OPTION AGREEMENT



        THIS AGREEMENT, made this 4th day of November, 1998, by and between
APPROVED FINANCIAL CORP., a Virginia corporation (the "Company"), and NEIL
PHELAN (the "Optionee").

                                   WITNESSETH:

        WHEREAS, the Optionee is now employed by the Company in a key capacity
and the Company desires to afford Optionee the opportunity to acquire, or
enlarge stock ownership in the Company so that Optionee may have a direct
proprietary interest in the Company's success;

        NOW, THEREFORE, in consideration of the covenants and agreement herein
contained, the parties hereto hereby agree as follows:

                                    SECTION 1
                             GRANT, PRICE AND SHARES

        Subject to the terms and conditions set forth herein, the Company hereby
grants the Optionee, during the period commencing on the date of this Agreement
and ending ten (10) years from the date hereof (or five (5) years if Optionee is
a Ten Percent (10%) Shareholder), the right and option (the "Option") to
purchase from the Company, at a price of $4.00 per share (which price shall be
multiplied by 110% if Optionee is a Ten Percent (10%) Shareholder), up to, but
not exceeding in the aggregate 7,000 shares of the Company's Common Stock (the
"Stock").

                                    SECTION 2
                                    EXERCISE

        Subject to the terms and conditions set forth herein, the Option may be
exercised in whole at any time or in part from time to time by the Optionee
during the period set forth in Section 1.

                                    SECTION 3
                           INVESTMENT REPRESENTATIONS

        The Optionee represents and warrants that Optionee has acquired this
Option for investment and not with a view to distribution and agrees to acquire
all shares provided hereunder for investment and not with a view to distribution
and upon each exercise of this Option will deliver to the Company a written
representation to such effect in form prepared by counsel to the Company.


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                                    SECTION 4
                               RECEIPT OF THE PLAN

        The Optionee acknowledges receipt of a copy of the Plan, a copy of which
is annexed hereto as Exhibit A, and made a part of this Agreement and Optionee
represents that he or she is familiar with the terms and provisions thereof. The
Optionee hereby accepts this Option subject to all the terms and provisions of
the Plan which are deemed incorporated herein. The Optionee hereby agrees to
accept as binding, conclusive and final all decisions and interpretations of the
Committee as defined in the Plan.

                                    SECTION 5
                        PROPER FORM OF NOTICE OF EXERCISE

        Optionee agrees that in order to exercise any option he or she will
provide notice in the form of Exhibit B attached hereto to the Company and prior
to providing said notice will be certain that all representations contained
therein are true and accurate including the receipt by Optionee of the documents
specified therein.

                                    SECTION 6
                               NONTRANSFERABILITY

        Any Option granted under the Plan shall be nontransferable except by
will or by the laws of descent and distribution and, during the lifetime of the
Optionee to whom the Option is granted, may be exercised only by the Optionee.
No right or interest of an Optionee in any Option shall be liable for, or
subject to, any lien, obligation, or liability of such Optionee.

                                    SECTION 7
                            EXERCISE OF STOCK OPTIONS

        a. EXERCISE. Except as otherwise provided elsewhere herein, if Optionee
shall not in any given period exercise any part of an Option which has become
exercisable during that period, the Optionee's right to exercise such part of
the Option shall continue until expiration of the Option or any part thereof as
may be provided in this Agreement. No Option shall, except as provided in
Section 17 hereof, become exercisable until one (1) year following the date of
grant, and an Option first becomes exercisable as to one-third (1/3) of the
Option Shares called for thereby during the second year following the date of
the grant, as to an additional one-third (1/3) during the third year and as to
the remaining one-third (1/3) during the fourth year. No Option or part thereof
shall be exercisable except with respect to whole shares of Common Stock, and
fractional share interests shall be disregarded except that they may be
accumulated.

        b. NOTICE AND PAYMENT. Options granted hereunder shall be exercised by
written notice delivered to the Company specifying the number of Option Shares
with respect to which the Option is being exercised, together with concurrent
payment in full of the exercise price as hereinafter provided.

        c. PAYMENT OF EXERCISE PRICE. The exercise price of any Option Shares
purchased upon the proper exercise of an Option shall be paid in full at the
time of each exercise of an


