<PAGE>
                                                                    Exhibit 10.3

                                                                        T. ADAIR

                         EXECUTIVE EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 21st day of July 2003, between DIRECT GENERAL CORPORATION, a Tennessee
corporation (the "Company") and TAMMY R. ADAIR (the "Executive").


                                    RECITALS


     A.  It is the desire of the Company to continue the employment of the
         Executive as its Executive Vice President as described in this
         Agreement.

     B.  The Executive desires to provide her services to the Company on the
         terms set forth in this Agreement.

     C.  The independent directors of the Company's Board of Directors have
         approved this Agreement as it relates to the Executive's compensation.

         NOW, THEREFORE, in consideration of the foregoing, and of the
respective covenants and agreements set forth below, the parties hereto agree as
follows:

                                   ARTICLE I
                                SERVICES AND TERM

         1.1.   TERM. Subject to the termination provisions set forth in Section
3.1, the Company will employ the Executive and the Executive accepts employment
with the Company for a period of five (5) years (the "Term") commencing on the
date of the completion of the initial public offering of Company's stock (the
"Effective Date").

         1.2.   SERVICES. During the Term, the Executive will serve as the
Company's Executive Vice President and will be primarily responsible for
overseeing the implementation of the Company's business strategy and such other
duties, commensurate with her position and authority, as are reasonably
determined, from time to time, by the Company's Chief Executive Officer (the
"CEO") and its Board of Directors (the "Board"). The duties of the Executive
shall at all times be subject to the direction, approval and control of the CEO
and the Board. The Executive shall devote her full business time and effort to
the performance of her duties hereunder.

         1.3.   PERSONAL. During this Agreement, it shall not be a violation of
this Agreement for Executive to (i) serve on corporate, civic or charitable
boards or committees; (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions; or (iii) manage personal investments or
companies in which personal investments are made so long as such activities do
not significantly interfere with the performance of Executive's responsibilities
with the Company and which companies are not in direct competition with or
otherwise conflict with the interests of the Company or its subsidiaries. Any
income incurred by Executive outside the scope of her employment and permitted
pursuant to the provisions hereof, shall inure to the benefit of Executive, and
the Company shall not claim any entitlement thereto; provided, however, that any
income derived by Executive related to the business of the Company or its
subsidiaries, including, without limitation, cash or equity compensation for
serving on boards of directors of companies in which the Company or its
subsidiaries has a



<PAGE>

significant investment, shall be paid over to the Company as and when received
unless otherwise agreed upon in writing by the parties.

                                   ARTICLE II
                              COMPENSATION PACKAGE

         2.1.   CASH COMPENSATION.

                (a)     BASE SALARY. During the Term, the Company will pay the
Executive an annual base salary of at least $200,000.00 for each twelve-month
period of the Term. The Executive's base salary shall be payable in accordance
with the normal payroll procedures of the Company. The Company's Board of
Directors or Compensation Committee shall annually review such base salary and
may increase such base salary.

                (b)     BONUS OPPORTUNITY. The Executive shall be eligible for
the payment of a bonus and to participate in such bonus program, option program
or other form of equity participation as the Compensation Committee of the
Company's Board of Directors may determine, in its sole discretion, based on
Executive's performance and the Company's business and financial condition and
operating results achieved.

         2.2    BENEFITS.

                (a)     BENEFIT PLANS. During the Term, the Executive shall be
eligible to participate in such medical, dental, health, retirement, savings,
welfare and life and disability insurance plans (including supplemental
retirement and savings plans) generally made available from time to time to
senior executives of the Company (subject to the usual terms of such plans), and
to receive other fringe benefits on terms and conditions that are at least as
favorable as the fringe benefits generally provided to other senior executives
of the Company at the time such other fringe benefits, if any, are made
available to them.

                (b)     PAID TIME OFF AND OTHER PAID LEAVE. During the term of
this Agreement, Executive shall be entitled to a minimum of 24 days of paid time
off ("PTO") annually, which shall accrue in accordance with the Company's PTO
policy applicable to all full-time employees as in effect from time to time. In
addition, Executive shall be entitled to paid time off for the same holidays as
other employees of the Company.

                (c)     BUSINESS EXPENSES. The Company will promptly pay or
reimburse the Executive for all reasonable business-related expenses incurred by
her in connection with the performance of her duties hereunder upon presentation
of written documentation, subject, however, to the Company's reasonable policies
relating to business-related expenses as in effect from time to time.

