising under or in connection
with  this  Agreement  shall be  settled  exclusively  by  arbitration  in North
Carolina  by three  arbitrators  in  accordance  with the rules of the  American
Arbitration  Association  then  in  effect.  Judgment  may  be  entered  on  the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek  specific  performance  of your right to be paid until
the date of your  termination  during the pendency of any dispute of controversy
arising under or in connection with this  Agreement.  The Company shall bear all
costs  and  expenses  arising  in  connection  with any  arbitration  proceeding
pursuant to this Section 13.

     14.  Employee's  Commitment.  You agree that  subsequent  to your period of
employment with the Company, you will not at any time communicate or disclose to
any  unauthorized  person,  without  the  written  consent of the  Company,  any
proprietary  processes of the Company or any  subsidiary of the Company or other
confidential information concerning their business,  affairs, products, supplies
or customers which, if disclosed,  would have a material adverse effect upon the
business or operations of the Company and its subsidiaries, taken as a whole; it
being  understood,  however,  that the  obligations of this Section 14 shall not
apply  to  the  extent  that  the   aforesaid   matters  (a)  are  disclosed  in
circumstances  where you are legally  required to do so or (b) become  generally
known to and available for use by the public otherwise than by your wrongful act
or omission.

     15.  Related  Agreements.  To the extent  that any  provision  of any other
agreement between the Company, or any of its subsidiaries,  and you shall limit,
qualify  or be  inconsistent  with any  provision  of this  Agreement,  then for
purposes of this Agreement,  while the same shall remain in force, the provision
of this Agreement shall control and such provision of such other agreement shall
be deemed to have been superseded,  and to be of no force or effect,  as if such
other agreement had been formally  amended to the extent necessary to accomplish
such purpose.

     16. Counterparts.  This Agreement may be executed in several  counterparts,
each of which shall be deemed to be an original but all of which  together  will
constitute one and the same instrument.

     If this letter  correctly  sets forth our  agreement on the subject  matter
hereof,  kindly  sign  below and return to the  Secretary  of the  Company  this
letter, which will then constitute our agreement on this subject.
                                   
                                        Sincerely,

                                        INTEGON CORPORATION


                                        By:  /s/ John C Head III
                                             -------------------
                                             John C Head III
                                             Chief Executive Officer

Agreed to this 10th day of March, 1997.

               ----       -------
/s/  John B. Yorke
------------------
John B. Yorke

End Exhibit 10.3
<PAGE>
                                  Exhibit 10.4

                             AMENDMENT NO. 2 TO THE
                               INTEGON CORPORATION
                             1992 STOCK OPTION PLAN


1.       Purpose

         The purpose of this Amendment No. 2 (this  "Amendment")  to the Integon
Corporation 1992 Stock Option Plan, as amended (the "Plan"),  is to provide that
Stock Options granted under the Plan may be transferable to the extent permitted
by the  Committee.  Terms not otherwise  defined  herein shall have the meanings
given them in the Plan.

2.       Effective Date

         The effective date of this Amendment shall be January 22, 1997.

3.       Transferability of Options

         The Plan is hereby  amended by  deleting  Section  5.3(g)  thereof  and
replacing it with the following:

         (g)  Transferability.  The Committee  may award to a Participant  Stock
         Options  that  are  transferable  by such  Participant  and  subsequent
         transferees.  The scope and limitations of the transferability of Stock
         Options  shall be set forth in the  written  agreement  evidencing  the
         Stock Options.  In the absence of any express provision in such written
         agreement  with respect to the  transferability  of such Stock Options,
         such Stock Options  shall not be  transferable  by a Participant  other
         than by will or the laws of descent and distribution.

4.       Conforming and Other Changes

         Section  5.3(h) of the Plan is hereby amended to permit the exercise of
any Stock  Option  properly  transferred  (pursuant  to the Plan and the written
agreement evidencing such Stock Option) by the holder thereof to the same extent
that such Stock Option  could have been  exercised  by the  Participant  (or the
Participant's legal representative or designated beneficiary, in the case of the
Participant's  death) had such Stock Option not been  transferred.  In addition,
the first  sentence  of Section  5.3(h) of the Plan is amended  and  restated as
follows:  "Stock Options which remain outstanding on the date of a Participant's
termination of employment or service with the Company and all  Affiliates  shall
cease to be exercisable  and shall  terminate on the date of such  Participant's
termination,  except as  otherwise  provided  in this  Section  5.3(h) or in the
written agreement evidencing such Stock Options."

End Exhibit 10.4
<PAGE>
                                 Exhibit 10.5

                    INTEGON CORPORATION AMENDED AND RESTATED
                          OMNIBUS LONG-TERM PERFORMANCE
                           INCENTIVE COMPENSATION PLAN


ARTICLE 1 - PURPOSE AND TERM OF PLAN

1.1 Purpose.  The purposes of the Plan are to aid the Company in attracting  and
retaining Key Employees through a competitive compensation package, to stimulate
the efforts of such Key Employees and to strengthen  their desire to remain with
the Company, to aid the Company in attracting  superior  individuals to serve as
Nonemployee   Directors  and  to  provide   appropriate   compensation  to  such
Nonemployee  Directors  for their  Service.  Towards this end, the Plan provides
that the Committee may grant (i) non-qualified stock options (i.e., options that
are not incentive  stock options  within the meaning of Section 422 of the Code)
to Key Employees  and  Nonemployee  Directors,  (ii)  Performance  Awards to Key
Employees payable in cash or deferred compensation that is denominated in Common
Stock share units or both and (iii) Units to Key  Employees  payable in cash and
Common Stock, all as more fully described herein. The Plan also provides (i) for
the grant of Common Stock to Nonemployee  Directors as part of such  Nonemployee
Directors' annual compensation and (ii) that such Nonemployee Directors may take
their remaining compensation in the form of cash, Common Stock, Restricted Stock
or non-qualified stock options.

1.2  Term.  The Plan  replaces  and  supersedes  the  Integon  Corporation  1992
Non-Employee Directors Stock Plan, except with respect to shares of Common Stock
issued and outstanding under such 1992  Non-Employee  Directors Stock Plan which
will  continue to be governed by the terms of such plan.  The Plan shall  become
effective as of February 8, 1996;  provided  that for purposes of Article 9, the
Plan shall become  effective on June 1, 1995.  Awards shall not be granted under
Articles 8 and 9 of the Plan after May 16, 2001,  except that the  Committee may
grant  Performance  Awards and value  Units  after such date in  recognition  of
performance for Performance  Periods and Unit Periods  commencing  prior to such
date. Notwithstanding the foregoing, the Plan is hereby amended and restated for
all Awards granted hereunder after December 31, 1996. In addition,  with respect
to Awards made under Article 9 prior to January 1, 1997, the amendments effected
hereby shall be applicable  only to Unit Periods  commencing  after December 31,
1996.

ARTICLE 2 - DEFINITIONS

2.1 Annual Dollar Value.  "Annual Dollar Value" of a Unit means the dollar value
(with  fractions  of a cent  rounded  up to the  nearest  cent)  resulting  from
multiplying  the Initial Dollar Value of such Unit by the applicable  Multiplier
for the  applicable  Unit Period and  dividing  such product by three (3). As an
example, using the chart of Multipliers attached as Exhibit A hereto, for a Unit
with an Initial  Dollar  Value of $13.00,  the Annual  Dollar Value of such Unit
would be $4.95 ($13.00 multiplied by 114.1% and divided by 3) for the applicable
Unit Period if the Growth in Net Written  Premiums and Combined  Operating Ratio
for such Unit Period were H% and CC.5%, respectively.

2.2  Award.  "Award"  means  any form of  cash,  deferred  compensation  that is
denominated  in  Common  Stock  share  units,   Common  Stock,   stock  options,
Performance Awards,  Deferral Restricted Stock,  Deferral Stock Options or Units
granted under  Articles 7, 8, 9 or 10 of the Plan to a  Participant  selected by
the  Committee  pursuant  to  such  terms,   conditions,   restrictions   and/or
limitations, if any, as the Committee may establish.

2.3 Award Date. "Award Date" shall have the meaning given such term in Section
8.4.

2.4 Award Payment  Date.  "Award  Payment  Date" means the date the  Performance
Awards for a Performance Period shall be paid to Participants. The Award Payment
Date for a Performance Period shall occur as soon as  administratively  possible
following the completion of the  certifications  required pursuant to Subsection
8.6.3.

2.5 Board. "Board" means the Board of Directors of Integon.

2.6 Cause. "Cause" means, in the case of a Nonemployee Director,  termination of
such Nonemployee Director's Service by Integon's shareholders for cause pursuant
to the Bylaws of Integon.

"Cause" means, in the case of a Key Employee, termination of such Key Employee's
employment by the Company  because of (a) the willful and  continued  failure by
the  Participant  to perform  substantially  all of his or her  duties  with the
Company (other than any such failure resulting from the Participant's incapacity
due to physical or mental illness) after a demand for substantial performance is
delivered  to the  Participant  by the  Chairman  of the  Board  or the CEO that
specifically   identifies   the  manner  in  which  the   Participant   has  not
substantially  performed his or her duties,  or (b) the willful  engaging by the
Participant in illegal conduct that is materially and demonstrably  injurious to
the Company. For purposes of this definition,  no act, or failure to act, on the
Participant's  part shall be considered  "willful" unless done, or omitted to be
done, by the  Participant  in bad faith and without  reasonable  belief that the
Participant's action or omission was in, or not opposed to, the best interest of
the Company.  Any act, or failure to act, based upon authority given pursuant to
a  resolution  duly adopted by the Board or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
the  Participant  in good faith and in the best  interest  of the  Company.  The
Participant's  attention to matters not directly  related to the business of the
Company shall not provide a basis for termination for Cause as long as the Board
has approved the  Participant's  engagement in such activities.  Notwithstanding
the foregoing,  the Participant  shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to the Participant a copy
of a  resolution  duly  adopted by the  affirmative  vote of not less than three
quarters of the entire  membership of the Board at a meeting called and held for
the purpose (after  reasonable  notice to the Participant and an opportunity for
the Participant, together with the Participant's counsel, to be heard before the
Board),  finding that in the good faith opinion of the Board the Participant was
guilty of the  conduct  set  forth  above in (a) or (b) of this  definition  and
specifying the particulars thereof in detail.

2.7 CEO. "CEO" means the Chief Executive Officer of Integon.

2.8 Change In Control. "Change In Control" means the following:

           2.8.1 A tender offer or exchange  offer is made whereby the effect of
           such offer is to take over and  control  the  affairs of Integon  and
           such offer is consummated  for the ownership of securities of Integon
           representing  50% or more of the  combined  voting power of Integon's
           then-outstanding voting securities;

           2.8.2 Integon is merged or consolidated with another corporation and,
           as a result of such merger or consolidation,  outstanding  securities
           representing  less than 50% of the voting  power of the  surviving or
           resulting  corporation  shall then be owned in the  aggregate  by the
           former  shareholders  of  Integon  other than  affiliates  within the
           meaning  of  the  Exchange  Act  of  any  party  to  such  merger  or
           consolidation;

           2.8.3  Integon transfers all or substantially all of its assets to 
           another corporation or entity that is not a wholly owned Subsidiary
           of Integon;

           2.8.4 Any  "person"  (as such term is used in  Sections  3(a)(9)  and
           13(d)(3) of the  Exchange  Act) is or becomes the  beneficial  owner,
           directly or indirectly,  of securities of Integon representing 50% or
           more of the  combined  voting  power  of  Integon's  then-outstanding
           securities; or

           2.8.5 As the result of a tender offer, merger, consolidation, sale of
           assets,   or  contested   election,   or  any   combination  of  such
           transactions,  the persons who were members of the Board  immediately
           before  the  transaction  cease to  constitute  at  least a  majority
           thereof.

2.9 Change In Control Price. "Change In Control Price" means the highest closing
price per share paid for the purchase of Common Stock during the ninety (90) day
period ending on the date the Change In Control occurs on the primary securities
exchange on which the Common Stock is then traded, or the merger or tender price
if higher.

2.10 Change in Ownership.  "Change in Ownership"  means a Change In Control that
results  directly or indirectly in Integon's Common Stock ceasing to be actively
traded on the primary  securities  exchange on which the Common  Stock is traded
immediately prior to such Change in Control.

2.11 Code.  "Code" means the Internal Revenue Code of 1986, as amended from time
to  time,  including   regulations   thereunder  and  successor  provisions  and
regulations thereto.

2.12 Combined Operating Ratio. "Combined Operating Ratio" means, for the Company
on a  consolidated  basis for any period,  the sum of (i) the statutory  expense
ratio,  plus (ii) the  statutory  loss  ratio  rounded to the  nearest  one-half
percentage point (0.5%).

2.13 Committee.  "Committee"  means the Compensation and Personnel  Committee of
the  Board,  unless  and until its  members  are not  qualified  to serve on the
Committee  pursuant to the  provisions of the Plan, in which case the Board will
designate the members of the Committee; provided that the Committee shall at all
times consist of two or more  Directors,  each of whom is both a  "disinterested
person"  within the meaning of Rule 16b-3 under the Exchange Act and an "outside
director"  within the meaning of the  definition  of such term as  contained  in
Treasury  Regulation  Section  1.162-27(e)(3),   or  any  successor  definition;
provided  further that no Director  shall be appointed a member of the Committee
who has  received  any Award  other than an Award  under  Article 10 in the year
prior to such appointment; provided further that no Committee member may receive
an Award other than pursuant to Article 10.

2.14 Common Stock.  "Common Stock" means common stock, $.01 par value per share,
of Integon,  which may be newly issued  shares,  shares issued and  outstanding,
treasury stock or shares owned by a Subsidiary.

2.15 Company. "Company" means Integon and its Subsidiaries.

2.16 Covered  Employee.  "Covered  Employee" means an Employee who is a "covered
employee" within the meaning of Section 162(m) of the Code.

2.17 Deferral Restricted Stock.  "Deferral  Restricted Stock" means Common Stock
of the Company that is subject to the risk of  forfeiture  and other  conditions
set forth in Section 10.3.2.

2.18 Deferral  Restriction  Period.  "Deferral  Restriction  Period" means,  for
Deferral Restricted Stock, the period ending 3 years after the Effective Date of
such Deferral Restricted Stock.

2.19 Deferral Stock Options.  "Deferral Stock Options" means options to purchase
shares of Common  Stock  having  the terms and  conditions  set forth in Section
10.3.3.

2.20 Director. "Director" means a director of Integon.

2.21 Disability.  "Disability" means a disability as determined under the Salary
Continuation  Plan  of  Integon  or  any  successor  or  replacement   long-term
disability plan maintained by the Company.

2.22 Effective Date.  "Effective  Date" means the date an Award is determined to
be effective by the Committee upon the grant of such Award.

2.23  Employee.  "Employee"  means any employee of Integon or any Subsidiary but
excludes Directors who are not also employees of Integon or any Subsidiary.

2.24 Exchange Act. "Exchange Act" means the Securities  Exchange Act of 1934, as
amended from time to time, including rules promulgated  thereunder and successor
provisions and rules thereto.

2.25 Final Dollar  Value.  "Final  Dollar  Value" of a Unit means the sum of the
Annual  Dollar  Value of such Unit for each of the  three  Unit  Periods  in the
three-year Unit Cycle for such Unit.

2.26 Growth in Net Written Premiums.  "Growth in Net Written Premiums" means the
annual  percentage  increase,  rounded to the nearest whole percentage point, in
the Net Written  Premiums  of the Company  calculated  for the  applicable  Unit
Period by subtracting the Net Written Premiums for the immediately  prior fiscal
year ("Starting  Premiums") from the Net Written Premiums for the subject fiscal
year and dividing such difference by the Starting Premiums.

2.27 Initial  Dollar  Value.  "Initial  Dollar Value" of a Unit means the dollar
value  established  for such  Unit by the  Committee  prior to the Award of such
Unit.

