Document:

<PAGE>
                                                                     Exhibit 4.5

                           DIRECT GENERAL CORPORATION

                          COMMON STOCK PURCHASE WARRANT

                           EXPIRING NOVEMBER 25, 2004

<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                Page
<S>      <C>                                                                     <C>
1.       Exercise of Warrant......................................................1
         1.1      Manner of Exercise..............................................1
         1.2      When Exercise Deemed Effected...................................2
         1.3      Delivery of Stock Certificates, etc.............................2

2.       Adjustment of Common Stock Issuable Upon Exercise .......................3
         2.1      Number of Shares; Warrant Price.................................3
         2.2      Adjustment of Warrant Price.....................................3
         2.3      No Fractional Shares to be Issued..............................10
         2.4      Statement Specifying Adjusted Warrant Price....................10
         2.5      Company Will Reserve Stock for Exercise........................10
         2.6      Corporate Action; Registration.................................10
         2.7      No Charge for Exercise.........................................11

3.       Consolidation, Merger, Sale of Assets, Reorganization, etc..............11
         3.1      General Provisions.............................................11
         3.2      Assumption of Obligations......................................12

4.       Notices of Corporate Action.............................................13

5.       Restrictions on Transfer................................................14
         5.1      Restrictive Legends............................................14
         5.2      Notice of Proposed Transfer; Opinions of Counsel...............15
         5.3      Termination of Restrictions....................................16
         5.4      Right of First Offer...........................................16
         5.5      Stockholders Agreement.........................................17

6.       Registration Under Securities Act, etc..................................17
         6.1      Required Registrations.........................................17
         6.2      Incidental Registration........................................18
         6.3      Registration Procedures........................................19
         6.4      Allocation of Expenses.........................................23
         6.5      Indemnification and Contribution...............................23
         6.6      Indemnification with Respect to Underwritten Offering..........26
         6.7      Information by Holder..........................................27
         6.8      "Stand-Off" Agreement..........................................27
         6.9      Rule 144 Requirements..........................................27
         6.10     Selection of Underwriter.......................................28

7.       Listing on Securities Exchange..........................................28

8.       Ownership, Transfer and Substitution of Warrants........................28
</TABLE>

                                       i
<PAGE>
<TABLE>
<CAPTION>
                                                                                Page
<S>      <C>                                                                     <C>
         8.1      Ownership of Warrants..........................................28
         8.2      Transfer and Exchange of Warrants..............................29
         8.3      Replacement of Warrants........................................29

9.       Definitions.............................................................29

10.      Remedies................................................................33

11.      No Rights or Liabilities as Warrantholder...............................33

12.      Notices.................................................................33

13.      Miscellaneous...........................................................34

14.      Expiration; Notice......................................................34

Form of Subscription
Form of Notice
</TABLE>

                                       ii
<PAGE>

                          Common Stock Purchase Warrant
                           Expiring November 25, 2004

                                                              New York, New York
                                                               November 25, 1996

No. W-1

        DIRECT GENERAL CORPORATION, a Tennessee corporation (the "Company"), for
value received, hereby certifies that ELDON CAPITAL, INCORPORATED or registered
assigns, is entitled to purchase from the Company 16,255 duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock, no par
value, of the Company (the "Common Stock") at the purchase price per share of
$49.22, at any time or from time to time on or prior to 3 P.M., New York City
time, on November 25, 2004, all subject to the terms, conditions and adjustments
set forth below in this Warrant.

        This Warrant (together with all Warrants issued in substitution herefor,
the "Warrants") was originally issued pursuant to the Engagement Agreement,
dated as of November 18, 1996, between the Company and Eldon Capital,
Incorporated, a Delaware corporation. The Warrant originally so issued evidences
rights to purchase an aggregate of 16,255 shares of Common Stock, subject to
adjustment as provided herein. Certain capitalized terms used in this Warrant
are defined in Section 9.

        1. Exercise of Warrant.

        1.1 Manner of Exercise. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours on any Business Day by
surrender of this Warrant, with the form of subscription at the end hereof (or a
reasonable facsimile thereof) duly executed by such holder, to the Company at
its principal office (or, if such exercise shall be in connection with an
underwritten Public Offering of shares of Common Stock subject to this Warrant,
at the location at which the Company shall have agreed to deliver the shares of
Common Stock subject to such offering), accompanied by payment, in cash by wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying (a) the number of shares of
Common Stock (without giving effect

<PAGE>

to any adjustment therein) designated in such form of subscription by (b) $49.22
and such holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
determined as provided in section 2.

        1.2 When Exercise Deemed Effected. Each exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the Business Day on which this Warrant shall have been surrendered to the
Company as provided in section 1.1, and at such time the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such exercise as provided in section 1.3 shall be deemed
to have become the holder or holders of record thereof.

        1.3 Delivery of Stock Certificates, etc. As soon as practicable after
the exercise of this Warrant, in whole or in part, and in any event within ten
Business Days thereafter (unless such exercise shall be in connection with an
underwritten Public Offering of shares of Common Stock subject to this Warrant,
in which event concurrently with such exercise), the Company at its expense will
cause to be issued in the name of and delivered to the holder hereof or, subject
to section 5, as such holder (upon payment by such holder of any applicable
transfer taxes) may direct,

                (a) a certificate or certificates for the number of duly
        authorized, validly issued, fully paid and nonassessable shares of
        Common Stock to which such holder shall be entitled upon such exercise
        plus, in lieu of any fractional share to which such holder would
        otherwise be entitled, cash in an amount equal to the same fraction of
        the Current Market Price per share of such Common Stock on the Business
        Day next preceding the date of such exercise, and

                (b) in case such exercise is in part only, a new Warrant or
        Warrants of like tenor, calling in the aggregate on the face or faces
        thereof for the number of shares of Common Stock equal (without giving
        effect to any adjustment therein) to the number of such shares called
        for on the face of this Warrant minus the number of such shares
        designated by the holder upon such exercise as provided in section 1.1.

                                       2

<PAGE>

        2. Adjustment of Common Stock Issuable Upon Exercise.

        2.1 Number of Shares; Warrant Price. The number of shares of Common
Stock which the holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this section 2) be
issuable upon such exercise, as designated by the holder hereof pursuant to
section 1.1, by a fraction of which (i) the numerator is $49.22 and (ii) the
denominator is the Warrant Price in effect on the date of such exercise. The
"Warrant Price" shall initially be $ 49.22 per share, shall be adjusted and
readjusted from time to time as provided in this section 2 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this section 2.

        2.2 Adjustment of Warrant Price. The Warrant Price specified in section
2.1 shall be subject to adjustment from time to time as follows:

        (A) Issuance of Shares of Common Stock. In case the Company at any time
or from time to time after the Initial Date shall issue or sell any shares of
Common Stock (including shares held in the treasury of the Company) or any
Convertible Securities (as hereinafter defined) without consideration, or for a
consideration per share less than the Warrant Price in effect (exclusive of (i)
any subdivision or consolidation by subparagraph 2.2(D) hereof and (ii) shares
of Common Stock issued upon conversion of the Series A Preferred Stock or Series
B Preferred Stock), in each case, on the date of and immediately prior to such
issue or sale, then, and in each such case, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest one-tenth of one cent) determined by multiplying such Warrant Price by a
fraction,

                (x) the numerator of which shall be (i) the number of shares of
        Common Stock outstanding immediately prior to such issue or sale plus
        (ii) the number of shares of Common Stock which the aggregate
        consideration received by the Company for the total

                                       3
<PAGE>

        number of such shares of Common Stock so issued or sold would purchase
        at the Warrant Price, and

                (y) the denominator of which shall be the number of shares of
        Common Stock outstanding immediately after such issue or sale,

provided that, for the purposes of this clause (A), (a) immediately after any
shares of Common Stock are deemed to have been issued pursuant to paragraphs
2.2(c) or 2.2(d), such shares of Common Stock shall be deemed to be outstanding
and (b) all shares of Common Stock issuable upon conversion of the Series A
Preferred Stock and the Series B Preferred Stock shall be deemed to be included
in "Common Stock outstanding".

        (B) Extraordinary Dividends and Distributions. In case the Company at
any time or from time to time after the Initial Date shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on any Common Stock, other than a dividend
payable in shares of Common Stock or in Options for Common Stock, then, and in
each such case, the Warrant Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
of securities entitled to receive such dividend or distribution shall be
reduced, effective as of the close of business on such record date, to a price
(calculated to the nearest one-tenth of one cent) determined by multiplying such
Warrant Price by a fraction,

                (x) the numerator of which shall be the Current Market Price in
        effect on such record date less the value of such dividend or
        distribution (as determined in good faith by the Board of Directors of
        the Company) applicable to one share of Common Stock, and

                (y) the denominator of which shall be such Current Market Price.

        For the purpose of this section 2.2, the following provisions shall also
be applicable:

                                       4
<PAGE>

                (a) In case of the issuance or sale for cash of shares of Common
        Stock or Convertible Securities, the consideration received by the
        Company therefor shall be deemed to be the amount of gross cash received
        by the Company therefor (or, if such shares of Common Stock or
        Convertible Securities are offered by the Company for subscription, the
        subscription price, or, if such shares or Convertible Securities are
        sold to underwriters or dealers for public offering without a
        subscription offering, the initial public offering price).

                (b) In case of either (i) the issuance (otherwise than upon
        exercise, conversion or exchange of Convertible Securities) or sale for
        a consideration other than cash, of shares of Common Stock or
        Convertible Securities or (ii) the issuance or grant for a consideration
        other than cash, or a consideration a part of which shall be other than
        cash, of shares of Common Stock or Convertible Securities (including,
        without limitation, any such shares of Common Stock or Convertible
        Securities issued in connection with the consolidation or merger of
        another Company with or into the Company and any such shares of Common
        Stock or Convertible Securities issued in connection with the
        reclassification of securities other than Common Stock), the amount of
        the consideration other than cash received by the Company for such
        shares of Common Stock or Convertible Securities shall be deemed to be
        the gross value of such consideration as determined in good faith by the
        Board of Directors of the Company (irrespective of the accounting
        treatment thereof) as of the day such shares of Common Stock or
        Convertible Securities are issued, granted or sold, as the case may be.

                (c) In case at any time after the Initial Date, the Company in
        any manner issues or grants (whether by dividend or otherwise) or sells
        any Convertible Securities and the price per share for which Common
        Stock is issuable upon the exercise, conversion or exchange of such
        Convertible Securities at the time such Convertible Securities first
        become exercisable, convertible or exchangeable (determined by dividing

                (x) in the case of an issue or grant of any Convertible
        Securities, the total amount, if any,

                                       5
<PAGE>

        received or receivable by the Company as consideration for the issue or
        grant of such Convertible Securities, plus the minimum aggregate amount
        of additional consideration, if any, payable to the Company upon the
        exercise, conversion or exchange of such Convertible Securities for
        Common Stock at the time such Convertible Securities first become
        exercisable, convertible or exchangeable, by

                (y) the total maximum number of shares of Common Stock issuable
        upon the exercise, conversion or exchange of such Convertible Securities
        at the time such Convertible Securities first become convertible or
        exchangeable)

shall be less than the Warrant Price in effect immediately prior to the time of
the issue, grant, or sale of such Convertible Securities, then the total maximum
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of the total maximum amount of such Convertible Securities at the time
such Convertible Securities first become exercisable, convertible or
exchangeable shall (as of the date of issue, grant, or sale of Convertible
Securities) be deemed to be outstanding and to have been issued for said price
per share; provided that (i) no further adjustment of the Warrant Price shall be
made upon the actual issue of such Common Stock upon the exercise, conversion or
exchange of such Convertible Securities and (ii) Convertible Securities issued
or granted pro rata to Warrantholders without consideration (whether by dividend
or otherwise) and Convertible Securities issuable by way of dividend or other
distribution to Warrantholders shall be deemed to have been issued or granted at
the close of business on the date fixed for the determination of Warrantholders
entitled to such Convertible Securities and shall be deemed to have been issued
without consideration.