                (d)     COMPANY CAR AND EXPENSES. The Company will provide
Executive with a sports utility vehicle or comparable company car for her
business and/or personal use during the entire term of her employment with
Company. It is the Company's desire to furnish Executive with a vehicle that
meets her reasonable satisfaction; therefore, the Executive shall have prior
approval as to any vehicle purchased for her use. The Company will pay all
expenses associated with or necessary for its operation, including, but not
limited to, any and all repair and gasoline costs. Said Company vehicle will be
replaced on a regular basis in accordance with the Company's policy and
procedures then in effect, but in any event upon the vehicle incurring in excess
of 60,000 miles. Executive's use of such vehicle and Company's payment of
related operation expenses may be subject to applicable state and federal
withholding taxes. In such event, Executive agrees that Executive will pay the
taxes through the Company's usual and customary payroll tax deductions.




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         2.3.   STOCK OPTIONS.

In accordance with the provisions of the Company's 2003 Equity Incentive Plan
(the "2003 Plan") and the specific authorization of the Committee (as that term
is defined in the 2003 Plan), the Company will grant to the Executive stock
options for the purchase of Seven Thousand Five Hundred (7,500) shares of
Company Common Stock ("Option Stock"). The effective date of such grant shall be
the date of the Company's initial public offering of its Common Stock ("IPO")
and the per share exercise price for said ISOs shall be equal to the Fair Market
Value (as defined in the 2003 Plan) of the Common Stock on the effective date of
the grant. The options shall vest in five (5) equal annual installments, with
the first annual installment vesting on the first anniversary of the date of
grant of the options. The options to be granted pursuant to this paragraph are
intended to qualify as incentive stock options ("ISOs") under the terms of the
2003 Plan, to the maximum extent permitted by law and applicable regulations.
Executive understands that the Committee may designate a portion of the options
granted under this paragraph to be non-qualified options, if necessary to comply
with applicable law and regulations related to ISOs. The options to be granted
pursuant to this paragraph shall be subject to such other terms and conditions
that are consistent with the 2003 Plan, as determined by the Committee in its
sole discretion, and such terms and conditions shall be reflected in one or more
option agreement(s) entered into between Executive and the Company pursuant to
the 2003 Plan. Notwithstanding anything to the contrary contained in this
Agreement or the 2003 Plan, all options to acquire Option Stock shall
irrevocably vest thirty (30) calendar days prior to the scheduled consummation
of a Change of Control (as defined herein by reference to the 2003 Plan). If any
change(s) in the federal income tax laws materially affect tax treatment of
Employee with respect to an option or the Option Stock, the parties agree to
negotiate in good faith to reach an agreement that will take advantage of, or
minimize the disadvantages of, such changes. As used in this Agreement, "Change
of Control" shall have the same meaning as provided in the 2003 Plan.

         2.4.   INDEMNIFICATION. The Company shall indemnify Executive (and her
executors, administrators, heirs, and assigns) to the fullest extent permitted
by applicable law and the Company's Charter and Bylaws, all as in effect from
time to time.

                                  ARTICLE III
                             TERMINATION OF SERVICES

         3.1.   TERMINATION. Executive's employment with the Company hereunder
may be terminated by the Company or the Executive, as applicable, at any time
prior to the end of the Term for any of the following reasons:

                (a)     DISABILITY. The Company may terminate the Executive's
employment hereunder upon the failure of the Executive to render services to the
Company on a full-time basis for a continuous period of six (6) months because
of the Executive's physical or mental disability or illness ("Disability"),
provided such termination does not otherwise violate applicable law. If there
should be a dispute between the parties as to the Executive's physical or mental
disability, such dispute shall be settled by the opinion of an impartial
reputable physician agreed upon for such purpose by the parties or their
representatives. If the parties are unable to agree upon a physician within 30
days after one party submits the name of a physician to the other party, then
the selection of a physician for the purposes of this paragraph shall be
submitted to arbitration in accordance with Section 5.4 (Disputes) hereof. The
certificate of such physician as to the matter in dispute shall be final and
binding on the parties.

