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                                                            As amended        
                                                            through 12/31/97  
                                                            


                        1992 INCENTIVE AND NON-INCENTIVE

                                STOCK OPTION PLAN

                                       OF

                         FRONTIER INSURANCE GROUP, INC.

1.  Purpose of Plan.

        The purpose of this 1992 Incentive and Non-Incentive Stock Option Plan
("Plan") is to further the growth and development of Frontier Insurance Group,
Inc. ("Company") and any direct and indirect subsidiaries thereof by encouraging
selected employees, directors and other persons who contribute and are expected
to contribute materially to the Company's success to obtain a proprietary
interest in the Company through the ownership of stock, thereby providing such
persons with an added incentive to promote the best interests of the Company and
affording the Company a means of attracting to its service persons of
outstanding ability.

2.  Stock Subject to the Plan.

        An aggregate of 300,000 shares of the Company's Common Stock, $.01 par
value ("Common Stock"), subject, however, to adjustment or change pursuant to
paragraph 13 hereof, shall be reserved for issuance upon the exercise of options
which may be granted from time to time in accordance with the Plan ("Options").
Such shares may be, in whole or in part, as the Board of Directors of the
Company ("Board") or an Incentive and Non-Incentive Stock Option Plan Committee
("Committee") appointed by the Board shall from time to time determine,
authorized but unissued shares or issued shares which have been reacquired by
the Company. If, for any reason, an Option shall lapse, expire or terminate
without having been exercised in full, the unpurchased shares covered thereby
shall again be available for purposes of the Plan.

3.  Administration.
             (a)  The Board of Directors shall appoint the Committee from among
                  its members, two or more of whom shall be "non-employee
                  directors" as defined by Regulation 240.16b-3 under the
                  Securities Exchange Act of 1934, as amended. Such Committee
                  shall have and may exercise any and all of the powers relating
                  to the administration of the Plan and the grant of Options
                  thereunder as are set forth in subparagraph 3(b) hereof. The
                  Board shall have the power at any time to fill vacancies in,
                  to change the membership of, or to discharge such Committee.
                  The Committee shall select one of its members as its chairman
                  and shall hold its meetings at such time and at such places as
                  it shall deem advisable. A majority of such Committee shall
                  constitute a quorum and such majority shall determine its
                  action. Any action may be taken without a meeting by written
                  consent of all the members of the Committee. The Committee
                  shall keep minutes of its proceedings and shall report the
                  same to the Board at the meeting next succeeding.

             (b)  The Board or the Committee shall administer the Plan and,
                  subject to the provisions of the Plan, shall have authority to
                  determine the persons to whom, and the time or times at which,
                  Options shall be granted, the number of shares to be subject
                  to each such Option and whether all or any portion of such
                  Options shall be incentive stock options ("Incentive Options")
                  qualifying under Section 422 of the Internal Revenue Code of
                  1986, as amended ("Code"), or stock options which do not so
                  qualify ("Non-Incentive Options"); provided, however, that
                  Options to purchase in excess of 100,000 shares may not be
                  granted to any one person. Both Incentive Options and
                  Non-Incentive Options may be granted to the same person at the
                  same time provided each type of Option is clearly designated.
                  In making such determinations, the Board or Committee may take
                  into account the nature of the services rendered by such
                  persons, their present and potential contributions to the
                  Company's success and such other factors as the Board or
                  Committee in its sole discretion may deem relevant. Subject to
                  the express provisions of the Plan, the Board or Committee
                  shall also have the authority to interpret the Plan, to
                  prescribe, amend and rescind rules and regulations relating
                  thereto, to determine the terms and provisions of the
                  respective Option Agreements, which shall be substantially in
                  the forms attached hereto as Exhibit A and Exhibit B, and to
                  make all other determinations necessary or advisable for the
                  administration of the Plan, all of which determinations shall
                  be conclusive and not subject to review.



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4.  Eligibility for Receipt of Options.

             (a)  Incentive Options.

                  Incentive Options may be granted only to employees (including
                  officers) of the Company and/or any of its subsidiaries.