                (d) In the case of the payment or making of a dividend or other
        distribution on Common Stock payable in Common Stock or Convertible
        Securities, the aggregate number of shares of Common Stock or the
        aggregate amount of such Convertible Securities issued in payment of
        such dividend or other distribution shall be deemed to have been issued
        at the close of business

                                       6
<PAGE>

        on the date fixed for the determination of Warrantholders entitled to
        such dividend or other distribution and shall be deemed to have been
        issued without consideration.

                (e) In the case of the payment or making of a dividend or other
        distribution on Common Stock in property (excluding Common Stock and
        Convertible Securities but including all other securities), such
        dividend or other distribution shall be deemed to have been paid or made
        at the close of business on the date fixed for the determination of
        Warrantholders entitled to receive such dividend or other distribution
        and the amount of such dividend or other distribution in property shall
        be deemed to be the value of such property, as determined in good faith
        by the Board of Directors of the Company at the time of the declaration
        of such dividend or other distribution.

                (f) The reclassification of securities other than Common Stock
        into securities including Common Stock shall be deemed to involve the
        issuance for a consideration other than cash of such Common Stock at the
        close of business on the date fixed for determination of Warrantholders
        entitled to receive such Common Stock. This paragraph (f) is not
        intended to refer to the conversion of any share of the Series A
        Preferred Stock or Series B Preferred Stock in accordance with its
        terms.

                (g) If the Company shall enter into a contract for the sale or
        exchange of its Common Stock or Convertible Securities, such Common
        Stock or Convertible Securities shall be deemed to have been issued on
        the date such contract is made; provided that (i) if on the date such
        contract is made the number of shares of Common Stock or the amount of
        Convertible Securities to be issued cannot be determined, such Common
        Stock or Convertible Securities shall be deemed to have been issued on
        the earliest date such determination can be made, and (ii) if such
        Common Stock or Convertible Securities or any part thereof, are not in
        fact issued, the Warrant Price, to the extent adjusted as the result of
        the provisions of this clause (g), shall be appropriately readjusted.

                                       7
<PAGE>

                (h) Common Stock held in the treasury of the Company shall not
        be deemed to be outstanding.

                (i) If the purchase/exercise price provided for in any
        Convertible Securities referred to in clause (c) of this section 2.2, or
        the rate at which any Convertible Securities referred to in clause (c)
        of this section 2.2 are convertible into or exchangeable for shares of
        Common Stock, shall change or a different purchase/exercise price or
        rate shall become effective at any time or from time to time (other than
        under or by reason of provisions designed to protect against dilution)
        then, upon such change becoming effective, the Warrant Price shall
        forthwith be increased or decreased to such Warrant Price as would have
        been obtained had the adjustments made upon the issuance, grant or sale
        of such Convertible Securities been made upon the basis of (i) the
        issuance of only the number of shares of Common Stock theretofore
        actually delivered upon the exercise, conversion or exchange or such
        Convertible Securities, and the total consideration received therefor,
        and (ii) the issuance at the time of such change of any such Convertible
        Securities then still outstanding for the consideration, if any,
        received by the Company therefor and to be received on the basis of such
        changed price; and on the expiration or termination of any such right to
        exercise, convert or exchange any Convertible Securities, the Warrant
        Price shall forthwith be increased or decreased to such Warrant Price as
        would have obtained (x) had the adjustment made upon the issuance, grant
        or sale of such Convertible Securities been made upon the basis of the
        issuance of only the number of shares of Common Stock theretofore
        actually delivered upon the exercise, conversion or exchange of such
        Convertible Securities, and the total consideration received therefor
        and (y) had adjustments been made on the basis of the Warrant Price as
        adjusted under foregoing subclause (x) for all issues, grants and sales
        of shares of Common Stock and Convertible Securities. If the exercise
        price provided for in any Convertible Securities referred to in clause
        (c) of this section 2.2 or the rate at which any Convertible Securities
        referred to in clause (c) of this section 2.2 are convertible into or
        exchangeable for Common Stock, shall decrease at any time under or by
        reason of provisions with respect thereto designed to protect

                                       8
<PAGE>

        against dilution, then in case of the delivery of Common Stock upon the
        exercise, conversion or exchange or any such Convertible Securities, the
        Warrant Price shall forthwith be decreased to such Warrant Price as
        would have been obtained had the adjustments made at the time of the
        issuance, grant or sale of such Convertible Securities been made upon
        the basis of the issuance of (and the total consideration received for)
        the shares of Common Stock delivered at such decreased purchase price or
        rate as aforesaid.

                (j) There shall be no adjustment in the Warrant Price in the
        case of the issuance of any shares of Common Stock or Convertible
        Securities by the Company pursuant to the issuance of Common Stock upon
        exercise of the Warrants or conversion of the Series A Convertible
        Preferred Stock, no par value, of the Company or the Series B
        Convertible Preferred Stock, no par value, of the Company.

        (C) Notwithstanding the provisions of subparagraphs (A) and (B) above,
the Warrant Price shall not be adjusted upon the issuance of any shares of
Common Stock or Convertible Securities of the Company as provided in this
section 2.2 in the event that the affirmative vote or consent of the holders of
a majority of the outstanding Warrants, voting or consenting separately as a
class, given in writing or by resolution adopted at a meeting called for such
purpose, is obtained agreeing to waive such adjustment.

        (D) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Warrant Price in effect
immediately prior to such subdivision shall, simultaneously with the
effectiveness of such subdivision, be proportionately reduced, and, conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Warrant Price in effect immediately prior
to such combination, shall, simultaneously with the effectiveness of such
combination, be proportionately increased.

        (E) The provisions of this section 2.2 shall similarly apply to
successive issues, grants, sales, dividends or other distributions, subdivisions
and combinations on or of shares of Common Stock.

                                       9
<PAGE>

        2.3 No Fractional Shares to be Issued. No fractional shares of Common
Stock or scrip representing fractional shares shall be issued upon the exercise
of the Warrants. If more than one Warrant shall be surrendered for exercise at
one time by the same holder, the number of full shares which shall be issuable
upon exercise thereof shall be computed on the basis of the aggregate number of
shares so surrendered by such holder. Instead of any fractional share of Common
Stock which would otherwise be issuable upon exercise of any Warrant, the
Company shall pay a cash adjustment in respect of a fraction based upon the fair
value of such share as determined by the Board of Directors.

        2.4 Statement Specifying Adjusted Warrant Price. Whenever the Warrant
Price shall, be adjusted pursuant to the provisions of section 2.1, the Company
shall file at its principal executive offices and shall mail within fifteen days
after the date upon which such adjustment shall be made by registered or
certified mail, to each registered holder of Warrants, a statement signed by a
responsible financial officer of the Company specifying the Warrant Price
determined as provided in section 2.1 and setting forth in reasonable detail the
method of calculation of such adjustment and the facts requiring the adjustment
and upon which the calculation is based.

        2.5 Company Will Reserve Stock for Exercise. The Company covenants that
it will at all times reserve and keep available out of its authorized Common
Stock, solely for the purpose of issue upon exercise of the Warrants as herein
provided, such number of Common Stock as shall then be issuable upon the
exercise of all outstanding Warrants. The Company covenants that all shares of
Common Stock which shall be so issuable shall be duly authorized and, when
issued upon exercise of the Warrants, shall be validly issued and fully paid and
nonassessable.

        2.6 Corporate Action; Registration. The Company will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Common Stock at the Warrant Price. The Company covenants that if any shares
of Common Stock required to be reserved for purposes of exercise of the Warrants
require registration with or approval of any governmental authority under any
federal or state law before such shares may be issued upon exercise, the Company
will in good faith and as

                                       10
<PAGE>

expeditiously as possible endeavor to cause such shares to be duly registered or
approved, as the case may be.

        2.7 No Charge for Exercise. The issuance of certificates for shares of
Common stock upon the exercise of any Warrants shall be made without charge to
the exercising holder of the Warrant for such certificates or for any tax in
respect of the issuance of such certificates, and such certificates shall be
issued in the name of, or in such names as may be directed by, the holder of the
Warrant; provided, however, that the Company shall not be required to pay any
taxes or other governmental charges which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a name
other than that of the holder of the Warrant, and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or other governmental charge or shall have established to the
satisfaction of the Company that such tax or other governmental charge has been
paid or provided for. The Company may also require, as a condition to the
issuance and delivery of any such certificate, an opinion of counsel acceptable
to the Company to the effect that the proposed transfer does not require
registration under federal or any state securities law.

        3. Consolidation, Merger, Sale of Assets, Reorganization, etc.

        3.1 General Provisions. In case the Company, after the Initial Date, (a)
shall consolidate with or merge into any other Person and shall not be the
continuing or surviving Company of such consolidation or merger, or (b) shall
permit any other Person to consolidate with or merge into the Company and the
Company shall be the continuing or surviving Person but, in connection with such
consolidation or merger, Common Stock shall be changed into or exchanged for
cash, stock or other securities of any other Person or any other property, or
(c) shall transfer all or substantially all of its properties and assets to any
other Person, or (d) shall effect a capital reorganization or reclassification
of Common Stock (other than a capital reorganization or reclassification
resulting in the issue of shares of Common Stock for which adjustment in the
Warrant Price is provided in section 2.1), then, and in the case of each such
transaction, the Company shall give written notice

                                       11
<PAGE>

thereof to each holder of any Warrant not less than 30 days prior to the
consummation thereof and the holder of this Warrant, at the time of the
consummation of such transaction, shall be entitled to receive, at the aggregate
Warrant Price in effect at the time of such consummation for all Common Stock
issuable upon the exercise of this Warrant immediately prior to such
consummation, in lieu of the Common Stock issuable upon such exercise prior to
such consummation, the amount of cash, securities or other property to which
such holder would actually have been entitled as a shareholder upon such
consummation if such holder had exercised this Warrant immediately prior
thereto, subject to adjustments (subsequent to such consummation) as nearly
equivalent as possible to the adjustments provided for in section 2 and this
section 3, provided that if a purchase, tender or exchange offer shall have been
made to and accepted by the holders of Common Stock under circumstances in
which, upon completion of such purchase, tender or exchange offer, the maker
thereof, together with members of any group (within the meaning of Rule 13d-5(b)
(1) under the Exchange Act) of which such maker is a part, and together with any
affiliate or associate of such maker (within the meaning of Rule 12b-2 under the
Exchange Act) and any members of any such group of which any such affiliate or
associate is a part, own beneficially (within the meaning of Rule 13d-3 under
the Exchange Act) more than 50% of the outstanding shares of Common Stock, and
if the holder of this Warrant so designates in a notice given to the Company,
the holder of this Warrant shall be entitled to receive the amount of cash,
securities or other property to which such holder would actually have been
entitled as a shareholder if the holder of this Warrant had exercised this
Warrant prior to the expiration of such purchase, tender or exchange offer,
accepted such offer and all of the Common Stock held by such holder had been
purchased pursuant to such purchase, tender or exchange offer, subject to
adjustments (from and after the consummation of such purchase, tender or
exchange offer) as nearly equivalent as possible to the adjustments provided for
in section 2 and this section 3.

        3.2 Assumption of Obligations. Notwithstanding anything contained in
this Warrant to the contrary, the Company will not effect any of the
transactions described in subdivisions (a) through (d) of section 3.1 unless,
prior to the consummation thereof, each Person (other than the Company) which
may be required to deliver any cash, stock or

                                       12
<PAGE>

other securities or other property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the holder of this Warrant, (a) the obligations of the Company
under this Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant) and
(b) the obligation to deliver to such holder such cash, stock or other
securities or other property as, in accordance with the foregoing provisions of
this section 3, such holder may be entitled to receive.

