<PAGE>
                                                                   Exhibit 10.23





                                OPTION AGREEMENT

                        (WITH ASSET PURCHASE SUPPLEMENT)



                                     BETWEEN



                      DIRECT GENERAL INSURANCE AGENCY, INC.



                                       AND



                              LR3 ENTERPRISES, INC.

                                       AND

                          MAITLAND UNDERWRITERS, INC.,





                                 AUGUST 16, 1999


<PAGE>
                                    CONTENTS

<TABLE>
<CAPTION>
 SECTION                        SECTION HEADINGS                             PAGE NO.
 -------                        ----------------                             --------
<S>           <C>                                                            <C>
              Recitals...........................................................1

     1.       Purchase Option....................................................2

     2.       Purchase Price.....................................................3

     3.       Exercise Date......................................................3

     4.       Transferred Assets.................................................3

     5.       Obligation to Sell Transferred Assets..............................4

     6.       Conduct of Cash Register...........................................4

     7.       Prohibited Transactions............................................4

     8.       Access to Financial and Other Information..........................5

     9.       Termination........................................................6

     10.      Schedule A.........................................................7

     11.      Non-Compete During Option Period...................................7

     12.      Board Approvals....................................................7

     13.      Miscellaneous Provision............................................8

         a.   Modification.......................................................8

         b.   Notices............................................................8

         c.   Assignment.........................................................9

         d.   Governing Law.....................................................10

         e.   Severability......................................................10

         f.   Counterparts......................................................10

         g.   Headings..........................................................10

         h.   Entire Agreement..................................................10

         i.   Confidentiality...................................................10

              Signatures........................................................13

              Schedule A:      List of Names and Addresses of the Agencies

              Supplement:      Asset Purchase Supplement, providing additional
                               terms and provisions and will govern the
                               consummation of the purchase and sale of assets
                               upon Purchaser's exercise of the Option (the
                               Supplement contains its own Contents page.)
</TABLE>



                                       i
<PAGE>
                                OPTION AGREEMENT

         THIS OPTION AGREEMENT, including all schedules, supplements, and
exhibits (referred to herein collectively as this "Agreement") is dated as of
August 16, 1999 between Direct General Insurance Agency, Inc. ("Purchase"), a
Tennessee corporation; and LR3 Enterprises, Inc., a Florida corporation ("LR3"),
Maitland Underwriters, Inc, a Florida corporation ("Maitland"), and each of the
Cash Register Auto Insurance Agencies, Friendly Auto Insurance Agencies, and
Insurance Options Agencies that are identified on Schedule A to this Agreement,
each a Florida corporation (referred to herein collectively as the "Agencies");
(LR3, Maitland, and the Agencies are sometimes referred to herein collectively
as the "Sellers"). For the purposes of this Agreement, the "Agencies" shall
include any and all additional insurance agencies that the Sellers may establish
or acquire prior to the consummation of this Agreement, as though such view
agencies had been listed on Schedule A.

                                   WITNESSETH:

         WHEREAS, Direct General Insurance Company, a Tennessee-domiciled
property and casualty insurer, also authorized in the State of Florida ("DOIC")
and Maitland Underwriters, Inc an affiliated Florida-licensed managing general
agent have entered into a managing general agent agreement of even date herewith
(the "MGA Agreement"), pursuant to which Maitland, through the Agencies, will
sell automobile insurance policies and perform certain other MGA functions on
behalf of DGIC in accordance with the terms of the MGA Agreement; and


                                       1

<PAGE>


         WHEREAS, Direct General Financial Services, Inc. ("DGFS") a
Tennessee-domiciled premium finance company, also authorized in the State of
Florida and LR3 and Maitland have entered into a premium finance agreement of
even date herewith (the "Premium Finance Agreement") pursuant to which the
business generated under the MGA Agreement will be financed with DGFS to the
extent customers desire premium financing; and

         WHEREAS, in connection with said MGA Agreement and Premium Finance
Agreement, Sellers desire to grant to Purchaser an exclusive option to purchase
the agency related assets of the Sellers, including, all business on the books
of the Agencies at the time of consummation of such purchase; and

         WHEREAS, Sellers and Purchaser desire to set forth in this Agreement
the terms of said option, including detailed provisions that will govern the
transfer of such assets upon the consummation of Purchaser's exercise of the
option granted under this Agreement;