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Option in cash or check and/or in Common Stock of the Company which, when added
to the cash payment, if any, has an aggregate fair market value equal to the
full amount of the exercise price of the Option, or part thereof, then being
exercised. Payment by Optionee as provided herein shall be made in full
concurrently with the Optionee's notification to the Company of his intention to
exercise all or part of an Option. If all or any part of a payment is made in
shares of Common Stock as heretofore provided, such payment shall be deemed to
have been made only upon receipt by the Company of all required share
certificates, and all stock powers and all other required transfer documents
necessary to transfer the shares of Common Stock to the Company. In addition,
Options may be exercised and payment made by delivering a properly executed
exercise notice together with irrevocable instructions to a broker or bank to
promptly deliver to the Company the amount of sale proceeds necessary to pay the
exercise price and any applicable tax withholding. The date of exercise shall be
deemed to be the date the Company receives the notice subject to Company
counsel's satisfaction of compliance with all laws and regulations.

        d. Minimum Exercise. Not less than ten (10) Option Shares may be
purchased at any one time upon exercise of an Option unless the number of shares
purchased is the total number which remains to be purchased under the Option.

                                    SECTION 8
                              SHAREHOLDER APPROVAL

               The Plan previously received Shareholder approval.

                                    SECTION 9
               COMPLIANCE WITH LAW AND REPRESENTATIONS OF OPTIONEE

        No shares of Common Stock shall be issued upon exercise of any Option,
and Optionee shall have no right or claim to such shares, unless and until: (i)
payment in full has been received by the Company with respect to the exercise of
any Option; (ii) in the opinion of the counsel for the Company, all applicable
requirements of law and of regulatory bodies having jurisdiction over such
issuance and delivery have been fully complied with; (iii) if required by
federal or state law or regulation, the Optionee shall have paid to the Company
the amount, if any, required to be withheld on the amount deemed to be
compensation to the Optionee as a result of the exercise of his or her Option,
or made other arrangements satisfactory to the Company, in its sole discretion,
to satisfy applicable income tax withholding requirements, and (iv) execution by
Optionee and the Company of this Agreement and compliance with all requirements
in this Agreement, including but not limited to required notices,
representations, warranties and covenants contained herein or as may be
requested by the Committee or counsel for the Company.

        Unless the shares of Common Stock have been registered with the
Securities and Exchange Commission pursuant to the registration requirements
under the Securities Act of 1933, Optionee shall: (i) by and upon the exercise
of an Option, or a part thereof, furnish evidence satisfactory to counsel for
the Company, including written and signed representations to the effect that the
Common Stock is being acquired for investment purposes and not for resale or
distribution, and that the Common Stock being acquired shall not be sold or
otherwise transferred by the Optionee except in compliance with the registration
provisions under the Securities Act of 1933, as amended, or an applicable
exemption therefrom. Furthermore, the Company, at its sole

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<PAGE>

discretion, to assure itself that any sale or distribution by the Optionee
complies with this Plan and any applicable federal or state securities law, may
take all reasonable steps, including placing stop transfer instructions with the
Company's transfer agent prohibiting transfers in violation of the Plan and
affixing the following legend (and/or such other legend or legends as the
Committee shall require) on certificates evidencing the shares:

        THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
        PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN
        THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM
        UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF,
        WHICH OPINION SHALL BE ACCEPTABLE TO APPROVED FINANCIAL CORP., THAT
        REGISTRATION IS NOT REQUIRED.

                                   SECTION 10
                   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

        In the event of any change in the number of issued and outstanding
shares of stock of the Company which results from a stock split, reverse stock
split, the payment of a stock dividend or any other change in the capital
structure of the Company such as merger, consolidation, reorganization or
recapitalization, the Committee shall appropriately adjust (a) the maximum
number of shares which may be issued under the Plan, (b) the number of shares
subject to each outstanding Option, and (c) the price per share thereof (but not
the total price), so that upon exercise of the Option, the Optionee shall
receive the same number of shares he or she would have received had he or she
been holder of all shares subject to his or her outstanding Options immediately
before the effective date of such change in the number of issued shares of stock
of the Company. Such adjustment shall not result in the issuance of fractional
shares.