        4. Notices of Corporate Action. In the event of

                (a) any taking by the Company of a record of the holders of
        Common Stock for the purpose of determining the holders thereof who are
        entitled to receive any dividend (other than a regular periodic dividend
        payable in cash out of earned surplus) or other distribution, or any
        right to subscribe for, purchase or otherwise acquire any shares of
        stock of any class or any other securities or property, or to receive
        any other right, or

                (b) any capital reorganization of the Company, any
        reclassification or recapitalization of the capital stock of the Company
        or any consolidation or merger involving the Company and any other
        Person or any transfer of all or substantially all the assets of the
        Company to any other Person, or

                (c) any voluntary or involuntary dissolution, liquidation or
        winding-up of the Company,

the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for the
securities or other property deliverable upon such

                                       13
<PAGE>

reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 20 days prior to the date therein specified, in the case of any date
referred to in the foregoing subdivision (i), and at least 30 days prior to the
date therein specified, in the case of the date referred to in the foregoing
subdivision (ii).

        5. Restrictions on Transfer.

        5.1 Restrictive Legends. Except as otherwise permitted by this section
5, each Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:

                "This Warrant and any shares acquired upon the exercise of this
        Warrant have not been registered under the Securities Act of 1933 and
        may not be transferred in the absence of such registration or an
        exemption therefrom under such Act. This Warrant and such shares are
        also subject to certain restrictions on transferability imposed hereby
        and by the Amended and Restated Stockholders Agreement, dated as of
        November 25, 1996, among the Company and the stockholders of the
        Company, a copy of which is on file at the offices of the Company."

Except as otherwise permitted by this section 5, each certificate for Common
Stock issued upon the exercise of any Warrant and each certificate issued upon
the direct or indirect transfer of any such Common Stock shall be stamped or
otherwise imprinted with a legend in substantially the following form:

                "The shares represented by this certificate have not been
        registered under the Securities Act of 1933 and may not be transferred
        in the absence of such registration or an exemption therefrom under such
        Act. Such shares are also subject to certain restrictions on
        transferability imposed by Common Stock Purchase Warrants expiring
        November 25, 2004, and the Amended and Restated Stockholders Agreement,
        dated as of November 25, 1996, among the Company and the stockholders of
        the Company, copies of which are on file at the offices of the Company."

                                       14

<PAGE>

        5.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to any
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act (other than a transfer
pursuant to Rule 144 or any comparable rule under such Act), the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this section 5.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer in sufficient detail to enable counsel to render the opinions referred
to below, and (b) shall designate counsel for the holder giving such notice (who
may be in-house counsel for such holder). The holder giving such notice will
submit a copy thereof to the counsel designated in such notice. The following
provisions shall then apply:

                (i) If in the opinion of counsel for the holder the proposed
        transfer may be effected without registration, such holder shall
        thereupon be entitled to transfer such Restricted Securities in
        accordance with the terms of the notice delivered by such holder to the
        Company. Each Warrant or certificate, if any, issued upon or in
        connection with such transfer shall bear the appropriate restrictive
        legend set forth in section 5.1 unless, in the opinion of such counsel,
        such legend is no longer required to insure compliance with the
        Securities Act.

                (ii) If the opinion of such counsel for the holder is not to the
        effect that the proposed transfer may legally be effected without
        registration of such Restricted Securities under the Securities Act,
        such holder shall not be entitled to transfer such Restricted Securities
        (other than in a transfer pursuant to Rule 144 or any comparable rule
        under the Securities Act) until the conditions specified in subdivision
        (i) above shall be satisfied or until registration of such Restricted
        Securities under the Securities Act has become effective.

Notwithstanding the foregoing provisions of this section 5.2, the holder of any
Restricted Securities shall be permitted to transfer any such Restricted
Securities pursuant to Rule 144A under the Securities Act, provided that each
transferee agrees in writing to be bound by all

                                       15
<PAGE>

the restrictions on transfer of such Restricted Securities contained in this
section 5.2.

        5.3 Termination of Restrictions. The restrictions imposed by this
section 5 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering such Restricted
Securities, (b) when, in the opinions of both counsel for the holder thereof and
counsel for the Company, such restrictions are no longer required in order to
insure compliance with the Securities Act, or (c) when such securities have been
beneficially owned, by a person who has not been an affiliate of the Company for
at least three months, for a period of at least a three years, all as determined
under Rule 144 under the Securities Act. Whenever such restrictions shall
terminate as to any Restricted Securities, as soon as practicable thereafter and
in any event within ten days, the holder thereof shall be entitled to receive
from the Company, without expense (other than transfer taxes, if any), new
securities of like tenor not bearing the applicable legend set forth in section
5.1 hereof.

        5.4 Right of First Offer. If the holder of this Warrant shall desire to
sell this Warrant in whole or in part (the "Offered Warrant") such holder (the
"Selling Holder") shall first offer the Offered Warrant to the Company, by
written notice to the Company, setting forth the terms and conditions upon which
the Selling Holder proposes to sell the Offered Warrant. The Company shall have
the exclusive right during the period of 30 days next following receipt of such
notice to elect to purchase all, but not less than all, of the Offered Warrant.
If the Company shall default in making payment in full for all of the Offered
Warrant to be sold, or if all of the Offered Warrant is not purchased by the
Company, the Selling Holder may sell the Offered Warrant so offered hereunder to
any person on terms no more favorable to such person than those contained in the
offer to the Company, provided the transferee thereof shall agree (in such
manner as the Company may reasonably require) to become upon any exercise of
this Warrant legally bound by all of the restrictions, terms and conditions of
the Stockholders Agreement in accordance with section 5.5. hereof. If, however,
the Selling Holder does not effect such sale within 180 days after the
termination by passage

                                       16
<PAGE>

of time or default of the first offer rights created under this section 5.4, the
Selling Holder may not thereafter transfer this Warrant in whole or in part
without again complying with the provisions of this section 5.4. All purchase
transactions between the Company and the Selling Holder pursuant to this section
5.4 shall be consummated at a closing to be held no later than five days after
the expiration of the thirty day option period provided for herein. At the
closing, the Company shall deliver to the Selling Holder the consideration (cash
or other) against delivery of the appropriate Warrant certificate duly endorsed
for transfer.

        5.5 Stockholders Agreement. In connection with any exercise of this
Warrant, the holder hereof agrees to become a party to the Stockholders
Agreement with respect to any shares of Common Stock issued upon such exercise,
and will be legally bound by all of the restrictions, terms and conditions of
the Stockholders Agreement. Any shares of Common Stock issued upon the exercise
of this Warrant are subject to the restrictions on transfer contained in the
Stockholders Agreement, in addition to the restrictions contained in this
section 5.

        6. Registration Under Securities Act, etc.

        6.1 Required Registrations. Whenever any Stockholder or Stockholders
shall request registration pursuant to section 10.1 of either of the Purchase
Agreements, the Company shall promptly give written notice of such proposed
registration to all Warrantholders. Such Warrantholders shall have the right, by
giving written notice to the Company within thirty days after the Company
provides its notice, to elect to have included in such registration such of
their Registrable Shares as such Warrantholders may request in such notice of
election; provided that if the underwriter (if any) managing the offering
determines in good faith that, because of marketing factors, all of the
Registrable Securities requested to be registered by all holders of Registrable
Securities may not be included in the offering, then all holders who have
requested registration shall participate in the offering pro rata based upon the
number of Registrable Securities that they have requested to be so registered.
Thereupon, the Company shall, as expeditiously as possible, use its best efforts
to effect the registration, on Form S-1, Form S-2 or

                                       17
<PAGE>

Form S-3 (or any successor form), of all Registrable Shares that the Company has
been requested to so register.

        6.2 Incidental Registration. (a) Whenever the Company proposes to file a
Registration Statement (other than pursuant to subsection 6.1) at any time and
from time to time, it will, prior to such filing, give written notice to all
Warrantholders of its intention to do so and, upon the written request of a
Warrantholder or Warrantholders given within thirty days after the Company
provides such notice (which request shall state the intended method of
disposition of such Registrable Shares), the Company shall use its best efforts
to cause all Registrable Shares that the Company has been requested by such
Warrantholder or Warrantholders to register to be registered under the
Securities Act to the extent necessary to permit their sale or other disposition
in accordance with the intended methods of distribution specified in the request
of such Warrantholder or Warrantholders; provided that the Company, shall have
the right to postpone or withdraw any registration effected pursuant to this
section 6.2 without obligation to any Warrantholder.

        (b) In connection with any offering by the Company under this section
6.2 involving an underwriting, the Company shall not be required to include any
Registrable Shares in such offering unless the holders thereof accept the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it (provided that such terms must be consistent with this
Agreement), and then only in such quantity as will not, in the good faith
opinion of the underwriters, jeopardize the success of the offering by the
Company. If in the opinion of the managing underwriter the registration of all,
or part of, the Registrable Shares that the holders have requested to be
included would materially and adversely affect such public offering, then the
Company shall be required to include in the underwriting only that number of
Registrable Shares, if any, that the managing underwriter believes may be sold
without causing such adverse effect. If the number of Registrable Shares to be
included in the underwriting in accordance with the foregoing is less than the
total number of shares that the holders of Registrable Shares have requested to
be included, then the holders of Registrable Shares who have requested
registration and other holders of shares of Common Stock entitled to include
shares of Common Stock in such registration shall participate in the

                                       18
<PAGE>

underwriting pro rata based upon their total ownership of shares of Common Stock
of the Company (giving effect to the conversion into Common Stock of all
securities convertible into Common Stock). If any holder would thus be entitled
to include more shares than such holder requested to be registered, the excess
shall be allocated among other requesting holders pro rata based upon their
total ownership of Registrable Shares.

        6.3 Registration Procedures. If and whenever the Company is required by
the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:

        (a) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
statement to become and remain effective;

        (b) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Registrable Shares covered thereby or forty five days
after the effective date thereof;

        (c) as expeditiously as possible furnish to each selling Warrantholder
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the selling Warrantholder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the selling Warrantholder;

        (d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the selling Warrantholders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to

                                       19
<PAGE>

enable the selling Warrantholders to consummate the public sale or other
disposition in such states of the Registrable Shares owned by the selling
Warrantholder; provided, however, that the Company shall not be required in
connection with this paragraph (d) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction;

        (e) use its best efforts to cause all Registrable Shares covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Shares;

        (f) furnish to each seller of Registrable Shares a signed counterpart,
addressed to such seller (and the underwriters, if any), of

                (x) an opinion of counsel for the Company, dated the effective
        date of such Registration Statement (and, if such registration includes
        an underwritten public offering, dated the date of any closing under the
        underwriting agreement), reasonably satisfactory in form and substance
        to such seller, and

                (y) a "comfort" letter, dated the effective date of such
        Registration Statement (and, if such registration includes an
        underwritten public offering, dated the date of any closing under the
        underwriting agreement), signed by the independent public accountants
        who have certified the Company's financial statements included in such
        Registration Statement,

covering substantially the same matters with respect to such Registration
Statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to the underwriters in underwritten public
offerings of securities and, in the case of the accountants' letter, such other
financial matters, as such seller (or the underwriters, if any) may reasonably
request; provided that the Company will be required to furnish such an
accountants' letter only if and to the extent such a letter is also being
delivered to the Company

                                       20
<PAGE>

or to any other Securityholder in connection with such registration;

        (g) immediately notify each seller of such Registrable Shares, and (if
requested by any such seller) confirm such advice in writing, (w) when the
prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to the Registration Statement or any post-effective
amendment, when the same has become effective, (x) of any request by the
Commission for amendments or supplements to the Registration Statement or the
prospectus or for additional information, (y) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose and (z) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;

        (h) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible time;

        (i) as promptly as practicable notify each holder of Registrable Shares
covered by such Registration Statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made, (whereupon the selling warrant holders shall
immediately cease making offers of Registrable Shares and shall return all
prospectuses to the Company), and at the request of any such holder promptly
prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;

                                       21
<PAGE>

        (j) otherwise comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and not file any amendment or supplement to such registration
statement or prospectus to which any such seller shall have reasonably objected
on the grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or of the rules or
regulations thereunder, having been furnished with a copy thereof at least five
business days prior to the filing thereof;

        (k) provide and cause to be maintained a transfer agent and registrar
for all Registrable Shares covered by such Registration Statement not later than
the effective date of such Registration Statement;

        (l) cooperate with the sellers of such Registrable Shares to facilitate
the timely preparation and delivery of certificates representing Registrable
Shares to be sold, which securities shall not bear any restrictive legends and
shall be in a form eligible for deposit with The Depository Trust Company; and
enable such Registrable Shares to be in such denominations and registered in
such names as such sellers may request at least two business days prior to any
sale of Registrable Shares;

        (m) use its best reasonable efforts (x) to cause all such Registrable
Shares covered by such registration statement to be listed on a national
securities exchange (if such Registrable Shares are not already so listed) and
on each additional national securities exchange on which similar securities
issued by the Company are then listed, if the listing of such Registrable Shares
is then permitted under the rules of such exchange, or (y) to secure designation
of all such Registrable Shares covered by such Registration Statement as a
NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of
the Commission or, failing that, secure NASDAQ authorization for such
Registrable Shares and, without limiting the generality of the foregoing, to
arrange for at least two market makers

                                       22
<PAGE>

to register as such with respect to such Registrable Shares with the NASD;

        (n) provide a CUSIP number for all Registrable Shares, not later than
the effective date of the applicable Registration Statement; and

        (o) enter into such agreements and take such other actions as the
Requisite Holders shall reasonably request in order to expedite or facilitate
the disposition of such Registrable Shares.