         NOW THEREFORE, in partial consideration for the commission rate and
other terms of the MGA Agreement and the Premium Finance Agreement, and in
further consideration for the mutual promises set forth herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, Purchaser and Sellers, intending to be legally
bound, hereby agree as follows:

1.       Purchase Option. Sellers irrevocably grant to Purchaser the exclusive
         right to purchase (the "Option") the Transferred Assets (defined
         below), which Sellers use to conduct their




                                       2
<PAGE>

         automobile insurance and ancillary products sales and service business
         throughout the State of Florida, for the Purchase Price (defined
         below), said Option being exercisable by Purchaser in accordance with
         this Agreement.

2.       Purchase Price. If Purchaser elects to exercise the Option granted
         hereunder, the aggregate purchase price payable to Sellers (allocation
         among Sellers to be determined by LR3) for the Transferred Assets shall
         be an amount of cash equal to twelve and one-half percent (12.5%) of
         the aggregate net written premium (less any liabilities assumed by
         Purchaser) written by the Agencies on behalf of DOIC and any
         third-party insurers, including the net written premium for all
         ancillary products, during the twelve (12) months immediately preceding
         the Closing Date of the asset purchase.

3.       Exercise Date. The Option shall become exercisable on the third
         anniversary of the Operational Date as defined in the MGA Agreement
         (the "Exercise Date"). Purchaser may exercise the Option by delivering
         written notice to LR3 (the "Notice") at any time on or before ninety
         (90) days prior to the Exercise Date, in accordance with the notice
         provision of this Agreement.

4.       Transferred Assets. The assets that Purchaser may acquire by exercising
         the Option shall consist of the "Transferred Assets" as such term is
         defined in the Asset Purchase Supplement (the "Supplement") attached
         hereto, and incorporated by reference herein and made an integral part
         of this Agreement.






                                       3
<PAGE>

5.       Obligation to Sell Transferred Assets. The parties expressly intend
         that the obligation of Sellers to sell the Transferred Assets to
         purchaser becomes final and enforceable upon the execution and delivery
         of this Agreement, subject only to (i) the exercise of the Option by
         Purchaser (ii) the termination of this Agreement as provided herein,
         and (iii) such conditions or contingencies that are expressly provided
         in this Agreement or the Supplement.

6.       Conduct of Cash Register. Before the expiration of the Option, except
         as permitted by the prior written consent of Purchaser, but without
         creating any liability, commitment, or obligation of Purchaser, Sellers
         shall comply with Section 5.2 of the Supplement.

7.       Prohibited Transactions.

         a.       Exclusivity. Before the expiration of the Option, except as
                  permitted by the prior written consent of Purchaser, but
                  without creating any liability, commitment, or obligation of
                  Purchaser, Sellers shall not directly or indirectly, in any
                  way, contact, initiate, enter into, or conduct any discussions
                  or negotiations, or enter into any agreements, whether written
                  or oral, with any person or entity with respect to the sale of
                  any of the Transferred Assets or any shares of the capital
                  stock of the Agencies or a merger or consolidation of LR3 or
                  Maitland with any other entity. This paragraph shall not limit
                  the Sellers' ability to sell immaterial amounts of assets in
                  the ordinary course of business.

         b.       Long-Term Contracts. During the term of this Agreement,
                  without the written consent of Purchaser, Sellers will not
                  enter into or renew any facility or equipment lease



                                       4
<PAGE>

                  agreement for a term greater than three (3) years. During the
                  third year of this Agreement, Sellers will not enter into or
                  renew any form of advertising contract, or any other agreement
                  that could materially affect the Transferred Assets (other
                  than facility or equipment leases), if such contract or
                  agreement has a term greater than one year.

         c.       Third Party Producer Agreements. During the term of this
                  Agreement, without the written consent of Purchaser, Sellers
                  will not enter into or renew any sales, producer, or agent
                  agreement with any agency, managing general agent, insurer,
                  broker, or other entity, pursuant to which Sellers would not
                  obtain exclusive rights to all renewals and the exclusive
                  control of renewal solicitations for all business written by
                  or through such agencies under such agreement,

         d.       Control of Cash Register. Notwithstanding anything in this
                  Agreement to the contrary, the parties acknowledge that until
                  Purchaser exercises the Option and the closing for the asset
                  purchase transaction has been consummated, the responsibility
                  for conducting the business affairs of the Agencies shall
                  remain exclusively with the current management of Sellers.