                  The aggregate Fair Market Value (as defined in paragraph 5 of
                  the Plan) determined as of the time the Incentive Option is
                  granted of the shares of the Company's Common Stock
                  purchasable thereunder exercisable for the first time by an
                  employee during any calendar year may not exceed $100,000.

                  A director of the Company or any subsidiary who is not an
                  employee of the Company or of one of its subsidiaries is not
                  eligible to receive Incentive Options under the Plan. Further,
                  Incentive Options may not be granted to any person who, at the
                  time the Incentive Option is granted, owns (or is considered
                  as owning within the meaning of Section 425(d) of the Code)
                  stock possessing more than 10% of the total combined voting
                  powers of all classes of stock of the Company or any
                  subsidiary (10% Owner), unless at the time the Incentive
                  Option is granted to a 10% Owner, the option price is at least
                  110% of the fair market value of the Common Stock subject
                  thereto and such Incentive Option by its terms is not
                  exercisable subsequent to five years from the date of grant.

             (b)  Non-Incentive Options.
                  
                  Non-Incentive Options may be granted to any employee
                  (including employees who have been granted Incentive Options),
                  directors, consultants, agents, independent contractors and
                  other persons whom the Committee determines will contribute to
                  the Company's success.

             (c)  Persons Ineligible.

                  Messrs. Walter A. Rhulen, Peter L. Rhulen and Jesse M. Farrow
                  are ineligible to receive Options under the Plan.



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5.  Option Price.

               The purchase price of the shares of Common Stock under each
Option shall be determined by the Board or Committee, which determination shall
be conclusive and not subject to review, but in no event shall be less than 100%
of the fair market value of the Common Stock on the date of grant (110% of fair
market value in the case of Incentive Options granted to a 10% Owner).

               In determining the fair market value of the Common Stock as of a
specified date (the "Fair Market Value"), the Committee shall consider, if the
Common Stock is listed on the New York Stock Exchange or another national
securities exchange, the closing price of the Common Stock on the business day
immediately preceding the date as of which the Fair Market Value is being
determined, or on the next preceding date on which such Common Stock is traded
if no Common Stock was traded on such immediately preceding business day, or, if
the Common Stock is not so listed on a national securities exchange, but
publicly traded, the representative closing bid price in the over-the-counter
market as reported by NASDAQ or as quoted by the National Quotation Bureau or a
recognized dealer in the Common Stock, on the date immediately preceding the
date as of which the Fair Market Value is being determined, or on the next
preceding date on which such Common Stock is traded if no Common Stock was
traded on such immediately preceding business day. The Committee may also
consider such other factors as it shall deem appropriate.

               For purposes of the Plan, the date of grant of an Option shall be
the date on which the Board or Committee shall by resolution duly authorize such
Option.

6.  Term of Options.

               The term of each Option shall be such number of years, not to
exceed ten years, as the Board or Committee shall determine, subject to earlier
termination as herein provided.

7.  Exercise of Options.

             (a)  No Option granted under the Plan shall be exercisable until at
                  least one year from the date of grant. Thereafter, each Option
                  shall be exercisable to the extent determined by the Board or
                  Committee.

                  An Option may not be exercised for less than ten shares at any
                  one time (or the remaining shares then purchasable if less
                  than ten) and may not be exercised for fractional shares of
                  the Company's Common Stock.

             (b)  Except as provided in paragraphs 10, 11 and 12 hereof, no
                  Option shall be exercisable unless the holder thereof shall
                  have been an employee, director, consultant, agent,
                  independent contractor or other person employed by or engaged
                  in performing services for the Company and/or a subsidiary
                  continuously from the date of grant to the date of exercise.