        6.4 Allocation of Expenses. The Company will pay all Registration
Expenses of all registrations under this Agreement. For purposes of this section
6, the term "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this section 6, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses, fees,
and expenses of counsel for the Company and the fees and expenses of one counsel
selected by the selling Warrantholders to represent the selling Warrantholders,
state Blue Sky fees and expenses, and the expense of any special audits incident
to or required by any such registration, but excluding underwriting discounts,
selling commissions, and the fees and expenses of selling Warrantholders' own
counsel (other than the counsel selected to represent all selling
Warrantholders).

        6.5 Indemnification and Contribution. (a) In the event of any
registration of any of the Registrable Shares under the Securities Act pursuant
to this Agreement, the Company will indemnify and hold harmless the seller of
such Registrable Shares, each underwriter of such Registrable Shares, and each
other person, if any, who controls such seller or underwriter within the meaning
of the Securities Act or the Exchange Act against any losses, claims, damages,
or liabilities, joint or several, to which such seller, underwriter, or
controlling person may become subject under the Securities Act, the Exchange
Act, state securities or Blue Sky laws, or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable Shares
were registered under the Securities Act, any preliminary prospectus, or final
prospectus contained in

                                       23
<PAGE>

the Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse such seller,
underwriter, and each such controlling person for any legal or any other
expenses reasonably incurred by such seller, underwriter, or controlling person
in connection with investigating or defending any such loss, claim, damage,
liability, or action, provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission made in such
Registration Statement, preliminary prospectus, or final prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of such seller,
underwriter, or controlling person specifically for use in the preparation
thereof.

        (b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities, joint or several, to which the Company, such directors
and officers, underwriter, on controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws, or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to such seller furnished in writing
to

                                       24
<PAGE>

the Company by or on behalf of such seller specifically for use in connection
with the preparation of such Registration Statement, prospectus, amendment, or
supplement; provided, however, that the obligations of such Warrantholders
hereunder shall be limited to an amount equal to the proceeds to each
Warrantholder of Registrable Shares sold in connection with such registration.

        (c) Each party entitled to indemnification under this section 6.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this section 6. The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability respect of such claim or litigation, and no Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation without the
prior written consent of the Indemnifying Party.

        (d) In order to provide for just and equitable contribution to joint
liability under the Securities Act or otherwise, in any case in which either (i)
any holder of Registrable Shares exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this section 6.5 but it is judicially determined (by the entry of a
final judgment or

                                       25
<PAGE>

decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this section 6.5 provides
for indemnification in such case, or (ii) contribution may be required on the
part of any such selling Warrantholder or any such controlling person in
circumstances for which indemnification is provided under this section 6.5;
then, in each such case, the Company and such Warrantholder will contribute to
the aggregate losses, claims, damages, or liabilities to which they may be
subject (after contribution from others) (x) in such proportion as is
appropriate to reflect the relative fault of the Company and the prospective
sellers of Registrable Shares covered by the Registration Statement which
resulted in such loss, claim, damage or liability, or action or proceeding in
respect thereof, with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action or proceeding in respect
thereof, as well as any other relevant equitable considerations or (y) if the
allocation provided by clause (x) above is not permitted by applicable law, in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and such prospective sellers from the offering of the
securities covered by such registration statement, provided, that for purposes
of clauses (x) or (y), the relative benefits received by the prospective sellers
shall be deemed not to exceed the amount of proceeds received by such
prospective sellers and no holder of Registrable Securities shall be required to
contribute any amount in excess of the amount such holder could have been
required to pay to an indemnified party if the indemnity under subsection (b) of
this section 6.5 was available. No person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Securities Act,
shall be entitled to contribution from any person or entity who is not guilty of
such fraudulent misrepresentation.

        6.6 Indemnification with Respect to Underwritten Offering. In the event
that Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to section 6.1(a), the Company agrees to enter
into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of an issuer of the
securities being registered and customary covenants and agreements to be
performed by such issuer, including without limitation

                                       26
<PAGE>

customary provisions with respect to indemnification by the Company of the
underwriters of such offering.

        6.7 Information by Holder. Each holder of Registrable Shares included in
any registration shall furnish to the Company such information regarding such
holder and the distribution proposed by such holder as the Company may request
in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this section 6.

        6.8 "Stand-Off" Agreement. Each Warrantholder, if requested by the
Company and an underwriter of Common Stock or other securities of the Company,
shall agree not to sell or otherwise transfer or dispose of any Registrable
Shares or other securities of the Company held by such Warrantholder for a
specified period of time (not to exceed 120 days) following the effective date
of a Registration Statement; provided, that:

                (a) such agreement shall only apply to the first such
        Registration Statement covering Common Stock of the Company to be sold
        on its behalf to the public in an underwritten offering; and

                (b) all Warrantholders holding not less than the number of
        shares of Common Stock held by such Warrantholder (including shares of
        Common Stock issuable upon the exercise of Warrants, or other
        convertible securities, or upon the exercise of options, warrants or
        rights) and all officers and directors of the Company enter into similar
        agreements.

        Such agreement shall be in writing in a form satisfactory to the Company
and such underwriter. The Company may impose stop-transfer instructions with
respect to the Registrable Shares or other securities subject to the foregoing
restriction until the end of the standoff period.

        6.9 Rule 144 Requirements. After the earliest of (a) the closing of the
sale of securities of the Company pursuant to a Registration Statement, (b) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act, or (c) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:

                                       27
<PAGE>

                (a) comply with the requirements of Rule 144(c) under the
        Securities Act with respect to current public information about the
        Company;

                (b) use its best efforts to file with the Commission in a timely
        manner all reports and other documents required of the Company under the
        Securities Act and the Exchange Act (at any time after it has become
        subject to such reporting requirements); and

                (c) furnish to any holder of Registrable Shares upon request (i)
        a written statement by the Company as to its compliance with the
        requirements of said Rule 144(c), and the reporting requirements of the
        Securities Act and the Exchange Act (at any time after it has become
        subject to such reporting requirements), (ii) a copy of the most recent
        annual or quarterly report of the Company, and (iii) such other reports
        and documents of the Company as such holder may reasonably request to
        avail itself of any similar rule or regulation of the Commission
        allowing it to sell any such securities without registration.

        6.10 Selection of Underwriter. In the case of any registration effected
pursuant to this section 6, the Company shall have the right to designate the
managing underwriter in any underwritten offering.

        7. Listing on Securities Exchange. The Company will list on each
national securities exchange on which any Common Stock may at any time be
listed, subject to official notice of issuance upon exercise of the Warrants,
and will maintain such listing of, all shares of Common Stock from time to time
issuable upon exercise of the Warrants.

        8. Ownership, Transfer and Substitution of Warrants.

        8.1 Ownership of Warrants. The Company may treat the person in whose
name any Warrant is registered on the register kept at the principal office of
the Company as the owner and holder thereof for all purposes, notwithstanding
any notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding
any notice to the contrary. Subject to section 7, a Warrant, if

                                       28
<PAGE>

properly assigned, may be exercised by a new holder without first having a new
Warrant issued.

        8.2. Transfer and Exchange of Warrants. Upon the surrender of any
Warrant, properly endorsed, for registration of transfer or for exchange at the
principal office of the Company, the Company at its expense will (subject to
compliance with section 5, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.

        8.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant, and upon, delivery of indemnity reasonably satisfactory to the Company
in form and amount or, in the case of any such mutilation, upon surrender of
such Warrant for cancellation at the principal office of the Company, the
Company at its expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.

        9. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:

        Business Day: any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the City of New York are authorized by
law to be closed.

        Commission: the Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.

        Common Stock: the Company's Common Stock, no par value, as constituted
on the date hereof, any stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification of such Common Stock,
and all other stock of any class or classes (however designated) of the Company
the holders of which have the right, without limitation as to amount, either to
all or to

                                       29
<PAGE>

a share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference.

        Company: Direct General Corporation, a Tennessee corporation.

        Convertible Securities: (i) any obligations, rights, warrants or options
exercisable with respect to the Common Stock or shares of stock of obligations,
rights, warrants or options which by their terms are convertible into or
exchangeable or exercisable for Common Stock, and (ii) any obligations, rights
or other options exercisable with respect to the Common Stock or shares of stock
or obligations, rights, warrants or options which by their terms are convertible
into or exchangeable for obligations or shares of stock which in turn are,
directly or indirectly, convertible into or exchangeable or exercisable for
Common Stock.

        Current Market Price: on any date of determination, the fair value of
one share of the Common Stock determined in good faith by the Board of Directors
of the Company as of a date which is within 15 days of the date of
determination.

        Exchange Act: the Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section of
the Securities Exchange Act of 1934 shall include a reference to the comparable
section, if any, of any such similar Federal statute.

        Initial Date: November 25, 1996.

        NASD: the National Association of Securities Dealers.

        Options: rights, options or warrants to subscribe for, purchase or
otherwise acquire either shares of Common Stock or Convertible Securities.

        Person: an individual, a partnership, an association, a joint venture, a
Company, a limited liability company, a business, a trust, an unincorporated
organization

                                       30
<PAGE>

or a government or any department, agency or subdivision thereof.

        Public Offering: the issuance by the Company in an initial registered
public offering under the Securities Act of shares of its Common Stock.

        Purchase Agreements: the two Purchase Agreements, each dated as of
November 18, 1996, between the Company and Eldon Capital Partners, L.P. and
Eldon Capital Partners (International), L.P., respectively.

        Registrable Securities: collectively, (a) Registrable Shares, (b)
"Registrable Shares" under the Purchase Agreements and (c) to the extent
included in any registration pursuant to section 10.1 of either of the Purchase
Agreements, (i) the securities entitled to registration pursuant to the
Securities Purchase Agreement, dated December 2, 1994, as amended, relating to
the Series A Preferred Stock and (ii) the securities entitled to registration
pursuant to the Stock Purchase Agreement, dated as of September 6, 1996, between
the Company and Mutual Service Casualty Insurance Company.