8.       Access to Financial and Other Information.

         a.       So long as the Option has not expired and this Agreement has
                  not been terminated, LR3 shall provide on a confidential basis
                  financial, premium volume and such other information about the
                  Agencies, the Business (as defined in the Supplement), and the
                  Transferred Assets, as Purchaser may reasonably request. LR3
                  will promptly advise Purchaser of, and provide detailed
                  information with respect to, any formal audit or examination
                  of, and any administrative action taken against, any of the
                  Sellers, by the




                                       5
<PAGE>

                  Florida Department of Insurance or any other regulatory
                  agency. Purchaser shall maintain any such information in
                  confidence and shall use it only for the purposes
                  contemplated within this Agreement.

         b.       Within thirty (30) days from the Effective Date of this
                  Agreement, LR3 shall provide to Purchaser the following
                  Schedules required by the Supplement, completed as of the
                  Effective Date: Schedules 1.1(a); 1.1(b); 1.1(f); 1.1(g);
                  3.11; and 3.14. Thereafter, during the term of this Agreement,
                  LR3 shall update such Schedules to be complete and accurate as
                  of each December 31st and deliver to Purchaser by the
                  following February 1st. If Purchaser delivers the Notice, then
                  LR3 shall update such Schedules to be complete and accurate as
                  of the Closing Date and deliver the revised Schedules to
                  Purchaser no fewer than five (5) business dates prior to the
                  Closing Date. Any changes to the original Schedules shall be
                  clearly indicated on the revised Schedules.

9.       Termination. This Agreement may be terminated by Purchaser at any time
         before Purchaser delivers the Notice. This Agreement shall terminate
         and the Option shall expire at 11:59 p.m., Nashville time, on the
         Exercise Date, unless prior to such date and time Purchaser has
         delivered the Notice to LR3. Termination of this Agreement shall have
         no effect on the MGA Agreement or Premium Finance Agreement, the
         terminations of which shall be governed by their own terms; provided,
         however, that this Agreement shall terminate automatically and the
         Option shall simultaneously expire if Maitland or Direct General
         Insurance Company terminates the MGA Agreement in accordance with the
         terms of the MGA Agreement; provided further that if the duration of
         the MGA Agreement is



                                       6
<PAGE>

         extended under Section 12.04 thereof, then the duration of this
         Agreement and the Option shall be likewise extended.

10.      Schedule A. LR3 represents that Schedule A to this Agreement is a list
         of the names and addresses of all of the entities through which Sellers
         conduct their automobile insurance and ancillary products sales and
         service business throughout the State of Florida. All voting capital
         stock of each entity identified on Schedule A is wholly owned by LR3,
         unless otherwise indicated. All of the Transferred Assets are owned,
         leased, or otherwise under the control of LR3, Maitland or one or more
         of the Agencies identified on Schedule A.

11.      Non-Compete During Option Period. Until the Option is exercised,
         expires or is terminated: (i) Purchaser shall not open or acquire,
         directly or indirectly, any nonstandard automobile insurance agency
         within a radius often (10) miles of any Agency; and (ii) LR3 or
         Maitland shall not open or acquire, directly or indirectly, any
         nonstandard automobile insurance agency within a radius of one (1) mile
         of any existing Agency or agency office of Purchaser.

12.      Board Approvals.

         a.       On or prior to the execution of this Agreement, Purchaser
                  shall have delivered to LR3 a certified copy of resolutions of
                  the board of directors of Purchaser granting final
                  authorization for Purchaser to enter into this Agreement
                  (including the Supplement hereto) and to consummate the
                  transactions contemplated by this Agreement and said




                                       7
<PAGE>

                  Supplement, subject only to the conditions set forth herein
                  and therein and to any additional conditions, acceptable to
                  LR3, expressly set forth in such resolutions.

         b.       On or prior to the execution of this Agreement, LR3 shall have
                  delivered to Purchaser certified copies of resolutions of the
                  board of directors of each Seller, and to the extent the
                  Transferred Assets will represent all or substantially all of
                  the assets of any Seller, certified copies of resolution of
                  the shareholder(s) of any such Seller(s), granting final
                  authorization for the Sellers to enter into this Agreement
                  (including the Supplement hereto) and to consummate the
                  transaction contemplated by this Agreement and said
                  Supplement, subject only to the conditions set forth herein
                  and therein and to any additional conditions, acceptable to
                  Purchaser, expressly set forth in such resolutions.

