<PAGE>
                            STOCK PURCHASE AGREEMENT

         STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of December 2,
2002, between Mutual Service Casualty Insurance Company, a corporation organized
under the laws of the State of Minnesota (the "Seller"), and Direct General
Corporation, a corporation organized under the laws of the State of Tennessee
(the "Buyer' or the "Company").

         WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires
to purchase from the Seller an aggregate of 101,697 shares of Direct General
Corporation Common Stock, no par value (the shares to be sold being referred to
hereinafter as the "Shares"), upon the terms and subject to the conditions set
forth herein.

         NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements contained herein, the parties hereto hereby
agree as follows:

         SECTION 1. SALE AND PURCHASE OF SHARES. The Seller hereby sells to the
Buyer, and the Buyer hereby purchases from the Seller, the Shares, for an
aggregate purchase price of $4,300,000.00 (or approximately $42.28 per Share).

         SECTION 2. CLOSING DELIVERY. Concurrently herewith, the Seller is
delivering to the Buyer one or more stock certificates representing in the
aggregate the number of Shares being purchased by the Buyer, duly endorsed for
transfer or accompanied by appropriate stock powers duly endorsed in blank,
against delivery by the Buyer to the Seller of a wire transfer as instructed by
Seller, or, payable to Seller's order, of one or more certified or official bank
checks payable in next day funds in the aggregate amount of the purchase price
for the number of the Shares being purchased by the Buyer.

         SECTION 3. SELLER'S REPRESENTATIONS AND WARRANTIES. The Seller hereby
represents and warrants to the Buyer that:

         (a) Clear Title to the Shares. The Seller has, and is hereby conveying
to the Buyer, good, valid and marketable title to the Shares, free and clear of
any and all liens, equities, claims, charges or other encumbrances or rights of
any third parties of any nature (including, but not limited to, options, rights
of first refusal or similar rights, contingent or otherwise).

         (b) Enforceability of This Agreement. The Seller has all requisite
legal power to enter into and to perform its obligations under this Agreement.
This Agreement and the stock certificates or stock powers being delivered
concurrently herewith have been duly executed and delivered by the Seller. This
Agreement constitutes the legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
rehabilitation, insolvency, moratorium or other similar laws affecting creditors
rights generally and by general principles of equity.

         (c) No Violation of Other Contracts or Law. Neither the execution and
delivery of this Agreement nor the consummation by the Seller of the transaction
contemplated hereby will





<PAGE>

conflict with, result in a breach of or constitute a default under or violation
of any term of any agreement, contract or instrument to which it is a party or
any applicable law, rule, regulation, order or judgment of any court or
governmental authority.

         (d) No Governmental Consents. No consent, approval, authorization, or
order of registration or filing with, or notice to, any domestic or foreign
governmental authority, regulatory body or court is required for the execution
or delivery of, or the performance by the Seller of its obligations under, or
compliance by the Seller with, this Agreement or the transaction contemplated
hereunder.

         (e) No Third Party Consents. The Seller has obtained all consents,
approvals and waivers of third parties that may be required in connection with
the execution and delivery of this Agreement and the consummation of the
transaction contemplated hereby. Without limiting the foregoing, to the Seller's
best information and belief no such consent, approval, or waiver is required
under the Amended and Restated Stockholders Agreement, dated as of November 18,
1996, among the Company and certain stockholders of the Company, because the
Shares are being sold directly to the Company.

         (f) Receipt and Review of Company Information. The Seller has, prior to
the date hereof (i) reviewed or been afforded adequate and satisfactory
opportunity to review, any and all records and documents of the Company material
to the transaction contemplated hereby; (ii) been informed on a regular basis of
all business developments material to the Company, including, without
limitation, being informed that, subject to public securities market conditions
and other relevant factors, the Company is considering a possible public
offering of its Common Stock within the next four to six months and that,
assuming such offering does in fact occur, the price per share at which the
Company's Common Stock is expected to sell in such offering may be substantially
in excess of the per share amount stated in Section 1 hereof; (iii) been
afforded adequate and satisfactory opportunity to ask such questions and make
such inquiries of management of the Company regarding (x) the Company's
business, financial condition and future prospects and (y) the transactions
contemplated hereby, as the Seller has deemed necessary, appropriate or
desirable' and (iv) received such information concerning the Company and the
transaction contemplated hereby as the Seller has requested of the Company (all
such information supplied or made available to the Seller by the Company, the
"Company Information").