        The foregoing adjustments shall be made by the Committee, subject to
approval by the Board of Directors. No Option granted pursuant to the Plan shall
be adjusted in a manner that causes the Option to fail to continue to qualify as
an "Incentive Option" within the meaning of Section 422A of the Internal Revenue
Code or to fail to comply with Rule 16b-3 of the Securities Exchange Act of 1934
or regulations thereunder. 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 in its capital or business
structure or to merge or consolidate or dissolve, liquidate or sell, or transfer
all or any part of its business or assets.

                                   SECTION 11
                              RIGHTS AS SHAREHOLDER

        Optionee shall have no rights with respect to any shares covered by an
Option until the date of the issuance of a stock certificate for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
provided in Section 16 hereof.

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<PAGE>

                                   SECTION 12
                      TERMINATION OR AMENDMENT OF THE PLAN

        The Board of Directors may without the consent of the shareholders, at
any time, suspend, amend, or terminate the Plan, provided that except as set
forth in Section 10 hereof, no amendment may be adopted that will: (A) increase
the number of shares reserved for Options under the Plan; (b) change the Option
price or the method of determining the Option price; (c) change the provisions
required for compliance with Section 422A of the Internal Revenue Code and
Regulations issued thereunder; or (d) cause noncompliance with Rule 16b-3. The
Board of Directors may amend the Plan to the extent permitted by law if they
deem it advisable in order to comply with the applicable Internal Revenue Code
provisions and with Rule 16b-3. The Board shall not amend the Plan so as to
materially increase the benefits accruing to participants under the Plan or
materially modify the requirements for eligibility for participation in the Plan
without the approval of the shareholders of the Company. The amendment or
termination of this Plan shall not, without the consent of the Optionee, alter
or impair any rights or obligations under any Option previously granted
hereunder.

                                   SECTION 13
                                   AFFILIATION

        Except as provided in Section 14 hereof, if, for any reason other than
disability or death, an Optionee ceases to be affiliated with the Company or a
Subsidiary as an employee, the Options granted to such Optionee shall expire on
the expiration dates specified for said Options at the time of their grant, or
three (3) months after the Optionee ceases to be so employed, whichever is
earlier. During such period after cessation of employment, such Options shall be
exercisable only as to those increments, if any which had become exercisable as
of the date on which such Optionee ceased to be so employed with the Company or
the Subsidiary, and any Options or increments which had not become exercisable
as of such date shall expire automatically on such date.

                                   SECTION 14
                              TERMINATION FOR CAUSE

        If Optionee's employment by or service as a Director with the Company or
a Subsidiary is terminated for cause, the Options granted shall automatically
expire and terminate in their entirety immediately upon such termination;
provided, however, that the Committee may, in its sole discretion, within thirty
(30) days of such termination, reinstate such Options by giving written notice
of such reinstatement to the Optionee. In the event of such reinstatement, the
Optionee may exercise the Options only to such extent, for such time, and upon
such terms and conditions as if the Optionee had ceased to be employed by or
affiliated with the Company or a Subsidiary upon the date of such termination
for a reason other than cause, disability or death. The Committee shall within
its sole discretion determine whether termination was for cause. The
determination of the Committee with respect thereto shall be final and
conclusive. For the purpose of this Section 14 "cause" shall include but is not
limited to: (i) a breach of any employment agreement or any policy, rule,
instruction, or order of the Company; (ii) any act or omission by Optionee which
involves moral turpitude, gross negligence, dishonesty, bad faith, conflict of
interest, intentionally lying to the Company, taking action prohibited by the
Company,

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<PAGE>

or breach of fiduciary duty; (iii) violation of any law or regulation applicable
to the business of the Company; (iv) repeated neglect of duties; or (v) failure
to follow any lawful directive from the President or Board of Directors.