13.      Miscellaneous Provision.

         a.       Modification. This Agreement may not be amended or modified in
                  any way except by a written document signed by the parties who
                  are affected by such amendment or modification.

         b.       Notices. The Notice and all other notices, requests, demands,
                  and other communications required or permitted hereunder shall
                  be in writing and shall be deemed to have been given (i) when
                  sent by facsimile with confirmation; (ii) when received from
                  an overnight courier or by other method of hand delivery; or
                  (iii) on the third business day after being mailed certified
                  or registered U.S. mail with postage prepaid as follows:




                                       8
<PAGE>

                  (1)      If to Purchaser, to:

                           Direct General Insurance Agency, Inc.

                           1281 Murfreesboro Road, Suite 5-01

                           Nashville, TN 37217

                           FAX: (615) 366-3722

                           ATTENTION: President

                  (2)      If to LR3, Maitland or the Agencies to:

                           LR3 Enterprises, Inc.

                           1535 N. Maitland Avenue

                           Maitland, FL 32751

                           FAX: (407)260-2207

                           ATTENTION: Jon Register

         c.       Assignment. This Agreement shall be binding upon and inure to
                  the benefit of the parties hereto and their respective
                  successors, and permitted assigns, but neither this Agreement
                  nor any of the rights, interest, or obligations hereunder
                  shall be assigned by either of the parties hereto without the
                  prior written consent of the other party; provided, however,
                  that Purchaser may assign all or a portion of its rights,
                  interest, or obligations hereunder to any affiliate that now
                  or hereafter controls, is controlled by, or under common
                  control with, Direct General Corporation; provided, however,
                  that any such assignment by Purchaser shall not relieve
                  Purchaser of its liabilities to Seller under this Agreement.
                  (For this paragraph, Sellers are deemed to be one "party.")



                                       9
<PAGE>

         d.       Governing Law. This Agreement and the legal relations between
                  the parties hereto shall be governed by, and construed in
                  accordance with, the laws of the State of Florida, without
                  reference to the conflict of laws principles thereof.

         e.       Severability. In the event any part(s) of this Agreement
                  should be adjudged invalid or unenforceable, such adjudication
                  shall in no manner affect the other parts, which shall remain
                  in full force and effect as if the part(s) so declared or
                  adjudged invalid were not originally a part hereof.

         f.       Counterparts. This Agreement may be executed simultaneously in
                  two or more counterparts, each of which shall be deemed an
                  original but all of which together shall constitute one and
                  the same instrument. This Agreement will be deemed binding and
                  in effect if counterparts are signed by the parties and
                  delivered by facsimile, provided that the parties exchange
                  originally signed counterparts by U.S. Mail or overnight
                  courier.

         g.       Headings. The headings contained in this Agreement are
                  inserted for convenience only and shall not constitute a part
                  hereof.

         h.       Entire Agreement. This Agreement, including any schedules,
                  supplements, exhibits and other documents referred to herein,
                  including, without limitation, the MGA Agreement, the Premium
                  Finance Agreement, and the Supplement, embodies the entire
                  agreement and understanding of the parties hereto with respect
                  to the subject matter contained herein and supersedes all
                  prior agreements and understandings between the parties with
                  respect to such subject matter, including, by way of
                  illustration and not by limitation, any term sheet or letter
                  of intent previously agreed to by the parties.

         i.       Confidentiality. In connection with this Agreement, and until
                  the Option expires or is exercised hereunder, each party has
                  provided, and intends to provide to the other,



                                       10
<PAGE>

                  information about their respective business affairs, financial
                  condition, computer information systems, corporate and
                  management structure, and other confidential and proprietary
                  information ("Information"). The term "Information" shall
                  include any form of communication between the parties,
                  including without limitation, written documents, software
                  programs, electronically stored data, and oral presentations
                  and discussions. The term "Information" includes this
                  Agreement, its contents, and the fact that this Agreement has
                  been entered into between the parties.