             (c)  The exercise of an Option shall be contingent upon receipt
                  from the holder thereof of a written representation that at
                  the time of such exercise it is the optionee's then present
                  intention to acquire the Option shares for investment and not
                  with a view to the distribution or resale thereof (unless a
                  Registration Statement covering the shares purchasable upon
                  exercise of the Options shall have been declared effective by
                  the Securities and Exchange Commission) and upon receipt by
                  the Company of cash, or a check to its order, for the full
                  purchase price of such shares; provided, however, that with
                  the consent of the Committee or such officer of the Company as
                  may be authorized by the Committee from time to time, the
                  purchase price and such amount, if any, as is required for
                  withholding taxes may be paid by (i) the surrender of Common
                  Stock in good form for transfer owned by the person exercising
                  the Option or (ii) the forfeiture by the person exercising the
                  Option of shares of Common Stock issuable upon exercise of the
                  Option, in each case having a Fair Market Value on the date of
                  exercise equal to the purchase price and such amount, if any,
                  as is required for withholding taxes, or in any combination of
                  cash and Common Stock so long as the total of the cash so paid
                  and the Fair Market Value of the Common Stock surrendered or
                  forfeited equals the purchase price and such amount, if any,
                  as is required for withholding taxes. Any Common Stock
                  delivered in satisfaction of all or any portion of the
                  purchase price shall be appropriately endorsed for transfer
                  and assignment to the Company. No share shall be issued



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                  until full payment therefor has been made.

             (d)  The holder of an Option shall have none of the rights of a
                  stockholder with respect to the shares purchasable upon
                  exercise of the Option until a certificate for such shares
                  shall have been issued to the holder upon due exercise of the
                  Option.

             (e)  The proceeds received by the Company upon exercise of an
                  Option shall be added to the Company's working capital and be
                  available for general corporate purposes.


8.  Effects of Change in Control

               Immediately following a "change in control" of the Company (as
hereinafter defined), the Options shall become immediately fully exercisable,
but in no event may an Option be exercised after the expiration date of the
Option. For purposes of the Plan, a "change in control" of the Company shall
mean (i) the acquisition at any time by a "person" or "group" (as such terms are
used in Sections 13(d) and 14(d)(2) of the Exchange Act) of beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities representing 40% or more of the combined voting power in the election
of directors of the then outstanding securities of the Company or any successor
of the Company; (ii) the termination of service of directors for any reason,
other than death, disability or retirement from the Board of Directors, during
any period of two consecutive years or less of individuals who at the beginning
of such period constituted a majority of the Board of Directors, unless the
election of or nomination for election of each new director during such period
was approved by a vote of at least two-thirds of the directors still in office
who were directors at the beginning of the period; (iii) approval by the
stockholders of the Company of any merger, consolidation, or statutory share
exchange as a result of which the Common Stock shall be changed, converted or
exchanged (other than a merger, consolidation or share exchange with a
wholly-owned Subsidiary) or liquidation of the Company or any sale or
disposition of 60% or more of the assets or earning power or the Company; or
(iv) approval by the stockholders of the Company of any merger, consolidation,
or statutory share exchange to which the Company is a party as a result of which
the persons who were stockholders immediately prior to the effective date of the
merger, consolidation or share exchange shall have beneficial ownership of less
than 50% of the combined voting power in the election of directors of the
surviving corporation; provided, however, that no change in control shall be
deemed to have occurred if, prior to such time as a change in control would
otherwise be deemed to have occurred, the Company's Board of Directors deems
otherwise.

9.  Non-Transferability of Options.

               No option granted pursuant to the Plan shall be transferable
otherwise than by will or the laws of descent or distribution and an Option may
be exercised during the lifetime of the holder only by such holder.

10. Termination of Employment or Engagement.

               In the event the employment of the holder of an Option shall be
terminated by the Company or a subsidiary for any reason other than by reason of
death, disability or retirement at or after age 65, or the engagement of a
non-employee holder of a Non-Incentive Option shall be terminated by the Company
or a subsidiary for any reason, such holder's Option shall immediately
terminate, lapse and expire. Absence on leave approved by the employer
corporation shall not be considered an interruption of employment for any
purpose under the Plan.

               Nothing in the Plan or in any Option Agreement granted hereunder
shall confer upon any Optionholder any right to continue in the employ of the
Company or any subsidiary or obligate the Company or any subsidiary to continue
the engagement of any Optionholder or interfere in any way with the right of the
Company or any such subsidiary to terminate such Optionholder's employment or
engagement at any time.