                (b)     FOR CAUSE. The Company may terminate this Agreement and
the Executive's employment hereunder for Cause. For purposes of this Agreement,
"Cause" shall mean: (i) the Executive's failure or refusal to materially perform
her duties under this Agreement; (ii) the Executive's failure or refusal to
follow material lawful directions of the CEO or Board or any other act of
material




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insubordination on the part of Executive; (iii) the engaging by the Executive in
misconduct, including but not limited to any type of sexual harassment, which
misconduct is materially and demonstrably injurious to the Company or any of its
divisions, subsidiaries or affiliates, monetarily or otherwise; (iv) Executive's
conviction of, or plea of guilty or nolo contendere with respect to a felony
(other than a traffic violation); or (v) the commission (or attempted
commission) of any act of fraud or dishonesty by the Executive which is
materially detrimental to the business or reputation of the Company or any of
its divisions, subsidiaries or affiliates.

                (c)     WITHOUT CAUSE OR FOR GOOD REASON.

                        (i)     The Company may terminate the Executive's
employment hereunder without Cause upon thirty (30) days written notice to the
Executive.

                        (ii)    The Executive may terminate her employment
hereunder for Good Reason upon thirty (30) days written notice to the Company.

                        "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent), of any one of the following acts by the Company, or
failures by the Company to act:

                               (I)          the assignment to the Executive of
                                            any duties inconsistent with the
                                            Executive's status as an executive
                                            officer of the Company (including by
                                            reason of the Company becoming a
                                            subsidiary of another company) or a
                                            substantial adverse alteration in
                                            the nature or status of the
                                            Executive's title or
                                            responsibilities from those in
                                            effect as of the date hereof;

                               (II)         a reduction by the Company in the
                                            Executive's annual base salary or
                                            annual bonus opportunity as set
                                            forth in the Agreement or as the
                                            same may thereafter be increased
                                            from time to time, or a failure to
                                            provide the Executive with
                                            participation in any stock option or
                                            other equity-based plan in which
                                            other employees of the Company (and
                                            any parent, surviving or acquiring
                                            company) participate on a basis that
                                            does not unreasonably discriminate
                                            against the Executive as compared to
                                            such other employees who have
                                            similar levels of responsibility and
                                            compensation;

                               (III)        the relocation of the Executive's
                                            principal place of employment to a
                                            location more than fifty (50) miles
                                            from the Executive's principal place
                                            of employment as of the date hereof,
                                            except for required travel and
                                            overnight stays on the Company's
                                            business to an extent substantially
                                            consistent with the Executive's
                                            business travel obligations as of
                                            the date hereof; or

                               (IV)         any material breach by the Company
                                            of its obligations under this
                                            Agreement.

                The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. Except as provided above, the Executive's continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any act or failure to act constituting Good Reason hereunder. The Executive
may resign for Good Reason only if such Executive provides the thirty (30) days
written Notice of Termination to the Company, as described in Section 3.1(c)(ii)
above, within three months of the Executive becoming aware that the basis for
such Good Reason exists.



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                (d)     DEATH. The Executive's employment hereunder shall
automatically terminate on the death of the Executive.

         3.2.   PAYMENT ON TERMINATION BY COMPANY FOR CAUSE. In the event that
Executive's employment is terminated by the Company for Cause pursuant to
Section 3.1(b) hereof, Executive shall be entitled to receive the following
payments not later than twenty (20) business days after the date of termination:

                (a)     payment of any earned but unpaid salary accrued through
and including the date of termination;

                (b)     payment of accrued, but unused, PTO time; and

                (c)     reimbursement of any unreimbursed business expenses
incurred prior to the date of termination.

         3.3.   PAYMENT ON TERMINATION BY COMPANY WITHOUT CAUSE OR BY EXECUTIVE
FOR GOOD REASON. Subject to the Executive's continuing compliance with the
covenants contained in Article IV of this Agreement (the "Covenants") and the
execution by the Executive of a customary binding general waiver and release of
claims (the "Release"), in the event that the Executive's employment is
terminated by the Company without Cause pursuant to Section 3.1(c)(i) hereof or
by the Executive for Good Reason pursuant to 3.1(c)(ii) hereof, then the
Executive, or the Executive's estate in the event of her death following such
termination, shall be entitled to receive the following less any required
withholdings:

                (a)     payment of any earned, but unpaid salary accrued through
and including the date of termination;

                (b)     payment of (i) any earned but unpaid annual bonus from a
previous calendar year and (ii) any earned but unpaid amounts that may be paid
under any company long term incentive plans to be paid according to the terms of
such plans;

                (c)     payment of the bonus amounts pursuant to Section 2.1(b)
(Bonus Opportunity), pro-rated based on the actual number of days elapsed in the
year in which Executive's termination takes place;

                (d)     continued payment of Executive's most recent salary for
a period of twenty-four (24) months from the date of termination;

