AMERICAN MEDICAL SECURITY GROUP INC
EXHIBIT 10.5 TO THE 2001 10-K
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<TYPE>EX-10
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<FILENAME>exhibit_10-5.txt
<DESCRIPTION>EXHIBIT 10.5 TO THE 2001 10-K
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                                                                    EXHIBIT 10.5



                         1995 DIRECTOR STOCK OPTION PLAN
                                       OF
                      AMERICAN MEDICAL SECURITY GROUP, INC.


                        (Amended as of November 29, 2001)















                         THIS DOCUMENT CONSTITUTES PART
                       OF A PROSPECTUS COVERING SECURITIES
                            THAT HAVE BEEN REGISTERED
                  UNDER THE SECURITIES ACT OF 1933, AS AMENDED.















<PAGE>


                         1995 DIRECTOR STOCK OPTION PLAN
                                       OF
                      AMERICAN MEDICAL SECURITY GROUP, INC.


1.       PURPOSE OF THE PLAN

         The purpose of the Plan is to attract and retain superior Directors, to
provide a stronger incentive for such Directors to put forth maximum effort for
the continued success and growth of the Company and its affiliates and, in
combination with these goals, to encourage stock ownership in the Company by
Directors.

2.       DEFINITIONS

         Unless the context otherwise requires, the following terms shall have
the meanings set forth below:

         (a) "Administrator" shall mean the Board of Directors or any executive
officer or officers of the Company designated by the Board of Directors which
may include the Company's Director of Human Resources.

         (b) "Board of Directors" or "Board" shall mean the entire board of
directors of the Company, consisting of both Employee and non-Employee members.

         (c) "Cause" shall mean: (I) willful and gross misconduct on the part of
a Participant that is materially and demonstrably detrimental to the Company; or
(ii) the commission by a Participant of one or more acts which constitute an
indictable crime under United States Federal, state, or local law.

         (d) "Code" shall mean the Internal Revenue Code of 1986, as amended.

         (e) "Company"  shall mean  American  Medical  Security  Group,  Inc.,
a Wisconsin  corporation,  and any successors thereto.

         (f) "Director" shall mean an individual who is a non-Employee member of
the Board of Directors.

         (g) "Disability" shall mean a physical or mental incapacity which
results in a Director no longer serving as a member of the Board of Directors.

         (h) "Effective Date" shall mean February 22, 1995, or such other date
as the Board of Directors may establish as the Effective Date.

         (i) "Employee" shall mean an individual who is a full-time employee of
the Company or a Subsidiary.
<PAGE>                                                                         1

         (j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         (k) "Fair Market Value" for a Share shall mean the Market Price for a
Share on the business day immediately preceding the relevant date.

         (l) "Market Price" shall mean the closing price for Shares on the
relevant date as reported on the New York Stock Exchange, or (if there were no
sales on such date) the average of closing prices on the nearest day before and
the nearest day after the relevant date.

         (m) "Option" shall mean an option which does not comply with the
provisions of Section 422 of the Code and which is granted under the Plan to
purchase Shares.

         (n) "Option Agreement" shall mean the agreement between the Company and
a Director whereby an Option is granted to a Director.

         (o) "Participant" shall mean a Director of the Company who has
outstanding an Option granted under the Plan.

         (p) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).

         (q) "Plan" shall mean the 1995 Director Stock Option Plan of the
Company.

         (r) "Retirement" shall mean: (i) a Director's determination after
serving a full three-year term not to stand for reelection to the Board of
Directors at the next annual meeting of the Board, (ii) the inability of the
Director to stand for reelection to the Board due to age guidelines adopted by
the Board, or (iii) a Director's resigning from the Board after reaching seventy
(70) years of age.

         (s) "Share" shall mean a share of the no par value common stock of the
Company.

         (t) "Subsidiary"  shall mean a subsidiary  corporation of the Company
as defined in Section 424(f) of the Code.