                  Each party will keep the Information provided by the other
                  party in confidence and will not use such Information for any
                  purpose other than as contemplated by this Agreement. Each
                  party will not copy the Information provided by the other
                  party, or disclose or allow disclosure of such Information to
                  any other person, except that each party may disclose such
                  Information to its officers, directors, employees, independent
                  contractors, affiliates, or independent auditors
                  ("Representatives") and applicable regulatory authorities
                  (upon the request of such authorities), who have a need to
                  know the Information for the purpose of implementing this
                  Agreement or auditing or regulating the affected party.

                  The term "Information" shall not include any information:

                  (i)      which at the time disclosed to or obtained by either
                           party is available generally to the public;

                  (ii)     which becomes available generally to the public
                           through no act or omission by either party in
                           violation of this provision;



                                       11
<PAGE>

                  (iii)    which either party demonstrates was received by it
                           from a third party, who had no confidentiality
                           obligations to the other party with respect thereto;

                  (iv)     which is required, under advice of counsel, to be
                           disclosed by law or court order, or in connection
                           with litigation or arbitration brought by either
                           party to enforce this Agreement; or

                  (v)      following the lapse of one year from the Exercise
                           Date or from the date this Agreement is terminated as
                           provided hereunder; provided that the prohibition
                           against disclosing the Purchase Price shall not
                           lapse.

                  Upon the execution of this Agreement, at the request of LR3 or
                  Purchaser, the parties may, individually or jointly issue a
                  press release describing the Option and any related
                  transactions. The language of any such press release(s) shall
                  be mutually agreed between the parties. After such initial
                  press release(s), except as and to the extent required by law
                  or regulation, as advised by counsel, without the prior
                  written consent of the other party, neither Purchaser, nor
                  Sellers will, and they will direct their Representatives not
                  to make, directly or indirectly, any public comment, statement
                  or communication with respect to, or otherwise to disclose or
                  to permit the disclosure of the existence of the Option or any
                  of the terms, conditions or other provisions of this
                  Agreement; other than to repeat the information disclosed in
                  the foregoing initial press release(s).




                                       12
<PAGE>


         IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date first above written.

                                              DIRECT GENERAL INSURANCE
                                              AGENCY, INC.


                                    By:       /s/ Kurt G. Schreiber
                                              ----------------------------------
                                    Name:     Kurt G. Schreiber
                                    Title:    Vice Chairman
Attest:


/s/ Constance A. Collins
-------------------------------
Name: Constance A. Collins

                                              LR3 ENTERPRISES, INC. on behalf of
                                              itself and each of the Agencies,
                                              as defined in this Agreement.


                                    By:       /s/ Lloyd E. Register, III
                                              ----------------------------------
                                    Name:     Lloyd E. Register, III
                                    Title:    President
Attest:


/s/ Ronald F. Wilson
-------------------------------
Name: Ronald F. Wilson

                                              MAITLAND UNDERWRITERS, INC.


                                    By:       /s/ Lloyd E. Register, III
                                              ----------------------------------
                                    Name:     Lloyd E. Register, III
                                    Title:    President
Attest:


/s/ Ronald F. Wilson
-------------------------------
Name: Ronald F. Wilson



                                       13
<PAGE>


                                    LLOYD E. REGISTER, III
                                    [Solely for the purpose of the non-
                                    competition (Section 8.8) and
                                    indemnification (Section 9.1) provision
                                    in the Supplement hereto]


                                    /s/ Lloyd E. Register, III
                                    --------------------------------------------
                                    Lloyd E. Register, III


Witness:


/s/ Ronald F. Wilson
-------------------------------
Name: Ronald F. Wilson


                                    LLOYD E. ("JON") REGISTER, IV
                                    [Solely for the purpose of the non-
                                    competition (Section 8.8) provision in the
                                    Supplement hereto]

                                    /s/ Lloyd E. Register, IV
                                    --------------------------------------------
                                    Lloyd E. Register, IV

Witness:


/s/ Ronald F. Wilson
-------------------------------
Name: Ronald F. Wilson








                                       14
<PAGE>
                        DIRECT GENERAL INSURANCE COMPANY
                              Nashville, Tennessee


                                 January 9, 2001


VIA FACSIMILE AND U.S. MAIL
---------------------------
Maitland Underwriters, Inc.
LR3 Enterprises, Inc.
1535 North Maitland Avenue
Maitland, Florida 32751