11. Retirement or Disability of Holder of Option.

               If the employment of the holder of an Option shall be terminated
by reason of such holder's disability or retirement at or after age 65, such
holder may, within six months from the date of such termination, exercise such
Option to the extent such Option was exercisable by such holder at the date of
such termination. Notwithstanding the foregoing, no Option may be exercised
subsequent to the date of its expiration.



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12. Death of Holder of Option.

               If the holder of any Option shall die while in the employ of, or
while performing services for, the Company or one or more of its subsidiaries
(or within six months following termination of employment due to disability or
retirement at or after age 65), the Option theretofore granted to such person
may be exercised, but only to the extent such Option was exercisable by the
holder at the date of death (or, with respect to employees, the date of
termination of employment due to disability of retirement at or after age 65) by
the legatee or legatees of such person under such person's Last Will, or by such
person's personal representative or distributees, within six months from the
date of death but in no event subsequent to the expiration date of the Option.

13. Adjustments Upon Changes in Capitalization.

               If at any time after the date of grant of an Option, the Company
shall by stock dividend, split-up, combination, reclassification or exchange, or
through merger or consolidation or otherwise, change its shares of Common Stock
into a different number or kind or class of shares or other securities or
property, then the number of shares covered by such Option and the price per
share thereof shall be proportionately adjusted for any such change by the
Committee, whose determination thereon shall be conclusive. In the event that a
fraction of a share results from the foregoing adjustment, said fraction shall
be eliminated and the price per share of the remaining shares subject to the
Option adjusted accordingly.

14.  Vesting of Rights Under Options.

               Neither anything contained in the Plan or in any resolution
adopted or to be adopted by the Committee or the stockholders of the Company
shall constitute the vesting of any rights under any Option. The vesting of such
rights shall take place only when a written Option Agreement, substantially in
the form of the Incentive Stock Option Agreement attached hereto as Exhibit A or
the Non-Incentive Stock Option Agreement attached hereto as Exhibit B, shall be
duly executed and delivered by and on behalf of the Company and the person to
whom the Option shall be granted.

15. Termination and Amendment.

               The Plan, which has been adopted by the Board of Directors on
March 20, 1992, subject to approval by the stockholders of the Company, shall
terminate on March 19, 2002, and no Option shall be granted under the Plan after
such date. The Board of Directors may at any time prior to such date terminate
the Plan or make such modifications or amendments thereto as it shall deem
advisable provided, however, that

             (i)  no increase shall be made in the aggregate number of shares
                  which may be issued under the Plan;

             (ii) no termination, modification or amendment shall adversely
                  affect the rights of a holder of an Option previously granted
                  under the Plan;

            (iii) no material modification shall be made to the requirements of
                  eligibility for participation in the Plan; and

             (iv) no material increase shall be made in the benefits accruing to
                  participants under the Plan.



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                                                                       EXHIBIT A

                         FRONTIER INSURANCE GROUP, INC.
                        INCENTIVE STOCK OPTION AGREEMENT

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

To:

               We are pleased to notify you that by the determination of the
Board of Directors (the "Board") or the Incentive and Non-Incentive Stock Option
Plan Committee (the "Committee") an incentive stock option to purchase ________
shares of the Common Stock of Frontier Insurance Group, Inc. (the "Company") at
a price of $______ per share has this ____ day of _______________, been granted
to you under the Company's 1992 Incentive and Non-Incentive Stock Option Plan
(the "Plan"). This option may be exercised only upon the terms and conditions
set forth below.

                1.    Purpose of Option.

               The purpose of the Plan under which this incentive stock option
has been granted is to further the growth and development of the Company and its
direct and indirect subsidiaries by encouraging key employees, directors,
consultants, agents, independent contractors and other persons who contribute
and are expected to contribute materially to the Company's success to obtain a
proprietary interest in the Company through the ownership of stock, thereby
providing such persons with an added incentive to promote the best interests of
the Company, and affording the Company a means of attracting to its service
persons of outstanding ability.

                2.    Acceptance of Option Agreement.

               Your execution of this incentive stock option agreement will
indicate your acceptance of and your willingness to be bound by its terms; it
imposes no obligation upon you to purchase any of the shares subject to the
option. Your obligation to purchase shares can arise only upon your exercise of
the option in the manner set forth in paragraph 4 hereof.