2.28 Initial Election Date.  "Initial Election Date" means, for each Nonemployee
Director,  the  later  to  occur  of (i)  the  date  of  Integon's  1996  annual
shareholders'  meeting or (ii) the date of the  Nonemployee  Director's  initial
election or appointment to the Board.

2.29 Insurance Subsidiary.  "Insurance Subsidiary" means a Subsidiary engaged in
the business of issuing insurance policies.

2.30 Integon. "Integon" means Integon Corporation, a Delaware corporation.

2.31 Key Employee.  "Key Employee"  means a senior level Employee of the Company
who holds a position  of  responsibility  in a  managerial,  administrative,  or
professional capacity.

2.32 Multiplier.  "Multiplier" means the number, established by the Committee in
the  manner set forth in this  Plan,  that is used to obtain  the Annual  Dollar
Value for a particular  Unit based upon targeted levels of Growth in Net Written
Premiums and Combined Operating Ratio for each Unit Period in the Unit Cycle for
such Unit.

2.33 Negative Discretion.  "Negative Discretion" means the discretion authorized
by the Plan to be applied by the Committee in  determining  the size of an Award
for a Performance Period if, in the Committee's sole judgment,  such application
is  appropriate.  Negative  Discretion  may  only be used  by the  Committee  to
eliminate or reduce the size of an Award under  Article 8. By way of example and
not by way of limitation,  in no event shall any discretionary authority granted
to the Committee by the Plan,  including but not limited to Negative Discretion,
be used to: (a) grant Awards for a Performance  Period if the Performance  Goals
for such  Performance  Period have not been  attained;  or (b) increase an Award
above the maximum amount payable under Article 8 of this Plan.

2.34 Net Written  Premiums.  "Net Written Premiums" means the aggregate for each
Insurance  Subsidiary,  but without duplication for Insurance  Subsidiaries that
are  Subsidiaries of Insurance  Subsidiaries,  of the amount of premiums written
(after deducting or adding premiums on business ceded to or assumed from others)
as determined in accordance with Statutory Accounting Practices.

2.35 Nonemployee  Director.  "Nonemployee  Director" means a member of the Board
who is not an Employee.

2.36 Participant.  "Participant" means any Key Employee or Nonemployee  Director
who has been  selected for a grant of stock  options  pursuant to Article 7, any
Key Employee who, for a Performance  Period, has been selected to participate in
the  Performance  Award Program  pursuant to Article 8, any Key Employee who has
been selected for a grant of Units pursuant to Article 9 and/or any  Nonemployee
Director who is eligible to receive a grant of Common Stock  pursuant to Article
10, or who elects to receive Common Stock, Deferral Restricted Stock or Deferral
Stock Options pursuant to Article 10.

2.37  Performance  Awards.  "Performance  Awards"  means  the cash and  deferred
compensation  denominated  in Common Stock share units  granted to Key Employees
pursuant to Article 8.

2.38 Performance Criteria. "Performance Criteria" means the one or more criteria
that the Committee  shall select for purposes of  establishing  the  Performance
Goal(s) for a Performance Period. The Performance  Criteria that will be used to
establish such Performance Goal(s) shall be limited to the following:  return on
net assets, return on shareholders' equity, return on assets, return on capital,
shareholder returns, profit margin, earnings per share, net earnings,  operating
earnings,  Common Stock price per share and sales or market share. To the extent
required by Section 162(m) of the Code, the Committee shall, within the first 90
days of a Performance  Period (or, if longer,  within the maximum period allowed
under Section 162(m) of the Code),  define in an objective fashion the manner of
calculating  the  Performance  Criteria  it selects to use for such  Performance
Period.

2.39 Performance Goals. "Performance Goals" means, for a Performance Period, the
one or more goals  established  by the Committee for a Performance  Period based
upon  Performance  Criteria.  The Committee is authorized at any time during the
first 90 days of a Performance  Period,  or at any time  thereafter (but only to
the  extent  the  exercise  of  such  authority  after  the  first  90 days of a
Performance  Period would not cause the Awards granted to the Covered  Employees
for  the   Performance   Period  to  fail  to  qualify   as   "performance-based
compensation"  under  Section  162(m)  of the  Code),  in its sole and  absolute
discretion,  to adjust or modify the calculation of a Performance  Goal for such
Performance Period in order to prevent the dilution or enlargement of the rights
of  Participants,  (a) in the event of, or in  anticipation  of, any  unusual or
extraordinary  corporate  item,  transaction,   event  or  development;  (b)  in
recognition of, or in anticipation of, any other unusual or nonrecurring  events
affecting the Company or the financial statements of the Company, or in response
to, or in anticipation of, changes in applicable laws,  regulations,  accounting
principles,  or  business  conditions;  and  (c)  in  view  of  the  Committee's
assessment of the business  strategy of the Company,  performance  of comparable
organizations,  economic and business  conditions,  and any other  circumstances
deemed relevant.

2.40 Performance Period.  "Performance  Period" means the one or more periods of
time at least  one year in  length,  which  may be of  varying  and  overlapping
durations, as the Committee may select, over which the attainment of one or more
Performance   Goals  will  be  measured  for  the  purpose  of   determining   a
Participant's right to the payment of a Performance Award.

2.41 Performance Restricted Period.  "Performance  Restricted Period" means with
respect  to  Common  Stock  share  units  credited  to  a  three-year   deferred
compensation  account for a particular  Performance  Award the three-year period
commencing  on the Award  Date of such  Performance  Award and with  respect  to
Common Stock share units credited to a five-year deferred  compensation  account
for a particular  Performance Award the five-year period commencing on the Award
Date of such Performance Award.

2.42 Plan. "Plan" means this Integon Corporation  Omnibus Long-Term  Performance
Incentive Compensation Plan, as amended and restated hereby.

2.43 Retirement.  "Retirement" means, in the case of a Key Employee, a voluntary
termination by such Key Employee from employment by the Company, (i) on or after
attainment  of  age  65,  (ii)  on or  after  the  attainment  of  age 60 if the
Participant has 10 years of employment with the Company or (iii) when the sum of
the Participant's age and the Participant's years of employment with the Company
equals or exceeds 80.

"Retirement"  means, in the case of a Nonemployee  Director,  the termination of
such Nonemployee  Director's  Service at the end of such Nonemployee  Director's
scheduled  term as a Director,  or at any  earlier  time with the consent of the
Board.

2.44 Rule 16b-3.  "Rule 16b-3" means Rule 16b-3  promulgated  under the Exchange
Act, or any successor or replacement provision.

2.45 Service. "Service" means service as a Director.

2.46 Statutory Accounting  Practices.  "Statutory  Accounting  Practices" means,
with respect to any Insurance  Subsidiary,  the statutory  accounting  practices
prescribed  or permitted by the  insurance  department  or similar  governmental
authority  charged with  regulating  insurance  companies  or insurance  holding
companies in its state of domicile,  consistent  with the past practices of such
Insurance Subsidiary.

2.47  Subsidiary.  "Subsidiary"  means a corporation or other business entity in
which Integon directly or indirectly has an ownership interest of 50% or more.

2.48 Unit.  "Unit" means an Award under this Plan  representing a promise by the
Corporation to pay an amount in accordance with Article 9.

2.49 Unit Grant  Notice.  "Unit Grant  Notice"  means notice to Key Employees of
grants of Units pursuant to Article 9.

2.50 Unit Cycle.  "Unit Cycle"  means,  for a particular  Unit,  the  three-year
period  commencing on the first day of the  Company's  fiscal year in which such
Unit is awarded and ending on the last day of the  Company's  second fiscal year
following the fiscal year in which such Unit is awarded.

2.51 Unit Period.  "Unit Period" means,  for a particular  Unit, each one of the
Company's fiscal years in the three-year Unit Cycle for such Unit.

ARTICLE 3 - ELIGIBILITY

3.1 In General.  Only Key  Employees and  Nonemployee  Directors are eligible to
participate  in Awards  under  Article 7. Only Key  Employees  are  eligible  to
participate  in Awards  under  Articles  8 and 9 of the Plan.  Only  Nonemployee
Directors shall participate in Awards under Article 10 of the Plan. For purposes
of Articles 7, 8 and 9 of the Plan,  the Committee  shall  select,  from time to
time,  Participants  from those Key Employees and Nonemployee  Directors who, in
the  opinion  of  the  Committee,  can  further  the  Plan's  purposes.  Once  a
Participant is so selected,  the Committee  shall determine the type or types of
Awards to be made to the  Participant  and shall  establish in the related Stock
Option  Agreement  or Unit Grant  Notice the  terms,  conditions,  restrictions,
and/or  limitations,  if any,  applicable to the Awards in addition to those set
forth in this Plan and the  administrative  rules and regulations  issued by the
Committee.

ARTICLE 4 - PLAN ADMINISTRATION

4.1 Responsibility.  The Committee shall have total and exclusive responsibility
to control,  operate,  manage,  and administer  the Plan in accordance  with its
terms.

4.2 Authority of the Committee.  The Committee shall have all the authority that
may be necessary or helpful to enable it to discharge its responsibilities  with
respect to the Plan. Without limiting the generality of the preceding  sentence,
the  Committee  shall have the exclusive  right to: (a) interpret the Plan;  (b)
determine  eligibility for  participation  in the Plan; (c) decide all questions
concerning  eligibility for and the amount of Awards payable under the Plan; (d)
construe any ambiguous provision of the Plan; (e) correct any defect; (f) supply
any  omission;  (g)  reconcile  any  inconsistency;   (h)  issue  administrative
guidelines as an aid to the  administration of the Plan and make changes in such
guidelines  as it from  time to time  deems  proper;  (i) make  regulations  for
carrying  out the Plan and make changes in such  regulations  as it from time to
time deems proper;  (j) determine  whether Awards should be granted  singly,  in
combination,  or in tandem;  (k) to the extent  permitted under the Plan,  grant
waivers of Plan terms, conditions, restrictions, and limitations; (l) accelerate
the  vesting,  exercise,  or payment of an Award,  other than  Awards made under
Article 10, or the Performance  Period,  Performance  Cycle or Unit Period of an
Award when such action or actions  would be in the best interest of the Company;
(m) grant Awards in replacement of Awards previously  granted under this Plan or
any  other  executive  compensation  plan  of the  Company;  (n)  establish  and
administer the Performance Goals and certify whether,  and to what extent,  they
have been attained;  and (o) take any and all other action it deems necessary or
advisable for the proper operation or administration of the Plan.

4.3  Discretionary  Authority.  The  Committee  shall  have  full  discretionary
authority in all matters  related to the discharge of its  responsibilities  and
the exercise of its authority  under the Plan including  without  limitation its
construction of the terms of the Plan and its  determination  of eligibility for
participation  and Awards under the Plan.  It is the intent of the Plan that the
decisions  of the  Committee  and its action  with  respect to the Plan shall be
final,  binding and  conclusive  upon all persons having or claiming to have any
right or interest in or under the Plan.

4.4 Section 162(m) of the Code. With regard to all Covered  Employees,  the Plan
shall, for all purposes, be interpreted and construed so as to ensure compliance
with Section 162(m) of the Code.

4.5 Action by the  Committee.  The  Committee  may act only by a majority of its
members. Any determination of the Committee may be made, without a meeting, by a
writing or writings signed by all of the members of the Committee.  In addition,
the  Committee  may  authorize  any one or more of its  members  or the  General
Counsel  of the  Company  to  execute  and  deliver  documents  on behalf of the
Committee.

4.6  Delegation  of  Authority.  The  Committee  may delegate some or all of its
authority  under  the  Plan to any  person  or  persons  provided  that any such
delegation be in writing; provided,  however, that only the Committee may select
and grant Awards to  Participants  who are subject to Section 16 of the Exchange
Act or are Covered Employees.

ARTICLE 5 - FORMS OF AWARDS

5.1 In  General.  Awards may be paid in the form of stock  options  pursuant  to
Article 7, Performance  Awards in cash or deferred  compensation  denominated in
shares of Common  Stock share units  pursuant to Article 8, Units in the form of
Common Stock or cash  pursuant to Article 9, and cash,  Common  Stock,  Deferral
Restricted  Stock, and Deferral Stock Options pursuant to Article 10. All Awards
shall be subject to the terms,  conditions,  restrictions and limitations of the
Plan. The Committee may, in its sole judgment,  subject an Award,  except awards
granted  pursuant to Article 10, to such other terms,  conditions,  restrictions
and/or  limitations  (including,  but not limited to, the time and conditions of
exercise and restrictions on transferability and vesting), provided they are not
inconsistent  with the terms of the Plan.  Awards under a particular  Article of
the Plan need not be uniform.  Any  combination  of Awards may be granted at one
time and on more  than one  occasion  to the same Key  Employee  or  Nonemployee
Director.  For purposes of the Plan,  the value of any Award granted in the form
of Common  Stock  shall be the  closing  price at which a share of Common  Stock
shall have been sold on the date of the grant's  Effective  Date, or on the next
preceding  trading  day if such  date was not a  trading  date,  on the  primary
securities exchange on which the Common Stock is then traded.

ARTICLE 6 - SHARES SUBJECT TO PLAN

6.1 Available Shares. The maximum number of shares of Common Stock that shall be
available  for grant of Awards under the Plan during its term,  shall not exceed
1,000,000.  (Such amount shall be subject to  adjustment  as provided in Section
6.2.) Any shares of Common Stock subject to Awards that terminate by expiration,
forfeiture,  cancellation  or surrender  for any reason  without the issuance of
such shares shall become again available for grant under the Plan; provided that
if such shares of Common Stock  subject to Awards are settled in cash in lieu of
Common Stock or are exchanged  with the  Committee's  permission  for Awards not
involving Common Stock, such shares shall not be available again for grant under
the Plan.  The maximum  number of shares  available for issuance  under the Plan
shall not be reduced to reflect any dividends or dividend  equivalents  that are
reinvested into additional shares of Common Stock.

6.2        Adjustment to Shares.

           6.2.1 In General. The provisions of this Subsection 6.2.1 are subject
           to the  limitation  contained in  Subsection  6.2.2.  If there is any
           change in the number of  outstanding  shares of Common Stock  through
           the  declaration  of stock  dividends,  stock splits or the like, the
           number of shares  available  for  Awards,  the shares  subject to any
           Award, the number of Common Stock share units held in a three-year or
           five-year  deferral  compensation  account  and the option  prices or
           exercise prices of Awards shall be automatically  adjusted.  If there
           is any change in the  number of  outstanding  shares of Common  Stock
           through  any change in the capital  account of Integon,  or through a
           merger,  consolidation,  separation  (including  a spin-off  or other
           distribution  of stock or property),  reorganization  (whether or not
           such reorganization  comes within the meaning of such term in Section
           368(a) of the Code) or partial or complete liquidation, the Committee
           shall make appropriate adjustments in the maximum number of shares of
           Common Stock which may be issued  under the Plan and any  adjustments
           and/or  modifications  to  outstanding  Awards  as it,  in  its  sole
           discretion,  deems  appropriate.  In the event of any other change in
           the  capital  structure  or in  the  Common  Stock  of  Integon,  the
           Committee   shall  also  be  authorized  to  make  such   appropriate
           adjustments in the maximum number of shares of Common Stock available
           for issuance under the Plan and any adjustments and/or  modifications
           to  outstanding   Awards  as  it,  in  its  sole  discretion,   deems
           appropriate.  The maximum  number of shares  available  for  issuance
           under  the  Plan  shall  be  automatically  adjusted  to  the  extent
           necessary  to reflect any  dividend  equivalents  paid in the form of
           Common Stock.

           6.2.2  Covered  Employees.  In  no  event  shall  the  Award  of  any
           Participant  who  is a  Covered  Employee  be  adjusted  pursuant  to
           Subsection  6.2.1 to the extent it would  cause such Award to fail to
           qualify as  "performance-based  compensation" under Section 162(m) of
           the Code.

ARTICLE 7 - STOCK OPTIONS

7.1 In General.  Awards may be granted by the  Committee  to Key  Employees  and
Nonemployee  Directors in the form of non-qualified  stock options (i.e.,  stock
options that are not incentive  stock options  within the meaning of Section 422
of the Code). All Awards under the Plan granted to Covered Employees in the form
of stock  options are  intended to qualify as  "performance-based  compensation"
under Section 162(m) of the Code.

