STOCK OPTION AGREEMENT


Date of Grant June 26, 1996

               THIS GRANT, dated as of the date of grant first stated above (the
"Date  of  Grant"),  is  delivered  by  Pioneer  Railcorp  ("Company")  to  (the
"Optionee"), who is a employee of the Company.

               WHEREAS,  the Board of Directors of the Company (the  "Board") on
May 28, 1996, adopted,  with stockholder  approval on June 26, 1996, the Pioneer
Railcorp Incentive Stock Option Plan (the "Plan");

               WHEREAS,  the Plan  provides for the granting of incentive  stock
options by the Board to employees and  directors of the Company to purchase,  or
to exercise  certain  rights with respect to, shares of the Class A Common Stock
of the  Company  (the  "Stock"),  in  accordance  with the terms and  provisions
thereof; and

               WHEREAS,  the Board  considers the optionee to be a person who is
eligible  for a grant  of  incentive  stock  options  under  the  Plan,  and has
determined  that it would be in the best  interest  of the  Company to grant the
incentive stock options documented herein.

               NOW, THEREFORE, the parties agree as follows:

1. Grant of option.

Subject to the terms and conditions  hereinafter  set forth,  the Company hereby
grants to the  Optionee,  as of the Date of Grant,  an option to  purchase up to
_____shares of Stock at a price of $___ per share,  the fair market value of the
Stock on the Date of Grant. (If the optionee is a ten percent  shareholder,  the
option  price is $___ per share,  110% of the fair market  value of the stock on
the date of grant).Such  option is  hereinafter  referred to as the "Option" and
the shares of stock  purchasable  upon  exercise  of the option are  hereinafter
sometimes  referred  to as the  "Option  Shares."  The Option is intended by the
parties hereto to be, and shall be treated as, an incentive stock option as such
term is defined under Section 422 of the Internal Revenue Code of 1986.

2.   Exercise of Option.

The options will be fully vested and exercisable as of July 1, 2001. The vesting
and exercise  date of the options will be  accelerated  to the 10th  consecutive
business day that the stock trades at a price of at least $4.50 greater than the
price of the stock on the close of business on June 26, 1996. Vested options may
be  exercised  in  whole or in part  within  10  years  from the date of  grant,
provided,  however, that the aggregate fair market value of stock (as determined
as of the date of  grant)which  first  becomes  exercisable  with respect to any
optionee in any calendar  year may not exceed  $100,000,  regardless of the date
the option is granted.

If the Optionee is a ten percent shareholder,  any option must be exercised,  if
at all, within five (5) years from the Date of Grant.

3. Termination of option.

(a)  Option shares shall survive only if the option holder's  employment remains
     active with the Company  until the options  vest,  unless the option holder
     dies prior  thereto,  in which case the  holder's  estate  shall  receive a
     pro-rata  number of shares,  based upon the time the employee  worked under
     the plan. Any vested,  unexercised options owned by a holder at death shall
     become  the  property  of the  holder's  estate.  (b) Upon  the  Optionee's
     termination of employment with the Company for any reason other than death,
     the  Optionee  may,  for a period of six months  thereafter,  exercise  any
     options which were  exercisable on the date of termination.  Any option not
     so exercised shall terminate.

4. Exercise of Options.

(a)  The optionee may exercise the Option with respect to all or any part of the
     number of Option  Shares then  exercisable  hereunder by giving the Company
     written notice of intent to exercise.  The notice of exercise shall specify
     the number of Option  Shares as to which the Option is to be exercised  and
     the date of exercise thereof.
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(b)  Full  payment by the  Optionee  of the option  price for the Option  Shares
     purchased shall be made in cash on or before the exercise date specified in
     the notice of exercise.

     On  the  exercise  date  specified  in the  optionee's  notice  or as  soon
     thereafter  as is  practicable,  the Company shall cause to be delivered to
     the Optionee,  a  certificate  or  certificates  for the Option Shares then
     being purchased upon full payment of such option Shares.  The obligation of
     the Company to deliver  Stock shall,  however,  be subject to the condition
     that if at any time the Board shall  determine in its  discretion  that the
     listing,  registration or  qualification of the Option or the Option Shares
     upon any  securities  exchange  or under any state or federal  law,  or the
     consent or approval of any  governmental  regulatory  body, is necessary or
     desirable  as a  condition  of, or in  connection  with,  the Option or the
     issuance or purchase of Stock  thereunder,  the Option may not be exercised
     in whole  or in part  unless  such  listing,  registration,  qualification,
     consent  or  approval  shall have been  affected  or  obtained  free of any
     conditions not acceptable to the Board.