        Registrable Shares: (a) the shares of Common Stock issued or issuable
upon exercise of the Warrants and (b) any other shares of Common Stock of the
Company issued in respect of such shares (because of stock splits, stock
dividends, reclassification, recapitalization, or similar events); provided,
however, that shares of Common Stock that are Registrable Shares shall cease to
be Registrable Shares upon any sale pursuant to a Registration Statement,
Section 4(1) of the Securities Act, or Rule 144 under the Securities Act.
Wherever reference is made in this Warrant to a request or consent of holders of
a certain percentage of Registrable Shares, the determination of such percentage
shall include shares of Common stock issuable upon exercise of the Warrants even
if such exercise has not yet been effected.

        Registration Expenses: the expenses described in section 6.4.

        Registration Statement: a registration statement filed by the Company
with the Commission for a public offering and sale of securities of the Company
(other than a registration statement on Form S-8 or Form S-4, or their

                                       31
<PAGE>

successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).

        Requisite Holders of Warrants: the holders of at least 66 2/3% of all
the Warrants at the time outstanding determined on the basis of the number of
shares of Common Stock deliverable upon exercise thereof.

        Restricted Securities: (a) any Warrants bearing the applicable legend
set forth in section 5.1, (b) any shares of Common Stock which have been issued
upon the exercise of Warrants and which are evidenced by a certificate or
certificates bearing the applicable legend set forth in such section, and (c)
unless the context otherwise requires, any shares of Common Stock which are at
the time issuable upon the exercise of Warrants and which, when so issued, will
be evidenced by a certificate or certificates bearing the applicable legend set
forth in such section.

        Securities Act: the Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time. Reference to a particular section of the
Securities Act of 1933 shall include a reference to the comparable section, if
any, of any such similar Federal statute.

        Series A Preferred Stock: the Series A Convertible Preferred Stock, no
par value, of the Company.

        Series B Preferred Stock: the Series B Convertible Preferred Stock, no
par value, of the Company.

        Stockholders: the meaning specified therefor in the Purchase Agreements.

        Stockholders Agreement: the Amended and Restated Stockholders Agreement,
dated as of November 25, 1996, among the Company and the stockholders of the
Company, as amended from time to time.

        Subsidiary: any Company, association or other business entity at least
50% (by number of votes) of the Voting Common Stock of which is at the time
owned by the

                                       32
<PAGE>

Company or by one or more Subsidiaries or by the Company and one or more
Subsidiaries.

        Voting Common Stock: with respect to any Company, association or other
business entity, stock of any class or classes (or equivalent interest) , if the
holders of the stock of such class or classes (or equivalent interests) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the directors (or persons performing similar functions) of such
Company, association or business entity, even if the right so to vote has been
suspended by the happening of such a contingency.

        Warrant Price: the meaning specified in section 2.1.

        Warrantholders: Eldon Capital, Incorporated and each subsequent holder
from time to time of any Warrants or any Registrable Shares.

        Warrants: the meaning specified in the opening paragraphs of this
Warrant.

        10. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.

        11. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any liabilities on such holder to
purchase any securities or as a Stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or Stockholders of the
Company or otherwise.

        12. Notices. All notices and other communications under this Agreement
shall be in writing and shall be delivered by hand or courier service, or mailed
by registered or certified mail, return receipt requested, or

                                       33
<PAGE>

sent by facsimile transmission, addressed (a) if to any holder of any Warrant or
any holder of any Common Stock, at the registered address of such holder as set
forth in the register kept at the principal office of the Company, or (b) if to
the Company, to the attention of its General Counsel, at its principal office,
provided that the exercise of any Warrant shall be effected in the manner
provided in section 1.

        13. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The agreements of the Company contained in this Warrant, other than
those applicable solely to the Warrants and the holders thereof, shall inure to
the benefit of and be enforceable by any holder or holders at the time of any
Common Stock issued upon the exercise of Warrants, whether so expressed or not.
This Warrant shall be construed and enforced in accordance with and governed by
the laws of the State of New York. The section headings in this Warrant are for
purposes of convenience only and shall not constitute a part hereof.

        14. Expiration; Notice. The right to exercise this Warrant shall expire
at 3 P.M., New York City time, on November 25, 2004.

                                    DIRECT GENERAL CORPORATION

                                    By: /s/ James R. Tuerff
                                    ---------------------------
                                    Name: James R. Tuerff
                                    Title: President and Chief Executive Officer

                                       34<PAGE>
                                                                    Exhibit 10.6

                               DIRECT CORPORATION

                       1996 EMPLOYEE STOCK INCENTIVE PLAN

SECTION 1. PURPOSE; DEFINITIONS.

         (a)      PURPOSE. The purpose of the Plan is to enable the Corporation
to attract, retain and reward officers and key employees of and consultants to
the Corporation and its Subsidiaries and Affiliates, and strengthen the
mutuality of interests between such individuals and the Corporation's
shareholders, by offering such officers, key employees and consultants Options
or other rights with respect to shares of Common Stock of the Corporation. The
creation of the Plan shall not diminish or prejudice other compensation programs
approved from time to time by the Board.

         (b)      DEFINITIONS. For purposes of the Plan, the following terms are
defined as set forth below:

                  (i)      "Affiliate" means any entity other than the
         Corporation and its Subsidiaries that is designated by the Board as a
         participating employer under the Plan, provided that the Corporation
         directly or indirectly owns at least 20% of the combined voting power
         of all classes of stock of such entity or at least 20% of the ownership
         interests in such entity.

                  (ii)     "Board" means the Board of Directors of the
         Corporation.

                  (iii)    "Capital Transaction" has the meaning provided in
         Section 3(b) of the Plan.

                  (iv)     "Cause" has the meaning provided in Section 5(b)(x)
         of the Plan.

                  (v)      "Change in Control" has the meaning provided in
         Section 9(b) of the Plan.

                  (vi)     "Change in Control Price" has the meaning provided in
         Section 9(d) of the Plan.

                  (vii)    "Common Stock" means the Corporation's Common Stock,
         without par value.

                  (viii)   "Code" means the Internal Revenue Code of 1986, as
         amended from time to time, and any successor thereto.

                  (ix)     "Commission" means the Securities and Exchange
         Commission.

                  (x)      "Committee" means the Committee referred to in
         Section 2 of the Plan.

                  (xi)     "Corporation" means Direct Corporation, a corporation
         organized under the laws of the State of Tennessee, or any successor
         corporation.

<PAGE>

                  (xii)    "Disability" means disability as determined under the
         Corporation's long-term disability insurance policy or, if there is no
         such definition, as reasonably determined by the Committee.

                  (xiii)   "Disinterested Person" has the meaning set forth in
         Rule 16b-3(c)(2)(i) as promulgated by the Commission under the Exchange
         Act, or any successor definition adopted by the Commission.

                  (xiv)    "Early Retirement" means retirement, for purposes of
         this Plan with the express consent of the Corporation at or before the
         time of such retirement, from active employment with the Corporation
         and any Subsidiary or Affiliate prior to age 65, in accordance with any
         applicable early retirement policy of the Corporation then in effect.

                  (xv)     "Exchange Act" means the Securities Exchange Act of
         1934, as amended from time to time, and any successor thereto.

                  (xvi)    "Fair Market Value" means the reported closing price
         of the Common Stock on any recognized exchange or over the counter
         market on the relevant date or, if no shares of Common Stock are traded
         on that date, the reported closing price on the next preceding date on
         which shares were traded. In the event that trading in the shares of
         Common Stock is not reported on an exchange or through the over the
         counter market, Fair Market Value shall be determined by such other
         method as the Committee in good faith deems appropriate without regard
         to any restriction other than a restriction which, by its terms, will
         never lapse.

                  (xvii)   "Incentive Stock Option" means any Option intended to
         be and designated as an "Incentive Stock Option" within the meaning of
         Section 422 of the Code.

                  (xviii)  "Non-Qualified Stock Option" means any Option that is
         not an Incentive Stock Option.

                  (xix)    "Normal Retirement" means retirement from active
         employment with the Corporation and any Subsidiary or Affiliate on or
         after age 65.

                  (xx)     "Option" means any option to purchase shares of
         Common Stock granted pursuant to Section 5 below.

                  (xxi)    "Other Stock-Based Award" means an award under
         Section 8 below that is valued in whole or in part by reference to, or
         is otherwise based on, Common Stock.

                  (xxii)   "Plan" means this Direct Corporation 1996 Employee
         Stock Incentive Plan, as amended from time to time in accordance
         herewith.

                  (xxiii)  "Restriction Period" has the meaning provided in
         Section 7(c)(i) of the Plan.

                                       2

<PAGE>

                  (xxiv)   "Restricted Stock" means an award of shares of Common
         Stock that is subject to restrictions under Section 7 of the Plan.

                  (xxv)    "Retirement" means Normal Retirement or Early
         Retirement.

                  (xxvi)   "Stock Appreciation Right" means the right granted
         under Section 6 of the Plan.

                  (xxvii)  "Subsidiary" means any corporation (other than the
         Corporation) in an unbroken chain of corporations beginning with the
         Corporation if each of the corporations (other than the last
         corporation in the unbroken chain) owns stock possessing 50% or more of
         the total combined voting power of all classes of stock in one of the
         other corporations in the chain.

SECTION 2. ADMINISTRATION,

         (a)      THE COMMITTEE. The Plan shall be administered by (i) the full
Board of Directors, (ii) a Committee of the Board or (iii) a Committee of not
less than two Disinterested Persons, who shall be appointed by the Board and who
shall serve at the pleasure of the Board. The functions of the Committee
specified in the Plan may be exercised by (1) an existing Committee of the Board
composed exclusively of Disinterested Persons or (2) the full Board of
Directors.

         (b)      AUTHORITY OF THE COMMITTEE. The Committee shall have authority
to grant, pursuant to the terms of the Plan, to officers, other key employees
and consultants eligible under Section 4 hereof: Options, Stock Appreciation
Rights, Restricted Stock and Other Stock-Based Awards.

         In particular, the Committee shall have the authority, consistent with
the terms of the Plan:

                  (i)      to select the officers and other key employees of and
         consultants to the Corporation and its Subsidiaries and Affiliates to
         whom Options, Stock Appreciation Rights, Restricted Stock or Other
         Stock-Based Awards may from time to time be granted hereunder;

                  (ii)     to determine whether and to what extent Incentive
         Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
         Restricted Stock or Other Stock-Based Awards, or any combination
         thereof, are to be granted hereunder to one or more eligible employees;

                  (iii)    to determine the number of shares to be covered by
         each such award granted hereunder;

                  (iv)     to determine the terms and conditions, not
         inconsistent with the terms of the Plan, of any award granted hereunder
         (including, but not limited to, the share price and any restriction or
         limitation, or any vesting, acceleration of vesting or waiver of

                                       3

<PAGE>

         forfeiture restrictions regarding any Option or other award or the
         shares of Common Stock relating thereto, based in each case on such
         factors as the Committee shall determine, in its sole discretion) and
         to amend or waive any such terms and conditions to the extent permitted
         by Section 10 hereof;

                  (v)      to determine whether and under what circumstances an
         Option or Stock Appreciation Right may be settled in cash or Restricted
         Stock under Section 5(b)(xiii) hereof, instead of shares of Common
         Stock;

                  (vi)     to determine whether, to what extent and under what
         circumstances Option grants or other awards under the Plan are to be
         made, and operate, on a tandem basis vis-a-vis other awards under the
         Plan, or on an additive basis;

                  (vii)    to determine whether, to what extent and under what
         circumstances shares of Common Stock and other amounts payable with
         respect to an award under this Plan shall be deferred either
         automatically or at the election of the participant (including
         providing for and determining the amount (if any) of any deemed
         earnings on any deferred amount during any deferral period); and

                  (viii)   to determine whether to require payment of any
         withholding requirements in shares of Common Stock.

         The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.

         All decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Corporation and Plan participants.

SECTION 3. SHARES OF COMMON STOCK SUBJECT TO PLAN.