7.2 Terms and Conditions of Stock  Options.  A stock option shall be exercisable
in whole or in such  installments  and at such times as may be determined by the
Committee  and may contain such other terms and  conditions as determined by the
Committee.  All stock options granted under this Plan shall expire no later than
10 years after the  Effective  Date of such  option.  The price at which  Common
Stock may be  purchased  upon  exercise of a stock option shall be not less than
100%  of the  fair-market  value  of the  Common  Stock,  as  determined  by the
Committee, on the Effective Date of the option.

7.3 Option  Agreements.  Each Award of a stock  option  under this Plan shall be
evidenced by a written  agreement  (a "Stock  Option  Agreement")  signed by the
Participant  and  containing  such terms and  conditions  as the  Committee  may
determine from time to time pursuant to this Plan.

7.4  Additional  Terms and  Conditions.  The Committee  may, by way of the Stock
Option  Agreement  or  otherwise,   establish  such  other  terms,   conditions,
restrictions and/or limitations, if any, with respect to any stock option Award,
provided they are not inconsistent with the Plan.

7.5 Exercise.  Upon exercise,  the option price of a stock option may be paid in
cash,  shares of Common Stock,  a combination  of the  foregoing,  or such other
consideration  as the  Committee  may  deem  appropriate.  The  Committee  shall
establish  appropriate methods for accepting Common Stock, whether restricted or
unrestricted,  and may impose such conditions as it deems appropriate on the use
of such Common Stock to exercise a stock option.  Subject to Section 11.1, stock
options  awarded  under the Plan may be  exercised  by way of a  broker-assisted
exercise program, provided such program is available at the time of the option's
exercise. The Committee may permit a Participant to satisfy any amounts required
to be withheld under the applicable federal, state, and local tax laws in effect
from time to time by  electing  to have the  Company  withhold  a portion of the
shares of Common Stock to be delivered for the payment of such taxes.

7.6  Termination  of  Employment  or  Service.  Stock  options  granted to a Key
Employee  under  Article 7 of this Plan that remain  outstanding  on the date of
such Key Employee's termination of employment with the Company shall cease to be
exercisable  and shall terminate and be forfeited on the date of such Employee's
termination of employment,  except as otherwise provided in this Section 7.6 and
Section 7.8. Stock options granted to a Nonemployee  Director under Article 7 of
this Plan that remain  outstanding  on the date of such  Nonemployee  Director's
termination of Service shall cease to be exercisable  and shall terminate and be
forfeited on the date of such  Nonemployee  Director's  termination  of Service,
except  as   otherwise   provided  in  this   Section   7.6  and  Section   7.8.
Notwithstanding the foregoing, (i) stock options granted under Article 7 of this
Plan to a Key Employee,  who immediately  prior to acceptance of employment with
the Company served as a Nonemployee  Director,  shall continue to be exercisable
after the date of such Key Employee's  termination of employment if at such time
such Key Employee  continues to serve as a Director and (ii) such stock  options
shall cease to be exercisable  and shall  terminate and be forfeited on the date
of such  Participant's  termination of Service,  except as otherwise provided in
this Section 7.6 and Section 7.8. To the extent  permitted  under Rule 16b-3, on
the date of a  Participant's  termination  of  employment  or  Service  with the
Company because of death,  Disability or Retirement,  all of such  Participant's
unexercised stock options granted under this Plan shall remain  exercisable,  to
the extent such  options were  exercisable  at the time of  termination,  for an
additional  period  of up to one  year  after  the  date of  such  Participant's
termination  (but in no event beyond the original  expiration date of such stock
options).  If a Participant's  employment or Service with the Company terminates
for  any  other  reason,  other  than  for  Cause,  all  of  such  Participant's
unexercised stock options granted under this Plan shall remain exercisable for a
period of up to 90 days after the Participant's  termination (but not beyond the
original  expiration  date of such  options)  to the same  extent  as they  were
exercisable on the date of Participant's termination.

7.7 No Shareholder  Rights. A Participant shall have neither rights to dividends
nor other rights of a shareholder  with respect to stock  options  granted under
this Plan until such Participant has exercised the option and received shares of
Common Stock upon payment in full.

7.8 Change in Control.  Notwithstanding any contrary provision in the Plan, upon
a  Change  in  Control,  no  additional  terms,  conditions,   restrictions,  or
limitations  shall be placed upon any stock option granted under this Article 7,
and each stock option outstanding shall become immediately exercisable as to all
of the shares of Common Stock  covered  thereby.  In addition,  upon a Change in
Ownership,  each outstanding  stock option granted under this Article 7 shall be
converted  into the right to  receive,  as soon as  practicable  but in no event
later than  thirty  (30) days after the Change in  Ownership,  for each share of
Common Stock  purchasable under such stock option an amount in cash equal to the
difference  between the Change In Control Price and the per share exercise price
of such stock  option.  In the event that the exercise  price of an  outstanding
stock option is equal to or greater than the Change In Control Price, such stock
option shall have a value of zero,  shall be  cancelled,  and the owner  thereof
shall not be entitled to receive any payment.

7.9 Maximum Award Payable.  Notwithstanding  any provision contained in the Plan
to the  contrary,  the maximum  number of shares of Common Stock for which stock
options  may  be  granted  under  the  Plan  in any  calendar  year  to any  one
Participant is 45,000 shares of Common Stock.

ARTICLE 8 - PERFORMANCE AWARD PROGRAM

8.1  Eligibility.  Only Key Employees  shall be eligible to receive  Performance
Awards.  Within the first 90 days of a Performance Period (or, if longer, within
the maximum  period  allowed  under Section  162(m) of the Code),  the Committee
shall select those Key Employees who will be Participants  for such  Performance
Period.  However,  designation  of  a  Key  Employee  as  a  Participant  for  a
Performance  Period shall not in any manner entitle the Participant to receive a
Performance Award for the Performance Period. The entitlement of any Participant
to payment of a Performance  Award for such Performance  Period shall be decided
solely  in  accordance   with  the  provisions  of  this  Article  8.  Moreover,
designation  of a Key Employee as a  Participant  for a  particular  Performance
Period shall not require  designation  of such Key Employee as a Participant  in
any  subsequent  Performance  Period,  and  designation of one Key Employee as a
Participant  shall  not  require  designation  of any other  Key  Employee  as a
Participant in such Performance  Period or in any other Performance  Period. All
of the Performance  Awards issued under the Performance Award Program to Covered
Employees  are  intended to qualify as  "performance-based  compensation"  under
Section 162(m) of the Code.

8.2 Calculation of Performance  Incentive Base Salary.  Within the first 90 days
of a Performance Period (or, if longer,  within the maximum period allowed under
Section 162(m) of the Code),  the Committee  shall  calculate the  Participant's
Performance Incentive Base Salary for the Performance Period then beginning. The
Performance  Incentive  Base  Salary  for any  Performance  Period  shall be the
Participant's  base  salary  as of the date  the  Performance  Goal(s)  for such
Performance Period is set by the Committee.  Once the Performance Incentive Base
Salary is determined,  the Performance Incentive Base Salary will not change for
that Performance Period.

8.3 Procedure for Determining  Awards.  With regard to a particular  Performance
Period,  the Committee shall,  using its full  discretion,  select the length of
such Performance  Period.  Within the first 90 days of a Performance Period (or,
if longer,  within the maximum period allowed under Section 162(m) of the Code),
the Committee  shall  establish in writing for such  Performance  Period (i) the
specific  Performance  Criteria that will be used to establish  the  Performance
Goal(s)  for such  Performance  Period and the kind(s)  and/or  level(s) of such
Performance  Goal(s) and (ii) an award matrix,  detailing the Performance  Award
for each  Participant if such  Performance  Goals are attained.  The amount of a
Participant's  Performance  Award  will equal the  product of the  Participant's
Incentive  Base Salary and the  percentage  derived  from the award  matrix (the
"Performance  Formula");  provided,  however, that in determining the size of an
individual Award to be paid for a Performance Period, the Committee may, through
the use of  Negative  Discretion,  reduce or  eliminate  the amount of the Award
earned under the Performance  Formula for the Performance Period if, in its sole
discretion, such reduction or elimination is appropriate.

8.4 Performance Awards: Cash or Deferred Compensation.  Of the Performance Award
determined  to be  payable  for any  Participant  at the end of any  Performance
Period,  20%  must  be  placed  into a  deferred  compensation  account  that is
denominated  in Common Stock share units.  The  deferred  compensation  may be a
three-year account or a five-year account, at the Participant's  election.  Each
Participant  shall  have  the  option  to  receive  the  remaining  80%  of  the
Performance  Award in any  combination  of the  following  three forms:  cash, a
credit to a three-year  deferred  compensation  account that is  denominated  in
Common Stock share units or a five-year  deferred  compensation  account that is
denominated in Common Stock share units.  Each  Participant  who has received an
award in a year shall make and  deliver to the  Company by  December  31 of such
year a written  election  with  respect  to the next  year as to such  method of
payment of the Performance Award that may be granted for such next year and each
other Participant shall make and deliver to the Company a written election as to
the method of payment of a  Performance  Award  within 10 days after  receipt of
written notice that such Participant is eligible to receive a Performance Award.
Unless  otherwise  changed in writing by a  Participant,  the most recent annual
election  made  by a  Participant  shall  apply  to  subsequent  years.  Amounts
contributed to a Participant's  three-year deferred  compensation  account for a
particular Performance Award shall be denominated in Common Stock share units as
follows:  the amount of cash  compensation  credited to the three-year  deferred
compensation  account  shall be  multiplied by 1.5 and divided by average of the
closing price (the "Award Date Price") per share of Common Stock, on the primary
securities  exchange on which shares of Common Stock are traded,  over the final
30 calendar days of the Performance  Period for which the Performance  Award was
made. Amounts  contributed to a Participant's  five-year  deferred  compensation
account for a particular  Performance Award shall be denominated in Common Stock
share units as follows:  the amount of cash  compensation  credited to five-year
deferred  compensation  account  shall be  multiplied  by 2.0 and divided by the
Award Date  Price.  The amount of share units  credited  to either a  three-year
deferred  compensation account or the five-year deferred compensation account in
excess of the  quotient of (i) the cash  compensation  credited to such  account
with respect to a particular  Performance  Award divided by (ii) the  applicable
Award Date Price is defined as the  "Restricted  Performance  Amount",  and such
quotient is defined as the  "Vested  Performance  Amount."  The final day of the
Performance Period for a Performance Award is defined as the "Award Date."

           8.4.1       Any amounts that the Participant elects, pursuant to 
           Section 8.4, be paid in cash shall be paid on the Award Payment Date;

           8.4.2  Amounts  credited  to  a  Participant's   three-year  deferred
           compensation  account with respect to a particular  Performance Award
           shall be paid to the Participant promptly after the third anniversary
           of the Award Date of such  Performance  Award. At the election of the
           Participant,  submitted in writing  prior to such third  anniversary,
           such  amounts  shall be paid in shares of Common  Stock  equal to the
           Common  Stock share units  credited to such  account or in cash in an
           amount equal to the product of the number of Common Stock share units
           credited to such account  multiplied by the closing trading price per
           share of Common Stock on the primary securities exchange on which the
           Common  Stock is traded on such third  anniversary  date (or, if such
           date is not a trading day, the next preceding trading day).

           8.4.3  Amounts  credited  to  a  Participant's   five-year   deferred
           compensation  account with respect to a particular  Performance Award
           shall be paid to the Participant promptly after the fifth anniversary
           of the Award Date of such  Performance  Award. At the election of the
           Participant,  submitted in writing  prior to such fifth  anniversary,
           such  amounts  shall be paid in shares of Common  Stock  equal to the
           Common  Stock share units  credited to such  account or in cash in an
           amount equal to the product of the number of Common Stock share units
           credited to such account  multiplied by the closing trading price per
           share of Common Stock on the primary securities exchange on which the
           Common  Stock is traded on such fifth  anniversary  date (or, if such
           date is not a trading day, the next preceding trading day).

8.5 Deferred Compensation Accounts: Terms and Conditions.  Deferred Compensation
Accounts  and  shares of Common  Stock to be issued  pursuant  thereto  shall be
subject to the following terms and conditions:

           8.5.1 Except as provided in this Section 8.5, the  Participant  shall
           not have,  with respect to the Common Stock share units credited to a
           three-year or five-year  deferred  compensation  account,  any of the
           rights of a shareholder  of the Company  holding shares of the Common
           Stock;  provided,  however,  that in the event of the  payment of any
           cash  dividends on the Common Stock based on a record date  occurring
           while  amounts are  credited to a three-year  or  five-year  deferred
           compensation  account,  the amount of such account shall be increased
           by a number of Common  Stock share units equal to the quotient of the
           amount of such cash dividend per share of Common Stock divided by the
           closing  price per share of Common  Stock on the  primary  securities
           exchange  on which the Common  Stock is traded on the record date for
           such dividend,  or the next preceding trading day if such record date
           is not a trading day on such exchange.

           8.5.2 The Restricted  Performance Amount with respect to a particular
           Performance  Award  shall  vest on a  straight-line  basis  with such
           amount credited to a three-year deferred  compensation  account fully
           vesting three years after the  applicable  Award Date and such amount
           credited to a five-year deferred  compensation  account fully vesting
           five years after the applicable  Award Date.  The Vested  Performance
           Amount  shall  be  fully  vested  as  of  the  Award  Date.   Upon  a
           Participant's   termination   of   employment   during  an  unexpired
           Performance  Restriction  Period, any amount credited to a three-year
           or five-year  deferred  compensation  account that has not yet vested
           shall be forfeited by that Participant.

8.6        Payment of Awards.

           8.6.1 Condition to Receipt of Awards.  Except as provided in Sections
           8.7 and 8.9, a  Participant  must be  employed  by the Company on the
           Performance  Period's  Award Payment Date to be eligible for an Award
           for such Performance Period.

           8.6.2 Limitation. A Participant shall be eligible to receive an Award
           for a Performance  Period only if: (i) the Performance Goals for such
           Performance Period are achieved;  and (ii) the Performance Formula as
           applied against such  Performance  Goals  determines that all or some
           portion of the Performance  Award has been earned by that Participant
           for the Performance Period.

           8.6.3  Certification.  Following  the  completion  of  a  Performance
           Period,  the  Committee  shall meet to review and  certify in writing
           whether,   and  to  what  extent,   the  Performance  Goals  for  the
           Performance  Period have been  achieved.  If the Committee  certifies
           that the Performance Goals have been achieved,  it shall,  based upon
           application of the Performance  Formula to the Performance  Goals for
           such  Performance  Period,  also calculate and certify in writing for
           each  Participant  what percentage of the Performance  Award has been
           earned for the Performance Period. The Committee shall then determine
           the size of each Participant's Award for the Performance Period.

           8.6.4  Timing of Award Payments.  The Performance Awards granted by 
           the Committee for a Performance Period shall be paid to Participants
           on the Award Payment Date for such Performance Period, subject to
           deferral pursuant to Section 8.4.

           8.6.5 New Participants.  Participants who commence  employment by the
           Company  after the  Committee's  selection  of  Participants  for the
           Performance  Period, as well as Key Employees who are selected by the
           Committee to be  Participants  after such date,  shall,  in the event
           Awards are paid for the Performance Period, be entitled to a pro rata
           Award.  The  amount  of the pro rata  Award  shall be  determined  by
           multiplying the Award the Participant  would have otherwise been paid
           if he or she had been a Participant for the entire Performance Period
           by a fraction, the numerator of which is the number of full months he
           or  she  was  eligible  as  a  Participant   to  participate  in  the
           Performance  Award  Program  during  the  Performance  Period and the
           denominator  of which  is the  total  number  of full  months  in the
           Performance Period. For purposes of this calculation, a partial month
           of   participation   shall:  (i)  be  treated  as  a  full  month  of
           participation  to  the  extent  a  Participant  participates  in  the
           Performance Award Program for 15 or more days of such month; and (ii)
           not be  taken  into  consideration  to  the  extent  the  Participant
           participates in the  Performance  Award Program for less than 15 days
           of such month.