                3.    When Option May Be Exercised.

               The option granted you hereunder may not be exercised for a
period of one year from the date of its grant by the Committee as set forth
above. Thereafter, this option shall be exercisable as follows: [set forth
terms]

             (i)  at the end of one year from the date of grant, up to _____% of
                  the total shares subject to the option;

This option may not be exercised for less than ten shares at any one time (or
the remaining shares then purchasable if less than ten) and expires at the end
of _____ years from the date of grant whether or not it has been duly exercised,
unless sooner terminated as provided in paragraphs 5, 6 and 7 hereof.

               4.    How Option May Be Exercised.

               This option is exercisable by a written notice signed by you and
delivered to the Company at its executive offices, signifying your election to
exercise the option. The notice must state the number of shares of Common Stock
as to which your option is being exercised, must contain a statement by you (in
a form acceptable to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale (unless a
registration statement covering the shares purchasable has been declared
effective by the Securities and Exchange Commission) and must be accompanied by
cash or check to the order of the Company for the full purchase price of the
share being purchased; provided, however, with the consent of the Committee or
such officer of the Company as may be authorized by the Committee from time to
time, the purchase price and such amount, if any, as is required for withholding
taxes may be paid by (i) the surrender of Common Stock in good form for transfer
owned by the person exercising the Option or (ii) the forfeiture by the person
exercising the Option of shares of Common Stock issuable upon exercise of the
Option, in each case having a Fair Market Value (as defined in the Plan) on the
date of exercise equal to the purchase price and such amount, if any, as is
required for withholding taxes, or in any combination of cash and Common Stock
so long as the total of the cash so paid and the Fair Market Value (as defined
in the Plan) of the Common Stock surrendered or forfeited equals the purchase
price and such amount, if any, as is required for withholding taxes. Any Common
Stock delivered in satisfaction of all or any portion of the purchase price
shall be appropriately endorsed for transfer and assignment to the Company. No
share shall be issued until


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full payment therefor has been made.

               If notice of the exercise of this option is given by a person or
persons other than you, the Company may require, as a condition to the exercise
of this option, the submission to the Company of appropriate proof of the right
of such person or persons to exercise this option.

               Certificates for shares of the Common Stock so purchased will be
issued as soon as practicable. The Company, however, shall not be required to
issue or deliver a certificate for any shares until it has complied with all
requirements of the Securities Act of 1933, the Securities Exchange Act of 1934,
any stock exchange on which the Company's Common Stock may then be listed and
all applicable state laws in connection with the issuance or sale of such shares
or the listing of such shares on said exchange. Until the issuance of the
certificate for such shares, you or such other person as may be entitled to
exercise this option, shall have none of the rights of a stockholder with
respect to shares subject to this option.

               You shall promptly advise the Company of any sale of shares of
Common Stock issued upon exercise of this option which occurs within one year
from the date of the exercise of this option relating to the issuance of such
shares.

               5.    Termination of Employment.

               If your employment with the Company (or a subsidiary thereof) is
terminated for any reason other than by death, disability or retirement, this
option shall immediately lapse and expire.

               6.    Retirement or Disability.

               If your employment with the Company (or a subsidiary thereof) is
terminated by reason of your disability or retirement at or after age 65, you
may exercise, within six months from the date of such termination, that portion
of this option which was exercisable by you at the date of such termination,
provided, however, that such exercise occurs within _____ years from the date
this option was granted to you.

               7.    Death.

               If you die while employed by the Company (or a subsidiary
thereof) or within six months after termination of your employment due to
disability or retirement at or after age 65, that portion of this option which
was exercisable by you at the date of your death may be exercised by your
legatee or legatees under your Will, or by your personal representatives or
distributees, within six months from the date of your death, but in no event
after _____ years from the date this option was granted to you.

               8.    Non-Transferability of Option.

               This option shall not be transferable except by Will or the laws
of descent and distribution, and may be exercised during your lifetime only by
you.

                                      2

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               9.    Adjustments upon Changes in Capitalization.