         (a)      SHARES OF COMMON STOCK RESERVED UNDER PLAN. The aggregate
number of shares of Common Stock reserved and available for distribution under
the Plan shall be 250,000 shares. Such shares of Common Stock may consist, in
whole or in part, of authorized and unissued shares or treasury shares. The
aggregate number of shares of Common Stock that may be granted to any individual
pursuant to any award under the Plan or with respect to which any awards are
made shall be 250,000, or up to 250,000 in any one year.

         If any Option or Stock Appreciation Right expires or is forfeited
without exercise, or if any shares of Common Stock that are subject to any
Restricted Stock or Other Stock-Based Award granted hereunder are forfeited
prior to the payment of any dividends, if applicable, with respect to such
shares of Common Stock, such shares shall again be available for distribution in
connection with future awards under the Plan. If dividends have been paid to the
grantee with respect to the shares of Common Stock subject to such forfeited
award, such shares shall not be available for distribution in connection with
future awards under the Plan.

                                       4

<PAGE>

         (b)      ADJUSTMENT IN CERTAIN EVENTS. In the event of any merger,
reorganization, consolidation, recapitalization, extraordinary cash dividend,
stock dividend, stock split or other change in corporate structure affecting the
Common Stock (a "Capital Transaction"), a substitution or adjustment will be
made in the aggregate number of shares reserved for issuance under the Plan, the
number that may be granted to any individual in any year or over the life of the
Plan and the number and price (if applicable) of shares subject to outstanding
awards granted under the Plan, so as to provide each holder of an award under
this Plan with the same rights on exercise or distribution of the benefits of
such award that such holder would have received if such holder had exercised or
received a distribution of the benefits of such award immediately prior to the
occurrence of such Capital Transaction; provided, however, that the number of
                                        ------------------
shares subject to any award shall always be a whole number. In the event of any
dispute as to any substitution or adjustment made under this Section 3(b), the
decision of the Committee shall be final and binding on all persons, including
the Corporation and Plan participants.

SECTION 4. ELIGIBILITY

         Officers and other key employees of and consultants to the Corporation
and its Subsidiaries and Affiliates (but excluding members of the Committee and
any person who serves only as a director) who are responsible for or contribute
to the management, growth or profitability of the business of the Corporation
and its Subsidiaries and Affiliates are eligible to be granted awards under the
Plan. Incentive Stock Options may only be granted to persons who are employees
of the Corporation or a Subsidiary of the Corporation.

SECTION 5. OPTIONS.

         (a)      ADMINISTRATION. Options may be granted alone, in addition to
or in tandem with other awards granted under the Plan. Any Option granted under
the Plan shall be in such form as the Committee may from time to time approve.

         Options granted under the Plan may be of two types: (i) Incentive Stock
Options and (ii) Non-Qualified Stock Options incentive Stock Options may be
granted only to individuals who are employees of the Corporation or any
Subsidiary of the Corporation.

         The Committee shall have the authority to grant to any optionee
(subject to the limitation set forth in the paragraph above) Incentive Stock
Options, Non-Qualified Stock Options, or both types of Options (in each case
with or without Stock Appreciation Rights).

         (b)      TERMS AND CONDITIONS. Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable.

                  (i)      Option Price. The option price per share of Common
         Stock purchasable under an Option shall be determined by the Committee
         at the time of grant but shall be not less than 100% (or, in the case
         of any employee who owns stock possessing more than 10% of the total
         combined voting power of all classes of stock of the Corporation or of
         any of its subsidiary or parent corporations, not less than 110%) of
         the Fair Market Value of the Common Stock at grant, in the case of
         Incentive Stock Options, and not less

                                       5

<PAGE>

         than 50% of the Fair Market Value of the Common Stock at grant, in the
         case of Non-Qualified Stock Options.

                  (ii)     Option Term. The term of each Option shall be fixed
         by the Committee, but no Incentive Stock Option shall be exercisable
         more than ten years (or, in the case of an employee who owns stock
         possessing more than 10% of the total combined voting power of all
         classes of stock of the Corporation or any of its subsidiary or parent
         corporations, more than five years) after the date the Option is
         granted.

                  (iii)    Exercisability. Options shall be exercisable at such
         time or times and subject to such terms and conditions as shall be
         determined by the Committee at or after grant; provided, however, that
         except as provided in Section 5(b)(vii), (viii) and (ix) hereof and
         Section 9 hereof, unless otherwise determined by the Committee at or
         after grant, no Option shall be exercisable prior to the first
         anniversary date of the granting of the Option. The Committee may
         provide that an Option shall vest over a period of future service at a
         rate specified at the time of grant, or that the Option is exercisable
         only in installments. If the Committee provides, in its sole
         discretion, that any Option is exercisable only in installments, the
         Committee may waive such installment exercise provisions at any time at
         or after grant in whole or in part, based on such factors as the
         Committee shall determine, in its sole discretion. The Committee may
         establish performance conditions or other conditions to the
         exercisability of any Options, as determined by the Committee in its
         sole discretion, which conditions may be waived by the Committee in its
         sole discretion.

                  (iv)     Method of Exercise. Subject to whatever installment
         or other exercise restrictions apply under Section 5(b)(iii) hereof,
         Options may be exercised in whole or in part at any time during the
         option period, by giving written notice of exercise to the Corporation
         specifying the number of shares to be purchased.

         Such notice shall be accompanied by payment in full of the purchase
price, either by check, note or such other instrument as the Committee may
accept. As determined by the Committee, in its sole discretion, at or (except in
the case of an Incentive Stock Option) after grant, payment in full or in part
may also be made in the form of unrestricted shares of Common Stock already
owned by the optionee or, in the case of the exercise of a Non-Qualified Stock
Option, Common Stock or Restricted Stock subject to an award hereunder (based in
each case, on the Fair Market Value of the Common Stock on the date the option
is exercised, as determined by the Committee). If payment of the exercise price
is made in part or in full with shares of Common Stock, the Committee may
(subject to the availability of additional shares reserved for issuance under
Section 3 above) award to the optionee a new Option to replace the shares of
Common Stock which were surrendered.

         If payment of the option exercise price of a Non-Qualified Stock Option
is made in whole or in part in the form of Restricted Stock, the Common Stock
received upon exercise shall be restricted in accordance with the original terms
of the Restricted Stock award in question, and any additional shares of Common
Stock received upon the exercise shall be subject to the same

                                       6

<PAGE>

forfeiture restrictions, unless otherwise determined by the Committee, in its
sole discretion, at or after grant.

         No shares of Common Stock shall be issued until full payment therefor
has been made. An optionee shall generally have the rights to dividends or other
rights of a shareholder with respect to shares subject to the Option when the
optionee has given written notice of exercise, has paid in full for such shares,
and, if requested, has given the representation described in Section 12(a)
hereof.

                  (v)      Non-Transferability of Incentive Stock Options.
         Notwithstanding any other provision of this Plan, no Incentive Stock
         Option shall be transferable by the optionee otherwise than by will or
         by the laws of descent and distribution, and all Incentive Stock
         Options shall be exercisable, during the optionee's lifetime, only by
         the optionee. See also Section l2(f) for other transfer restrictions.

                  (vi)     Bonus for Taxes. In the case of a Non-Qualified Stock
         Option, the Committee in its discretion may award at the time of grant
         or thereafter the right to receive upon exercise of such Option a cash
         bonus calculated to pay part or all of the federal and state, if any,
         income tax incurred by the optionee upon such exercise.

                  (vii)    Termination by Death. Subject to Section 5(b)(xi)
         hereof, if an optionee's employment by the Corporation and any
         Subsidiary or (except in the case of an Incentive Stock Option)
         Affiliate terminates by reason of death, any Option held by such
         optionee may thereafter be exercised, to the extent such Option was
         exercisable at the time of death or (except in the case of an Incentive
         Stock Option) on such accelerated basis as the Committee may determine
         at or after grant (or except in the case of an Incentive Stock Option,
         as may be determined in accordance with procedures established by the
         Committee) by the legal representative of the estate or by the legatee
         of the optionee under the will of the optionee, for a period of one
         year (or such shorter period as the Committee may specify at grant)
         from the date of such death or until the expiration of the stated term
         of such Option, whichever period is the shorter.

                  (viii)   Termination by Reason of Disability. Subject to
         Section 5(b)(xi) hereof, if an optionee's employment by the Corporation
         and any Subsidiary or (except in the case of an Incentive Stock Option)
         Affiliate terminates by reason of Disability, any Option held by such
         optionee may thereafter be exercised by the optionee, to the extent it
         was exercisable at the time of termination or (except in the case of an
         Incentive Stock Option) on such accelerated basis as the Committee may
         determine at or after grant (or, except in the case of an Incentive
         Stock Option, as may be determined in accordance with procedures
         established by the Committee), for a period of (A) three years (or such
         shorter period as the Committee may specify at grant) from the date of
         such termination of employment or until the expiration of the stated
         term of such Option, whichever period is the shorter, in the case of a
         Non-Qualified Stock Option and (B) one year from the date of
         termination of employment or until the expiration of the stated term of
         such Option, whichever period is shorter, in the case of an Incentive
         Stock Option; provided, however, that, if the optionee dies within the
         period specified in clause (A) above (or such other

                                       7

<PAGE>

         period as the Committee shall specify at grant), any unexercised
         Non-Qualified Stock Option held by such optionee shall thereafter be
         exercisable to the extent to which it was exercisable at the time of
         death for a period of twelve months from the date of such death or
         until the expiration of the stated term of such Option, whichever
         period is the shorter. In the event of termination of employment by
         reason of Disability, if an Incentive Stock Option is exercised after
         the expiration of the exercise period applicable to Incentive Stock
         Options, but before the expiration of any period that would apply if
         such Stock Option were a Non-Qualified Stock Option, such Stock Option
         will thereafter be treated as a Non-Qualified Stock Option.

                  (ix)     Termination by Reason of Retirement. Subject to
         Section 5(b)(xi) hereof, if an optionee's employment by the Corporation
         and any Subsidiary or (except in the case of an Incentive Stock Option)
         Affiliate terminates by reason of Normal or Early Retirement, any
         Option held by such optionee may thereafter be exercised by the
         optionee, to the extent it was exercisable at the time of such
         Retirement or (except in the case of an Incentive Stock Option) on such
         accelerated basis as the Committee may determine at or after grant (or,
         except in the case of an Incentive Stock Option, as may be determined
         in accordance with procedures established by the Committee), for a
         period of (A) three years (or such shorter period as the Committee may
         specify at grant) from the date of such termination of employment or
         the expiration of the stated term of such Option, whichever period is
         the shorter, in the case of a Non-Qualified Stock Option and (B) three
         months from the date of such termination of employment or the
         expiration of the stated term of such Option, whichever period is the
         shorter, in the event of an Incentive Stock Option; provided, however,
         that, if' the optionee dies within the period specified in clause (A)
         above (or such shorter period as the Committee may specify at grant),
         any unexercised Non-Qualified Stock Option held by such optionee shall
         thereafter be exercisable, to the extent to which it was exercisable at
         the time of death, for a period of 12 months from the date of such
         death or until the expiration of the stated term of such Option,
         whichever period is the shorter. In the event of termination of
         employment by reason of Retirement, if an Incentive Stock Option is
         exercised after the expiration of the exercise period applicable to
         Incentive Stock Options, but before the expiration of the period that
         would apply if such Stock Option were a Non-Qualified Stock Option, the
         option will thereafter be treated as a Non-Qualified Stock Option.