         (g) Independent Judgment. The Seller has (i) undertaken its independent
analysis of the Company, based on the Company Information and based on such
advice, if any, that the Seller has received from the Seller's legal, tax and
financial advisors; (ii) considered such other factors it deems relevant to the
decision to sell the Shares to Buyer at the purchase price contemplated herein;
and (ii) made its independent judgment to enter into this Agreement and sell to
the Buyer the Shares.

         (h) No Representations or Warranties by Buyers About the Company or
Shares. The Buyer has not made, and the Seller has not relied upon, any
representations or warranties to the Seller regarding the Company or its
business, prospects or financial condition, or the terms or



                                       2

<PAGE>

value of the Shares, and the Seller has not looked to or made any request to the
Buyer for any such representations or warranties.

         SECTION 4. BUYERS' REPRESENTATIONS AND WARRANTIES. The Buyer hereby
represents and warrants to the Seller that:

         (a) Enforceability of This Agreement. The Buyer has all requisite power
to enter into and perform its obligations under this Agreement. This Agreement
has been duly executed and delivered by the Buyer and constitutes the legal,
valid and binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, rehabilitation, insolvency, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity.

         (b) No Violation of Other Contracts or Law. Neither the execution and
delivery of this Agreement nor the consummation by the Buyer of the transaction
contemplated hereby will conflict with, result in a breach of or constitute a
default under or violation of any term of any agreement, contract or instrument
to which it is a party or any applicable law, rule, regulation, order or
judgment of any court or governmental authority.

         (c) No Governmental Consents. No consent, approval, authorization, or
order of registration or filing with, or notice to, any domestic or foreign
governmental authority, regulatory body or court is required for the execution,
delivery and performance by the Buyer of its obligations under, or compliance by
the Buyer with, this Agreement or the transaction contemplated hereunder.

         (d) No Third Party Consents. The Buyer has obtained all consents,
approvals and waivers of third parties that may be required in connection with
the execution and delivery of this Agreement and the consummation of the
transaction contemplated hereby.

Without limiting the foregoing, to the Buyer's best information and belief no
such consent, approval, or waiver is required under the Amended and Restated
Stockholders Agreement, dated as of November 18, 1996, among the Company and
certain stockholders of the Company, because the Shares are being purchased
directly by the Company.

         SECTION 5. FURTHER ASSURANCES; CONSENTS. From time to time each party
hereto, at its own cost, will execute all such instruments and take all such
further actions as the other party may reasonably request in order to carry out
and to give effect to the intent and purpose hereof including without
limitation, the execution and delivery of any and all confirmatory and other
instruments, and any and all actions which may reasonably be necessary or
desirable to complete the transactions contemplated hereby.

         SECTION 6. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing, shall be delivered by hand,
commercial courier or facsimile transmission and shall be deemed to have been
given or made when delivered, addressed as follows:



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<PAGE>

<TABLE>
<CAPTION>
Seller:                                               Buyer:
------                                                -----
<S>                                                   <C>
Mutual Service Casualty Insurance Corp.               Direct General Corporation
Attn: CFO & Treasurer                                 Attn: SVP & CFO
Two Pine Tree Drive                                   1281 Murfreesboro Road
Arden Hills, MN 55112-3793                            Nashville, TN 37217
</TABLE>

         SECTION 7. MISCELLANEOUS. This Agreement embodies the entire agreement
and understanding between the Buyer and the Seller and supersedes all prior
agreements, correspondence, and understandings between them relating to the
subject matter hereof This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Tennessee. This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument. This
Agreement may be deemed executed upon receipt by all parties hereto (or their
duly authorized representatives) of executed signature pages by facsimile
transmission, provided that such facsimile transmission shall be followed by
overnight courier or mail delivery of such original executed signature pages.
This Agreement may not be amended or modified except in a writing signed by both
parties.

         IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.