         (u) "Triggering Event" shall be deemed to have occurred as of the first
day that any one or more of the following conditions shall have been satisfied:


         i.       any "person", as such term is used in Section 13(d)(3) of the
                  Securities Exchange Act of 1934, becomes, directly or
                  indirectly, the beneficial owner of securities of the Company,
                  or any subsidiary of the Company, representing forty percent
                  (40%) or more of the combined voting power of the then
                  outstanding securities of the Company that may be cast for the
                  election of Directors of the Company; or
<PAGE>                                                                         2

         ii.      there is consummated a merger, consolidation or reorganization
                  of the Company with or into any other entity after which the
                  voting securities of the Company outstanding immediately
                  preceding such merger, consolidation or reorganization
                  represent or are converted into, less than 60% of the voting
                  securities of the surviving entity outstanding immediately
                  after such merger, consolidation or reorganization; or

         iii.     during any consecutive two year period, individuals who, at
                  the beginning of such period constitute the "Incumbent Board"
                  (as hereinafter defined), cease to constitute a majority of
                  the Board of Directors of the company as a result of an actual
                  or threatened contest for election of directors (for purposes
                  of this definition (u)iii., the term "Incumbent Board" means
                  all of the members of the Board of the Directors of the
                  Company as of November 29, 2001 and any successors thereto who
                  are elected or named thereto other than as a result of an
                  actual or threatened contest for election of directors); or

         iv.      there is  consummated  an agreement (or series of related
                  agreements)  for the sale or disposition of all or
                  substantially all of the assets of the Company; or

         v.       the Company  consummates a plan of liquidation or  dissolution
                  of the Company or the  shareholders  of the Company  approve
                  a plan of  liquidation  or  dissolution  that does not make
                  provision  for the satisfaction of the Company' obligations
                  under this Plan; or

         vi.      a  Participant  is removed  from office as a result of an
                  actual or  threatened  contest  for  election of directors;
                  provided,  however,  that such "Triggering Event" shall apply
                  only to Participants so removed.

         The foregoing notwithstanding, in no event shall a "Triggering Event"
be deemed to be effective with respect to a Participant while the Participant
remains a member of the Board of Directors; and no "Triggering Event shall be
deemed to have occurred with respect to a Participant if the Participant remains
a member of the Board of Directors for six (6) months following the occurrence
of events giving rise to what would otherwise have constituted a "Triggering
Event".

         Words importing the singular shall include the plural and vice versa
and words importing the masculine shall include the feminine.
<PAGE>                                                                         3

3.       ADMINISTRATION

         The Plan shall be administered by the Administrator. The terms and
conditions under which Options may be granted are set forth in Paragraph 6. The
Administrator shall have the authority to interpret the provisions of the Plan,
to establish such rules and procedures as may be necessary or advisable to
administer the Plan and to make all determinations necessary or advisable for
the administration of the Plan; PROVIDED, HOWEVER, that no such interpretation
or determination shall change or affect the eligibility of Directors to receive
Options, the number of Shares covered by or the timing of any Option grant under
the Plan or the terms and conditions thereof. The interpretation and
construction by the Administrator of any Plan provision or of any Option
Agreement shall be final and binding upon all persons.

4.       SHARES RESERVED UNDER THE PLAN

         The aggregate number of Shares which may be issued or sold under the
Plan and which are subject to outstanding Options at any time shall not exceed
seventy-five thousand (75,000) Shares, which may be treasury Shares or
authorized but unissued Shares, or a combination of the two, subject to
adjustment as provided in Paragraph 10 hereof. Any Shares subject to an Option
which expires or terminates for any reason (whether by voluntary surrender,
lapse of time or otherwise) and is unexercised as to such Shares may again be
the subject of an Option under the Plan subject to the limits set forth above. A
Director shall be entitled to the rights and privileges of ownership with
respect to the Shares subject to the Option only after actual purchase and
issuance of such Shares pursuant to exercise of all or part of an Option.

5.       PARTICIPATION

         Only Directors shall be eligible to receive Options under the Plan.