               If at any time after the date of grant of this option, the
Company shall, by stock dividend, split-up, combination, reclassification or
exchange, or through merger or consolidation, or otherwise, change its shares of
Common Stock into a different number or kind or class of shares or other
securities or property, then the number of shares covered by this option and the
price of each such share shall be proportionately adjusted for any such change
by the Committee whose determination shall be conclusive. Any fraction of a
share resulting from any adjustment shall be eliminated and the price per share
of the remaining shares subject to this options adjusted accordingly.

               10.   Effects of Change in Control.

               Immediately following a "change in control" of the Company (as
defined in the Plan), this Option shall become immediately fully exercisable,
but in no event may this Option be exercised after 10 years from the date this
Option was granted to you.

               11.    Subject to Terms of the Plan.

               This incentive stock option agreement shall be subject in all
respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan, the decision of the
Board or Committee shall be conclusive.

                                                      Sincerely yours,        
                                        FRONTIER INSURANCE GROUP, INC.        
                                                                       
                                        By:___________________________ 
                                                       President
                                       

Agreed to and accepted this ___ day of _________, 199_.

---------------------------
Signature of Optionee

                                      3

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                                                                       EXHIBIT B

                         FRONTIER INSURANCE GROUP, INC.

                      NON-INCENTIVE STOCK OPTION AGREEMENT

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

To:

               We are pleased to notify you that by the determination of the
Board of Directors (the "Board") or the Incentive and Non-Incentive Stock Option
Plan Committee (the "Committee") a non-incentive stock option to purchase
_______ shares of the Common Stock of Frontier Insurance Group, Inc. (the
"Company") at a price of $_______ per share has this ___ day of ______________
been granted to you under the Company's 1992 Incentive and Non-Incentive Stock
Option Plan (the "Plan"). This option may be exercised only upon the terms and
conditions set forth below.

               1.    Purpose of Option.

               The purpose of the Plan under which this non-incentive stock
option has been granted is to further the growth and development of the Company
and its direct and indirect subsidiaries by encouraging key employees,
directors, consultants, agents, independent contractors and other persons who
contribute and are expected to contribute materially to the Company's success to
obtain a proprietary interest in the Company through the ownership of stock,
thereby providing such persons with an added incentive to promote the best
interests of the Company, and affording the Company a means of attracting to its
service persons of outstanding ability.

               2.    Acceptance of Option Agreement.

               Your execution of this non-incentive stock option agreement will
indicate your acceptance of and your willingness to be bound by its terms; it
imposes no obligation upon you to purchase any of the shares subject to the
option. Your obligation to purchase shares can arise only upon your exercise of
the option in the manner set forth in paragraph 4 hereof.

               3.    When Option May Be Exercised.

               The option granted you hereunder may not be exercised for a
period of one year from the date of its grant by the Committee as set forth
above. Thereafter, this option shall be exercisable as follows: [set forth
terms].

             (i)  at the end of one year from the date of grant, up to ____ % of
                  the total shares subject to the option;

This option may not be exercised for less than ten shares at any one time (or
the remaining shares then purchasable if less than ten) and expires at the end
of [indicate term of option] years from the date of grant whether or not it has
been duly exercised, unless sooner terminated as provided in paragraphs 5, 6 and
7 hereof.

               4.    How Option May Be Exercised

               This option is exercisable by a written notice signed by you and
delivered to the Company at its executive offices, signifying your election to
exercise the option. The notice must state the number of shares of Common Stock
as to which your option is being exercised, must contain a statement by you (in
a form acceptable to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale (unless a
registration statement covering the shares purchasable has been declared
effective by the Securities and Exchange Commission) and must be accompanied by
cash or check to the order of the Company for the full purchase price of the
shares being purchased, plus such amount, if any, as is required for withholding
taxes; provided, however, with the consent of the Committee or such officer of
the Company as may be authorized by the Committee from time to time, the
purchase price and such amount, if any, as is required for withholding taxes may
be paid by (i) the surrender of Common Stock in good form for transfer owned by
the person exercising the Option or (ii) the forfeiture by the person exercising
the Option of shares of Common Stock issuable upon exercise of the Option, in
each case having a Fair Market Value (as defined in the Plan) on the date of
exercise equal to the purchase price and such amount, if any, as is required for
withholding taxes, or in any combination of cash and Common Stock so long as the
total of the cash so paid and the Fair Market Value of the Common Stock
surrendered or forfeited equals the purchase price and such amount, if any, as
is required for withholding taxes. Any Common Stock delivered in satisfaction of
all or any portion of the purchase price shall be appropriately endorsed for
transfer and assignment to the Company. No share shall


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be issued until full payment therefor has been made.