                (e)     payment of accrued, but unused PTO time;

                (f)     reimbursement any unreimbursed business expenses, or
automobile expenses incurred prior to the date of termination;

                (g)     for twenty-four (24) months, from the date of
termination, the Company shall continue to provide Executive and her or her
eligible dependents with all benefit plans and other fringe benefits as
described in Section 2.2(a) (Benefit Plans) that were being provided to the
Executive immediately prior to her termination of employment upon the same terms
and conditions as provided to other senior executives; after twenty-four (24)
months, Executive and her or her eligible dependents shall be eligible for COBRA
benefits for eighteen (18) months or such longer period as provided by COBRA;
and



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<PAGE>

                (h)     immediate amendment to any outstanding option
agreement(s), pursuant to which any stock options of the Company have been
granted to Executive, to provide that (i) 100% of such options shall immediately
vest and (ii) may be exercised within three (3) years of Executive's termination
date; provided, however, that if such amendment to extend the term for the
exercise of such options would disqualify the ISO status of any such options,
Executive may elect that any such option agreement(s) not be amended to the
extent necessary to maintain the tax qualified status of such ISOs.

         3.4.   PAYMENT ON TERMINATION DUE TO DEATH OR DISABILITY. Company shall
make the following payments to Executive in the event of termination due to
Disability (as defined in Section 3.1(a) hereof) or to Executive's estate in the
event of Executive's Death: the payments set forth in Sections 3.3(a), (b), (c)
(d), (e) and (f). In the event of Death following Disability, amounts remaining
to be paid under this section shall be paid to Executive's estate.

                                   ARTICLE IV
                                    COVENANTS

         4.1.   NON-COMPETITION.

                (a)     During the Term. The Executive covenants and agrees that
during the Term, the Executive shall not directly or indirectly own an interest
in, operate, join, control, advise, consult to, work for, serve as a director or
manager of, have a financial interest, or participate in any corporation,
partnership, proprietorship, firm, association, person, or other entity that
engages or is planning to be engaged in the business of writing, issuing,
underwriting, selling, distributing or re-insuring personal property and
casualty or life insurance products or any other business in which the Company
is engaged during the Term (the "Business"). This Covenant applies to each state
or territory in which the Company is doing Business or is making an active
effort to do Business during the Term.

                (b)     During Post-Termination Period. The Executive covenants
and agrees that for a period of TWENTY-FOUR (24) MONTHS (THE "POST-TERMINATION
PERIOD"), following a termination of her or her employment by the Company
without Cause pursuant to Section 3.1(c)(i) hereof, or by the Executive for Good
Reason pursuant to Section 3.1(c)(ii) hereof, the Executive shall not directly
or indirectly own an interest in, operate, join, control, advise, consult to,
work for, serve as a director or manager of, have a financial interest, or
participate in any corporation, partnership, proprietorship, firm, association,
person, or other entity that engages or is planning to be engaged in the
business of writing, issuing, underwriting, selling, distributing or re-insuring
non-standard personal automobile insurance or any other business in which the
Company is engaged at the time of such termination of Executive's employment
(the "Pre-Termination Business"). This Covenant applies to each state or
territory in which the Company is doing such Pre-Termination Business or is
making an active effort to do such Pre-Termination Business at the time the
Executive's employment with the Company is terminated.

                (c)     Passive Investments Permitted. This non-competition
Covenant does not prohibit the passive ownership, during either the Term or
during the Post-Termination Period, of less than five percent (5%) of the
outstanding stock or debt of any corporation, the securities of which are
publicly traded, as long as the Executive is not otherwise in violation of this
Section 4.1.



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         4.2.   NO DIVERSION. The Executive covenants and agrees that (i) during
the Term and (ii) during the POST-TERMINATION PERIOD, she shall not divert or
attempt to divert or take advantage of or attempt to take advantage of any
actual or potential Business or Pre-Termination Business opportunities, as the
case may be, which the Executive becomes or became aware of during her or her
employment with the Company.

         4.3.   NON-RECRUITMENT. The Executive agrees that the Company has
invested substantial time and effort in assembling its present workforce.
Accordingly, the Executive covenants and agrees that during the Term and the
Post-Termination Period, she shall not directly or indirectly entice or solicit
(other than pursuant to general, non-targeted public media advertisements) or
seek to induce or influence any of the Company's Employees to leave their
employment.