6.       OPTIONS:  TERMS AND CONDITIONS

         (a) OPTION AGREEMENT. Each Option granted under the Plan shall be
evidenced by a written Option Agreement which shall specify the number of Shares
that may be acquired through its exercise, and which shall comply with and be
subject to the following terms and conditions:

                   (i) INITIAL OPTION GRANTS. Upon the Effective Date of the
         Plan each Director shall be granted an Option to purchase three
         thousand (3,000) Shares, subject to adjustment as provided in Paragraph
         10 hereof. The effective date of these initial grants shall be the
         Effective Date of the Plan.

                   (ii) GRANTS TO SUBSEQUENT DIRECTORS. To the extent Shares are
         available for grant under the Plan, each Director who is first elected
         as a Director subsequent to the Effective Date (a "Subsequent
         Director") shall be granted, as of the date on which such Subsequent
         Director is qualified and first begins to serve as a Director, an

<PAGE>                                                                         4

         Option to purchase 5,000 Shares, subject to adjustment pursuant to
         Paragraph 10, or to purchase such lesser number of Shares as remain
         available for grant under the Plan. In the event that the number of
         Shares available for grant under the Plan is insufficient to make all
         grants hereby specified on the relevant date, then all Directors who
         are entitled to a grant on such date shall share ratably in the number
         of Shares then available for grant under the Plan. The purchase price
         per Share deliverable upon exercise of such Option shall equal the Fair
         Market Value of a Share on the date the grant of this Option is
         effective.

                   If sufficient Shares are not available under the Plan to
         fulfill the grant of Options to any Subsequent Director first elected
         after the Effective Date, and thereafter additional Shares become
         available, such Subsequent Director receiving an Option for fewer than
         5,000 Shares shall then receive an Option to purchase an amount of
         Shares, determined by dividing the number of Shares available pro-rata
         among each Subsequent Director receiving an Option for fewer than 5,000
         Shares, then available under the Plan, not to exceed 5,000 Shares,
         subject to adjustment as to any one Subsequent Director. The date of
         grant shall be the date such additional Shares become available. The
         purchase price per Share deliverable upon exercise of an Option shall
         equal the Fair Market Value of a Share on the date the Option is
         granted.

                   If a Subsequent Director receives an Option to purchase
         fewer than 5,000 Shares, subject to adjustment pursuant to Paragraph 10
         hereof, and additional Shares subsequently become available under the
         Plan, an Option to purchase such Shares shall first be allocated as of
         the date of availability to any Subsequent Director who has not
         previously been granted an Option. Such Options shall be granted to
         purchase a number of Shares no greater than the number of Shares
         covered by Options granted to other Subsequent Directors first elected
         subsequent to the Effective Date, but who have received Options to
         purchase fewer than 5,000 Shares (subject to adjustment pursuant to
         Paragraph 10). Thereafter, Options for any remaining Shares shall be
         granted pro-rata among all Subsequent Directors granted Options to
         purchase fewer than 5,000 Shares. No Director first elected after the
         Effective Date shall receive an Option to purchase more than 5,000
         Shares (subject to adjustment under Paragraph 10).

                   Notwithstanding anything to the contrary contained in this
         Paragraph 6(a)(ii), no person who was a participant at any time prior
         to July 24, 1998 shall be entitled to receive an Option to purchase
         Shares in excess of 3,000 Shares per such Participant as a result of
         the July 24, 1998 amendment of this Paragraph increasing the number of
         Shares subject to each Option from 3,000 to 5,000 Shares; provided,
         however, that any such person who continues as a participant following
         completion of the distribution to shareholders of the Company of shares
         of stock of the Company's wholly owned subsidiary Newco/UWS, Inc. and
         who has not already received Options to purchase a total of 5,000
         Shares shall be granted an Option to purchase a number of Shares equal
         to 5,000 MINUS the total number of Shares currently subject to issued
         and outstanding Options with respect to such Participant.
<PAGE>                                                                         5

         (b) OPTION EXERCISE PRICE. The per share exercise price of the Shares
purchasable under each Option shall be equal to one hundred percent (100%) of
the Fair Market Value per Share on the date of grant of such Option.