Attention:   Jon Register
Facsimile:   (407) 260-2207

Dear Jon:

         This letter reflects recent conversations between Lloyd Register,
William Adair, Barry Elkins, and yourself regarding certain proposed
modifications to our arrangement. Our agreement expressed in this letter is
intended to modify the Florida Managing General Agency Agreement effective
August 16, 1999, by and between Direct General Insurance Company and Maitland
Underwriters, Inc. (the "MGA Agreement") and the Option Agreement dated as of
August 16, 1999, between Direct General Insurance Agency, Inc. and LR3
Enterprises, Inc., Maitland Underwriters, Inc. (the "Option Agreement") and each
of the Agencies identified on Schedule A to the Option Agreement. Capitalized
terms used in this letter agreement have the same definitions ascribed to them
in the MGA Agreement and Option Agreement, respectively.

         MGA Agreement

         Section 12.01. Term. The Term of the MGA Agreement, as defined in
Section 12.01 thereof, shall be extended by the number of days necessary for the
MGA to produce net written premiums on behalf of the Company equal to
$8,100,000, less net written premiums produced on behalf of the Company for the
three-month period October 1, 2000 through December 31, 2000, as determined by
the records of the Company established in its normal course of business.
Provided, however, that in no event shall the Term of the MGA Agreement be
extended beyond January 31, 2003.

         Option Agreement

         Section 3. Exercise Date. The Exercise Date, as defined in Section 3 of
the Option Agreement, shall be extended through the date on which the Term of
the MGA Agreement is extended under the preceding paragraph. In addition, the
second sentence of Section 3 is replaced with the following: "Purchaser may
exercise the Option by delivering written notice to LR3 (the "Notice") at any
time on or before October 1, 2002, in accordance with the notice provision of
this Agreement." Furthermore the Closing Date, as defined in Section 2.1 of the
Asset Purchase Supplement to the Option Agreement, is the same date as the
Exercise Date, as defined in the




<PAGE>

Option Agreement. Thus, our extension of the Exercise Date under the Option
Agreement automatically extends the Closing Date.

         Section 2. Purchase Price. Because of our agreed upon extension of the
Exercise Date ads described above, the Exercise Date will likely occur during
the middle of a month. Therefore, we have agreed that as used in the last
sentence of Section 2, the phrase "during the twelve (12) months immediately
preceding the Closing Date" shall be interpreted a follows: the "twelve (12)
months" shall be the twelve (12) calendar months preceding the Closing Date that
end on the last day of the calendar month that immediately precedes the Closing
Date. For example, the Closing Date turns out to be December 12, 2002, then the
"twelve (12) months" used to calculate the purchase price under the Option
Agreement would be the twelve (12) calendar months that end on November 30,
2002.

         Section 9. Termination. Because of our agreed upon extension of the
Exercise Date as described above, we noted that the automatic termination of the
Option Agreement and expiration of the Option that are provided in Section 9,
shall likewise be extended in conformity with the extended Exercise Date.

         Furthermore, the intent of the parties as expressed in this letter
shall, if necessary, be applied to other provisions of the MGA agreement and
Option Agreement (including the Asset Purchase Supplement) that are affected by
the terms of this letter, even if such provisions have not been specifically
referenced in this letter. All other provisions of the MGA Agreement and Option
Agreement that are not affected by the terms of this letter shall remain in full
force and effect.

         If the foregoing accurately reflects our understanding, please sign in
the space provided below and return a fully executed copy of this letter
agreement to my attention. Thank you.

                                DIRECT GENERAL INSURANCE COMPANY


                                By:  /s/ Barry D. Elkins
                                     ------------------------------------------
                                     Barry D. Elkins
                                     Vice President and Chief Financial Officer




                                DIRECT GENERAL INSURANCE AGENCY, INC.


                                By:  /s/ Barry D. Elkins
                                     ------------------------------------------
                                     Barry D. Elkins
                                     Vice President and Chief Financial Officer


<PAGE>

ACKNOWLEDGED AND AGREED TO as
of the date of this letter:

LR3 ENTERPRISES, INC. (including the Agencies as defined in the Option
Agreement)


By:  /s/ Lloyd E. Register, IV
     ------------------------------------
     Name:  Lloyd E. Register, IV
     Title: Vice President



     MAITLAND UNDERWRITERS, INC.