         4.4.   NON-DISCLOSURE. This Agreement hereby incorporates by reference
in its entirety that certain Confidentiality Agreement entered into between the
Company and the Executive as of January 22, 2003 (the "Confidentiality
Agreement").

         4.5.   TERMINATION FOR CAUSE. Executive agrees that if her employment
is terminated for Cause pursuant to Section 3.1 (b) hereof, Executive shall be
bound (i) to the Covenants set forth in Sections 4.2 (No Diversion) and 4.3
(Non-Recruitment) hereof, for the duration of the Post-Termination Period, (ii)
to the Covenant set forth in Section 4.4 (Non-Disclosure) hereof for the
duration on the Post-Termination Period or the term of the Confidentiality
Agreement, whichever period is longer, and (iii) to the Covenants set forth in
Subsections (b) and (c) of Section 4.1 (Non-Competition) hereof for a duration
of SIX (6) MONTHS following such termination.

         4.6.   INJUNCTIVE REMEDIES. The Executive acknowledges that should she
violate any of the Covenants, it will be difficult to determine the resulting
damages to the Company and, in addition to any other remedies it may have, and
notwithstanding the provisions of Section 5.4 (Disputes) hereof, the Company
shall be entitled to temporary injunctive relief, up to such time as the
arbitration proceedings provided by Section 5.4 hereof have been completed,
without being required to post a bond.

         The Company may elect to seek one or more of these injunctive remedies
at its sole discretion on a case-by-case basis. Failure to seek any or all
remedies in one situation does not restrict the Company from seeking any such
remedies in another situation. Such action by the Company or Executive shall not
constitute a waiver of any of its or the Executive's other rights hereunder.

         4.7.   SEVERABILITY AND MODIFICATION OF ANY UNENFORCEABLE COVENANT. It
is the parties' intent that each of the Covenants be read and interpreted with
every reasonable inference given to its enforceability. However, without
limiting the generality of Section 5.5 (Severability, Enforceability) hereof, it
is also the parties' intent that if any term, provision or condition of the
Covenants is held to be invalid, void or unenforceable, the remainder of the
provisions thereof shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. Finally, it is also the parties' intent that
if it is determined any of the Covenants are unenforceable because of over
breadth, then the covenant shall be modified so as to make it reasonable and
enforceable under the prevailing circumstances.

         4.8.   TOLLING. In the event of the breach by Executive of any Covenant
the running of the period of restriction shall be automatically tolled and
suspended for the amount of time that the breach continues, and shall
automatically recommence when the breach is remedied so that the Company shall
receive the benefit of Executive's compliance with the Covenants. This paragraph
shall not apply to any period for which the Company is awarded and receives
actual monetary damages for breach by the Executive of a Covenant with respect
to which this paragraph applies.





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<PAGE>

                                   ARTICLE V
                                  MISCELLANEOUS

         5.1.   SUCCESSORS. This Agreement shall inure to the benefit of the
Company and its successors and assigns, as applicable and to the benefit of
Executive's personal or legal representatives, executors, administrators or
heirs. If the Company shall merge or consolidate with or into, or transfer
substantially all of its assets, including goodwill, to another corporation or
other form of business organization, this Agreement shall be binding on, and run
to the benefit of, the successor of the Company resulting from such merger,
consolidation, or transfer. The Executive shall not assign, pledge, or encumber
her interest in this Agreement, or any part thereof, without the prior written
consent of the Company, and any such attempt to assign, pledge or encumber any
interest in this Agreement shall be null and void and shall have no effect
whatsoever.

         5.2.   GOVERNING LAW. This Agreement is being made and executed in and
is intended to be performed in the State of Tennessee and shall be governed,
construed, interpreted and enforced in accordance with the substantive laws of
the State of Tennessee, without regard to the conflict of laws principles
thereof.

         5.3.   ENTIRE AGREEMENT. This Agreement, the Confidentiality Agreement
referenced in Section 4.4 (Non-Disclosure) hereof, and any stock option or other
incentive award agreement(s) entered into between Executive and the Company
under the Company's 1996 Employee Stock Incentive Plan or its 2003 Equity
Incentive Plan comprise the entire agreement between the parties hereto relating
to the subject matter hereof and as of the Effective Date, supersedes, cancels
and annuls all other previous agreements between the Company (and/or its
predecessors) and the Executive, as the same may have been amended or modified,
and any right of the Executive under such other previous agreement, other than
for compensation accrued thereunder as of the date hereof, and supersedes,
cancels and annuls all other prior written and oral agreements between the
Executive and the Company or any predecessor to the Company. The terms of this
Agreement and the other agreements identified in this paragraph are intended by
the parties to be the final expression of their agreement with respect to the
employment of the Executive by the Company and may not be contradicted by
evidence of any other prior or contemporaneous agreement.