(c)  If the Optionee fails to pay for any of the Option Shares specified in such
     notice  or  fails to  accept  delivery  thereof,  the  Optionee's  right to
     purchase  such Option  Shares may be  terminated  by the Company.  The date
     specified in the

     Optionee's  notice  as the date of  exercise  shall be  deemed  the date of
     exercise of the option, provided that payment in full for the Option Shares
     to be purchased upon such exercise shall have been received by such date.

(d)  Optionee shall comply with such  additional  procedures for exercise of the
     Option as are from time to time established by the Board.

5. Adjustment of and Changes in Stock of the Company.

In the event of a  reorganization,  recapitalization,  change of  shares,  stock
split, spin-off, stock dividend, reclassification, subdivision or combination of
shares,  merger,  consolidation,  rights  offering,  or any other  change in the
corporate  structure or shares of capital stock of the Company,  the Board shall
make such adjustment as it deems appropriate in the number and kind of shares of
Stock subject to the Option or in the option price; provided,  however that such
adjustment shall give the Optionee any additional benefits under the Option.

6.   Fair Market Value.

As used herein, the "fair market value" of a share of Stock shall be the closing
price  per  share of Stock  on the  Chicago  Stock  Exchange,  NASDAQ,  or other
recognized  market source, as determined by the Board, on the applicable date of
reference hereunder, or if there is no sale on such date, then the closing price
on the last  previous day on which a sale is reported.  The fair market value of
the Stock on June 26, 1996 is $_______ per share.

7.   No Rights of Stockholders.

Neither the Optionee nor any personal representative shall be, or shall have any
of the rights or privileges of, a stockholder of the Company with respect to any
shares of Stock  purchasable  or issuable  upon the  exercise of the Option,  in
whole or in part, prior to the date of exercise of the option.

8.   Non-Transferability of Option.

During the Optionee's  lifetime,  the option hereunder shall be exercisable only
by the Optionee or any guardian or legal representative of the Optionee, and the
Option shall not be transferable  except,  in case of the death of the Optionee,
by will or the laws of descent and distribution.

9.   Employment Not Affected.

Neither the grant of the option nor its exercise  shall be construed as granting
to the optionee any right with respect to continued employment with the Company.



<PAGE>


10. Amendment of option.

The option may be amended by the Board at any time (I) if the Board  determines,
in its sole discretion, that amendment is necessary or advisable in light of the
Internal Revenue Code of 1986 or in the regulations  issued  thereunder,  or any
federal or state securities law or other law or regulation or (ii) other than in
the  circumstances  described in clause (I),  with the consent of the  Optionee,
unless the amendment would not adversely affect the Optionee.

11. Notice.

Any notice to the Company  provided for in this instrument shall be addressed to
it at its offices at Peoria,  Illinois,  and any notice to the Optionee shall be
addressed  to the  Optionee at the current  address  shown on the records of the
Company.  Any  notice  shall be  deemed  to by duly  given if and when  properly
addressed and posted by registered or certified mail, postage prepaid.

12. Incorporation of Plan by Reference.

The option is granted  pursuant to the terms of the Plan, the terms of which are
incorporated  herein by  reference,  and the  Option  shall in all  respects  be
interpreted in accordance  with the Plan. The Board shall interpret and construe
the Plan and this instrument,  and its interpretations and determinations  shall
be conclusive and binding on the parties hereto and any other person claiming an
interest hereunder, with respect to any issue arising hereunder or thereunder.

13. Governing Law.

The validity,  construction,  interpretation and effect of this instrument shall
exclusively  be governed by and  determined  in  accordance  with the law of the
State of Illinois.


OPTIONEE                                 PIONEER RAILCORP



__________________                       By: /s/
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                                             its: