Document:

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                                                                     EXHIBIT 4.2

                                     WARRANT
                          REGISTRATION RIGHTS AGREEMENT

                                RAILAMERICA, INC.

               130,000 Warrants to Purchase Shares of Common Stock

                           Dated as of August 14, 2000

                          DONALDSON, LUFKIN & JENRETTE
                             SECURITIES CORPORATION

                                       and

                                BARCLAYS BANK PLC

                                       and

                            SCOTIA CAPITAL (USA) INC.

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         This Warrant Registration Rights Agreement (this "Agreement") is made
and entered into as of August 14, 2000, between RailAmerica, Inc., a Delaware
corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette Securities
Corporation, Barclays Bank PLC and Scotia Capital (USA) Inc. (collectively, the
"INITIAL PURCHASERS").

         The Company, RailAmerica Transportation Corp., a Delaware corporation
("RAILAMERICA Transportation"), the guarantors named therein and the Initial
Purchasers have entered into a Purchase Agreement, dated August 9, 2000 (the
"PURCHASE AGREEMENT"). The Purchase Agreement provides for the offering by the
Company and RailAmerica Transportation of 130,000 Units, each consisting of
$1,000 principal amount of RailAmerica Transportation's 12 7/8% Senior
Subordinated Notes due 2010 (the "NOTES") and one warrant initially representing
the right to purchase 10.8570307 shares of common stock, par value $0.001 per
share, of the Company (the "WARRANT SHARES").

         Pursuant to the Purchase Agreement, the Company has entered into a
Warrant Agreement (the "WARRANT AGREEMENT") with Wells Fargo Bank Minnesota,
N.A., as warrant agent (the "WARRANT AGENT"), providing for the issuance of
130,000 warrants (the "WARRANTS"), each initially representing the right to
purchase 10.8570307 Warrant Shares.

         In order to induce the Initial Purchasers to purchase the Warrants, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 9 of the Purchase
Agreement.

         Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Warrant Agreement.

         The parties hereby agree as follows:

1.       DEFINITIONS

         As used in this Agreement, the following capitalized terms shall have
the following meanings:

         ACT: The Securities Act of 1933, as amended.

         ADVICE: As defined in Section 4(b) hereof.

         AFFILIATE: As defined in Rule 144.

         BLACK OUT NOTICE: As defined in Section 4(b) hereof.

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         BLACK OUT PERIOD: As defined in Section 3(a) hereof.

         CLOSING DATE: The date hereof.

         COMMISSION: The Securities and Exchange Commission.

         EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.

         EXPIRATION DATE: 5:00 p.m. New York City time on August 15, 2010.

         HOLDERS: As defined in Section 2 hereof.

         NASD: National Association of Securities Dealers, Inc.

         PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.

         REGISTRATION STATEMENT: Any registration statement of the Company
relating to the registration for resale of Transfer Restricted Securities that
is filed pursuant to the provisions of this Agreement and including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.

         RULE 144: Rule 144 promulgated under the Act.

         TRANSFER RESTRICTED SECURITIES: (a) Each Warrant and Warrant Share held
by an Affiliate of the Company and (b) each other Warrant and Warrant Share
until the earlier to occur of (i) the date on which such Warrant or Warrant
Share (other than any Warrant Share issued upon exercise of a Warrant in
accordance with a Registration Statement) has been disposed of in accordance
with a Registration Statement and (ii) the date on which such Warrant or Warrant
Share (or the related Warrant) is distributed to the public pursuant to Rule 144
under the Act.

2.       HOLDERS

         A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person is the holder of record of Transfer
Restricted Securities.

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3.       SHELF REGISTRATION

         (a) SHELF REGISTRATION. The Company shall prepare and cause to be filed
with the Commission on or before 120 days from the Closing Date pursuant to Rule
415 under the Act a Registration Statement on the appropriate form relating to
resales of Transfer Restricted Securities by the Holders thereof and the
issuance of Warrant Shares upon the exercise of the Warrants sold pursuant to
such Registration Statement. The Company shall use its reasonable best efforts
to cause the Registration Statement to be declared effective by the Commission
on or before 180 days after the Closing Date.

         To the extent necessary to ensure that the Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 3(a), the Company shall use its
reasonable best efforts to keep any Registration Statement required by this
Section 3(a) continuously effective, supplemented, amended and current as
required by and subject to the provisions of Section 4(a) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, until
the later of (i) the second anniversary of the effective date of the
Registration Statement and (ii) the earlier of (A) the Expiration Date and (B)
the first date as of which all Warrants have been exercised by the Holders
thereof; PROVIDED, HOWEVER, that such obligation shall expire before such date
if the Company delivered to the Warrant Agent a written opinion of counsel to
the Company (which opinion of counsel shall be satisfactory to the Initial
Purchasers) that all Holders (other than Affiliates of the Company) of Warrants
and Warrant Shares may resell the Warrants and the Warrant Shares without
registration under the Act and without restriction as to the manner, timing or
volume of any such sale; and PROVIDED, FURTHER, that notwithstanding the
foregoing, any Affiliate of the Company may, with notice to the Company, require
the Company to keep the Registration Statement continuously effective for
resales by such Affiliate for so long as such Affiliate holds Warrants or
Warrant Shares, including as a result of any market-making activities or other
trading activities of such Affiliate. Notwithstanding the foregoing, the Company
shall not be required to amend or supplement the Registration Statement, any
related prospectus or any document incorporated therein by reference, for a
period (a "BLACK OUT PERIOD") not to exceed, for so long as this Agreement is in
effect, an aggregate of 90 days in any calendar year, in the event that (i) an
event occurs and is continuing as a result of which the Registration Statement,
any related prospectus or any document incorporated therein by reference as then
amended or supplemented would, in the Company's good faith judgment, contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and (ii)(A) the Company determines in its
good faith judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the Company
or (B) the disclosure otherwise relates to a material business transaction

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which has not yet been publicly disclosed; PROVIDED, HOWEVER, that such Black
Out Period shall be extended for any period, not to exceed an aggregate of 30
days in any calendar year, during which the Commission is reviewing any proposed
amendment or supplement to the Registration Statement, any related prospectus or
any document incorporated therein by reference which has been filed by the
Company; and provided, FURTHER, that no Black Out Period may be in effect during
the three months prior to the Expiration Date.

         (b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may include
any of its Transfer Restricted Securities in any Registration Statement pursuant
to this Agreement unless and until such Holder furnishes to the Company in
writing, within 20 days after receipt of a request therefor, the information
specified in Item 507 or 508 of Regulation S-K, as applicable, or such other
information as the Company may reasonably request under the Act for use in
connection with any Registration Statement or Prospectus or preliminary
prospectus included therein or in any application to the NASD. Each selling
Holder agrees to promptly furnish additional information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.

4.       REGISTRATION PROCEDURES

         (a) In connection with the Registration Statement and any related
Prospectus required by this Agreement, the Company shall:

                  (i) Comply with all the provisions of this Section 4(a) and
         use its reasonable best efforts to effect such registration to permit
         the sale of the Transfer Restricted Securities being sold in accordance
         with the intended method or methods of distribution thereof (as
         indicated in the information furnished to the Company pursuant to
         Section 3(b) hereof), and pursuant thereto the Company will prepare and
         file with the Commission a Registration Statement relating to the
         registration on any appropriate form under the Act, which form shall be
         available for the sale of the Transfer Restricted Securities in
         accordance with the intended method or methods of distribution thereof
         within the time periods and otherwise in accordance with the provisions
         hereof;

                  (ii) use its reasonable best efforts to keep such Registration
         Statement continuously effective and provide all requisite financial
         statements for the period specified in Section 3 of this Agreement.
         Upon the occurrence of any event that would cause any such Registration
         Statement or the Prospectus contained therein (A) to contain an untrue
         statement of material fact or omit to state any material fact necessary
         to make the statement therein, in the light of the circumstances under
         which they were made, not misleading or (B) not to be effective and
         usable for resale of Transfer Restricted Securities during the period
         required by this Agreement, the Company shall, subject to

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         Section 3(a), file promptly an appropriate amendment to such
         Registration Statement or a supplement to the Prospectus, as
         applicable, curing such defect, and, in the case of an amendment, use
         its reasonable best efforts to cause such amendment to be declared
         effective as soon as practicable thereafter;

                  (iii) prepare and file with the Commission such amendments and
         post-effective amendments to the applicable Registration Statement as
         may be necessary to keep such Registration Statement effective for the
         applicable period set forth in Section 3; cause the Prospectus to be
         supplemented by any required Prospectus supplement, and as so
         supplemented to be filed pursuant to Rule 424 under the Act, and to
         comply fully with Rules 424, 430A and 462, as applicable, under the Act
         in a timely manner; and comply with the provisions of the Act with
         respect to the disposition of all securities covered by such
         Registration Statement during the applicable period in accordance with
         the intended method or methods of distribution by the sellers thereof
         set forth in such Registration Statement or supplement to the
         Prospectus;

                  (iv) promptly advise each Holder whose Transfer Restricted
         Securities have been included in the Registration Statement (each, a
         "RELEVANT HOLDER") and the Initial Purchasers and, if requested by such
         Person, confirm such advice in writing, (A) when the Prospectus or any
         Prospectus supplement or post-effective amendment has been filed, and,
         with respect to any applicable Registration Statement or any
         post-effective amendment thereto, when the same has become effective,
         (B) of any request by the Commission for amendments to the Registration
         Statement or amendments or supplements to the Prospectus or for
         additional information relating thereto, (C) of the issuance by the
         Commission of any stop order suspending the effectiveness of the
         Registration Statement under the Act or of the suspension by any state
         securities commission of the qualification of the Transfer Restricted
         Securities for offering or sale in any jurisdiction, or the initiation
         of any proceeding for any of the preceding purposes, and (D) of the
         existence of any fact or the happening of any event that makes any
         statement of a material fact made in the Registration Statement, the
         Prospectus, any amendment or supplement thereto or any document
         incorporated by reference therein untrue, or that requires the making
         of any additions or changes in the Registration Statement in order to
         make the statements therein not misleading, or that requires the making
         of any additions to or changes in the Prospectus in order to make the
         statements therein, in the light of the circumstances under which they
         were made, not misleading. If at any time the Commission shall issue
         any stop order suspending the effectiveness of the Registration
         Statement, or any state securities commission or other regulatory
         authority shall issue an order suspending the qualification or
         exemption from qualification of the Transfer Restricted Securities
         under state securities or Blue Sky laws, the Company

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         shall use its reasonable best efforts to obtain the withdrawal or
         lifting of such order at the earliest possible time;

                  (v) subject to Section 4(a)(ii), if any fact or event
         contemplated by Section 4(a)(iv)(D) hereof shall exist or have
         occurred, prepare a supplement or post-effective amendment to the
         Registration Statement or related Prospectus or any document
         incorporated therein by reference or file any other required document
         so that, as thereafter delivered to the purchasers of Transfer
         Restricted Securities, the Prospectus will not contain an untrue
         statement of a material fact or omit to state any material fact
         necessary to make the statements therein, in the light of the
         circumstances under which they were made, not misleading;

                  (vi) furnish to each Relevant Holder and the Initial
         Purchaser, before filing with the Commission, copies of any
         Registration Statement or any Prospectus included therein or any
         amendments or supplements to any such Registration Statement or
         Prospectus (including all documents incorporated by reference after the
         initial filing of such Registration Statement), which documents will be
         subject to the review and comment of such Persons in connection with
         such sale, if any, for a period of at least five Business Days, and the
         Company will not file any such Registration Statement or Prospectus or
         any amendment or supplement to any such Registration Statement or
         Prospectus (including all such documents incorporated by reference) to
         which such Person shall reasonably object within five Business Days
         after the receipt thereof. Such Person shall be deemed to have
         reasonably objected to such filing if such Registration Statement,
         amendment, Prospectus or supplement, as applicable, as proposed to be
         filed, contains an untrue statement of a material fact or omits to
         state any material fact necessary to make the statements therein, in
         the light of the circumstances under which they were made, not
         misleading or fails to comply with the applicable requirements of the
         Act;

                  (vii) promptly prior to the filing of any document that is to
         be incorporated by reference into a Registration Statement or
         Prospectus, provide copies of such document to each Relevant Holder and
         the Initial Purchaser, make the Company's representatives available for
         discussion of such document and other customary due diligence matters,
         and include such information in such document prior to the filing
         thereof as such Persons may reasonably request;

                  (viii) make available, at reasonable times, for inspection by
         each Relevant Holder and the Initial Purchasers and any attorney or
         accountant retained by such Persons, all financial and other records
         and pertinent corporate documents of the Company and cause the
         Company's officers, directors and employees to supply all information
         reasonably requested by any such Person, attorney or accountant in
         connection with such

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         Registration Statement or any post-effective amendment thereto
         subsequent to the filing thereof and prior to its effectiveness;
         PROVIDED, HOWEVER, that any information that is reasonably and in good
         faith designated by the Company in writing as confidential at the time
         of delivery of such information shall be kept confidential by such
         Persons, unless (i) disclosure of such information is required by court
         or administrative order or is necessary to respond to inquiries of
         regulatory authorities, (ii) disclosure of such information is required
         by law (including any disclosure requirements pursuant to federal
         securities laws in connection with the filing of such Registration
         Statement or the use of any Prospectus, except if the Company obtains
         "confidential treatment" for any document or information in accordance
         with the rules of the Commission), (iii) such information becomes
         generally available to the public other than as a result of a
         disclosure or failure to safeguard such information by such Person or
         (iv) such information becomes available to such Person from a source
         other than the Company and its subsidiaries and such source is not
         known, after due inquiry, by such Person to be bound by a
         confidentiality agreement;

                  (ix) if requested by any Relevant Holder or by the Initial
         Purchasers, promptly include in any Registration Statement or
         Prospectus, pursuant to a supplement or post-effective amendment if
         necessary, such information as any such Person reasonably requests to
         have included therein, including, without limitation, information
         relating to the "Plan of Distribution" of the Transfer Restricted
         Securities and the use of the Registration Statement or Prospectus for
         market-making activities; and make all required filings of such
         Prospectus supplement or post-effective amendment as soon as
         practicable after the Company is notified of the matters to be included
         in such Prospectus supplement or post-effective amendment;

                  (x) furnish to the Initial Purchasers and each Relevant Holder
         upon request, without charge, at least one copy of the Registration
         Statement, as first filed with the Commission, and of each amendment
         thereto, including all documents incorporated by reference therein and
         all exhibits (including exhibits incorporated therein by reference);

                  (xi) deliver to the Initial Purchasers and each Relevant
         Holder, without charge, as many copies of the Prospectus (including
         each preliminary prospectus) and any amendment or supplement thereto as
         such Persons reasonably may request; the Company hereby consents to the
         use (in accordance with law) of the Prospectus and any amendment or
         supplement thereto by each Person in connection with the offering and
         the sale of the Transfer Restricted Securities covered by the
         Prospectus or any amendment or supplement thereto and all market-making
         activities of the Initial Purchasers, as the case may be;

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                  (xii) upon the request of any Relevant Holder or the Initial
         Purchasers, enter into such agreements (including underwriting
         agreements) as are customary in comparable offerings and make such
         representations and warranties and take all such other actions in
         connection therewith in order to expedite or facilitate the disposition
         of the Transfer Restricted Securities pursuant to any applicable
         Registration Statement contemplated by this Agreement as may be
         reasonably requested by any Person in connection with any sale or
         resale pursuant to any applicable Registration Statement. In such
         connection, and also in connection with market-making activities by the
         Initial Purchaser, the Company shall:

                           (A) upon request of any Person, furnish (or in the
                  case of paragraphs (2) and (3), use its reasonable best
                  efforts to cause to be furnished) to each Person, upon the
                  effectiveness of the Registration Statement:

                                    (1) a certificate, dated such date, signed
                           on behalf of the Company by (x) the President or any
                           Vice President and (y) a principal financial or
                           accounting officer of the Company, confirming, as of
                           the date thereof, the matters set forth in paragraphs
                           (a), (b) and (c) of Section 9 of the Purchase
                           Agreement and such other similar matters as such
                           Person may reasonably request;

                                    (2) an opinion, dated the date of
                           effectiveness of the Registration Statement, of
                           counsel for the Company covering matters similar to
                           those set forth in paragraph (e) of Section 9 of the
                           Purchase Agreement and such other matters as such
                           Person may reasonably request, and in any event
                           including a statement to the effect that such counsel
                           has participated in conferences with officers and
                           other representatives of the Company and
                           representatives of the independent public accountants
                           for the Company and has considered the matters
                           required to be stated therein and the statements
                           contained therein, although such counsel has not
                           independently verified the accuracy, completeness or
                           fairness of such statements; and that such counsel
                           advises that, on the basis of the foregoing, no facts
                           came to such counsel's attention that caused such
                           counsel to believe that the applicable Registration
                           Statement, at the time such Registration Statement or
                           any post-effective amendment thereto became
                           effective, contained an untrue statement of a
                           material fact or omitted to state a material fact
                           required to be stated therein or necessary to make
                           the statements therein not misleading, or that the
                           Prospectus contained in such Registration Statement
                           as of its date contained an untrue statement of a
                           material fact or omitted to state a material fact
                           necessary in order to make the statements therein, in
                           the light

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                           of the circumstances under which they were made, not
                           misleading. Without limiting the foregoing, such
                           counsel may state further that such counsel assumes
                           no responsibility for, and has not independently
                           verified, the accuracy, completeness or fairness of
                           the financial statements, notes and schedules and
                           other financial data included in any Registration
                           Statement contemplated by this Agreement or the
                           related Prospectus; and

                                    (3) a customary comfort letter, dated the
                           date of effectiveness of the Registration Statement,
                           from the Company's independent accountants, in the
                           customary form and covering matters of the type
                           customarily covered in comfort letters to
                           underwriters in connection with underwritten
                           offerings, and affirming the matters set forth in the
                           comfort letters delivered pursuant to paragraph (g)
                           of Section 9 of the Purchase Agreement; and

                           (B) deliver such other documents and certificates as
                  may be reasonably requested by such Person to evidence
                  compliance with the matters covered in clause (A) above and
                  with any customary conditions contained in any agreement
                  entered into by the Company pursuant to this clause;

                  (xiii) prior to any public offering of Transfer Restricted
         Securities, cooperate with the selling Holders and their counsel in
         connection with the registration and qualification of the Transfer
         Restricted Securities under the securities or Blue Sky laws of such
         jurisdictions as the selling Holders may request and do any and all
         other acts or things necessary or advisable to enable the disposition
         in such jurisdictions of the Transfer Restricted Securities covered by
         the applicable Registration Statement; PROVIDED, HOWEVER, that the
         Company shall not be required to register or qualify as a foreign
         corporation where it is not now so qualified or to take any action that
         would subject it to the service of process in suits or to taxation,
         other than as to matters and transactions relating to the Registration
         Statement, in any jurisdiction where it is not so subject;

                  (xiv) in connection with any sale of Transfer Restricted
         Securities that will result in such securities no longer being Transfer
         Restricted Securities, cooperate with the selling Holders to facilitate
         the timely preparation and delivery of certificates representing
         Transfer Restricted Securities to be sold and not bearing any
         restrictive legends; and to register such Transfer Registered
         Securities in such denominations and such names as the selling Holders
         may request at least two Business Days prior to such sale of Transfer
         Restricted Securities;

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                  (xv) use its reasonable best efforts to cause the disposition
         of the Transfer Restricted Securities covered by the 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 Transfer
         Restricted Securities, subject to the proviso contained in clause
         (xiii) above;

                  (xvi) provide a CUSIP number for all Transfer Restricted
         Securities not later than the effective date of a Registration
         Statement covering such Transfer Restricted Securities and provide the
         Warrant Agent with printed certificates for the Transfer Restricted
         Securities which are in a form eligible for deposit with The Depository
         Trust Company;

                  (xvii) otherwise use its reasonable best efforts to comply
         with all applicable rules and regulations of the Commission so long as
         any provision of this Agreement shall be applicable, and make generally
         available to its security holders with regard to any applicable
         Registration Statement, as soon as practicable, a consolidated earnings
         statement meeting the requirements of Rule 158 (which need not be
         audited) covering a twelve-month period beginning after the effective
         date of the Registration Statement (as such term is defined in Rule
         158(c) under the Act); and

                  (xviii) provide promptly to each Holder and the Initial
         Purchasers, upon request, each document filed after the date of this
         Agreement with the Commission pursuant to the requirements of Section
         13 or Section 15(d) of the Exchange Act.

         (b) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security and the Initial Purchasers agrees that, upon
receipt of the notice from the Company of the commencement of a Black Out Period
(in each case, a "BLACK OUT NOTICE"), such Person will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until (i) such Person has received copies of the
supplemented or amended Prospectus referred to in Section 4(a)(v) hereof, or
(ii) such Person is advised in writing that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus (the "ADVICE"). Each Person
receiving a Black Out Notice hereby agrees that it will either (i) destroy any
Prospectuses, other than permanent file copies, then in such Person's possession
which have been replaced by the Company with more recently dated Prospectuses or
(ii) deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Person's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Black Out Notice. The time period regarding the effectiveness of
such Registration Statement set forth in Section 3 hereof shall be extended by a
number of days equal to the number of days in the period from and including the
date of delivery of the Black Out Notice to and including the date when each
Person that received a

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Black Out Notice shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 4(a)(v) hereof or
shall have received the Advice.

5.       REGISTRATION EXPENSES

         All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including, without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing Prospectuses (whether for sales,
market-making or otherwise)), messenger and delivery services and telephone;
(iv) all fees and disbursements of counsel for the Company; (v) all applications
and filing fees in connection with listing the Warrant Shares on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public
accountants of the Company (including the expenses of any special audit and
comfort letters required by or incident to such performances).

         Notwithstanding the foregoing, the Holders will be responsible for any
underwriting discounts and commissions, brokers fees and any transfer taxes
relating to Warrants disposed of by the Holders. The Company will, in any event,
bear its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company.

6.       INDEMNIFICATION

         (a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers, partners, employees, representatives and agents and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments (including, without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) directly or indirectly caused by,
related to, based upon, arising out of or in connection to any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
Transfer Restricted Securities, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by an untrue statement or omission
or alleged untrue statement or omission that is

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made in reliance upon and in conformity with information relating to any Holder
furnished in writing to the Company by any such Holder.

         (b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company, its directors and
officers, and each Person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company, to the same extent
as the foregoing indemnity from the Company set forth in Section 6(a) hereof,
but only with reference to information relating to such Holder furnished in
writing to the Company by such Holder expressly for use in any Registration
Statement. In case any action or proceeding shall be brought against the Company
or its directors or officers or any such controlling person in respect of which
indemnity may be sought against a Holder of Transfer Restricted Securities, such
Holder shall have the rights and duties given the Company, and the Company, such
directors or officers or such controlling person shall have the rights and
duties given to each Holder by the preceding paragraph. In no event shall any
Holder, its directors, officers or any Person who controls such Holder be liable
or responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages that such Holder, its directors, officers or any Person who controls
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.

         (c) In case any action shall be commenced involving any Person in
respect of which indemnity may be sought pursuant to Section 6(a) or 6(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the Person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing,
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that,
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 6(a) and 6(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 6(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party, unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may

<PAGE>   14
                                      -13-

be one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 6(a), and by
the Company, in the case of parties indemnified pursuant to Section 6(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without the indemnifying party's written consent if the settlement
is entered into more than twenty Business Days after the indemnifying party
shall have received a request from the indemnified party for reimbursement for
the fees and expenses of counsel (in any case where such fees and expenses are
at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. The indemnifying party shall not, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.

         (d) To the extent that the indemnification provided for in this Section
6 is unavailable to an indemnified party under Section 6(a) or Section 6(b)
hereof (other than by reason of exceptions provided in those sections) in
respect of any losses, claims, damages, liabilities, expenses or judgments
referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities,
expenses or judgments in such proportion as is appropriate to reflect the
relative fault of the Company, on the one hand, and of the Holders, on the other
hand, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities, expenses or judgments, as well as any
other relevant equitable considerations. The relative fault of the Company, on
the one hand, and of the Holders, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, on the

<PAGE>   15
                                      -14-

one hand, or by the Holders, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities, expenses and judgments referred to
above shall be deemed to include, subject to the limitations set forth in
Section 6(a), any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.

         The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by PRO
RATA allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities, expenses or judgments referred to above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any matter, including any action that could have
given rise to such losses, claims, damages, liabilities, expenses or judgments.
Notwithstanding the provisions of this Section 6, no Holder, its directors, its
officers or any Person, if any, who controls such Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds the sum of (i) the
amount paid by such Holder for such Transfer Restricted Securities plus (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 6(d) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.

         (e) The Company agrees that the indemnity and contribution provisions
of this Section 6 shall apply to the Initial Purchasers to the same extent, on
the same conditions, as it applies to Holders.

7.       RULE 144

         The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act

<PAGE>   16
                                      -15-

in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.

8.       MISCELLANEOUS

         (a) REMEDIES. The Company acknowledges and agrees that any failure by
the Company to comply with its obligations under Section 3 hereof may result in
material irreparable injury to the Initial Purchasers or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Initial Purchasers or any Holder may obtain such relief as may be required
to specifically enforce the Company's obligations under Section 3 hereof. The
Company further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.

         (b) NO INCONSISTENT AGREEMENTS. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its
securities to any Person that is currently effective. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.

         (c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given, unless (i) in the case of this Section
8(c)(i), the Company has obtained the written consent of Holders of all
outstanding Transfer Restricted Securities, and (ii) in the case of all other
provisions hereof, the Company has obtained the written consent of Holders of a
majority of the outstanding principal amount of Transfer Restricted Securities
(excluding Transfer Restricted Securities held by the Company or its
Affiliates); PROVIDED, HOWEVER, that this Agreement may be amended without the
consent of any Holder to the same extent as permitted pursuant to Section 19 of
the Warrant Agreement.

         (d) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.

<PAGE>   17
                                      -16-

         (e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:

                  (i) if to a Holder, at the address set forth on the records of
         the Warrant Agent, with a copy to the Warrant Agent; and

                  (ii) if to the Company:

                           RailAmerica, Inc.
                           5300 Broken Sound Boulevard, N.W.
                           Boca Raton, Florida 33487
                           Facsimile No.: (561) 994-3929
                           Attention: General Counsel

                           With a copy to:

                           Greenberg Traurig, P.A.
                           1221 Brickell Avenue
                           Miami, Florida 33131
                           Facsimile No.: (305) 579-0500
                           Attention: Fern Watts

         All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.

         Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Warrant Agent at the
address specified in the Warrant Agreement. Upon the date of filing a Shelf
Registration Statement, notice shall be delivered to the Initial Purchasers (in
the form attached hereto as Exhibit A) and shall be addressed to: Attention:
Louise Guarneri (Compliance Department), 277 Park Avenue, New York, New York
10172.

         (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without limitation, and without the need for an express assignment,
subsequent Holders; PROVIDED, HOWEVER, that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or the
Warrant Agreement. If any transferee of any Holder shall acquire Transfer
Restricted Securities in any manner, whether by operation of law or otherwise,
such Transfer Restricted Securities shall be held subject to all of the terms of
this Agreement, and by taking and holding such Transfer Restricted

<PAGE>   18
                                      -17-

Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement, including
the restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such Person shall be entitled to receive the benefits
hereof.

         (g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

         (h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

         (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.

         (j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

         (k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

<PAGE>   19
                                      -18-

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

                                       RAILAMERICA, INC.

                                       By: /s/ Bennett Marks
                                           ----------------------------------
                                       Name:  Bennett Marks
                                       Title: Senior Vice President and Chief
                                               Financial Officer

Donaldson, Lufkin & Jenrette Securities Corporation
Barclays Bank PLC
Scotia Capital (USA) Inc.

By: DONALDSON, LUFKIN & JENRETTE
      SECURITIES CORPORATION

By:  /s/ Steven D. Smith
   ----------------------------------
   Name:  Steven D. Smith
   Title: Senior Vice President

<PAGE>   20

                                                                       EXHIBIT A

                               NOTICE OF FILING OF
                         WARRANT REGISTRATION STATEMENT

To:               Donaldson, Lufkin & Jenrette Securities Corporation
                  277 Park Avenue
                  New York, New York  10172
                  Attention: Louise Guarneri (Compliance Department)
                  Fax: (212) 892-7272

From:             RailAmerica, Inc.
                  Warrants to Purchase Shares of Common Stock

Date:

         For your information only (NO ACTION REQUIRED):

         Today,_____________________, we filed a Shelf Registration Statement
with the Securities and Exchange Commission.<PAGE>   1
                                                                     EXHIBIT 4.5

                           KING PHARMACEUTICALS, INC.

                  1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

                             ----------------------

     1. NAME AND PURPOSE. This plan shall be called the King Pharmaceuticals,
Inc. Non-Employee Director Stock Option Plan (the "Plan"). The Plan is intended
to encourage stock ownership by Non-Employee Directors (as such term is defined
under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of King Pharmaceuticals, Inc., a Tennessee corporation (the
"Company"), to provide such directors with an additional incentive to manage the
Company effectively and to contribute to its success, and to provide a form of
compensation which will attract and retain highly qualified individuals as
members of the Board of Directors of the Company.

     2. EFFECTIVE DATE AND TERM OF THE PLAN. The Plan shall become effective on
the date of the adoption of the Plan by the Board of Directors; however, the
Plan shall be approved by the vote of the holders of a majority of the
outstanding shares of the Company's common stock within twelve (12) months of
the adoption of the Plan by the Board. Options may not be granted under the Plan
after the tenth (10th) anniversary of the Effective Date (the "Term"); provided,
however, that all options outstanding as of that date shall remain or become
exercisable pursuant to their terms and the terms of the Plan.

     3. ADMINISTRATION. The Plan shall be administered by the Board of Directors
of the Company (the "Board"). Each non-employee member of the Board shall be
eligible to participate in the Plan; however, grants made to a non-employee
member of the Board must be approved by a majority of the full Board with such
member abstaining. Subject to the express provisions of the Plan, the Board
shall have discretionary authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, to determine the details and
provisions of each stock option agreement, and to make all the determinations
necessary or advisable in the administration of the Plan. The interpretation and
construction by the Board of any provisions of the Plan or of any option granted
pursuant to the Plan shall be final and binding upon the Company and any
optionee. No member of the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any option granted pursuant
thereto.

     4. STOCK AVAILABLE FOR OPTIONS. Subject to the adjustments as provided in
Subsection 7(f), the aggregate number of shares of Common Stock, no par value
per share, of the Company (the "Common Stock") reserved for purposes of the Plan
shall be 300,000 shares of authorized and unissued shares or issued shares
reacquired by the Company.

         Determinations as to the number of shares that remain available for
issuance under the Plan shall be made in accordance with such rules and
procedures as the Board shall determine from time to time. If any outstanding
option under the Plan expires or is terminated for any reason before the end of
the Term of the Plan, the shares allocable to the unexercised portion of such
option shall

<PAGE>   2

become available for the grant of other options under the Plan. No shares
delivered to the Company in full or partial payment upon exercise of an option
pursuant to Subsection 7(c) or in full or partial payment of any withholding tax
liability permitted under Section 10 shall become available for the grant of
other options under the Plan.

     5. PARTICIPATION. Subject to the limitations contained in this Section 5,
any director of the Company who is not a contractual nor common law employee of
the Company or any of its subsidiaries (a "Non-Employee Director") will be
eligible to be granted options to purchase shares of the issued or issuable
Common Stock in accordance and consistent with the terms and conditions of the
Plan. An optionee may hold more than one option, but only on the terms and
subject to the restrictions hereafter set forth. Except as provided herein,
terms and conditions of options granted to a director at any given time need not
be the same for any other grant of options.

     6. OPTION GRANTS.

        (a) Discretionary Grants. The Board shall determine from time to time
the directors (among the Non-Employee Directors) to be granted options, the
number of shares of Common Stock subject to such options, and the terms and
conditions of the options to be granted.

        (b) Non-Statutory Stock Options. All options granted under the Plan
shall be non-statutory options not intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Each option granted
under the Plan shall provide that such option will not be treated as an
"incentive stock option," as that term is defined in Section 422(b)of the Code.

     7. TERMS AND CONDITIONS OF OPTIONS OF THE PLAN. Options granted under this
Plan shall be evidenced by agreements in such form as the Board shall from time
to time approve, which agreements shall comply with and be subject to the
following conditions:

        (a) Term of Options. The term of each option shall be for a period of
not greater than ten (10) years from the date of grant of the option.

        (b) Option Price. The exercise price of each option shall be equal to
100% of the Fair Market Value of the shares of Common Stock on the date of the
grant of the option. If the shares are traded in the over-the-counter market,
the Fair Market Value per share shall be the closing price on the Nasdaq
National Market ("Nasdaq") on the day the option is granted or if no sale of
shares is reflected on Nasdaq on that day, on the next preceding day on which
there was a sale of shares reflected on Nasdaq. If the shares are not traded in
the over-the-counter market but are listed upon an established stock exchange or
exchanges, such Fair Market Value shall be deemed to be the closing price of the
shares on such stock exchange or exchanges on the day the option is granted or
if no sale of the shares shall have been made on any stock exchange on that day,
on the next preceding day on which there was a sale of the shares.

                                      - 2 -

<PAGE>   3

          (c) Medium of Payment. The option price shall be payable to the
Company either (i) in United States dollars in cash or by check, bank draft, or
money order payable to the order of the Company or (ii) if permitted by the
Board, through the delivery of shares of the Common Stock with a Fair Market
Value on the date of the exercise equal to the option price, provided such
shares are utilized as payment to acquire at least 100 shares of Common Stock,
or (iii) by a combination of (i) and (ii) above. Fair Market Value will be
determined in the manner specified in Subsection 7(b) except as to the date of
determination.

          (d) Exercise of Options. Except as provided herein, the Board shall
have the authority to determine, at the time of grant of each option pursuant to
Subsection 6(a), the times at which an option may be exercised and any
conditions precedent to the exercise of an option. An option shall be
exercisable upon written notice to the Secretary or Assistant Secretary of the
Company, as to any or all shares covered by the option, until its termination or
expiration in accordance with its terms or the provisions of the Plan.
Notwithstanding the foregoing, an option shall not at any time be exercisable
with respect to less than 100 shares unless the remaining shares covered by an
option are less than 100 shares. The purchase price of the shares purchased
pursuant to an option shall be paid in full upon delivery to the optionee of
certificates for such shares. Exercise by an optionee's heir, personal
representative or permitted transferee shall be accompanied by evidence of his
or her authority to act, in a form reasonably satisfactory to the Company.

          (e) Termination of Service as Director.

              (i) Termination of Service for any Reason Other than Death or
         Permanent Disability. In the event an optionee shall cease to serve the
         Company as a director for any reason other than such optionee's death
         or Permanent Disability, each option held by such optionee shall, to
         the extent rights to purchase shares under the option have become
         vested at the time such optionee ceases to serve as a director, remain
         exercisable, in whole or in part, by the optionee, subject to prior
         expiration according to its terms and other limitations imposed by the
         Plan, for a period of one (1) year following the optionee's cessation
         of service as a director of the Company. If the optionee dies after
         such cessation of service, the optionee's options shall be exercisable
         in accordance with Subsection 7(e)(ii) hereof.

              (ii) Termination of Service for Death or Permanent Disability. If
         an optionee ceases to be a director by reason of death or Permanent
         Disability, each option held by such optionee shall immediately become
         exercisable and shall remain exercisable, in whole or in part, by (in
         the case of Permanent Disability) the optionee or the optionee's
         guardian or attorney-in-fact or (in the case of death) the personal
         representative of the optionee's estate or by any person or persons who
         have acquired the option directly from the optionee during the shorter
         of the following periods: (i) the term of the option, or (ii) a period
         of two (2) years from the death or Permanent Disability of such
         optionee. If an optionee dies or a Permanent Disability occurs during
         the extended exercise period following cessation of service specified
         in Subsection 7(e)(i) above, such option may be exercised any time
         within the longer of such extended period or one (1) year after death
         or Permanent Disability, subject to the prior

                                      - 3 -

<PAGE>   4

         expiration of the term of the option. For purposes of this Subsection
         7(e)(ii), "Permanent Disability" shall mean a determination by the
         Social Security Administration or any similar successor agency that an
         optionee is "permanently disabled," and the date on which a Permanent
         Disability is deemed to have occurred shall be the date on which such
         determination by such agency shall have been made.

         (f) Adjustment in Shares Covered by Option. The number of shares
covered by each outstanding option, and the purchase price per share thereof,
shall be proportionately adjusted for any increase or decrease in the number of
issued and outstanding shares resulting from a split in or combination of shares
or the payment of a stock dividend on the shares or any other increase or
decrease in the number of such shares effected without receipt of consideration
by the Company.

         If the Company shall be the surviving corporation in any merger or
consolidation or if the Company is merged into a wholly-owned subsidiary solely
for purposes of changing the Company's state of incorporation, each outstanding
option shall pertain to and apply to the securities to which a holder of the
number of shares subject to the option would have been entitled to receive in
such transaction.

         In the event of a Change in Control, only if provided in the option
agreement, any option awarded under this Plan to the extent not previously
exercisable shall immediately become fully exercisable. The Board in its sole
discretion may direct the Company to cash out all outstanding options on the
basis of the Change in Control Price as of the date a Change in Control occurs
or such other date as the Committee may determine prior to the Change in
Control. For purposes of this Plan, a "Change in Control" means the occurrence
of any of the following: (i) when any "person" as defined in Section 3(a)(9) of
the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d) of the Exchange Act but excluding the
Company and any subsidiary, any of the Company's existing shareholders prior to
the Effective Date and any employee benefit plan sponsored or maintained by the
Company or any subsidiary (including any trustee of such plan acting as
trustee), directly or indirectly, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act, as amended from time to time), after the
Effective Date, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities; (ii) when,
during any period of 24 consecutive months during the existence of the Plan, the
individuals who, at the beginning of such period, constitute the Board of
Directors of the Company (the "Incumbent Directors") cease for any reason other
than death to constitute at least a majority thereof; provided, however, that a
director who was not a director at the beginning of such 24-month period shall
be deemed to have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually (because they were directors at the
beginning of such 24 month period) or by prior operation of this provision; or
(iii) the approval by the shareholders of the Company of a transaction involving
the acquisition of the Company by an entity other than the Company or a
subsidiary through purchase of assets, by merger, or otherwise. For purposes of
this Plan, "Change in Control Price" means the highest price per share of Common
Stock paid in any transaction reported on Nasdaq or paid or

                                      - 4 -

<PAGE>   5

offered in any bona fide transaction related to a Change in Control at any time
during the 60-day period immediately preceding the occurrence of the Change in
Control, in each case as determined by the Committee.

         In the event of a change in the shares as presently constituted, which
is limited to a change of all of its authorized shares with par value into the
same number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be the shares within
the meaning of the Plan.

         To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Any such
adjustment may provide for the elimination of any fractional share which might
otherwise become subject to an option.

         Except as expressly provided in this Subsection 7(f), the optionee
shall have no rights by reason of any split or combination of shares of stock of
any class or the payment of any stock dividend or any other increase or decrease
in the number of shares of stock of any class or by reason of any dissolution,
liquidation, merger, or consolidation or spinoff of assets or stock of another
corporation, and any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of stock subject to the option.

         The grant of an option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.

         (g) Rights of a Shareholder. An optionee shall have no rights as a
shareholder with respect to any shares covered by his or her option until the
date on which the optionee becomes the holder of record of such shares. No
adjustment shall be made for dividends, distributions, or other rights for which
the record date is prior to the date on which he or she shall have become the
holder of record thereof, except as provided in Subsection 7(f).

         (h) Postponement of Delivery of Shares and Representations. The
Company, in its discretion, may postpone the issuance and/or delivery of shares
upon any exercise of an option until completion of the registration or other
qualification of such shares under any state and/or federal law, rule or
regulation as the Company may consider appropriate, and may require any person
exercising an option to make such representations, including a representation
that it is the optionee's intention to acquire shares for investment and not
with a view to distribution thereof, and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the shares
in compliance with applicable laws, rules, and regulations. In such event no
shares shall be issued to such holder unless and until the Company is satisfied
with the accuracy of any such representations.

                                      - 5 -

<PAGE>   6

          (i) Transferability. All options shall be nontransferable except (i)
upon the optionee's death, by the optionee's will or the laws of descent and
distribution or (ii) on a case-by-case basis as may be approved by the Board in
its discretion, in accordance with the terms provided below. Each option
agreement shall provide the optionee may, during his or her lifetime and subject
to the prior approval of the Boar at the time of proposed transfer, transfer all
or part of the option to a Permitted Transferee (as defined below), provided
that such transfer is made by the optionee for estate and tax planning purposes
or donative purposes and no consideration (other than nominal consideration) is
received by the optionee therefor. The transfer of an option shall be subject to
such other terms and conditions as the Board may in its discretion impose from
time to time, including a condition that the portion of the option to be
transferred be vested and exercisable by the optionee at the time of the
transfer. Subsequent transfer of an option transferred under this Subsection
7(i) shall be prohibited other than by will or the laws of descent and
distribution upon the date of the transferee.

         For purposes hereof, a "Permitted Transferee" shall be any member of
the optionee's immediate family or a charitable institution (each defined
below), or a trust for the exclusive benefit of such immediate family members
and/or charitable institution, or a partnership or limited liability company the
equity interests of which are owned exclusively by the optionee and/or one or
more members of his or her immediate family. For purposes of the preceding
definition, (i) the "immediate family" of the optionee shall mean and include
the optionee's spouse, any descendant of the optionee or his or her spouse
(including descendants by adoption), and any descendant of either parent of the
optionee (including descendants by adoption), and (ii) "charitable institution"
shall mean and include any organization described in each of section
170(b)(1)(A), 170(c), 2055(a) and 2522(a) of the Code, as well as any charitable
remainder trust created under section 664 of the Code, the income beneficiary of
which is a member of the optionee's immediate family or a trust or other entity
described above in this Subsection 7(i).

         No transfer of an option by the optionee by will or by laws of descent
and distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and an authenticated copy of the
will and/or such other evidence as the Board may deem necessary to establish the
validity of the transfer. During the lifetime of an optionee, the option shall
be exercisable only by him, except that, in the case of an optionee who is
legally incapacitated, the option shall be exercisable by his guardian or legal
representative.

          (j) Other Provisions. The option agreements authorized under the Plan
shall contain such other provisions, including, without limitation, restrictions
upon the exercise of the option, as the Board shall deem advisable.

     8. ADJUSTMENTS IN SHARES AVAILABLE FOR OPTIONS. The adjustments in number
and kind of shares and the substitution of shares, affecting outstanding options
in accordance with Subsection 7(f) hereof, shall also apply to the number and
kind of shares issuable upon the exercise of options to be granted pursuant to
Section 6 and the number and kind of shares reserved for issuance pursuant to
the Plan, but not yet covered by options.

                                      - 6 -

<PAGE>   7

     9. AMENDMENT OF THE PLAN. The Board, insofar as permitted by law, shall
have the right from time to time, with respect to any shares at the time not
subject to options, to suspend or discontinue the Plan or revise or amend it in
any respect whatsoever. So long as the Common Stock is eligible for trading on
Nasdaq, the Board shall obtain shareholder approval for those revisions or
amendments of the Plan required to be so approved pursuant to the By-laws of the
National Association of Securities Dealers. If the Plan is amended so that the
exemption provided by Rule 16b-3 as a result of the Plan being approved by the
shareholders of the Company is no longer available for options granted under
Subsections 6(b) or 6(c) hereof, all options subsequently granted thereunder
must be approved by the Board prior to such grant.

     10. WITHHOLDING OF TAXES. The Company shall have the right to deduct from
any payment to be made pursuant to this Plan, or to otherwise require, prior to
the issuance or delivery of any shares of Common Stock, payment by the optionee
of any federal, state, or local taxes required by law to be withheld. Unless
otherwise prohibited by the Board, an optionee may satisfy any such withholding
tax obligation by any of the following means or by a combination of such means:

         (a) tendering a cash payment;

         (b) authorizing the Company to withhold from the shares otherwise
         issuable to the optionee a number of shares having a Fair Market Value
         as of the "Tax Date," less than or equal to the amount of withholding
         tax obligation; or

         (c) delivering to the Company unencumbered shares owned by the optionee
         having a Fair Market Value, as of the Tax Date, less than or equal to
         the amount of the withholding tax obligation.

         The "Tax Date" shall be the date that the amount of tax to be withheld
         is determined. Fair Market Value shall be determined in the manner
         specified in Subsection 7(b), except as to the date of determination.
         An optionee's election to pay the withholding tax obligation by either
         of (b) or (c) above shall be irrevocable, may be disapproved by the
         Board, and must be made either six (6) months prior to the Tax Date or
         during the period beginning on the third business day following the
         date of release of the Company's quarterly or annual summary statement
         of sales and earnings and ending on the twelfth business day following
         such date.

     11. RIGHT OF BOARD OF DIRECTORS OR SHAREHOLDERS TO TERMINATE DIRECTOR'S
SERVICE. Nothing in this Plan or in the grant of any option hereunder shall
inany way limit or affect the right of the Board of Directors or the
shareholders of the Company to remove any director or otherwise terminate his or
her service as a director, pursuant to the law, the Second Amended and Restated
Charter, or Amended and Restated By-laws of the Company.

     12. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of stock pursuant to options will be used for general corporate purposes.

                                      - 7 -

<PAGE>   8

     13. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
impose no obligation on the optionee to exercise such option.

     14. CONSTRUCTION. This Plan shall be construed under the laws of the State
of Tennessee.

                                      - 8 -

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