                                   SECTION 15
                                DEATH OF OPTIONEE

        If Optionee dies while employed by or serving as a Director with the
Company or a Subsidiary, or during the three-month period referred to in Section
13 hereof, the Options granted to such Optionee shall expire on the expiration
dates specified for said Options at the time of their grant, or six (6) months
after the date of such death, whichever is earlier. After such death, but before
such expiration, subject to the terms and provisions of the Plan and the related
Agreements, the person or persons to whom such Optionee's rights under the
Options shall have passed by will or by the applicable laws of descent and
distribution, or the executor of administrator of the Optionee's estate, shall
have the right to exercise such Options to the extent that increments, if any,
had become exercisable as of the date on which the Optionee died.

                                   SECTION 16
                             DISABILITY OF OPTIONEE

        If Optionee is disabled while employed by or serving as a Director of
the Company or a Subsidiary or during the three-month period referred to in
Section 13 hereof, the Options granted to Optionee shall expire on the
expiration dates specified for said Options at the time of their grant, or one
(1) year after the date such disability occurred, whichever is earlier. After
such disability occurs, but before such expiration, the Optionee or the guardian
or conservator of the Optionee's estate, as duly appointed by a court of
competent jurisdiction, shall have the right to exercise such Options to the
extent that increments, if any, had become exercisable as of the date on which
the Optionee became disabled or ceased to be employed by or affiliated with the
Company or a Subsidiary as a result of the disability. An Optionee shall be
deemed to be "disabled" if it shall appear to the Committee, upon written
certification delivered to the Company of a qualified licensed physician, that
the Optionee has become permanently and totally unable to engage in any
substantial gainful activity by reason of a medically determinable physical or
mental impairment which can be expected to result in the Optionee's death, or
which has lasted or can be expected to last for a continuous period of not less
than 12 months. The Committee shall have the right (but not the obligation) to
obtain and to rely solely upon the opinion of a duly licensed medical doctor
appointed by the Committee. The Committee shall have the right to require any
other proof deemed appropriate to the Committee.

                                   SECTION 17
                            EFFECT OF CERTAIN CHANGES

        a. LIQUIDATING EVENT. In the event of the proposed dissolution or
liquidation of the Company, or in the event of any corporate separation or
division, including, but not limited to, split-up, split-off or spin-off (each,
a "Liquidating Event"), the Committee may provide that the holder of any Stock
Options then exercisable shall have the right to exercise such Stock Options (at
the price provided in the agreement evidencing the Stock Options) subsequent to
the Liquidating Event, and for the balance of its term, solely for the kind and
amount of shares of

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<PAGE>

Stock and other securities, property, cash or any combination thereof receivable
upon such Liquidating Event by a holder of the number of shares of Stock for or
with respect to which such Stock Options might have been exercised immediately
prior to such Liquidating Event; or the Committee may provide, in the
alternative, that each Stock Option granted under the Plan shall terminate as of
a date to be fixed by the Board; provided, however, that not less than 30 days
written notice of the date so fixed shall be given to each Optionee and if such
notice is given, each Optionee shall have the right, during the period of 30
days preceding such termination, to exercise his or her Stock Options as to all
or any part of the shares of Stock covered thereby, without regard to any
installment or vesting provisions in his or her Stock Options agreement, on the
condition, however, that the Liquidating Event actually occurs; and if the
Liquidating Event actually occurs, such exercise shall be deemed effective (and,
if applicable, the Optionee shall be deemed a shareholder with respect to the
Stock Options exercised) immediately preceding the occurrence of the Liquidating
Event (or the date of record for shareholders entitled to share in such
Liquidating Event, if a record date is set).