         (c) VESTING OF OPTIONS. An Option for Shares can not be exercised until
it is vested. Subject to acceleration as provided below, Options shall vest
annually at the rate of thirty-three and one third percent (33-1/3%) of the
aggregate number of Shares granted annually beginning on the first anniversary
of the date of grant and on each subsequent anniversary of the date of grant
thereafter.

         If a Director's tenure ends during the applicable three-year period,
however, the Director's rights in the Option shall be as follows:

                   (i) DEATH,  DISABILITY.  Upon the death or  Disability  of a
         Director,  each Option of such Director  shall become  immediately
         exercisable  as to one hundred  percent  (100%) of the Shares covered
         thereby as of the Director's last day of service as a Director with the
         Company;

                   (ii) RETIREMENT. In the event of a Director's Retirement
         from the Board, such Director's Option shall become exercisable as to
         one hundred percent (100%) of the Shares covered thereby as of the
         earlier of: (I) the date of the Company's annual shareholders' meeting
         at which he or she would otherwise, but for said Retirement, be a
         nominee for election to the Board, or (ii) the date on which the
         Director attains seventy (70) years of age;

                   (iii) TRIGGERING   EVENT.   Upon  the  occurrence  of  a
         Triggering   Event,  each  Option outstanding  under the Plan shall
         become  immediately  exercisable as to one hundred percent (100%) of
         the Shares covered thereby; or

                   (iv) ANY OTHER REASON. If a Director's tenure ends for
         any reason other than death, Disability, Retirement or as the result of
         a Triggering Event, the unvested portion of such Director's Option
         shall lapse immediately.

         Once any portion of an Option becomes exercisable, it shall remain
exercisable for the shortest period of (1) twelve years from the date of grant;
or (2) two (2) years following the date on which the Director ceases to serve in
such capacity for any reason other than removal for Cause. If a Director is
removed for Cause, all outstanding Options held by the Participant shall
immediately be forfeited to the Company and no additional exercise period shall
be allowed, regardless of the vested status of the Options.

         (d) PAYMENT OF EXERCISE PRICE. The purchase or exercise price shall be
payable in whole or in part in cash or Shares; and such price shall be paid in
full at the time that an Option is exercised. If a Director elects to pay all or
a part of the purchase or exercise price in Shares, such Director shall make
such payment by delivering to the Company a number of Shares already owned by
the Director equal in value to the purchase or exercise price. All Shares so

<PAGE>                                                                         6

delivered shall be valued at their Market Price on the business day immediately
preceding the day on which such Shares are delivered.

7.       TRANSFERABILITY

         An Option granted to a Director under this Plan shall not be
transferable or subject to execution, attachment or similar process, and during
the lifetime of the Director shall be exercisable only by the Director. A
Director shall have the right to transfer the Option upon such Director's death,
either by the terms of such Director's will or under the laws of descent and
distribution, and all such distributees shall be subject to all terms and
conditions of this Plan to the same extent as would the Director, except as
otherwise expressly provided herein.

         Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when any necessary spousal
consent is obtained and filed by the Participant in writing with the Secretary
of the Company during the Participant's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.

8.       EXERCISE

         An Option shall be exercisable by a Director's giving written notice of
exercise to the Secretary of the Company specifying the number of Shares to be
purchased and such other documentation as the Administrator shall reasonably
require accompanied by payment in full of the required exercise price. The
Company shall have the right to delay the issue or delivery of any Shares under
the Plan until: (a) the completion of such registration or qualification of such
Shares under any federal or state law, ruling or regulation as the Company shall
determine to be necessary or advisable, and (b) receipt from the Director of
such documents and information as the Company may deem necessary or appropriate
in connection with such registration or qualification. In no event may any
Option become exercisable prior to six (6) months following the date of its
grant.

         The Administrator also may allow cashless exercise as permitted under
the Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or exercise by any other means which the Administrator determines
to be consistent with the Plan's purpose and applicable law.
<PAGE>                                                                         7

9.       SECURITIES LAWS

         Each Option Agreement shall contain such representations, warranties
and other terms and conditions as shall be necessary in the opinion of counsel
to the Company to comply with all applicable federal and state securities laws.
The Plan is intended to comply with Rule 16b-3 promulgated under the Exchange
Act. Any provision of the Plan or of any Option Agreement inconsistent with the
terms of such Rule shall be inoperative and shall not affect the validity of the
Plan, such Option Agreement or any provision thereof.