8.7  Termination  of  Employment  During  Performance  Period.  In the  event  a
Participant's  employment  terminates  prior to the Award Date for a Performance
Period,  such  Participant  shall not receive any amount in connection with such
Performance  Award and such Performance  Award shall terminate.  Notwithstanding
the preceding sentence, if (i) such Participant's  employment terminates because
of death,  Disability  or  Retirement  or (ii) if such  Participant  served as a
Nonemployee  Director immediately prior to his acceptance of employment with the
Company,  upon the termination of such employment  prior to the Award Date for a
Performance  Period, such Participant shall receive, if Awards are paid for such
Performance  Period, a pro rata Performance  Award determined by multiplying the
Performance  Award the  Participant  would have otherwise been paid if he or she
had been a Participant  through the Award Date for the  Performance  Period by a
fraction,  the  numerator  of which is the number of full months he or she was a
Participant  during such Performance  Period and the denominator of which is the
total  number of full months in the  Performance  Period.  For  purposes of this
calculation,  a partial month of  participation  shall: (1) be treated as a full
month  of  participation  to  the  extent  a  Participant  participates  in  the
Performance Award Program on 15 or more days of such month; and (2) not be taken
into consideration to the extent the Participant participates in the Performance
Award  Program  for less than 15 days of such month.  Such pro rata  Performance
Award  shall be paid in the form of cash no more  than 120 days  after the Award
Payment Date for such Performance Award.

8.8 Maximum Award Payable.  Notwithstanding  any provision contained in the Plan
to the contrary,  the maximum  Performance  Award payable to any one Participant
under the Plan for a  Performance  Period,  before  adjustments  to account  for
deferral of payment pursuant to Section 8.4 is $700,000.

8.9        Change of Control, Liquidation or Dissolution.

           8.9.1   Dissolution,   Liquidation.   In  the  event  of  a  proposed
           dissolution or  liquidation  of the Company,  all vested amounts in a
           three-year or five-year deferred  compensation  account shall be paid
           to the  Participants in cash in an amount equal to the product of (i)
           the sum of the Vested  Performance  Amount plus the vested portion of
           the Restricted  Performance  Amount  multiplied by (ii) the Change in
           Control Price, as though such dissolution or liquidation  constituted
           a Change in  Control.  All other  amounts  in such  account  shall be
           forfeited.

           8.9.2 Change in Control;  Current  Awards.  Upon a Change in Control,
           any  Participant in the  Performance  Award Program shall be paid, as
           soon as practicable but in no event later than thirty (30) days after
           the Change in Control,  for an Award for each  Performance  Period in
           which the  Participant  was selected to participate  and during which
           the Change in Control  occurs  ("Current  Performance  Period").  The
           amount of such payment for an Award shall be  determined  by assuming
           that the  Performance  Goal for such Current  Performance  Period was
           attained at a level of 100% or the equivalent thereof and determining
           the  Performance   Award  that  would  have  been  payable  for  such
           Performance  Period had the Performance Goal been attained at a level
           of 100% or the equivalent thereof.

           8.9.3 Change in Control;  Deferred Compensation.  Notwithstanding any
           contrary  provision  in  the  Plan,  upon a  Change  in  Control,  no
           additional  terms,  conditions,  restrictions or limitations shall be
           placed on a three-year or five-year  deferred  compensation  account,
           and  all  vested  amounts  in  a  three-year  or  five-year  deferred
           compensation  account  shall be paid to  Participants  in cash, in an
           amount equal to the product of (i) the sum of the Vested  Performance
           Amount plus the vested portion of the Restricted  Performance  Amount
           multiplied by (ii) the Change in Control Price.  All other amounts in
           such account shall be forfeited.

ARTICLE 9 - UNIT AWARD PROGRAM

9.1 In General.  Awards may be granted by the  Committee to Key Employees in the
form of Units.  All Awards  under the Plan  granted to Covered  Employees in the
form of Units are intended to qualify as "performance-based  compensation" under
Section 162(m) of the Code.

9.2  Eligibility.  Only Key  Employees  shall be eligible  to receive  Awards of
Units; provided that no Key Employee is eligible to receive an Award of Units in
any calendar year in which that Key Employee is a Participant  for purposes of a
Performance  Award  under  Article 8. Within the first 90 days of any Unit Cycle
(or, if longer,  within the maximum  period  allowed under Section 162(m) of the
Code),  the Committee  shall select those Key Employees who will be Participants
for  purposes of Awards of Units for such Unit  Cycle.  The  entitlement  of any
Participant to payment of an Award of Units for such Unit Cycle shall be decided
solely in accordance with the provisions of this Article 9. Designation of a Key
Employee  as a  Participant  for a  particular  Unit  Cycle  shall  not  require
designation of such Key Employee as a Participant in any subsequent  Unit Cycle,
and  designation  of  one  Key  Employee  as a  Participant  shall  not  require
designation  of any other Key Employee as a Participant in such Unit Cycle or in
any other Unit Cycle.

9.3 Procedure for Determining Unit Awards. With regard to grants of Units in any
particular Unit Cycle,  the Committee shall,  using its full discretion,  within
the first 90 days of a Unit Cycle  (or,  if longer,  within the  maximum  period
allowed under Section 162(m) of the Code), establish in writing (i) Multipliers,
which  shall be a function  of  Combined  Operating  Ratio for each Unit  Period
within the Unit Cycle and Growth in Net  Written  Premiums  for each Unit Period
within the Unit Cycle,  (ii) the Initial Dollar Value of all Units to be awarded
in such  Unit  Cycle  and  (iii)  the  number  of  Units to be  granted  to each
Participant.  In  establishing  such  Multipliers,  the Committee shall consider
return on equity implied by targeted Combined Operating Ratios and Growth in Net
Written  Premiums.  An  example  of a chart  establishing  such  Multipliers  is
attached as Exhibit A hereto.

9.4 Unit Grant Notice. As soon as administratively practicable following a grant
of Units to a Key  Employee,  the Company shall provide such Key Employee a Unit
Grant  Notice  which  shall  contain,  among other  things,  a copy of the chart
adopted by the Committee  establishing the Multipliers applicable to such Units,
the number of Units granted to the Participant and the Initial Value thereof.

9.5  Nontransferability  of Units. No Unit granted pursuant to the Plan shall be
transferable  otherwise than by will or by the laws of descent and  distribution
or pursuant to a qualified domestic relations order as defined by the Code.

9.6 Additional Terms and Conditions. The Committee may, by way of the Unit Grant
Notice or otherwise,  establish  other terms,  conditions,  restrictions  and/or
limitations,  if any, with respect to any grant of Units,  provided they are not
inconsistent with the Plan.

9.7        Valuation and Payment of Units.

           9.7.1 Annual Certification. Following the completion of a Unit Period
           for any Unit,  the  Committee  shall  meet to review  and  certify in
           writing the determination of the applicable Multiplier for such Unit.
           Based  upon  such  Multiplier  so  calculated,  the  Committee  shall
           calculate and notify each  Participant  of the Annual Dollar Value of
           the Unit.  In the event the  Multiplier  for any Unit Period is zero,
           the  value of the Units to which  such  Multiplier  applies  shall be
           zero.

           9.7.2 Three-year Certification.  Upon the determination of the Annual
           Dollar  Value for the third fiscal year of the Unit Cycle for a Unit,
           the Committee  shall certify in writing the Final Dollar Value of the
           Unit and notify the Participant thereof.

           9.7.3  Conversion  to  Common  Stock and  Rights to Cash.  As soon as
           administratively   possible   following  the   certification  of  the
           Multiplier  applicable to Units for the third year of the Unit Cycle,
           the Company shall cause to be issued in the name of such Participant,
           and promptly deliver to such  Participant,  a certificate (the "Share
           Certificate")  evidencing a number of shares of Common Stock equal to
           the  quotient  of (i)  sixty  percent  (60%) of the sum of the  Final
           Dollar Value of such Units divided by (ii) the average  closing price
           per share of the Common Stock over the final 30 calendar  days of the
           Unit Cycle on the  primary  securities  exchange on which such shares
           are traded,  rounded down to the nearest  whole share (the  remaining
           dollar  amount not so  converted  into shares of common  stock due to
           rounding is referred to herein as the "Fractional Amount").

           9.7.4  At  the  time  the  Share  Certificate  is  delivered  to  the
           Participant,  the Company  shall pay to such  Participant  in cash an
           amount equal to forty percent (40%) of the Final Dollar Value of such
           Units plus the Fractional  Amount with respect to Share  Certificates
           then  delivered,  less  applicable  withholding for state and federal
           taxes (including taxes with respect to the Share Certificates).

           9.7.5 If the  amount to be paid  pursuant  to  paragraph  9.7.3  with
           respect to any Units held by such  Participant  is not  sufficient to
           satisfy the  Company's  obligation to make  withholding,  pursuant to
           applicable  federal and state law, for applicable  taxes, the Company
           shall,  at the request of the  Participant,  deduct and withhold from
           the  Share  Certificate  the whole  number of shares of Common  Stock
           having a value (based on the closing price at which a share of Common
           Stock  shall have sold on the final  trading day of the Unit Cycle as
           reported on the listing of the primary  securities  exchange on which
           such shares are traded),  rounded up to the nearest  share,  equal to
           such deficiency and shall deliver,  in lieu of the Share Certificate,
           a new certificate evidencing such remaining shares of Common Stock.

9.8 New Participants. Key Employees selected by the Committee to be Participants
for a Unit Cycle who commence  employment with the Company after the Committee's
initial  selection of Participants  for the Unit Cycle, as well as Key Employees
who are selected by the Committee to be Participants for a Unit Cycle after such
date,  shall be  entitled  to a pro rata Award for the Unit Period in which such
employment  or  selection  commences.  The amount of the pro rata Award shall be
determined by multiplying  the Award the  Participant  would otherwise have been
paid if he or she had been a Participant  for the entire Unit Period (i.e.,  the
Annual Dollar Value for such Unit Period) by a fraction,  the numerator of which
is the  number  of  full  months  he or she was  eligible  as a  Participant  to
participate in the Unit Award Program during the Unit Period and the denominator
of which is twelve (12).  For purposes of this  calculation,  a partial month of
participation  shall:  (i) be treated as a full  month of  participation  to the
extent a Participant  participates in the Unit Award Program for 15 or more days
of such  month;  and (ii) not be taken  into  consideration  to the  extent  the
Participant participates in the Unit Award Program for less than 15 days of such
month.  The amount of such Award will be deemed the Annual Dollar Value for such
Unit Period for the purpose of determining both such amount and the Final Dollar
Value.

9.9 Forfeiture Upon Cessation of Employment.  A Participant  who ceases,  at any
time  before  the  expiration  of the Unit  Cycle for any Units  awarded to such
Participant,  to be a full-time employee of the Company (defined as any employee
of the Company  employed on the basis of 40 hours per work week,  or 2,080 hours
per year, or the equivalent  thereof) for any reason shall forfeit all rights to
receive any payment pursuant to this Plan with respect to such Units;  provided,
however,  in the event that cessation of such  Participant's  employment results
from such Participant's death, Disability or Retirement, all Units applicable to
such  Participant,  including  Units  for which  the Unit  Cycle  shall not have
elapsed,  for which  payment had not  previously  been made to such  Participant
pursuant to the term of this Plan shall,  upon such event, be converted into the
right to receive an amount in cash equal to the sum of (i) with respect to Units
awarded to such  Participant  for which an  applicable  Unit  Period  shall have
elapsed,  the sum of the Annual Dollar Value for each elapsed Unit Period in the
Unit Cycle and (ii) with respect to Units awarded to such  Participant for which
the  applicable  Unit Period shall not have  elapsed,  a pro rata portion of the
Annual  Dollar  Value for the  then-current  Unit Period based on the portion of
such Unit Period that had elapsed.  Amounts,  if any, payable under this Section
9.9 shall be paid as soon as  administratively  possible;  provided that amounts
payable  hereunder  with regard to Units for which the Unit Cycle shall not have
elapsed shall not be paid until after the Annual Dollar Value for such Units for
such Unit Cycle have been determined pursuant to this Article 9.

9.10       Change of Control, Liquidation or Dissolution.

           9.10.1  Dissolution,   Liquidation.   In  the  event  of  a  proposed
           dissolution or  liquidation  of the Company,  each Unit awarded under
           the Plan shall  terminate as of a date to be fixed by the  Committee.
           At least thirty (30) days' written  notice of the date so fixed shall
           be given to each Participant  holding  outstanding  Units for which a
           Unit Period has elapsed (or other person  entitled to receive payment
           in respect of such Units).  On such date fixed by the Committee,  the
           Company  shall make payments to such  Participants  (or other persons
           entitled  to receive  payment in respect of such Units) in cash based
           on the Final  Dollar  Value of such Units being the sum of the Annual
           Dollar Value for such Units for the Unit Periods then elapsed.

           9.10.2 Change in Control.  Notwithstanding  any contrary provision in
           the Plan, upon a Change in Control, no additional terms,  conditions,
           restrictions,  or limitations  shall be placed upon any Award granted
           under  Article 9, and all Units,  including  Units for which the Unit
           Period shall not have elapsed,  for which payment had not  previously
           been made to a  Participant  pursuant to the term of this Plan shall,
           upon the Change of Control,  be  converted  into the right to receive
           within thirty (30) days after such Change of Control occurs an amount
           in cash equal to the Final Dollar Value  thereof.  For the purpose of
           determining  such Final Dollar  Value,  the Annual  Dollar Value of a
           Unit with respect to any unelapsed Unit Period shall be determined by
           assuming that the Multiplier for such Unit Period is 100%.

9.11 Maximum Award Payable.  Notwithstanding any provision contained in the Plan
to the  contrary,  the maximum  Final  Dollar Value of Units that may be awarded
under the Plan in any calendar year to any Participant is $375,000.

ARTICLE 10 - NONEMPLOYEE DIRECTOR AWARDS

10.1 In General.  Nonemployee  Directors  are eligible to (i) receive  automatic
grants  of  shares  of  Common  Stock  as  part  of the  compensation  for  such
Nonemployee  Directors' Service and (ii) elect to receive Common Stock, Deferral
Restricted  Stock, or Deferral Stock Options in lieu of other cash  compensation
for Service.

10.2       Common Stock.

           10.2.1 Awards of Common Stock. Each Nonemployee Director serving as a
           Director  on the  next  day  following  the end of  Integon's  annual
           shareholder's  meeting in each year  ("Director  Grant  Date")  shall
           automatically  be  awarded  1,650  shares  of  Common  Stock  on such
           Director  Grant Date (or a portion of such shares of Common  Stock if
           such  Participant  did not  serve as a  Director  the  entire  period
           between the annual shareholders' meeting preceding the Director Grant
           Date and the Director Grant Date,  which portion of such shares shall
           equal the  portion  of such  period  the  Participant  did serve as a
           Director).

           10.2.2 Rule 16b-3(c)(2)(ii)(B).  The provisions of Section 10.2 shall
           not be altered or amended  more than once every six months  except as
           necessary  to comply with the Code,  the Employee  Retirement  Income
           Security Act, or the rules and regulations thereunder.