         5.4.   DISPUTES.

                (a)     Any dispute or controversy arising under, out of, in
connection with or in relation to this Agreement, including any claims for
discrimination or other similar violation of federal law, shall be finally
determined and settled by arbitration in Shelby County Tennessee, in accordance
with the rules and procedures of the American Arbitration Association, and
judgment upon the award may be entered in any court having jurisdiction thereof.

                (b)     If any arbitration or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, in addition to any other relief that may be granted, the prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding; provided that with respect to any
arbitration proceeding, the amount of such recovery may be limited in whole or
in part as may be determined by the arbitrators.

         5.5.   SEVERABILITY, ENFORCEABILITY. If any provision of this
Agreement, or the application thereof to any person, place, or circumstance,
shall be held to be invalid, unenforceable, or void by the final determination
of an arbitration proceeding mandated by Section 5.4 (Disputes) hereof or, if
applicable, a court of competent jurisdiction in any jurisdiction and all
appeals therefrom shall have failed or the time for such appeals shall have
expired, as to that jurisdiction and subject to this Section




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<PAGE>

5.5, such clause or provision shall be deemed eliminated from this Agreement,
but the remaining provisions shall nevertheless be given full force and effect.
In the event this Agreement or any portion hereof is more restrictive than
permitted by the law of the jurisdiction in which enforcement is sought, this
Agreement or such portion shall be limited in that jurisdiction only, and shall
be enforced in that jurisdiction as so limited to the maximum extent permitted
by the law of that jurisdiction.

         5.6.   NOTICES. Any notice, request, claim, demand, document and other
communication hereunder to any party shall be effective upon receipt (or refusal
of receipt) and shall be in writing and delivered personally or sent by
facsimile (with confirmation), electronic mail, commercial courier service, or
U.S. certified or registered mail, postage prepaid, as follows:

                If to the Company:

                Direct General Corporation

                Attention: General Counsel or Vice President - Human Resources

                1281 Murfreesboro Road

                Nashville, TN 37217

                Fax: (615) 366-3722

                E-mail: ron.wilson@directins.com

                or to such other facsimile number, address or addresses as the
Company may specify to Executive in writing from time to time.

                If to the Executive:

                Tammy R. Adair

                154 Koph Road, Senatobia, MS 38668

                Fax: 901-541-3382

                E-mail: Tammy.Adair@directins.com

                or to such other facsimile number or address or addresses as
Executive may specify to the Company in writing from time to time.

         5.7    COUNTERPARTS. This Agreement may be executed by facsimile and in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement. If executed by
facsimile, within five (5) business days after the parties exchange signed
facsimiles, each party shall provide to the other party the originally signed
Agreement or counterpart.

         5.8    AMENDMENTS; WAIVERS. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, approved by the Board
(or the Committee, if related to compensation matters) and signed by the
Executive and the Company. By an instrument in writing similarly executed, the
Executive or the Company may, with the approval of the Board (or the Committee,
if related to compensation matters), waive compliance by the other party or
parties with any provision of this Agreement that such other party was or is
obligated to comply with or perform; provided, however, that such waiver shall
not operate as a waiver of, or estoppel with respect to, any other or subsequent
failure. No failure to exercise and no delay in exercising any right, remedy or
power hereunder shall preclude any other or further exercise of any other right,
remedy or power provided herein or by law or in equity.

         5.9    NO INCONSISTENT ACTIONS. The parties hereto shall not
voluntarily undertake any action inconsistent with, or voluntarily undertake or
fail to undertake any action or course of action to avoid or evade, the
provisions or essential intent of this Agreement. Furthermore, it is the intent
of the parties




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hereto to act in a fair and reasonable manner with respect to the interpretation
and application of the provisions of this Agreement.

                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written, to become effective on the
Effective Date as provided in Section 1.1 (Term) hereof.



DIRECT GENERAL CORPORATION                         EXECUTIVE


By:     /s/ Barry D. Elkins
        ------------------------------------       /s/ Tammy R. Adair
                                                   ----------------------------
Name:   Barry D. Elkins                            Tammy R. Adair
        ------------------------------------
Title:  Senior Vice President and CFO
        ------------------------------------



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