10.      ADJUSTMENT PROVISIONS

         In the event of any stock dividend, split-up, recapitalization, merger,
consolidation, combination or exchange of shares, or the like, as a result of
which shares of any class shall be issued in respect of the outstanding Shares,
or the Shares shall be changed into the same or a different number of the same
or another class of stock, or into securities of another person, cash or other
property (not including a regular cash dividend), the total number of Shares
authorized to be offered in accordance with Paragraph 4, the number of Shares
subject to each outstanding Option, the exercise price applicable to each such
Option, and/or the consideration to be received upon exercise of each such
Option shall be appropriately adjusted.

11.      TAXES

         The Company shall have the power and the right to deduct or withhold,
or require a Participant to remit to the Company, an amount sufficient to
satisfy Federal, state, and local taxes required by law to be withheld with
respect to any taxable event arising or as a result of this Plan, and the
Company may defer making delivery of Shares obtained pursuant to the exercise of
an Option until arrangements satisfactory to it have been made with respect to
any such withholding obligations. If a withholding obligation should arise, a
Director exercising an Option may, at his or her election, provided applicable
laws and regulations are complied with, satisfy his or her obligation for
payment of withholding taxes either by having the Company retain a number of
Shares having an aggregate Market Price on the date the Shares are withheld
equal to the amount of the withholding tax or by delivering to the Company
Shares already owned by the Director having an aggregate Market Price on the
business day immediately preceding the day on which such Shares are delivered
equal to the amount of the withholding tax. In addition, the Director's tax
obligation may be satisfied through a cashless exercise, if the Administrator so
allows.

12.      EFFECTIVE DATE OF THE PLAN

         Upon approval by the Board of Directors of the Company, subject to
ratification by an affirmative vote of a majority of Shares at an annual
shareholders' meeting of the Company, the Plan shall become effective as of
February 22, 1995, or such later date as the Board may determine, and shall
remain in effect as provided herein. Options may be granted prior to shareholder
ratification of the Plan; provided, however, that in the event shareholder
approval of the Plan is not obtained, all outstanding Options shall become null
and void.
<PAGE>                                                                         8

13.      TERMINATION AND AMENDMENT

         With the approval of the Board of Directors, the Administrator may
terminate the Plan or make such modifications or amendments thereof as it shall
deem advisable, including, but not limited to, such modifications or amendments
as it shall deem advisable in order to conform to any law or regulation
applicable thereto; provided, HOWEVER, that the Administrator may not amend the
Plan more frequently than once every six months (except as to comport with
changes in the Code or the Employee Retirement Income Security Act of 1974, as
amended) and may not, unless otherwise permitted under federal law, without
further approval of the holders of a majority of the Shares voted at any meeting
of shareholders at which a quorum is present and voting, adopt any amendment to
the Plan for which shareholder approval is required under tax, securities or any
other applicable law, including, but not limited to, any amendment to the Plan
which would cause the Plan to no longer comply with Rule 16b-3 of the Exchange
Act or any successor rule or other regulatory requirements. Subject to the right
of the Administrator to terminate the Plan at any time, the Plan shall remain in
effect until all Shares subject to it shall have been purchased or acquired
according to the Plan's provisions. However, in no event may an Option award be
granted under the Plan on or after February 22, 2005. No termination,
modification or amendment of the Plan may, without the consent of a Director,
adversely affect the rights of such Director under an outstanding Option then
held by the Director.

14.      TENURE

         The grant of an Option pursuant to the Plan is no guarantee that a
Director will be renominated, reelected or reappointed as a Director, and
nothing in the Plan shall be construed as conferring upon a Director the right
to continue to be associated with the Company as a Director or otherwise.

15.      SUCCESSORS

         All obligations of the Company under the Plan, with respect to Option
grants hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

16.      APPLICABLE LAW

         The Plan will be administered in accordance with the laws of the State
of Wisconsin.

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