SELLER


By: /s/ Stephen L. Rohde
    -----------------------------------------
    Stephen L. Rohde
    Vice President
    Chief Financial Officer & Treasurer
    Mutual Service Casualty Insurance Company



BUYER


By: /s/ Barry D. Elkins
    -----------------------------------------
    Barry D. Elkins
    Senior Vice President and
    Chief Financial Officer
    Direct General Corporation









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<PAGE>
                                                                   Exhibit 10.28



                           DIRECT GENERAL CORPORATION

                              NASHVILLE, TENNESSEE


     BARRY D. ELKINS

  SENIOR VICE PRESIDENT
& CHIEF FINANCIAL OFFICER


December 2, 2002



VIA FACSIMILE AND U.S. MAIL
Mr. Stephen L. Rohde
Mutual Service Casualty Insurance Company
Two Pine Tree Drive
Arden Hills, MN 55112-3793

RE:   (1) Funding of Uncollectible Reinsurance Recoverables Related to Reliance;
          and
      (2) Repurchase of Direct General Common Stock

Dear Steve:

This letter is in response to our telephone conversation this morning and, as
described below, sets forth the terms of two transactions between our respective
companies, Direct General Corporation (the "Company") and Mutual Service
Casualty Insurance Company ("MSCIC").

1.       Funding of Uncollectible Reinsurance Recoverables. Claim payments
         approximating $1,250,000 have been disbursed from the account
         established by the Company under the name "Mutual Service Casualty
         Insurance account" (the "Account"), but such amount has not been
         recovered from a reinsurer, Reliance Insurance Company ("Reliance"), in
         accordance with the terms of the Quota Share Reinsurance Agreements
         (the "Agreement") between MSCIC and Reliance. As the result of the
         liquidation of Reliance, it is unlikely that any of this amount will be
         received in the near future, if ever. MSCIC acknowledges that it is
         liable for any and all uncollectible reinsurance recoverables due from
         Reliance under the Agreement.

         With respect to the current unrecovered amount of approximately
         $1,250,000, MSCIC and the Company agree for their mutual financial
         planning benefit as follows:

         a.       MSCIC will wire $1,250,000 today in the name of the Company to
                  an account to be designated by the Company.

         b.       On or before the close of business on December 31, 2002, the
                  Company will wire or otherwise transfer funds in the amount of
                  $1,250,000 to the Account held for the benefit of MSCIC.

         c.       In the event that any of the uncollectible reinsurance
                  recoverables due under the Agreement to MSCIC from Reliance
                  are in fact recovered by the Company from





<PAGE>

                  Reliance, state guaranty fund, or other applicable source of
                  funds through court order, regulatory action, or other manner,
                  the Company will promptly reimburse such funds to MSCIC or to
                  the Account held for the benefit of MSCIC.

         With respect to any future claim payments disbursed from the Account,
         MSCIC agrees to transfer funds into the Account at least quarterly, in
         an amount representing the uncollectible reinsurance recoverable due
         from Reliance. The amount of such recoverable will be calculated by the
         Company and provided to MSCIC on a monthly basis.

2.       Repurchase of Direct General Corporation Common Stock. The Company and
         MSCIC have agreed by letter agreement dated November 12, 2002, that the
         Company will repurchase 101,697 shares of its Common Stock (the
         "Shares") from MSCIC for the aggregate purchase price of $4,300,000.
         Today, the parties are implementing that agreement as follows:

         a.       A copy of that certain Stock Purchase Agreement dated as of
                  December 2, 2002 (the "Purchase Agreement") signed by the
                  Company is being delivered in conjunction with this letter
                  (via fax or PDF email).

         b.       Upon the execution and return by MSCIC (via fax or PDF email)
                  of the Purchase Agreement, together with the execution and
                  return of this letter agreement, the Company will wire
                  $4,300,000 to MSCIC in accordance with transfer instructions
                  from MSCIC.

         c.       Upon receipt of said wire transfer of funds from the Company,
                  MSCIC will promptly deliver to the Company, by overnight
                  delivery, stock certificate(s) representing the Shares, duly
                  endorsed for transfer or accompanied by appropriate stock
                  powers duly endorsed in blank, as provided under Section 2 of
                  the Purchase Agreement.

If MSCIC agrees that this letter, together with the Purchase Agreement, sets
forth the terms of our agreement regarding the two transactions described above,
and that this letter, together with the Purchase Agreement, supercedes and
replaces any prior agreements between us regarding the same subject matter,
please sign below and return a signed copy of this letter to me.

Sincerely,                             Agreed.


/s/ Barry D. Elkins                    /s/ Stephen L. Rohde
----------------------------           -----------------------------------
Barry D. Elkins                        Stephen L. Rohde
Senior Vice President and              Vice President
Chief Financial Officer                Chief Financial Officer & Treasurer
Direct General Corporation             Mutual Service Casualty Insurance Company








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