10.3       Common Stock, Deferral Restricted Stock, and Deferral Stock Options.

           10.3.1 Election. Each year, on the date of Integon's scheduled annual
           shareholders'  meeting (or, for  Nonemployee  Directors whose Initial
           Election  Date shall fall within the period of six months  after such
           scheduled  annual  meeting,  on such  Initial  Election  Date),  each
           Nonemployee Director may, subject to any approval by the shareholders
           of the Company required by Rule 16b-3,  make an irrevocable  election
           to receive,  in lieu of all or any part of the cash  compensation  to
           which such  member  would  otherwise  be  entitled as a member of the
           Board (other than reimbursement of expenses and/or individual meeting
           fees) for the period from the annual shareholders' meeting to the day
           prior to the following annual meeting,  either (i) Common Stock, (ii)
           Deferral Restricted Stock or (iii) Deferral Stock Options, but not in
           any combination of the three,  provided,  however, that a Participant
           may make his or her first  election  on, or at any time prior to, his
           or her Initial  Election  Date. An election made  hereunder  shall be
           effective,  beginning  on the  Initial  Election  Date or the  annual
           meeting dates  following such a Initial  Election Date, for the grant
           of such  number  of:  (i)  shares of  Common  Stock,  (ii)  shares of
           Deferral  Restricted  Stock or (iii) Deferral  Stock  Options,  as is
           determined by the  Committee at the  Effective  Date to constitute an
           amount of Common Stock,  Deferral Restricted Stock, or Deferral Stock
           Options  equivalent to the cash compensation  elected to be foregone.
           In making such  determination  of equivalency  for purposes of Common
           Stock and Deferral  Restricted  Stock,  the  Committee  shall use the
           average of the closing  price at which a share of Common  Stock shall
           have been traded  over the 30  calendar  days ending with the date of
           the grant of such Common  Stock or Deferral  Restricted  Stock on the
           primary securities exchange on which the Common Stock is then traded.
           In making such  determination of equivalency for purposes of Deferral
           Stock Options, the Committee shall rely upon the Black-Scholes option
           pricing model,  determining such equivalency as of the Effective Date
           of such Deferral Stock Option.

           Each such election  shall be in writing and shall be delivered to the
           Secretary of the Company.  The  Effective  Date of any such  Deferral
           Award shall be the date six months after such Nonemployee  Director's
           Initial  Election Date and, for  subsequent  elections on the date of
           Integon's  annual  shareholders'  meeting,  the date six months after
           such meeting.

           10.3.2        Terms and Conditions of Deferral Restricted Stock.

                         10.3.2.1  Subject to the provisions of the Plan,  until
                         the expiration of the Deferral  Restriction Period, the
                         Participant  shall  not be  permitted  to  hold,  sell,
                         assign,  transfer,  pledge or otherwise encumber shares
                         of Deferral Restricted Stock.

                         10.3.2.2  Except as provided in this Section 10.3,  the
                         Participant  shall have,  with respect to the shares of
                         Deferral  Restricted  Stock,  all  of the  rights  of a
                         shareholder of the Company holding shares of the Common
                         Stock, including, if applicable,  the right to vote the
                         shares  and the right to  receive  any cash  dividends.
                         Dividends  payable in Common Stock shall be paid in the
                         form of additional whole shares of Deferral  Restricted
                         Stock on which  such  dividend  was paid  (based on the
                         closing  price  per  share of the  Common  Stock on the
                         primary  securities  exchange which the Common Stock is
                         traded as of the record date for such dividend,  or the
                         next preceding  trading day if the record date is not a
                         trading day on such exchange), held subject to the same
                         conditions and restrictions of the underlying  Deferral
                         Restricted  Stock,  with any  fractional  share amounts
                         paid in cash on the payment date of such dividend.

                         10.3.2.3  Except to the extent  otherwise  provided  in
                         this Section 10.3, upon a Participant's  termination of
                         Service  during  an  unexpired   Deferral   Restriction
                         Period,  all shares subject to such unexpired  Deferral
                         Restriction  Period held by that  Participant  shall be
                         forfeited.  In the event of the  termination of Service
                         of a  Participant  in the  Deferral  Restricted  Period
                         because  of  death,   Disability  or  Retirement,   the
                         unexpired  Deferral  Restriction  Period  applicable to
                         Deferral  Restricted  Stock  held by  that  Participant
                         shall  lapse  and  shares of such  Deferral  Restricted
                         Stock shall become free of all  restrictions and become
                         fully  vested  and  transferable.  Notwithstanding  any
                         contrary  provision  in  the  Plan,  upon a  Change  in
                         Control, no additional terms, conditions, restrictions,
                         or  limitations  shall  be  placed  upon  any  Deferral
                         Restricted Stock granted under this Article 10, and the
                         unexpired  Deferral  Restriction  Period  applicable to
                         each share of  Deferral  Restricted  Stock  outstanding
                         under  this Plan  shall  lapse  and each  share of such
                         Deferral  Restricted  Stock  shall  become  free of all
                         restrictions and become fully vested and transferable.

                         10.3.2.4 Each Deferral  Restricted Stock award shall be
                         confirmed  by,  and be  subject  to  the  terms  of,  a
                         Deferral Stock Agreement.

                         10.3.2.5 Deferral Restricted Stock Certificates. Shares
                         of Deferral Restricted Stock shall be evidenced in such
                         manner as the Committee may deem appropriate, including
                         book-entry  registration  or  issuance  of one or  more
                         stock  certificates.  Any certificate issued in respect
                         of  shares  of  Deferral   Restricted  Stock  shall  be
                         registered  in the name of such  Participant  and shall
                         bear an  appropriate  legend  referring  to the  terms,
                         conditions,   and   restrictions   applicable  to  such
                         Deferral   Restricted   Stock,   substantially  in  the
                         following form:

                                  "The  transferability  of this certificate and
                                  the  shares of stock  represented  hereby  are
                                  subject to the terms and conditions (including
                                  forfeiture) of the Integon Corporation Amended
                                  and  Restated  Omnibus  Long-Term  Performance
                                  Incentive  Compensation  Plan.  Copies of such
                                  Plan and  Agreement are on file at the offices
                                  of Integon Corporation, 500 West Fifth Street,
                                  Winston-Salem, North Carolina 27152."

                         The  Committee   may  require  that  the   certificates
                         evidencing  such  shares  be  held  in  custody  by the
                         Company  until  the  restrictions  thereon  shall  have
                         lapsed  and  that,  as a  condition  of  any  Award  of
                         Deferral  Restricted  Stock, the Participant shall have
                         delivered a stock power, endorsed in blank, relating to
                         the Common Stock covered by such Award.

                         If and when the applicable Deferral  Restriction Period
                         expires  without  a prior  forfeiture  of the  Deferral
                         Restricted  Stock,  unlegended  certificates  for  such
                         shares  shall  be  delivered  to the  Participant  upon
                         surrender of the legended certificates.

           10.3.3        Terms and Conditions of Deferral Stock Options.

                         10.3.3.1  Exercise  Price.  The  price at which  Common
                         Stock may be  purchased  upon  exercise  of a  Deferral
                         Stock  Option  shall  be  not  less  than  100%  of the
                         fair-market value of the Common Stock, as determined by
                         the  Committee,  on the date of grant of such  Deferral
                         Stock Options.

                         10.3.3.2 Vesting. Subject to the provisions of Sections
                         10.3.3.3  and   10.3.3.4,   after  one  year  from  the
                         Effective  Date of such  Deferral  Stock  Option,  such
                         Deferral Stock Option shall become  exercisable for all
                         shares of Common Stock covered thereby.

                         10.3.3.3  Acceleration  due to  Termination of Service,
                         Change in Control.  If the  Service of any  Participant
                         ends  during  the   one-year   period  for  which  cash
                         compensation has been waived, such Participant's rights
                         in such Deferral Stock Option shall be as follows:

                                  10.3.3.3.1   Upon  the   termination  of  such
                                  Nonemployee   Director's  Service  because  of
                                  death,  Disability or  Retirement  during such
                                  one-year  period,  each  unexercised  Deferral
                                  Stock Option held by that Nonemployee Director
                                  shall  become  immediately  exercisable  as to
                                  100% of the  shares  of Common  Stock  covered
                                  thereby;

                                  10.3.3.3.2   Upon  the   termination  of  such
                                  Nonemployee  Director's  Service  during  such
                                  one- year  period  for any  reason  other than
                                  death, Disability or Retirement,  a portion of
                                  the  shares of Common  Stock  covered  thereby
                                  shall  become   immediately   exercisable   as
                                  follows:

                                           10.3.3.3.2.1The   shares   of  Common
                                           Stock  covered  by a  Deferral  Stock
                                           Option  attributable  to the election
                                           to forgo  cash  compensation  for the
                                           one-year   period   in   which   such
                                           Participant's    Service   terminates
                                           shall be  prorated  and  such  Option
                                           shall become immediately  exercisable
                                           to the extent of that  portion of the
                                           shares of Common  Stock  attributable
                                           to the time of Service  during that 1
                                           year period; and

                                           10.3.3.3.2.2 As to the balance of the
                                           shares of Common Stock covered by
                                           such Deferral Stock Option for such
                                           1 year period, such option shall
                                           lapse immediately.

                                  Notwithstanding  any contrary provision in the
                                  Plan, upon a Change in Control,  no additional
                                  terms,    conditions,     restrictions,     or
                                  limitations  shall be placed upon any Deferral
                                  Stock  Option  granted  under this Article 10,
                                  and each  Deferral  Stock  Option  outstanding
                                  shall become immediately exercisable as to all
                                  of the shares of Common Stock covered thereby.
                                  In addition, upon a Change in Ownership,  each
                                  outstanding   Deferral  Stock  Option  granted
                                  under this Article 10 shall be converted  into
                                  the right to receive,  as soon as  practicable
                                  but in no event  later than  thirty  (30) days
                                  after the Change in Ownership,  for each share
                                  of  Common   Stock   purchasable   under  such
                                  Deferral  Stock Option an amount in cash equal
                                  to  the  difference   between  the  Change  In
                                  Control Price and the per share exercise price
                                  of such Deferral  Stock  Option.  In the event
                                  that exercise price of an outstanding Deferral
                                  Stock  Option is equal to or greater  than the
                                  Change In Control  Price,  such Deferral Stock
                                  Option  shall  have a value of zero,  shall be
                                  cancelled,  and the owner thereof shall not be
                                  entitled to receive any payment.

                         10.3.3.4 Term of Exercisability.  Once any portion of a
                         Deferral  Stock Option  becomes  exercisable,  it shall
                         remain  exercisable only for the lesser of (i) 10 years
                         after the date of grant (or such lesser number of years
                         as the  Committee  shall  determine) or (ii) 1 year (or
                         such  greater  number of years as the  Committee  shall
                         determine)   after  the   Service   of  a   Participant
                         terminates for any reason.

                         10.3.3.5  Exercise  and  Payment.  Upon  exercise,  the
                         option price of a Deferral  Stock Option may be paid in
                         cash,  shares of Common  Stock,  a  combination  of the
                         foregoing, or such other consideration as the Committee
                         may deem  appropriate.  The Committee  shall  establish
                         appropriate methods for accepting Common Stock, whether
                         restricted  or   unrestricted,   and  may  impose  such
                         conditions as it deems  appropriate  on the use of such
                         Common  Stock to  exercise a stock  option.  Subject to
                         Section 15.8,  stock options awarded under the Plan may
                         be  exercised  by  way  of a  broker-assisted  exercise
                         program, provided such program is available at the time
                         of the option's  exercise.  The  Committee may permit a
                         Participant  to  satisfy  any  amounts  required  to be
                         withheld under the applicable federal,  state and local
                         tax laws in effect  from time to time,  by  electing to
                         have the  Company  withhold  a portion of the shares of
                         Common  Stock to be  delivered  for the payment of such
                         taxes.

                         10.3.3.6  Option  Agreements.  Each Award of a Deferral
                         Stock  Option  under this Plan shall be  evidenced by a
                         written  agreement  signed by the Nonemployee  Director
                         and  containing   such  terms  and  conditions  as  the
                         Committee may  determine  from time to time pursuant to
                         this Plan.

           10.3.4 Rule 16b-3  Compliance.  The grant of Common  Stock,  Deferral
           Restricted Stock, and Deferral Stock Options is intended to comply in
           all respects with Rule  16b-3(d)(1) of the Exchange Act such that the
           grant of all Common Stock,  Deferral  Restricted  Stock, and Deferral
           Election  Stock  Options  issued  under the Plan shall be exempt from
           Section 16(b) of the Exchange Act.

ARTICLE 11 - MISCELLANEOUS

11.1 Withholding Taxes. The Company shall be entitled to deduct from any payment
under  the  Plan,  regardless  of the form of such  payment,  the  amount of all
applicable  income and  employment  taxes  required by law to be  withheld  with
respect to such  payment or may  require the  Participant  to pay to it such tax
prior to and as a condition of the making of such payment.  In  accordance  with
any applicable administrative guidelines it establishes, the Committee may allow
a Participant  to pay the amount of taxes required by law to be withheld from an
Award by  withholding  from any payment of Common  Stock due as a result of such
Award,  or by permitting the  Participant  to deliver to the Company,  shares of
Common Stock having a fair-market  value, as determined by the Committee,  equal
to the amount of such required withholding taxes.

11.2 Amendments to Awards.  The Committee may at any time unilaterally amend any
unexercised,  unearned,  or unpaid  Award,  except Awards made under Article 10,
including, but not by way of limitation,  Awards earned but not yet paid, to the
extent it deems appropriate;  provided,  however, that any such amendment which,
in the opinion of the Committee, is adverse to the Participant shall require the
Participant's consent.

11.3 Regulatory  Approvals and Listings.  Notwithstanding  anything contained in
this Plan to the  contrary,  the Company  shall have no  obligation  to issue or
deliver  certificates  of Common  Stock  evidencing  any Award  resulting in the
payment of Common  Stock prior to (i) the  obtaining  of any  approval  from any
governmental agent that the Company shall, in its sole discretion,  determine to
be necessary or  advisable,  (ii) the admission of such shares to listing on the
stock  exchange on which the Common Stock may be listed and (iii) the completion
of any  registration  or other  qualification  of said shares under any state or
federal law or ruling of any  governmental  body that the Company shall,  in its
sole discretion, determine to be necessary or advisable.

11.4 No Right to Continued Employment or Grants. Participation in the Plan shall
not give any Key  Employee or  Nonemployee  Director  any right to remain in the
employ or Service of the Company.  Integon, or, in the case of employment with a
Subsidiary, the Subsidiary,  reserves the right to terminate any Employee at any
time,  subject  to the  provisions  of any  employment  agreement  with such Key
Employee.  Further,  except as provided in Article 10, the adoption of this Plan
shall not be deemed to give any Key Employee,  Nonemployee Director or any other
individual any right to be selected as a Participant or to be granted an Award.

11.5  Amendment/Termination.  The Committee may suspend or terminate the Plan at
any time  with or  without  prior  notice.  In  addition,  except  as  otherwise
expressly  provided,  the  Committee  may, from time to time and with or without
prior  notice,  amend the Plan in any manner,  but may not  without  shareholder
approval adopt any amendment that would require the vote of the  shareholders of
Integon  pursuant  to Section 16 of the  Exchange  Act or Section  162(m) of the
Code,  but only insofar as such  amendment  affects  Covered  Employees.  Upon a
Change In  Control  no  action,  including,  but not by way of  limitation,  the
amendment,  suspension or  termination  of the Plan,  shall be taken which would
affect the rights of any  Participant  or the operation of the Plan with respect
to any Award to which the Participant  may have become entitled  hereunder on or
prior to the date of the  Change  In  Control  or to which he or she may  become
entitled as a result of such Change In Control.

11.6  Governing  Law. The Plan shall be governed by and  construed in accordance
with the laws of the State of North Carolina, except as superseded by applicable
federal law.

11.7 No Right,  Title, or Interest in Company Assets.  No Participant shall have
any rights as a shareholder as a result of  participation  in the Plan until the
date of issuance of a stock  certificate  in his or her name and, in the case of
shares of Common  Stock,  such rights are granted to the  Participant  under the
Plan.  To the extent any person  acquires a right to receive  payments  from the
Company  under the Plan,  such rights  shall be no greater than the rights of an
unsecured  creditor of the Company and the Participant shall not have any rights
in or against any  specific  assets of the  Company.  All of the Awards  granted
under the Plan shall be unfunded.

11.8  Section  16 of the  Exchange  Act.  In  order to avoid  any  Exchange  Act
violations, the Committee may, from time to time, impose additional restrictions
upon an  Award,  including  but  not  limited  to,  restrictions  regarding  tax
withholdings and restrictions  regarding the  Participant's  ability to exercise
Awards under any broker-assisted exercise program.