                  (x)      Other Termination. Unless otherwise determined by the
         Committee (or pursuant to procedures established by the Committee) at
         or (except in the case of an Incentive Stock Option) after grant, if an
         optionee's employment by the Corporation and any Subsidiary or (except
         in the case of an Incentive Stock Option) Affiliate is involuntarily
         terminated for any reason other than death, Disability or Normal or
         Early Retirement, the Option shall thereupon terminate, except that
         such Option may be exercised, to the extent otherwise then exercisable,
         for the lesser of three months or the balance of such Option's term if
         the involuntary termination is without Cause. For purposes of this
         Plan, "Cause" means (A) a felony conviction of a participant or the
         failure of a participant to contest prosecution for a felony, or (B) a
         participant's willful misconduct or dishonesty, which is directly and
         materially harmful to the business or reputation of the Corporation or
         any Subsidiary or Affiliate. If an optionee voluntarily

                                       8

<PAGE>

         terminates employment with the Corporation and any Subsidiary or
         (except in the case of an Incentive Stock Option) Affiliate (except for
         Disability, Normal or Early Retirement), the Option shall thereupon
         terminate; provided, however, that the Committee at grant or (except in
         the case of an Incentive Stock Option) thereafter may extend the
         exercise period in this situation for the lesser of three months or the
         balance of such Option's term.

                  (xi)     Incentive Stock Options. Anything in the Plan to the
         contrary notwithstanding, no term of this Plan relating to Incentive
         Stock Options shall be interpreted, amended or altered, nor shall any
         discretion or authority granted under the Plan be so exercised, so as
         to disqualify the Plan under Section 422 of the Code, or, without the
         consent of the optionee(s) affected, to disqualify any Incentive Stock
         Option under such Section 422.

         No Incentive Stock Option shall be granted to any participant under the
Plan if such grant would cause the aggregate Fair Market Value (as of the date
the Incentive Stock Option is granted) of the shares of Common Stock with
respect to which all Incentive Stock Options are exercisable for the first time
by such optionee during any calendar year (under all such plans of the
Corporation and any Subsidiary) to exceed $100,000.

         To the extent permitted under Section 422 of the Code or the applicable
regulations thereunder or any applicable Internal Revenue Service pronouncement:

                           a.       if the exercise of an Incentive Stock Option
                  is accelerated by reason of a Change in Control, any portion
                  of such option that is not exercisable as an "incentive stock
                  option" under Section 422 of the Code by reason of the
                  $100,000 limitation contained in Section 422(d) of the Code
                  shall be treated as a Non-Qualified Stock Option;

                           b.       if for any other reason the portion of any
                  Incentive Stock Option that is otherwise exercisable without
                  regard to the $100,000 limitation contained in Section 422(d)
                  of the Code, is greater than the portion of such option that
                  is immediately exercisable as an "incentive stock option"
                  under Section 422 of the Code, such excess shall be treated as
                  a Non-Qualified Stock Option; and

                           c.       the Committee shall have the right, with the
                  consent of the optionee, to treat an Incentive Stock Option
                  that cannot be exercised, for any other reason, as an
                  "incentive stock option" under Section 422 of the Code as a
                  Non-Qualified Stock Option.

                  (xii)    Performance and Other Conditions. The Committee may
         condition the exercise of any Option upon the attainment of specified
         performance goals or other factors as the Committee may determine, in
         its sole discretion. Unless specifically provided in the option
         agreement, any such conditional Option shall vest immediately prior to
         its expiration if the conditions to exercise have not theretofore been
         satisfied. The shares of Common Stock acquired pursuant to any
         conditional Option shall not be transferable by an optionee subject to
         Section 16(a) of the Exchange Act within six months of the date such
         Option first becomes exercisable.

                                       9

<PAGE>

                  (xiii)   Settlement Provisions. If the option agreement so
         provides at grant or (except in the case of an Incentive Stock Option)
         is amended after grant and prior to exercise to so provide (with the
         optionee's consent), the Committee may require that all or part of the
         shares to be issued with respect to the spread value of an exercised
         Option take the form of Restricted Stock, which shall be valued on the
         date of exercise on the basis of the Fair Market Value (as determined
         by the Committee) of such Restricted Stock determined without regards
         to the forfeiture restrictions involved.

SECTION 6. STOCK APPRECIATION RIGHTS.

         (a)      GRANT AND EXERCISE. Stock Appreciation Rights may be granted
alone or in conjunction with all or part of any Option granted under the Plan.
In the case of a Non-Qualified Stock Option, such rights may be granted either
at or after the time of the grant of such Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of such
Option.

         A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option, subject to such provisions as the
Committee may specify at grant where a Stock Appreciation Right is granted with
respect to less than the full number of shares covered by a related Option.

         A Stock Appreciation Right may be exercised by the grantee, subject to
Section 6(b) hereof, in accordance with the procedures established by the
Committee for such purpose. Upon such exercise, the grantee shall be entitled to
receive an amount determined in the manner prescribed in Section 6(b) hereof.
Options relating to exercised Stock Appreciation Rights shall no longer be
exercisable to the extent that the related Stock Appreciation Rights have been
exercised.

         (b)      TERMS AND CONDITIONS. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
the Plan, as shall be determined from time to time by the Committee, including
the following:

                  (i)      Exercise Provisions for Tandem Grants. A Stock
         Appreciation Right granted in conjunction with all or part of any
         Option shall be exercisable only at such time or times and to the
         extent that the Option to which it relates shall be exercisable in
         accordance with the provisions of Section 5 and this Section 6 of the
         Plan; provided, however, that any Stock Appreciation Right granted to a
         grantee subject to Section 16(a) of the Exchange Act shall be subject
         to the further limitations set forth in Section 6(b)(v) and, if
         applicable, Section 6(b)(vi) below.

                  (ii)     Payment on Exercise. Upon the exercise of a Stock
         Appreciation Right, a grantee shall be entitled to receive an amount in
         cash or shares of Common Stock (or a combination of cash and shares of
         Common Stock) equal in value to the excess of the Fair Market Value of
         one share of Common Stock over the price per share specified in the
         Stock Appreciation Right or related Option multiplied by the number of
         shares in

                                       10

<PAGE>

         respect of which the Stock Appreciation Right shall have been
         exercised, with the Committee having the right to determine the form of
         payment.

                  (iii)    Use of Authorized Shares. Upon the exercise of a
         Stock Appreciation Right, any shares of Common Stock issued thereunder
         or with respect to which a cash payment was made shall be deemed to
         have been issued for the purpose of the limitation set forth in Section
         3 of the Plan on the number of shares of Common Stock to be issued
         under the Plan.

                  (iv)     Payment based on Change in Control Price. Unless
         otherwise determined by the Committee at grant, in the event of a
         Change in Control or a Potential Change in Control, the amount to be
         paid upon the exercise of a Stock Appreciation Right shall be based on
         the Change in Control Price, subject to such terms and conditions as
         the Committee may specify at grant.

                  (v)      Restrictions on Exercise by Persons Subject to
         Section 16(a). The exercise of Stock Appreciation Rights held by
         grantees who are subject to Section 16(a) of the Exchange Act shall
         comply with Rule 16b-3(e) thereunder. In particular, such Stock
         Appreciation Rights shall be exercisable only pursuant an irrevocable
         election made at least six months prior to the date of exercise or
         within the applicable ten business day "window" periods specified in
         Rule 16b-3(e)(3). Stock Appreciation Rights held by grantees who are
         subject to Section 16(a) of the Exchange Act shall not be exercisable
         for the first six months after the date of grant.

                  (vi)     Performance and Other Conditions. The Committee may
         condition the exercise of any Stock Appreciation Right upon the
         attainment of specified performance goals or other factors as the
         Committee may determine, in its sole discretion. Unless specifically
         provided in the applicable award agreement, any such conditional Stock
         Appreciation Right shall vest immediately prior to its expiration, if
         the conditions to exercise have not theretofore been satisfied. A
         conditional Stock Appreciation Right held by a grantee subject to
         Section 16(a) of the Exchange Act shall not be exercisable until the
         expiration of six months following the satisfaction of the condition
         giving rise to such Stock Appreciation Right.

SECTION 7. RESTRICTED STOCK.

         (a)      ADMINISTRATION. Shares of Restricted Stock may be issued
either alone, in addition to or in tandem with other awards granted under the
Plan. The Committee shall determine the eligible persons to whom, and the time
or times at which, grants of Restricted Stock will be made, the number of shares
of Restricted Stock to be awarded to any person, the price (if any) to be paid
by the recipient of Restricted Stock (subject to Section 7(b) hereof), the time
or times within which such awards may be subject to forfeiture, and the other
terms, restrictions and conditions of the awards in addition to those set forth
in Section 7(c) hereof.

         The Committee may condition the grant or vesting of Restricted Stock
upon the attainment of specified performance goals or other factors as the
Committee may determine, in its sole discretion.

                                       11

<PAGE>

         (b)      AWARDS AND CERTIFICATES. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Corporation, and has
otherwise complied with the applicable terms and conditions of such award.

                  (i)      Purchase Price. The purchase price for shares of
         Restricted Stock shall be established by the Committee and may be zero.

                  (ii)     Acceptance of Awards. Awards of Restricted Stock must
         be accepted within a period of 60 days (or such shorter period as the
         Committee may specify at grant) after the award date, by executing a
         Restricted Stock award agreement and paying whatever price (if any) is
         required under Section 7(b)(i) hereof.

                  (iii)    Stock Certificates. Each participant receiving a
         Restricted Stock award shall be issued a stock certificate in respect
         of such shares of Restricted Stock. Such certificate shall be
         registered in the name of such participant, and shall bear an
         appropriate legend referring to the terms, conditions, and restrictions
         applicable to such award.

                  (iv)     Custody of Stock Certificates. The Committee shall
         require that the stock certificates evidencing such shares be held in
         custody by the Corporation until the restrictions thereon shall have
         lapsed, and that, as a condition of any Restricted Stock award, the
         participant shall have delivered a stock power, endorsed in blank,
         relating to the shares of Common Stock covered by such award.

         (c)      RESTRICTIONS AND CONDITIONS. The shares of Restricted Stock
awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:

                  (i)      Restriction Period. Subject to the provisions of this
         Plan and the award agreement, during a period set by the Committee
         commencing with the date of such award (the "Restriction Period"),
         the participant shall not be permitted to sell, transfer, pledge,
         assign or otherwise encumber shares of Restricted Stock awarded under
         the Plan. Within these limits, the Committee, in its sole discretion,
         may provide for the lapse of such restrictions in installments and
         may accelerate or waive such restrictions in whole or in part, based
         on service, performance or other factors or criteria as the Committee
         may determine, in its sole discretion.

                  (ii)     Dividends. Except as provided in this paragraph (ii),
         Section 7(c)(i) hereof and the award agreement, the participant shall
         have, with respect to the shares of Restricted Stock, all of the rights
         of a shareholder of the Corporation, including the right to vote the
         shares, and the right to receive any cash dividends. The Committee, in
         its sole discretion, as determined at the time of award, may permit or
         require the payment of cash dividends to be deferred and, if the
         Committee so determines, reinvested, subject to Section 12(e) hereof,
         in additional Restricted Stock to the extent shares are available under
         Section 3 hereof or otherwise reinvested. Pursuant to Section 3 hereof,
         stock dividends issued with respect to Restricted Stock shall be
         treated as additional shares of

                                       12

<PAGE>

         Restricted Stock that are subject to the same restrictions and other
         terms and conditions that apply to the shares of Restricted Stock with
         respect to which such dividends are issued.

                  (iii)    Vesting and Forfeiture. Subject to the applicable
         provisions of the award agreement and this Section 7, upon termination
         of a participant's employment with the Corporation and any Subsidiary
         or Affiliate for any reason during the Restriction Period, all shares
         still subject to restriction will vest, or be forfeited, in accordance
         with the terms and conditions established by the Committee at or after
         grant.

                  (iv)     Delivery of Shares on Termination of Restriction
         Period. If and when the Restriction Period expires without a prior
         forfeiture of the Restricted Stock subject to such Restriction Period,
         certificates for an appropriate number of unrestricted shares shall be
         delivered to the participant promptly.

SECTION 8. OTHER STOCK-BASED AWARDS.

