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 director 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 Stock Option Plan (the "Plan");

               WHEREAS,  the Plan  provides for the granting of 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 stock options under the Plan, and has determined that it
would be in the best interest of the Company to grant 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.  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."

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.

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.

(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


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     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.



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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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