11.9 No Guarantee of Tax Consequences.  No person connected with the Plan in any
capacity,  including, but not limited to, Integon and its Subsidiaries and their
directors, officers, agents and employees makes any representation,  commitment,
or guarantee that any tax  treatment,  including,  but not limited to,  federal,
state and local income,  estate and gift tax treatment,  will be applicable with
respect to amounts  deferred  under the Plan, or paid to or for the benefit of a
Participant  under the  Plan,  or that such tax  treatment  will  apply to or be
available to a Participant on account of participation in the Plan.

11.10  Compliance with Section 162(m).  If any provision of the Plan would cause
the  Awards  granted to a Covered  Person  not to qualify as  "performance-based
compensation"  under Section 162(m) of the Code, that  provision,  insofar as it
pertains to the Covered  Person,  shall be severed from, and shall be deemed not
to be a part of this Plan, but the other provisions  hereof shall remain in full
force and effect.

11.11 Funding of Cash Payments.  The Company shall fund cash payments under this
Plan from its general assets and shall not maintain any designated or segregated
fund for such purposes.

11.12 Legal Fees. Integon shall pay all legal fees and related expenses incurred
by a Participant  in seeking to obtain or enforce any payment,  benefit or right
he or she may be  entitled  to under  the Plan  after a Change in  Control  or a
Change in Ownership;  provided,  however,  the Participant  shall be required to
repay  any  such  amounts  to  Integon  to  the  extent  a  court  of  competent
jurisdiction  issues  a  final  and  non-appealable   order  setting  forth  the
determination  that the  position  taken by the  Participant  was  frivolous  or
advanced in bad faith.
<PAGE>
                             Exhibit 10.5 Continued
<TABLE>
<CAPTION>
                                    EXHIBIT A

                           SAMPLE CHART OF MULTIPLIERS

                            Combined Operating Ratio


                              FF.0%   EE.5%   EE.0%    DD.5%    DD.0%    CC.5%    CC.0%    BB.5%    BB.0%    AA.5%**
                               ====   ----    -----    -----    -----    -----    -----    -----    -----    -------
<S>                           <C>     <C>     <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
               A%*.......                                71.8%   81.9%     91.9%   101.9%   111.9%   122.0%   132.0%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

               B% .......                                75.7%   86.2%     96.6%   107.0%   117.3%   127.7%   138.0%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

               C% .......                                79.1%   90.1%    101.0%   111.9%   122.8%   133.5%   144.2%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

               D% .......                      71.3%     82.7%   94.0%    105.3%   116.6%   127.9%   139.2%   150.4%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

               E% .......                      73.0%     84.4%   95.9%    107.4%   118.9%   130.4%   141.9%   153.4%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

Growth in      F% .......                      74.7%     86.3%   97.9%    109.6%   121.3%   132.9%   144.6%   156.3%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

Net Written    G% .......                      76.4%     88.2%   100.0%   111.8%   123.6%   135.5%   147.3%   159.2%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

Premiums       H%  .......                     78.2%     90.1%   102.1%   114.1%   126.0%   138.1%   150.1%   162.1%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

               I% .......                      79.9%     92.1%   104.2%   116.4%   128.5%   140.7%   152.9%   165.1%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

               J% .......                      81.7%     94.0%   106.4%   118.7%   131.1%   143.4%   155.8%   168.1%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

               K% .......              70.9%   83.4%     96.0%   108.5%   121.0%   133.6%   146.1%   158.7%   171.2%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

               L% .......              72.5%   85.2%     97.9%   110.7%   123.4%   136.1%   148.9%   161.6%   174.3%
                               ====    ----    -----    -----    -----    -----    -----    -----    -----    -------

               M% .......     74.1%   87.0%    99.9%    112.9%   125.8%   138.7%   151.7%   164.6%   177.5%
                               ----    ----    -----    -----    -----    -----    -----    -----    -----    -------

               N% .......     75.7%   88.8%   102.0%    115.1%   128.2%   141.3%   154.5%   167.6%   180.7%
                               ----    ----    -----    -----    -----    -----    -----    -----    -----    -------
</TABLE>
----------------
* or less

** or greater

No  payments  shall be due with  respect  to Units to the  extent  Growth in Net
Written Premiums is less than A%, Combined Operating Ratio is greater than EE.5%
or with respect to boxes in the chart left blank.

The foregoing  chart has been prepared on an arbitrary  basis and is provided to
illustrate  the  application  of the Plan.  Letters  have been  substituted  for
numbers in Growth in Net Written Premiums and Combined  Operating Ratio to avoid
any implication  that the foregoing chart presents a projection of the Company's
operating results.


End Exhibit 10.5
<PAGE>
Exhibit 10.6

                             AMENDMENT NO. 1 TO THE
                               INTEGON CORPORATION
                              AMENDED AND RESTATED
                          OMNIBUS LONG-TERM PERFORMANCE
                           INCENTIVE COMPENSATION PLAN


1.       Purpose

         The purpose of this Amendment No. 1 (this  "Amendment")  to the Integon
Corporation  Amended  and  Restated  Omnibus  Long-term   Performance  Incentive
Compensation  Plan (the  "Plan") is to clarify  the  treatment  of Awards  under
Article 8 upon  termination  of  employment  of a  Participant  who  served as a
Nonemployee  Director  immediately  prior to acceptance  of employment  with the
Company.  Terms not otherwise  defined herein shall have the meanings given them
in the Plan.

2.       Effective Date

         The effective date of this Amendment shall be February 13, 1997.

3.       Certain Revisions to Article 8

         (a) The Plan is hereby amended by adding the following clause to the
end of the first sentence of 8.5.2:

         ; provided, however, that with respect to any Participant who served as
         a Nonemployee  Director  immediately prior to accepting employment with
         the Company the Restricted  Performance Amount shall be fully vested as
         of the Award Date.

As so revised, Section 8.5.2 shall read as follows:

         8.5.2 The  Restricted  Performance  Amount with respect to a particular
         Performance Award shall vest on a straight-line  basis with such amount
         credited to a three-year  deferred  compensation  account fully vesting
         three years after the applicable Award Date and such amount credited to
         a five-year  deferred  compensation  account  fully  vesting five years
         after the applicable Award Date; provided,  however,  that with respect
         to any  Participant  who served as a Nonemployee  Director  immediately
         prior  to  accepting   employment   with  the  Company  the  Restricted
         Performance  Amount  shall be fully  vested as of the Award  Date.  The
         Vested  Performance  Amount shall be fully vested as of the Award Date.
         Upon a  Participant's  termination  of  employment  during an unexpired
         Performance  Restriction Period, any amount credited to a three-year or
         five-year deferred  compensation  account that has not yet vested shall
         be forfeited by that Participant.

         (b) The Plan is hereby  amended by deleting the first two  sentences of
Section 8.7 in their entirety and replacing them with the following:

         In the event a Participant's  employment  terminates prior to the Award
         Date for a Performance  Period,  such Participant shall not receive any
         amount in connection with such  Performance  Award and such Performance
         Award shall terminate;  provided, however, that for the purpose of this
         Section  8.7,  the phrase  "terminates  employment"  shall  mean,  with
         respect  to  any  Participant  who  served  as a  Nonemployee  Director
         immediately prior to accepting  employment with the Company,  the later
         of such  Participant's  termination  of employment  with the Company or
         termination of Service. Notwithstanding the preceding sentence, if such
         Participant  terminates  employment  because  of death,  Disability  or
         Retirement  prior to the  Award  Date for a  Performance  Period,  such
         Participant  shall  receive,  if Awards  are paid for such  Performance
         Period,  a pro rata  Performance  Award  determined by multiplying  the
         Performance  Award the Participant would have otherwise been paid if he
         or  she  had  been  a  Participant  through  the  Award  Date  for  the
         Performance Period by a fraction,  the numerator of which is the number
         of full  months he or she was a  Participant  during  such  Performance
         Period and the  denominator of which is the total number of full months
         in the Performance Period.

As so revised, Section 8.7 shall read as follows:

         8.7 Termination of Employment During Performance Period. In the event a
         Participant's  employment  terminates  prior  to the  Award  Date for a
         Performance  Period,  such Participant  shall not receive any amount in
         connection with such Performance Award and such Performance Award shall
         terminate; provided, however, that for the purpose of this Section 8.7,
         the phrase  "terminates  employment"  shall mean,  with  respect to any
         Participant who served as a Nonemployee  Director  immediately prior to
         accepting  employment with the Company, the later of such Participant's
         termination  of employment  with the Company or termination of Service.
         Notwithstanding the preceding sentence, if such Participant  terminates
         employment  because of death,  Disability  or  Retirement  prior to the
         Award Date for a Performance Period, such Participant shall receive, if
         Awards are paid for such  Performance  Period,  a pro rata  Performance
         Award  determined by multiplying the Performance  Award the Participant
         would  have  otherwise  been  paid if he or she had been a  Participant
         through the Award Date for the  Performance  Period by a fraction,  the
         numerator  of  which  is the  number  of  full  months  he or she was a
         Participant during such Performance Period and the denominator of which
         is the total  number  of full  months in the  Performance  Period.  For
         purposes of this calculation,  a partial month of participation  shall:
         (1) be  treated  as a full  month  of  participation  to the  extent  a
         Participant participates in the Performance Award Program on 15 or more
         days of such  month;  and (2) not be taken  into  consideration  to the
         extent the Participant  participates  in the Performance  Award Program
         for less than 15 days of such month.  Such pro rata  Performance  Award
         shall be paid in the form of cash no more than 120 days after the Award
         Payment Date for such Performance Award.

End Exhibit 10.6
<PAGE>
                                  Exhibit 10.7

                               INTEGON CORPORATION
                         EXECUTIVE SALARY DEFERRAL PLAN


ARTICLE 1 - PURPOSE AND TERM OF PLAN

1.1 Purpose.  The purposes of the Plan are to permit  selected Key  Employees of
the Company the  opportunity to defer receipt of salary for three to five years,
with the amount  thereof  treated as phantom  stock  units  during the period of
deferral. Accordingly, the Plan is intended to aid the Company in attracting and
retaining superior individuals to serve as Key Employees by providing a flexible
compensation program.

1.2 Term. The Plan shall become effective as of January 22, 1997 and no election
to defer any  payment  of salary  shall be made  under the Plan with  respect to
salary to be paid in the ordinary course after December 31, 2006.

ARTICLE 2 - DEFINITIONS

2.1        Board.  "Board" means the Board of Directors of Integon.

2.2        Change In Control.  "Change In Control" means the following:

           2.2.1 A tender offer or exchange  offer is made whereby the effect of
           such offer is to take over and  control  the  affairs of Integon  and
           such offer is consummated  for the ownership of securities of Integon
           representing  50% or more of the  combined  voting power of Integon's
           then-outstanding voting securities;

           2.2.2 Integon is merged or consolidated with another corporation and,
           as a result of such merger or consolidation,  outstanding  securities
           representing  less than 50% of the voting  power of the  surviving or
           resulting  corporation  shall then be owned in the  aggregate  by the
           former  stockholders  of  Integon  other than  affiliates  within the
           meaning  of  the  Exchange  Act  of  any  party  to  such  merger  or
           consolidation;

           2.2.3 Integon transfers all or substantially all of its assets to
           another corporation or entity that is not a wholly owned Subsidiary
           of Integon;

           2.2.4 Any  "person"  (as such term is used in  Sections  3(a)(9)  and
           13(d)(3) of the  Exchange  Act) is or becomes the  beneficial  owner,
           directly or indirectly,  of securities of Integon representing 50% or
           more of the  combined  voting  power  of  Integon's  then-outstanding
           securities; or

           2.2.5 As the result of a tender offer, merger, consolidation, sale of
           assets,   or  contested   election,   or  any   combination  of  such
           transactions,  the persons who were members of the Board  immediately
           before  the  transaction  cease to  constitute  at  least a  majority
           thereof.

2.3 Change In Control Price. "Change In Control Price" means the highest closing
price per share paid for the purchase of Common Stock during the ninety (90) day
period ending on the date the Change In Control occurs on the primary securities
exchange on which the Common Stock is then traded, or the merger or tender price
if higher.

2.4 Committee. "Committee" means the Compensation and Personnel Committee of the
Board,  unless and until its members are not qualified to serve on the Committee
pursuant to the  provisions of the Plan, in which case the Board will  designate
the members of the  Committee;  provided that the  Committee  shall at all times
consist of two or more Directors,  each of whom is both a "disinterested person"
within  the  meaning  of Rule  16b-3  under  the  Exchange  Act and an  "outside
director"  within the meaning of the  definition  of such term as  contained  in
Treasury  Regulation  Section  1.162-27(e)(3),   or  any  successor  definition;
provided  further that no Director  shall be appointed a member of the Committee
who has received  any Award other than an Award under  Article 10 of the Integon
Corporation  Amended  and  Restated  Omnibus  Long-term   Performance  Incentive
Compensation  Plan,  as amended from time to time (the "Omnibus  Plan"),  in the
year prior to such  appointment;  provided  further that no Committee member may
receive an Award other than pursuant to Article 10 of the Omnibus Plan.

2.5 Common Stock.  "Common Stock" means common stock,  $.01 par value per share,
of Integon,  which may be newly issued  shares,  shares issued and  outstanding,
treasury stock or shares owned by a Subsidiary.

2.6 Company. "Company" means Integon and its Subsidiaries.

2.7 Integon. "Integon" means Integon Corporation, a Delaware corporation.

2.8 Key Employee.  "Key  Employee"  means a senior level employee of the Company
who holds a position  of  responsibility  in a  managerial,  administrative,  or
professional capacity.

2.9 Participant.  "Participant"  means any Key Employee who has been selected to
be eligible to participate in the Plan.

2.10 Plan. "Plan" means this Integon Corporation Executive Salary Deferral Plan.

2.11  Subsidiary.  "Subsidiary"  means a corporation or other business entity in
which Integon directly or indirectly has an ownership interest of 50% or more.

ARTICLE 3 - ELIGIBILITY

3.1 In General.  Only Key Employees are eligible to participate in the Plan. The
Committee shall select, from time to time, Participants from those Key Employees
who, in the opinion of the Committee,  can further the Plan's  purposes.  Once a
Participant is so selected,  the Committee shall promptly notify the Participant
of eligibility.

ARTICLE 4 - PLAN ADMINISTRATION

4.1 Responsibility.  The Committee shall have total and exclusive responsibility
to control,  operate,  manage,  and administer  the Plan in accordance  with its
terms.

4.2 Authority of the Committee.  The Committee shall have all the authority that
may be necessary or helpful to enable it to discharge its responsibilities  with
respect to the Plan. Without limiting the generality of the preceding  sentence,
the  Committee  shall have the exclusive  right to: (a) interpret the Plan;  (b)
determine  eligibility for participation in the Plan; (c) construe any ambiguous
provision  of the Plan;  (d) correct any defect;  (e) supply any  omission;  (f)
reconcile any inconsistency;  (g) issue  administrative  guidelines as an aid to
the  administration  of the Plan and make changes in such  guidelines as it from
time to time deems proper;  (h) make  regulations  for carrying out the Plan and
make changes in such  regulations  as it from time to time deems proper;  (i) to
the extent  permitted under the Plan,  grant waivers of Plan terms,  conditions,
restrictions,  and limitations; (j) accelerate the vesting, exercise, or payment
of an Award when such  action or actions  would be in the best  interest  of the
Company;  and (k) take any and all other action it deems  necessary or advisable
for the proper operation or administration of the Plan.

4.3  Discretionary  Authority.  The  Committee  shall  have  full  discretionary
authority in all matters  related to the discharge of its  responsibilities  and
the exercise of its authority  under the Plan including  without  limitation its
construction of the terms of the Plan and its  determination  of eligibility for
participation  and Awards under the Plan.  It is the intent of the Plan that the
decisions  of the  Committee  and its action  with  respect to the Plan shall be
final,  binding and  conclusive  upon all persons having or claiming to have any
right or interest in or under the Plan.