By:  /s/ Lloyd E. Register, IV
     ------------------------------------
     Name:  Lloyd E. Register, IV
     Title: Vice President




cc: Jed Berman, Esq.
(fax only: 407-644-4128)

<PAGE>
                        DIRECT GENERAL INSURANCE COMPANY
                              Nashville, Tennessee

                                February 20, 2002


VIA FACSIMILE AND U.S. MAIL
---------------------------
Maitland Underwriters, Inc.
LR3 Enterprises, Inc.
153 5 North Maitland Avenue
Maitland, Florida 32751

Attention: Jon Register
Facsimile: (407) 260-2207

Dear Jon:

         This letter agreement reflects recent conversations between you and
William Adair and me regarding certain proposed modifications to our arrangement
in Florida. Our agreement expressed in this letter is intended to modify each of
the following:

         (i) Florida Managing General Agency Agreement effective August 16,
1999, by and between Direct General Insurance Company ("DGIC") and Maitland
Underwriters, Inc. (the "MGA Agreement");

         (ii) Option Agreement dated as of August 16, 1999, between Direct
General Insurance Agency, Inc. ("DGIA") and LR3 Enterprises, Inc., Maitland
Underwriters, Inc. (the "Option Agreement", including the Asset Purchase
Supplement attached thereto) and each of the Agencies identified on Schedule A
to the Option Agreement; and

         (iii) Premium Finance Services Agreement effective August 16, 1999, by
and between Direct General Financial Services, Inc., and LR3 Enterprises, Inc.,
Maitland Underwriters, Inc., (the "Premium Finance Agreement") and each of the
Florida-based insurance agencies whose name is listed on Schedule A to the
Premium Finance Agreement.

In addition, all parties intend for this letter agreement to supercede and
replace in its entirety that certain letter agreement dated January 9, 200 1
between our two organizations (the "Prior Letter Agreement"). Unless otherwise
defined in this letter agreement, capitalized terms used in this letter have the
same definitions ascribed to them in the MGA Agreement and Option Agreement,
respectively.

         PRIOR LETTER AGREEMENT

         The Prior Letter Agreement shall be terminated effective as of November
1, 2001 and shall no longer be enforceable or have any effect.


<PAGE>


         MGA AGREEMENT

         Schedule C. commission Schedule. For policies effective as of November
1, 2001, the Operational Commission Rate shall be reduced from 22.5% to 19.5%
for each of Private Passenger Automobile Liability and Physical Damage. If DGIA
decides not to exercise the Option or if the Option Agreement is otherwise
terminated in accordance with the Option Agreement, then DGIC may withhold
commissions payable to MGA from the date of Notice of such decision or
termination of the Option Agreement through the termination date of the MGA
Agreement until the aggregate amount withheld is equal to the aggregate amount
of the Purchase Price Deposit paid by DGIA under the Option Agreement, as
provided in the amendment to the Option Agreement set forth below. If for any
reason there are insufficient commissions payable to MGA to equal the aggregate
amount of DGIA's Purchase Price Deposit, then upon the termination date of the
MGA Agreement, LR3 or MGA shall pay to DGIC any such shortfall amount in full as
soon as possible, but in no event more than fifteen (15) business days after
such termination date. All such funds withheld by, or paid to, DGIC for the
purpose of refunding DGIA's Purchase Price Deposit shall be remitted by DGIC to
DOIA.

         Section 12.01. Term. The first sentence of this Section shall be
revised to read as follows (modification is in italics):

         "The initial term of this Agreement shall commence on the Effective
         Date, and, including the Trial Period, terminate on the fourth
         anniversary of the Operational Date, unless terminated earlier as set
         forth in Article 13 below."

Because the Operational Date was November 1, 1999, the effect of this revision
to Section 12.01 is that the term of the MGA Agreement shall terminate on
November 1, 2003.

         OPTION AGREEMENT

         Section 3. Exercise Date. The first sentence of this Section shall be
revised to read as follows (modification is in italics):


         "The Option shall become exercisable on the fourth anniversary of the
         Operational Date as defined in the MGA Agreement (the "Exercise
         Date")."