         (a)      ADMINISTRATION. Other Stock-Based Awards valued by reference
to shares of Common Stock may be granted either alone or in addition to or in
tandem with Options, Stock Appreciation Rights or Restricted Stock granted under
the Plan; provided that no such Other Stock-Based Awards may be granted in
tandem with Incentive Stock Options if that would cause such Incentive Stock
Options not to qualify as "incentive stock options" pursuant to Section 422 of
the Code.

         Subject to the provisions of the Plan, the Committee shall have
authority to determine the persons to whom and the time or times at which such
awards shall be made, the number of shares of Common Stock to be awarded
pursuant to such awards, and all other conditions of the awards. The Committee
may also provide for the grant of shares of Common Stock upon the completion of
a specified performance period.

         The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.

         (b)      TERMS AND CONDITIONS. Other Stock-Based Awards made pursuant
to this Section 8 shall be subject to the following terms and conditions:

                  (i)      Restriction on Transfer. Subject to the provisions of
         this Plan and the award agreement referred to in Section 8(b)(v) below,
         shares subject to awards under this Section 8 may not be sold,
         assigned, transferred, pledged or otherwise encumbered prior to the
         date on which the shares are issued, or, if later, the date on which
         any applicable restriction, performance or deferral period lapses.

                  (ii)     Dividends and Interest. Subject to the provisions of
         this Plan and the award agreement and unless otherwise determined by
         the Committee at grant, the recipient of an award under this Section 8
         shall be entitled to receive, currently or on a deferred basis,
         interest or dividends or interest or dividend equivalents with respect
         to the number of shares covered by the award, as determined at the time
         of the award by the

                                       13

<PAGE>

         Committee, in its sole discretion, and the Committee may provide that
         such amounts (if any) shall be deemed to have been reinvested in
         additional shares of Common Stock or otherwise reinvested.

                  (iii)    Vesting and Forfeiture. Any award under this Section
         8 and any shares of Common Stock covered by any such award shall vest
         or be forfeited to the extent so provided in the award agreement, as
         determined by the Committee, in its sole discretion.

                  (iv)     Waiver of Vesting or Forfeiture Provisions. In the
         event of the participant's Retirement, Disability or death, or in cases
         of special circumstances, the Committee may, in its sole discretion,
         waive in whole or in part any or all of the remaining limitations
         imposed hereunder (if any) with respect to any or all of an award under
         this Section 8.

                  (v)      Awards Agreements. Each award under this Section 8
         shall be confirmed by, and subject to the terms of, an agreement
         between the Corporation and the participant.

                  (vi)     Purchase Price. Shares of Common Stock (including
         securities convertible into shares of Common Stock) issued on a bonus
         basis under this Section 8 may be issued for no cash consideration. The
         purchase price of shares of Common Stock (including securities
         convertible into shares of Common Stock) purchased pursuant to a
         purchase right awarded under this Section 8 shall be determined by the
         Committee in its sole discretion on the date of grant.

SECTION 9. CHANGE IN CONTROL PROVISIONS.

         (a)      IMPACT OF EVENT. In the event of a Change in Control or
Potential Change in Control, the following acceleration and valuation provisions
shall apply if so determined by the Committee in its sole discretion:

                  (i)      Acceleration of Vesting. Any Stock Appreciation
         Rights and any Option awarded under the Plan not previously exercisable
         and vested shall become fully exercisable and vested; provided,
         however, that Stock Appreciation Rights held by persons subject to
         Section 16(a) under the Exchange Act shall not become exercisable until
         six months after the date of grant.

                  (ii)     Lapse of Other Restrictions. The restrictions and
         deferral limitations applicable to any Restricted Stock and Other
         Stock-Based Awards, in each case to the extent not already vested under
         the Plan, shall lapse and such shares and awards shall be deemed fully
         vested.

                  (iii)    Cash-Out Provisions. Except as otherwise provided in
         Section 9(a)(iv) below, the value of all outstanding Options, Stock
         Appreciation Rights, Restricted Stock and Other Stock-Based Awards
         shall, unless otherwise determined by the Committee in its sole
         discretion at or (except in the case of an Incentive Stock Option)
         after grant but prior to any Change in Control, be cashed out on the
         basis of the Change in Control Price

                                       14

<PAGE>

         as of the date such Change in Control or such Potential Change in
         Control is determined to have occurred or such other date as the
         Committee may determine prior to the Change in Control.

                  (iv)     Cash-Out Provisions for Statutory Insiders. In the
         case of any Options, Stock Appreciation Rights, Restricted Stock and
         Other Stock-Based Awards held by any person subject to Section 16(a) of
         the Exchange Act, the value of all such Options, Stock Appreciation
         Rights, Restricted Stock or Other Stock-Based Awards, in each case to
         the extent that they have been held for at least six months, shall be
         cashed out on the basis of the Change in Control Price as of the date
         of such Change in Control or such Potential Change in Control is
         determined to have occurred. The Committee shall have the right (A) to
         cause any right to receive the Change in Control Price to be cancelled
         with respect to all or any grantee(s) who are subject to Section 16(a)
         of the Exchange Act if payment of the Change in Control Price to such
         grantee(s) would cause liability under Section 16 of the Exchange Act,
         and (B) to determine whether the Change in Control Price shall be paid
         in cash or in shares of capital stock (including the capital stock of
         any acquiring corporation) to grantees who are subject to Section 16(a)
         of the Exchange Act.

         (b)      DEFINITION OF CHANGE IN CONTROL. A "Change in Control" means
the happening of any of the following:

                  (i)      any person or entity, including a "group" as defined
         in Section 13(d)(3) of the Exchange Act, other than the Corporation, a
         wholly-owned subsidiary thereof, any employee benefit plan of the
         Corporation or any of its Subsidiaries or any shareholder as of the
         adoption of this Plan having more than 50% of the combined beneficially
         voting power of the then outstanding voting securities, becomes the
         beneficial owner of the Corporation's securities having more than 50%
         of the combined voting power of the then outstanding securities of the
         Corporation that may be cast for the election of directors of the
         Corporation (other than as a result of an issuance of securities
         initiated by the Corporation in the ordinary course of business); or

                  (ii)     as the result of, or in connection with, any cash
         tender or exchange offer, merger or other business combination, sale of
         assets or contested election, or any combination of the foregoing
         transactions, less than a majority of the combined voting power of the
         then outstanding securities of the Corporation or any successor
         corporation or entity entitled to vote generally in the election of the
         directors of the Corporation or such other corporation or entity after
         such transaction are held in the aggregate by the holders of the
         Corporation's securities entitled to vote generally in the election of
         directors of the Corporation immediately prior to such transaction; or

                  (iii)    during any period of two consecutive years,
         individuals who at the beginning of such period constitute the Board
         cease for any reason to constitute at least a majority thereof, unless
         the election, or the nomination for election by the Corporation's
         shareholders, of each director of the Corporation first elected during
         such period was approved by a vote of at least two-thirds of the
         directors of the Corporation then still in office who were directors of
         the Corporation at the beginning of such period.

                                       15

<PAGE>

         (c)      DEFINITION OF POTENTIAL CHANGE IN CONTROL. A "Potential Change
in Control" means the happening of any one of the following:

                  (i)      The approval by shareholders of an agreement by the
         Corporation, the consummation of which would result in a Change in
         Control of the Corporation; or

                  (ii)     The acquisition of beneficial ownership, directly or
         indirectly, by any entity, person or group (other than the Corporation
         or a Subsidiary or any Corporation employee benefit plan (including any
         trustee of such plan acting as such trustee)) of securities of the
         Corporation representing 20% or more of the combined voting power of
         the Corporation's outstanding securities and the adoption by the
         Committee of a resolution to the effect that a Potential Change in
         Control of the Corporation has occurred for purposes of this Plan.

         (d)      CHANGE IN CONTROL PRICE. The "Change in Control Price" means
the highest price per share paid in any transaction reported on The Nasdaq Stock
Market's National Market or such other exchange or market as is the principal
trading market for the Common Stock, or paid or offered in any bona fide
transaction related to a Change in Control or Potential Change in Control of the
Corporation at any time during the 60 day period immediately preceding the
occurrence of the Change in Control (or, where applicable, the occurrence of the
Potential Change in Control event), in each case as determined by the Committee
except that, in the case of Incentive Stock Options and Stock Appreciation
Rights relating to Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the optionee exercises such
Incentive Stock Option or Stock Appreciation Rights or, where applicable, the
date on which a cash out occurs under Section 9(a)(iii) or (iv) hereof.

SECTION 10. AMENDMENTS AND TERMINATION.

         The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of an
optionee or participant under an Option, Stock Appreciation Right, Restricted
Stock award or Other Stock-Based Award theretofore granted, without the
optionee's or participant's consent. In addition, no amendment or alteration
shall be made without the approval of the Corporation's shareholders, if such
amendment or alteration would:

         (a)      except as provided in Section 3(b) of the Plan, increase the
         total number of shares of Common Stock reserved for the purpose of the
         Plan;

         (b)      materially increase the benefits accruing to participants
         under the Plan; or

         (c)      materially modify the requirements as to eligibility for
         participation in the Plan.

         The Committee may amend the terms of any Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section
3(b) above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Options for previously
granted Options (on a one for one or other basis), including previously granted
Options having higher option exercise prices.

                                       16

<PAGE>

         Subject to the above provisions, the Board shall have broad authority
to amend the Plan to take into account changes in applicable securities and tax
laws and accounting rules, as well as other developments.

SECTION 11. UNFUNDED STATUS OF PLAN.

         The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Corporation, nothing contained herein shall give
any such participant or optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver shares of Common Stock or payments in lieu of
or with respect to awards hereunder; provided, however, that, unless the
Committee otherwise determines with the consent of the affected participant, the
existence of such trusts or other arrangements is consistent with the "unfunded"
status of the Plan.

SECTION 12. GENERAL PROVISIONS.

         (a)      SECURITIES LAW RESTRICTIONS. The Committee may require each
person purchasing shares of Common Stock pursuant to an Option or other award
under the Plan to represent to and agree with the Corporation in writing that
the optionee or participant is acquiring the shares without a view to
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.

         All certificates for shares of Common Stock or other securities
delivered under the Plan shall be subject to such stock-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Commission, any stock exchange upon
which the Common Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

         (b)      OTHER COMPENSATION ARRANGEMENTS. Nothing contained in this
Plan shall prevent the Board from adopting other or additional compensation
arrangements, subject to shareholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.

         (c)      NO RIGHT TO CONTINUED EMPLOYMENT. The adoption of the Plan
shall not confer upon any employee of the Corporation or any Subsidiary or
Affiliate any right to continued employment with the Corporation or a Subsidiary
or Affiliate, as the case may be, nor shall it interfere in any way with the
right of the Corporation or a Subsidiary or Affiliate to terminate the
employment of any of its employees at any time.

         (d)      WITHHOLDING. No later than the date as of which an amount
first becomes includible in the gross income of the participant for Federal
income tax purposes with respect to any award under the Plan, the participant
shall pay to the Corporation, or make arrangements satisfactory to the Committee
regarding the payment of, any Federal, state, or local taxes of any

                                       17

<PAGE>

kind required by law to be withheld with respect to such amount. The Committee
may require withholding obligations to be settled with shares of Common Stock,
including shares of Common Stock that are part of the award that gives rise to
the withholding requirement. The obligations of the Corporation under the Plan
shall be conditional on such payment or arrangements and the Corporation and its
Subsidiaries or Affiliates shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment of any kind otherwise due to the
participant.

         (e)      DIVIDENDS. The actual or deemed reinvestment of dividends or
dividend equivalents in additional Restricted Stock (or other types of Plan
awards) at the time of any dividend payment shall only be permissible if
sufficient shares of Common Stock are available under Section 3 hereof for such
reinvestment (taking into account then outstanding Options and other Plan
awards).

                                       18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]