4.4 Action by the  Committee.  The  Committee  may act only by a majority of its
members. Any determination of the Committee may be made, without a meeting, by a
writing or writings signed by all of the members of the Committee.  In addition,
the  Committee  may  authorize  any one or more of its  members  or the  General
Counsel  of the  Company  to  execute  and  deliver  documents  on behalf of the
Committee.

4.5  Delegation  of  Authority.  The  Committee  may delegate some or all of its
authority  under  the  Plan to any  person  or  persons  provided  that any such
delegation be in writing.

ARTICLE 5 - DEFERRED SALARY PROGRAM

5.1  Election  to Defer  Compensation.  Promptly  upon  receipt  of  notice to a
Participant of eligibility to participate in the Plan,  such  Participant  shall
deliver  to  the  General   Counsel  of  the  Company  written  notice  of  such
Participant's  election to defer, in accordance with the terms of the Plan, some
or all of the salary payments to be received by such Participant.  Such election
shall be effective with respect to the regular pay period next commencing  after
the date of such notice from the  Participant,  and may be amended in writing at
any time,  which amendments shall be effective with respect to salary to be paid
in the regular pay period next  commencing  after the Company's  receipt of such
amendment.  In addition, the Participant's notice of election, and any amendment
thereto, shall set forth the percentage of the Participant's salary to be placed
in a three-year  deferred  compensation  account that is  denominated  in Common
Stock  share  units and the  percentage  of  salary to be placed in a  five-year
deferred  compensation  account that is denominated in Common Stock share units.
Any  portion of salary that is not to be  deferred  shall be paid in  accordance
with the Company's  regular pay procedures.  Unless otherwise changed in writing
by a Participant,  the most recent election made by a Participant shall apply to
subsequent periods.  Amounts contributed to a Participant's  three-year deferred
compensation account or five-year deferred compensation account for a particular
pay period  shall be  denominated  in Common  Stock share units as follows:  the
amount of cash compensation credited to such deferred compensation account shall
be  divided  by the  closing  price  per share of  Common  Stock on the  primary
securities  exchange  on which  shares of the Common  Stock are traded as of the
date that  written  notice of election  to defer is  received  by the  Company's
General Counsel from the Participant (or the next succeeding trading day if such
day is not a trading day on such  exchange).  The date on which such  payment of
salary would otherwise be made is defined as the "Deferral Date."

5.2  Payment  of  Deferred  Compensation.  The  amount of salary  elected  to be
deferred pursuant to the Plan shall be paid as follows:

           5.2.1  Except as provided  in Section  5.2.3,  amounts  credited to a
           Participant's  three-year deferred  compensation account with respect
           to a particular pay period shall be paid to the Participant  promptly
           after the third anniversary of the Deferral Date with respect to such
           pay period. Such amounts shall be paid in cash, subject to applicable
           withholding,  in an  amount  equal to the  product  of the  number of
           Common Stock share units credited to such account for such pay period
           multiplied by the closing  trading price per share of Common Stock on
           the primary  securities  exchange on which the Common Stock is traded
           on such  third  anniversary  date (or,  if such date is not a trading
           day, the next preceding trading day).

           5.2.2  Except as provided  in Section  5.2.3,  amounts  credited to a
           Participant's five-year deferred compensation account with respect to
           a  particular  pay period shall be paid to the  Participant  promptly
           after the fifth anniversary of the Deferral Date with respect to such
           pay period. Such amounts shall be paid in cash, subject to applicable
           withholding,  in an  amount  equal to the  product  of the  number of
           Common Stock share units credited to such account for such pay period
           multiplied by the closing  trading price per share of Common Stock on
           the primary  securities  exchange on which the Common Stock is traded
           on such  fifth  anniversary  date (or,  if such date is not a trading
           day, the next preceding trading day).

           5.2.3 A  Participant  may elect to defer  receipt of amounts  payable
           pursuant  to the Plan for one  additional  year by  providing  to the
           Company, at least one year prior to the scheduled date for payment of
           any amount hereunder, written notice of the Participant's election to
           defer receipt for an  additional  one-year  period.  The final day of
           each  such   additional   one-year  period  is  referred  to  as  the
           "Termination Date." Amounts credited to a Participant's three-year or
           five-year deferred compensation account the payment of which has been
           so  deferred  shall be paid to the  Participant  promptly  after  the
           Termination Date in cash,  subject to applicable  withholding,  in an
           amount equal to the product of the number of Common Stock share units
           credited  to such  account  the payment of which has been so deferred
           until such  Termination  Date multiplied by the closing trading price
           per share of Common Stock on the primary securities exchange on which
           the Common Stock is traded on such Termination Date (or, if such date
           is not a trading day, the next preceding trading day).

5.3        No Rights as Stockholder; Adjustments.

           5.3.1 The  Participant  shall not have,  with  respect  to the Common
           Stock share units  credited to a  three-year  or  five-year  deferred
           compensation  account,  any of the rights of a stockholder of Integon
           holding shares of the Common Stock;  provided,  however,  that in the
           event of the payment of any cash  dividends on the Common Stock based
           on a record date occurring while amounts are credited to a three-year
           or five-year  deferred  compensation  account or the payment of which
           has been  deferred  pursuant  to  Section  5.2.3,  the amount of such
           account  shall be  increased  by a number of Common Stock share units
           equal to the  quotient of the amount of such cash  dividend per share
           of Common  Stock  divided  by the  closing  price per share of Common
           Stock on the primary securities exchange on which the Common Stock is
           traded on the record date for such  dividend,  or the next  preceding
           trading  day if  such  record  date  is  not a  trading  day on  such
           exchange.

           5.3.2 If there is any change in the number of  outstanding  shares of
           Common Stock through the declaration of stock dividends, stock splits
           or the like,  the number of Common Stock share units held in deferred
           compensation  accounts shall be appropriately  adjusted. In the event
           of any other  change in the capital  structure or in the Common Stock
           of  Integon,  the  Committee  shall also be  authorized  to make such
           appropriate  adjustments  in amounts  held in  deferred  compensation
           accounts.

5.4        Change of Control, Liquidation or Dissolution.

           5.4.1 In the event of a proposed  dissolution  or  liquidation of the
           Company or upon a Change in Control,  all amounts in a three-year  or
           five-year  deferred   compensation  account  shall  be  paid  to  the
           Participants in cash in an amount equal to the product of (i) the sum
           of  the  amounts  held  in  such   deferred   compensation   accounts
           (denominated  in Common  Stock  share  units  multiplied  by (ii) the
           Change in Control  Price,  as though such  dissolution or liquidation
           constituted a Change in Control.

           5.4.2  Notwithstanding  any contrary  provision  in the Plan,  upon a
           Change in Control, no additional terms,  conditions,  restrictions or
           limitations  shall be placed on a three-year  or  five-year  deferred
           compensation account.

ARTICLE 6 - MISCELLANEOUS

6.1 Withholding  Taxes. The Company shall be entitled to deduct from any payment
under  the  Plan,  regardless  of the form of such  payment,  the  amount of all
applicable  income and  employment  taxes  required by law to be  withheld  with
respect to such  payment or may  require the  Participant  to pay to it such tax
prior to and as a condition of the making of such payment.

6.2  Amendment/Termination.  The  Committee may suspend or terminate the Plan at
any time  with or  without  prior  notice.  In  addition,  except  as  otherwise
expressly  provided,  the  Committee  may, from time to time and with or without
prior notice, amend the Plan in any manner.

6.3  Governing  Law. The Plan shall be governed by and  construed in  accordance
with the laws of the State of North Carolina.

6.4 No Guarantee of Tax  Consequences.  No person connected with the Plan in any
capacity,  including, but not limited to, Integon and its Subsidiaries and their
directors, officers, agents and employees makes any representation,  commitment,
or guarantee that any tax  treatment,  including,  but not limited to,  federal,
state and local income,  estate and gift tax treatment,  will be applicable with
respect to amounts  deferred  under the Plan, or paid to or for the benefit of a
Participant  under the  Plan,  or that such tax  treatment  will  apply to or be
available to a Participant on account of participation in the Plan.

6.5 Funding of Cash  Payments.  The Company shall fund cash payments  under this
Plan from its general assets and shall not maintain any designated or segregated
fund for such purposes.

End Exhibit 10.7
<PAGE>
                                  Exhibit 10.8

--------------------------------------------------------------------------------
INTEGON                                            FUNCTION:  HUMAN RESOURCES
OPERATING POLICY
--------------------------------------------------------------------------------
================================================================================
                   DISTRIBUTION:                  All Employees
MEMO NO.           RELEASE DATE:                  01/97
HR 1910            EFFECTIVE DATE:                02/01/97          PAGE 1 OF 7
                   SUPERSEDES POLICY DATED:       03/93
================================================================================
SUBJECT:    SEVERANCE
--------------------------------------------------------------------------------

 1.  PURPOSE:
     -------
     To provide financial  assistance to certain employees whose services are no
longer  needed  and who  are  permanently  separated  from  Integon  Corporation
(hereinafter collectively referred to as the "Company"), at the Company's choice
and through no fault of their own;  provided that such employees comply with the
terms and conditions set forth in this policy.  This policy neither  constitutes
an  employment  contract  nor a  contract  by the  Company  to extend  severance
benefits to any of its  employees.  Severance  payments  are not to be viewed as
automatic and are not compensation  for past services,  but instead are intended
only as  prospective  payments  that will be  offered in the  discretion  of the
Company.

 2.  APPLICABILITY:
     -------------
     
This Policy applies to all Eligible Employees of the Company.

A. Eligible  Employees:  Full-time and year round  part-time  employees who have
been employed by the Company and who are permanently separated, at the Company's
choice as a result of:

     o Elimination  of current job or reduction in the total number of employees
in the same department performing the same or similar job.

     o Substantial change in current job duties for which the employee no longer
qualifies.
     
     o  Substantial  change in  current  job  duties  which  results in a twenty
percent (20%) or more reduction in salary.

     o Declining a geographic transfer to a new job offered to employee upon the
elimination of current job as an  alternative  to termination  provided that the
expenses  associated  with the  transfer  would  qualify  as  deductible  moving
expenses under the Internal Revenue Code.

B. Ineligible Employees:

1. Any employee covered by an employment agreement, or other written agreement
regarding  severance pay. 

2. Any employee, if the termination is for any of the following reasons:
     a. Discharge for cause as determined by the Company.
     b. Voluntary resignation.
     c.  Retirement.
     d. The sale, exchange or transfer of Company assets to another employer who
assumes the operations of the Company if such employer offers  employment at the
same geographic location or at a location for which the expenses associated with
a transfer  would not qualify as deductible  moving  expenses under the Internal
Revenue Code and offers  employment  at a base salary which is at least equal to
eighty percent (80%) of the employee's current base salary.
     e. The  Company  ceases an  operation  and the same is  assumed  by another
employer if such employer offers  employment at the same geographic  location or
at a location for which expenses associated with a transfer would not qualify as
deductible moving expenses under the Internal Revenue Code and offers employment
at a base salary which is at least equal to 80% of the  employee's  current base
salary.
     f. Death.
     g. Disability
     h. Failure to return to work following a Family and Medical Leave of
Absence.
--------------------------------------------------------------------------------

<PAGE>
--------------------------------------------------------------------------------
INTEGON                                              FUNCTION:  HUMAN RESOURCES
OPERATING POLICY
--------------------------------------------------------------------------------
================================================================================
                  DISTRIBUTION:                     All Employees
MEMO NO.          RELEASE DATE:                     01/97
HR 1910           EFFECTIVE DATE:                   02/01/97        PAGE 2 OF 7
                  SUPERSEDES POLICY DATED:          03/93
================================================================================
SUBJECT:    SEVERANCE
--------------------------------------------------------------------------------
2.   APPLICABILITY:              
     -------------
     (cont.)

3. Any employee who  transfers  employment  to a subsidiary  or affiliate of the
Company.

4. Any  employee  who is  otherwise  eligible  but does not  execute a severance
agreement that includes,  among other things, a provision releasing the Company,
its  subsidiaries and affiliates from any and all claims the employee might have
against the Company, its subsidiaries and affiliates including,  but not limited
to, any claim of  discrimination  on account of any matter or things  whatsoever
relating to employee's employment by the Company.
                                 
5. In the event that the time for the Eligible  Employee to review the severance
agreement has not expired before the Eligible Employee's employment  terminates,
severance benefits will begin on the day following such employee's  termination.
Provided, however, that if an executed severance agreement is not returned prior
to the expiration of time to review such, no further severance  payments will be
made and all severance payments made must be reimbursed to the Company.

6. Any  Eligible  Employee  who  accepts a  severance  package is  obligated  to
reimburse  the  Company for the full  amount of such  payments  if the  employee
subsequently discloses any of the Company's trade secrets,  violates any written
covenants  between the employee and the Company or otherwise  engages in conduct
that may adversely affect the Company's reputation or business relations.

7. The Company may permanently  suspend benefits under severance packages in pay
status in the event of the Company, its subsidiaries or affiliates'  insolvency,
liquidation,  or bankruptcy reorganization or in the event the cost of providing
such   benefits   would  lead  to   insolvency,   liquidation,   or   bankruptcy
reorganization.

8. Any  severance  benefits  provided by the Company  under this policy shall be
reduced dollar-for-dollar by any severance, separation, or other termination pay
benefit  that the Company is  required to pay to an Eligible  Employee or former
employee  under any  federal  or state law  (including  but not  limited  to the
Worker's Adjustment and Restraining Notification Act "WARN").

3.   POLICY:
     -------
A.  Severance  pay is computed on the basis of Eligible  Employee's  base salary
(excluding commissions,  bonuses, overtime and/or other additional remuneration)
at the time of termination.

B. In addition,  Eligible  Employees will be entitled to receive payment for all
earned but unused vacation.

C. In addition, in the event of a termination of employment in connection with a
change in control of the Company, as defined in the Amended and Restated Integon
Corporation  Omnibus Long-Term  Performance  Incentive  Compensation  Plan, (the
"Omnibus  Plan")  the  Company  will make a payment  in cash of any award  under
Article 9 of the Omnibus  Plan that  exceeds the maximum  award that may be paid
out during any performance period under the Omnibus Plan.

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

<PAGE>
--------------------------------------------------------------------------------
INTEGON                                              FUNCTION:  HUMAN RESOURCES
OPERATING POLICY
--------------------------------------------------------------------------------
================================================================================
               DISTRIBUTION:                     All Employees
MEMO NO.       RELEASE DATE:                     01/97
HR 1910        EFFECTIVE DATE:                   02/01/97           PAGE 3 OF 7
               SUPERSEDES POLICY DATED:          03/93
================================================================================
SUBJECT:   SEVERANCE
--------------------------------------------------------------------------------

3.   POLICY:               
     ------
     (cont.)                    

D. The amount of  severance  is based on the number of full  years'  service the
Eligible Employee has with the Company as follows:

Years of Service         Weeks of Severance Pay

Less than 1 Year         2 weeks of base salary

1-4 Years                4 weeks of base salary

5-9 Years                1 week of base salary for each year of service plus 4
                         additional weeks of base salary

10-14 Years              1 week of base salary for each year of service plus 8
                         additional weeks of base salary

15 Years and Over        1 week of base salary for each completed year of
                         service plus 12 additional weeks of base salary.

E. Any Assistant Vice President of the Company who is an Eligible Employee, with
less than ten (10) years of service  will be entitled to receive  thirteen  (13)
weeks of  severance  pay and will be  entitled  to receive  up to an  additional
thirteen  (13)  weeks  of  supplemental  severance  pay  if the  officer  is not
employed.  If an officer has ten (10) years of service or more, the officer will
be entitled to receive  severance  based on the table set forth above;  provided
however,  if the number of weeks of severance does not equal at least twenty-six
(26), and the officer remains  unemployed at the end of his scheduled  severance
period, the officer will be entitled to receive additional weeks of supplemental
severance  pay so that the maximum total number of weeks of severance pay equals
twenty-six  (26) weeks.  For example,  if an Assistant Vice President has eleven
(11) years of service,  he/she is entitled to nineteen  (19) weeks of  severance
plus up to an additional  seven (7) weeks of  supplemental  severance pay if the
officer is not employed.