               If notice of the exercise of this option is given by a person or
persons other than you, the Company may require, as a condition to the exercise
of this option, the submission to the Company of appropriate proof of the right
of such person or persons to exercise this option.

               Certificates for shares of the Common Stock so purchased will be
issued as soon as practicable. The Company, however, shall not be required to
issue or deliver a certificate for any shares until it has complied with all
requirements of the Securities Act of 1933, the Securities Exchange Act of 1934,
any stock exchange on which the Company's Common Stock may then be listed and
all applicable state laws in connection with the issuance or sale of such shares
or the listing of such shares on said exchange. Until the issuance of the
certificate for such shares, you or such other person as may be entitled to
exercise this option, shall have none of the rights of a stockholder with
respect to shares subject to this option.

               You shall promptly advise the Company of any sale of shares of
Common Stock issued upon exercise of this option which occurs within one year
from the date of the exercise of this option relating to the issuance of such
shares.

               5.    Termination of Employment.

               If your employment with the Company (or a subsidiary thereof) is
terminated for any reason other than by death, disability or retirement or, if a
non-employee, your engagement by the Company (or a subsidiary) is terminated for
any reason, this option shall immediately lapse and expire.

               6.    Retirement or Disability.

               If your employment with the Company (or a subsidiary thereof) is
terminated by reason of your disability or retirement at or after age 65, you
may exercise, within six months from the date of such termination, that portion
of this option which was exercisable by you at the date of such termination,
provided, however, that such exercise occurs within ______ years from the date
this option was granted to you.

               7.    Death.

               If you die while employed by the Company (or a subsidiary
thereof) or within six months after termination of your employment due to
disability or retirement at or after age 65, that portion of this option which
was exercisable by you at the date of your death may be exercised by your
legatee or legatees under your Will, or by your personal representatives or
distributees, within six months from the date of your death, but in no event
after _____ years from the date this option was granted to you.

               8.    Non-Transferability of Option.

               This option shall not be transferable except by Will or the laws
of descent and distribution, and may be exercised during your lifetime only by
you.

               9.    Adjustments upon Changes in Capitalization.

               If at any time after the date of grant of this option, the
Company shall, by stock dividend, split-up, combination, reclassification or
exchange, or through merger or consolidation, or otherwise, change its shares of
Common Stock into a different number or kind or class of shares or other
securities or property, then the number of shares covered by this option and the
price of each such share shall be proportionately adjusted for any such change
by the Committee whose determination shall be conclusive. Any fraction of a
share resulting from any adjustment shall be eliminated and the price per share
of the remaining shares subject to this option adjusted accordingly.

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               10.   Effects of Change in Control.

               Immediately following a "change in control" of the Company (as
defined in the Plan), this Option shall become immediately fully exercisable,
but in no event may this Option be exercised after 10 years from the date this
Option was granted to you.

               11.   Subject to Terms of the Plan.

               This non-incentive stock option agreement shall be subject in all
respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan, the decision of the
Committee shall be conclusive.

               12.   Tax Status.

               This option does not qualify as an "incentive stock option" under
the provisions of Section 422 of the Internal Revenue Code of 1986, as amended,
and the income tax implications of your receipt of a non-incentive stock option
and your exercise of such an option should be discussed with your tax counsel.

                                                               Sincerely yours,
                                                                               
                                                 FRONTIER INSURANCE GROUP, INC.
                                                                               
                                                 By:___________________________ 
                                                                      President 
                                                
Agreed to and accepted this ___ day of _________, 199_.

---------------------------
Signature of Optionee

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