The effect of this revision to Section 3 is that the Exercise Date under the
Option Agreement becomes November 1, 2003. Furthermore, the Closing Date, as
defined in Section 2.1 of the Asset Purchase Supplement to the Option Agreement,
is the same date as the Exercise Date, as defined in the Option Agreement. Thus,
our extension of the Exercise Date under the Option Agreement automatically
extends the Closing Date to November 1, 2003.

         Section 2. Purchase Price. The following new paragraph shall be added
to Section 2:

                  "Effective as of November 1, 2001, DGIA shall pay a refundable
         "Purchase Price Deposit" to LR3 on behalf of LR3 and the other Sellers
         under the Option Agreement. The Purchase Price Deposit shall be paid on
         a monthly basis



<PAGE>

        and shall be calculated in an amount equal to three percent (3%) of the
        net written premiums of the automobile insurance business written by the
        Agencies on behalf of DGIC in Florida during the period beginning
        November 1, 2001 (i.e., policies with an effective date of November 1,
        2001) and ending on the Closing Date. The amount of the purchase price
        calculated in accordance with the formula described above shall be
        reduced by an amount equal to the aggregate Purchase Price Deposit paid
        by DGIA to LR3 or Maitland as of the Closing Date. The parties
        acknowledge that in the event the Option expires or is terminated for
        any reason, the aggregate amount of the Purchase Price Deposit paid by
        DGIA shall be refunded in the manner set forth on amended Schedule C of
        the MGA Agreement."

         Section 9. Termination. Because of our agreed upon extension of the
Exercise Date to November 1, 2003 as described above, the automatic termination
of the Option Agreement and expiration of the Option that are provided in
Section 9 of the Option Agreement, shall likewise be extended to November 1,
2003 in conformity with the extended Exercise Date.

         Section 1.5 of the Asset Purchase Supplement to the Option Agreement.
Proceeds at Closing. In clause (ii) of this Section 1.5, the word "third" shall
replace the word "second" to reflect the intent of the parties with respect to
identifying the twelve-month period of cancellations that will be used to
calculate the estimated amount of unearned commissions to be used in calculating
the amount of the proceeds to be paid by Purchaser at the Closing, as provided
in this Section 1.5.

         PREMIUM FINANCE AGREEMENT

         Section 3. Term. The first sentence of this Section shall be revised to
read as follows (modification is in italics):

         "The initial term of this Agreement shall commence on the Effective
         Date, and, including the Trial Period (as defined in the MGA
         Agreement), terminate on the fourth anniversary of the Operational Date
         (as defined in the MGA Agreement), unless terminated earlier as set
         forth in Section 12 below."

The effect of this revision to Section 3 is that the term of the Premium Finance
Agreement shall terminate on November 1, 2003 in conformity with the above
described modifications to the MGA Agreement and Option Agreement.

         Furthermore, the intent of the parties to modify their relationship as
expressed in this letter agreement shall, if necessary, be applied to conform
other provisions of the MGA Agreement, Option Agreement (including the Asset
Purchase Supplement) and the Premium Finance Agreement that are affected by the
terms of this letter, even if such provisions have not been specifically
referenced in this letter. All other provisions of the MGA Agreement, Option
Agreement (including the Asset Purchase Supplement) and the Premium Finance
Agreement that are not affected by the terms of this letter agreement shall
remain in full force and effect.


<PAGE>


         If the foregoing accurately reflects our understanding, please sign in
the space provided below and return a fully executed copy of this letter
agreement to my attention. Upon your execution and return of this letter
agreement, its terms shall be deemed effective as of November 1, 2001.


                         DIRECT GENERAL INSURANCE COMPANY

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


                         DIRECT, GENERAL INSURANCE AGENCY, INC.

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


                         DIRECT GENERAL FINANCIAL SERVICES, INC.

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

ACKNOWLEDGED AND AGREED TO as of the date of this letter,
the terms of which are effective as of November 1 , 2001:

LR3 ENTERPRISES, INC. (including the Agencies as defined under the Option
Agreement and the Premium Finance Agreement)


By:  /s/ Lloyd E. Register, IV
     -----------------------------------
     Name:  Lloyd E. Register, IV
     Title: V.P.............

MAITLAND UNDERWRITERS, INC.

By:  /s/ Lloyd E. Register, IV
     -----------------------------------
     Name:  Lloyd E. Register, IV
     Title: V.P.............






cc:  Jed Berman, Esq.
     (fax only: 407-644-4128)