If the  Officer  becomes  employed  at any  time  while  receiving  supplemental
severance,  the officer will be entitled to continue  receiving  the  difference
between the  supplemental  severance  pay and the base salary of the new job, if
any, for the remainder of the supplemental severance period. Employment includes
self-employment.

F. Any Vice President of the Company who is an eligible employee, with less than
fifteen (15) years of service will be entitled to receive  twenty-six (26) weeks
of severance pay and will be entitled to receive up to an additional  twenty-six
(26) weeks of supplemental  severance pay if the officer is not employed.  If an
officer has fifteen (15) years of service or more,  the officer will be entitled
to receive severance based on the table set forth above;  provided  however,  if
the number of weeks of severance does not equal  fifty-two (52), and the officer
remains  unemployed at the end of his scheduled  severance  period,  the officer
will be entitled to receive  additional  weeks of supplemental  severance pay so
that the maximum  total number of weeks of severance pay equals  fifty-two  (52)
weeks. For example, if a Vice President has twenty (20) years of service, he/she
is entitled  to  thirty-two  (32) weeks of  severance  plus up to an  additional
twenty (20) weeks of supplemental severance pay if the officer is not employed.

If the  Officer  becomes  employed  at any  time  while  receiving  supplemental
severance,  the Officer will be entitled to continue  receiving  the  difference
between the  supplemental  severance  pay and the base salary of the new job, if
any, for the remainder of the supplemental severance period. Employment includes
self-employment.
--------------------------------------------------------------------------------

<PAGE>
--------------------------------------------------------------------------------
INTEGON                                              FUNCTION:  HUMAN RESOURCES
OPERATING POLICY
--------------------------------------------------------------------------------
================================================================================
                    DISTRIBUTION:                     All Employees
MEMO NO.            RELEASE DATE:                     01/97
HR 1910             EFFECTIVE DATE:                   02/01/97      PAGE 4 OF 7
                    SUPERSEDES POLICY DATED:          03/93
================================================================================
SUBJECT:   SEVERANCE
--------------------------------------------------------------------------------

3.   POLICY:               
     -------
     (cont.)  

G. Payments  will be made on a  semi-monthly  basis on the fifteenth  (15th) and
last day of each month.  The Company  reserves the right to determine the method
of payment.  Notwithstanding the foregoing,  any Eligible Employee who is not an
Officer will receive a lump sum payment of any remaining  severance upon written
notification to the Company of new employment.

H. In the  event of the  death of an  Eligible  Employee  during  the  severance
period, all severance payments shall cease.

I. Any debts or monies owed to the Company or its  subsidiaries or affiliates by
the employee will be deducted from the first  severance  payment and  subsequent
severance payments, if necessary, until the amount owed is repaid in full.

J. Benefits:

     1. Long Term  Disability  benefits  will  terminate on the last day worked.
Life  insurance  coverage will continue  through the  severance  period.  If the
severance  agreement is not executed life insurance  coverage  terminates at the
end of the  conversion  period  as stated in the  policy.  Continuance  of these
coverages are based on the conversion rights of each plan's provisions.

     2. If the eligible  employee  executes the  severance  agreement,  medical,
dental,  and vision benefits will continue  through the severance pay period and
the Company  will  continue to  subsidize  the  required  premium as it does for
active employees during this time.

     If the employee qualifies for COBRA at the end of the severance pay period,
or if an employee  does not  execute a severance  document  (and  qualifies  for
COBRA) the employee may elect to continue  benefits  provided under COBRA for up
to eighteen  (18) months or until the  employee no longer  qualifies  for COBRA,
whichever is shorter.
 
4.   ADMINISTRATION AND INTERPRETATION:
     ----------------------------------

A. The Human Resources Department will administer the policy.

B. The Company  retains the right to interpret,  revise or cancel this policy at
any time and without prior notice.

C.  The  Company  shall  in  its  sole  discretion   determine  each  employee's
eligibility and the amount of severance pay.

5.   PLAN DESCRIPTION:
     -----------------

NAME: Severance Policy of Integon Corporation

PLAN ADMINISTRATOR: Integon Corporation

EMPLOYER PLAN IDENTIFICATION NUMBER: 13-3559471

DEPARTMENT OF LABOR NUMBER FOR PLAN: 513

AGENT FOR SERVICE OF LEGAL PROCESS UNDER THE PLAN: Integon Corporation

DATE PLAN YEARS END: 12/31

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

<PAGE>
--------------------------------------------------------------------------------
INTEGON                                              FUNCTION:  HUMAN RESOURCES
OPERATING POLICY
--------------------------------------------------------------------------------
================================================================================
                   DISTRIBUTION:                 All Employees
MEMO NO.           RELEASE DATE:                 01/97
HR 1910            EFFECTIVE DATE:               02/01/97           PAGE 5 OF 7
                   SUPERSEDES POLICY DATED:      03/93
================================================================================
SUBJECT:   SEVERANCE
--------------------------------------------------------------------------------

5.   PLAN DESCRIPTION:
     -----------------
     (cont.)

PLAN ADMINISTRATION:

The Board of Directors of Integon  Corporation  shall have the right at any time
to amend or modify the plan,  retroactively  or  otherwise,  or to  terminate or
partially terminate the plan. However, no such amendment or termination shall in
any manner impair the rights to receive benefit payments  provided for under the
plan to any eligible  employee who has  satisfied  all  conditions  precedent to
receiving  severance  benefits under the plan prior to such  amendment.  No oral
representations  by anyone  can  extend  the  severance  pay  policy to  provide
severance packages not covered by this plan.

The plan  document  and  Summary  Plan  Description  determines  all  rights and
benefits  under this plan. A copy of the plan document is available upon request
from the Human Resources Department.

ERISA STATEMENT:

As a participant under the Severance Policy of Integon  Corporation for Eligible
Employees of Integon  Corporation (the plan), you are entitled to certain rights
and  protections  under the  Employee  Retirement  Income  Security  Act of 1974
(ERISA).  A copy of the plan  document  will be on file in the  Human  Resources
Department, P. O. Box 3199, Winston-Salem, NC 27152, and you are free to examine
it at any time.  You may also obtain a copy of the plan  document and other plan
information upon written request to Integon. A charge to cover the printing cost
of the documents will be made. A summary of the plan's annual  financial  report
will be furnished to each participant as soon as practically  possible after the
annual filing.

In addition to creating rights for plan participants,  ERISA imposes duties upon
the people who are  responsible  for the  operation of the plan.  The people who
operate your plan, called  "fiduciaries,"  have a duty to do so prudently and in
the  interest  of you  and  other  plan  participants.  No one may  fire  you or
discriminate  against you in any way to prevent you from  obtaining a benefit or
exercising  your rights  under  ERISA.  If your claim for a benefit is denied in
whole or in part,  you must receive a written  explanation of the reason for the
denial. You have the right to have your claim reviewed and reconsidered.


Under ERISA,  there are steps you can take to enforce your rights. For instance,
if you request  materials  from the plan and do not receive them within 30 days,
you may file suit in a federal court.  In such a case, the court may require the
plan  administrator  to provide the materials and pay you up to $100 a day until
you receive the materials,  unless the materials were not sent to you because of
reasons  beyond  the  control  of the  administrator.  If you  have a claim  for
benefits  which is denied or ignored,  you may file a suit in a state or federal
court.  If it should  happen that plan  fiduciaries  misuse the money or you are
discriminated  against for asserting your rights,  you may seek  assistance from
the U.S.  Department of Labor,  or you may file a suit in a federal  court.  The
court  will  decide  who  should  pay court  costs and  legal  fees.  If you are
successful,  the court may order the person you have sued to pay these costs and
fees.  If you lose,  the court may order you to pay these costs and fees. If you
have  questions  about  your  plan,  you  should  contact  the  Human  Resources
Department,  Integon, P.O. Box 3199,  Winston-Salem,  NC 27102-3199. If you have
any questions about this statement or about your rights under ERISA,  you should
contact the nearest Area Office of the Pension Welfare Benefits  Administration,
Department of Labor.

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

<PAGE>
--------------------------------------------------------------------------------
INTEGON                                               FUNCTION: HUMAN RESOURCES
OPERATING POLICY
--------------------------------------------------------------------------------
================================================================================
                   DISTRIBUTION:                  All Employees
MEMO               RELEASE DATE:                  01/97
HR 1910            EFFECTIVE DATE:                02/01/97          PAGE 6 of 7
                   SUPERSEDES POLICY DATED:       03/93
================================================================================
SUBJECT:   SEVERANCE
--------------------------------------------------------------------------------

5.   PLAN DESCRIPTION:
     -----------------
     (cont.)

A. Except as otherwise provided in the plan,  Integon  Corporation has the power
and  discretion to determine  conclusively  all questions  arising in connection
with the  administration,  interpretation  and/or  application  of the plan, and
shall  make all  determinations  as to the  right of any  potentially  eligible,
terminated employee to benefits under the plan.

B. If an ex-employee believes that he/she is entitled to a severance package, in
whole or in part,  he/she  must  forward a written  claim to the Vice  President
Human Resources at:

6.   CLAIMS PROCEDURES:
     ------------------
Integon Corporation
P. O. Box 3199
Winston-Salem, NC 27102-3199

The claimant's claim should include the following:

1. The claimant's name, address, telephone number, and social security number.

2. The claimant's dates of employment with the Company.

3. The claimant's job title and position with the Company.

4. The reasons for termination of the claimant's employment; and

5. A statement of the reasons why the claimant  believes that he/she is entitled
to severance pay under the plan.

C.  Within  ninety  (90)  days of  receipt  of the  claimant's  claim,  the Vice
President Human Resources will determine  whether the claimant is eligible for a
severance package, unless special circumstances require an extension of time for
an additional  ninety (90) days. The Vice President  Human Resources will notify
the claimant within that period. The notice shall set forth the specific reasons
for the  determination  and the plan provisions on which the decision was based;
describe any additional  material or  information  necessary for the claimant to
perfect the claim along with an  explanation of why such material or information
is necessary; and explain the steps to be taken if the claimant wishes to submit
his or her claim for review.

D. If a claimant desires a review, he/she must file a written request for review
with the Vice President Human Resources within sixty (60) days following receipt
of the notice initially denying the claim, in whole or in part. After submission
of the request for review,  the Vice President  Human  Resources must act within
sixty (60) days after  receiving the claimant's  request for review.  Before the
end of that sixty (60) day  period,  the Vice  President  Human  Resources  will
provide the claimant a written  statement  containing  the final decision on the
claim for  severance  benefits.  The time  limit for the review  process  may be
extended to a maximum of one hundred  twenty (120) days from the Vice  President
Human  Resources'  receipt  of the  request  for  review  if there  are  special
circumstances.  The final decision on the claim will specify both circumstances.
The  final  decision  on the  claim  will  specify  both  the  reasons  for  the
determination and the plan provisions on which the decision was based.

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

<PAGE>
--------------------------------------------------------------------------------
INTEGON                                             FUNCTION:  HUMAN RESOURCES
OPERATING POLICY
--------------------------------------------------------------------------------
================================================================================
                   DISTRIBUTION:                  All Employees
MEMO NO.           RELEASE DATE:                  01/97
HR 1910            EFFECTIVE DATE:                02/01/97          PAGE 7 OF 7
                   SUPERSEDES POLICY DATED:       03/93
================================================================================
SUBJECT:  SEVERANCE
--------------------------------------------------------------------------------

6.   CLAIMS PROCEDURES:
     ------------------
     (cont.)

E. The claimant is entitled to be represented by an attorney or other authorized
person at any time during the review  procedure.  The claimant or his/her  agent
has a right to see all pertinent  plan records  concerning the claim and a right
to submit written comments.

7.   QUESTIONS REGARDING THIS POLICY:
     --------------------------------

May be directed to the Assistant Vice  President,  Human  Resources at Extension
2948; or the Vice President, Human Resources at Extension 2263.

--------------------------------------------------------------------------------
End Exhibit 10.8
<PAGE>
                                  Exhibit 10.9

                             AMENDED AND RESTATED

                           ANNUAL INCENTIVE AWARD PLAN

                               INTEGON CORPORATION


I. PURPOSE

     The purpose of the Integon  Corporation Annual Incentive Plan (this "Plan")
is to enhance  profits  and  overall  performance  of Integon  Corporation  (the
"Company") by providing  senior  management and key employees of the Company and
its  subsidiaries  an  additional  inducement  for  achieving  and exceeding the
Company's performance objectives.  Additionally,  the Plan will allow a level of
compensation that is appropriate when compared with compensation levels of other
comparable  organizations  and will provide the Company with the  flexibility to
recognize  and  reward an  individual's  performance  and  contributions  to the
Company.


II. ADMINISTRATION OF PLAN

     The  Compensation  and Personnel  Committee of the Board of Directors  (the
"Committee")  shall  administer  the Plan.  The Committee may in its  discretion
delegate its authority to administer this Plan to the Chief Executive Officer of
the Company.


III. EFFECTIVE DATE

     The Plan will become effective each year commencing January 1.


IV. ELIGIBILITY

A. The Committee  along with the Chief  Executive  Officer shall determine which
members of senior  management  and other key  employees  of the  Company and its
subsidiaries shall be eligible to participate in this Plan.


V. AWARDS

A. Awards  will be based on growth in the  Company's  net written  premiums on a
consolidated basis ("Net Written Premiums") and the Company's combined operating
ratio ("Combined  Operating  Ratio"),  as well as the  participant's  individual
performance against personal objectives.

B. Awards shall be stated as a percentage  of the  participant's  base salary at
targeted  levels of Net  Written  Premiums  and  Combined  Operation  Ratio.  In
determining the amount to be paid to a participant under the Plan, the Committee
shall weigh three performance factors: Net Written Premiums,  Combined Operating
Ratio and the participant's achievement of personal performance objectives.  The
Committee  may assign  differing  weights to these  factors  depending  upon the
participant's  position  with the  Company  and  ability to affect  Net  Written
Premiums and Combined Operating Ratio. Such  determination  shall be made by the
Committee  in its sole  discretion.  The  Committee  may  delegate  to the Chief
Executive  Officer  the  authority  to make the  foregoing  determinations  with
respect to any  participant  other than the Chief Executive  Officer,  the Chief
Operating Officer and the Chief Financial Officer.
        
C. Payment of Awards

Awards  shall  be  payable  in a lump  sum as soon  as  possible  following  the
determination  of results for the Plan year. All payments of amounts pursuant to
this Plan shall be subject to applicable withholding for taxes.

End Exhibit 10.9
<PAGE>
 
                                  Exhibit 11.1
<TABLE>
<CAPTION>
                      INTEGON CORPORATION AND SUBSIDIARIES
                        COMPUTATION OF EARNINGS PER SHARE
                  (Dollars in thousands, except per share data)
                                   (Unaudited)


                                                  Three Months Ended
                                                        March 31,
                                                 ----------------------
                                                   1997            1996
                                              ------------    ------------     
<S>                                           <C>             <C>
Income available to common shareholders:

Net income (loss) .........................   $    (33,388)   $      3,385
Preferred stock dividends .................         (1,393)         (1,393)
                                              ------------    ------------
    Net income available to common
      shareholders ........................   $    (34,781)   $      1,992
                                              ============    ============


Weighted average common shares outstanding:
Primary:
     Common shares outstanding ............     15,736,121      15,714,407
     Assumed exercise of stock options ....           --           188,361
                                              ------------    ------------
    Total .................................     15,736,121      15,902,768
                                              ============    ============
Fully diluted:
     Common shares outstanding ............     15,736,121      15,714,407
     Assumed exercise of stock options ....           --           188,361
                                              ------------    ------------
    Total .................................     15,736,121      15,902,768
                                              ============    ============

Earnings per common share:
Primary ...................................   $      (2.21)   $        .13
                                              ============    ============
Fully diluted .............................   $      (2.21)   $        .13
                                              ============    ============
</TABLE>
End Exhibit 11.1