        b. MERGER OR CONSOLIDATION. In the case of any capital reorganization,
any reclassification of the Stock (other than a change in par value or
recapitalization described in Section 10 of the Plan), or the consolidation of
the Company with, or a sale of substantially all of the assets of the Company to
(which sale is followed by a liquidation or dissolution of the Company), or
merger of the Company with another person (a "Reorganization Event"), the
Committee may determine, in its sole and absolute discretion, to accelerate the
vesting of outstanding Stock Options (a "Liquidity Event") in which case the
Company shall deliver to the Optionees at least 15 days prior to such
Reorganization Event (or at least 15 days prior to the date of record for
shareholders entitled to share in the securities or property distributed in the
Reorganization Event, if a record date is set) a notice which shall (i) indicate
whether the Reorganization Event shall be considered a Liquidity Event and (ii)
advise the Optionee of his or her rights pursuant to the agreement evidencing
such Stock Options. If the Reorganization Event is determined to be a Liquidity
Event, (i) the Surviving Corporation may, but shall not be obligated to, tender
stock options or stock appreciation rights to the Optionee with respect to the
Surviving Corporation, and such new options and rights shall contain terms and
provisions that substantially preserve the rights and benefits of the applicable
Stock Options then outstanding under the Plan, or (ii) in the event that no
stock options or stock appreciation rights have been tendered by the Surviving
Corporation pursuant to the terms of item (i) immediately above, the Optionee
shall have the right, exercisable during a 10 day period ending on the fifth day
prior to the Reorganization Event (or ending on the fifth day prior to the date
of record for shareholders entitled to share in the securities or property
distributed in the Reorganization Event, if a record date is set), to exercise
his or her rights as to all or any part of the shares of Stock covered thereby,
without regard to any installment or vesting provisions in his or her Stock
Options agreement, on the condition, however, that the Reorganization Event is
actually effected; and if the Reorganization Event is actually effected, such
exercise shall be deemed effective (and, if applicable, the Optionee shall be
deemed a shareholder with respect to the Stock Options exercised) immediately
preceding the effective time of the Reorganization Event (or on the date of
record for shareholders entitled to share in the securities or property
distributed in the Reorganization Event, if a record date is set). If the
Reorganization Event is not determined to be a Liquidity Event, the Optionee
shall thereafter be entitled upon exercise of the Stock Options to purchase the
kind and number of shares of stock or other securities or property of the
Surviving Corporation receivable upon such event by a holder of the number of
shares of the Stock which

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the Stock Options would have entitled the Optionee to purchase from the Company
if the Reorganization Event had not occurred, and in any such case, appropriate
adjustment shall be made in the application of the provisions set forth in this
Plan with respect to the Optionee's rights and interests thereafter, to the end
that the provisions set forth in the agreement applicable to such Stock Options
(including the specified changes and other adjustments to the Exercise Price)
shall thereafter be applicable in relation to any shares or other property
thereafter purchasable upon exercise of the Stock Options.

        c. DECISION OF COMMITTEE FINAL. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Committee, whose determination in that respect shall be final,
binding and conclusive; provided, however, that each Incentive Stock Option
granted pursuant to the Plan shall not be adjusted without the prior consent of
the holder thereof in a manner that causes such Stock Option to fail to continue
to qualify as an Incentive Stock Option.

        d. NO OTHER RIGHTS. Except as expressly provided in this Section 17, no
Optionee shall have any rights by reason of any subdivision or consolidation of
shares of Stock or the payment of any dividend or any other increase or decrease
in the number of shares of Stock of any class or by reason of any Liquidating
Event, merger, or consolidation of assets or stock of another corporation, or
any other issued by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class; and except as provided in this
Section 17, none of the foregoing events shall affect, and no adjustment by
reason thereof shall be made with respect to, the number of price or shares of
Stock subject to Stock Options. The grant of Stock Options pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassification, reorganizations or changes of its capital or
business structures or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or part of its business or assets.

                                   SECTION 18
                              EFFECT ON EMPLOYMENT

        Neither the adoption of the Plan, its operation, nor any documents
describing or referring to the Plan (or any part thereof) shall confer upon any
Director any right to continue on the Board or confer upon any employee any
right to continue in the employ of the Company or an Affiliate or in any way
affect any right and power of the Company or an Affiliate to remove any Director
or terminate the employment of any employee at any time with or without
assigning a reason therefor.

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<PAGE>

                                   SECTION 19
                  DISQUALIFYING DISPOSITION; WITHHOLDING TAXES

        a. DISQUALIFYING DISPOSITION. Optionees who make a "disposition" (as
defined in the Code) of all or any of the Stock acquired through the exercise of
Stock Options within two years from the date of grant of the Stock Option, or
within one year after the issuance of Stock relating thereto, must immediately
advise the Company in writing as to the occurrence of the sale and the price
realized upon the sale of such Stock; and each Optionee agrees that he or she
shall maintain all such Stock in his or her name so long as he or she maintains
beneficial ownership of such Stock. A "disposition" within two years from the
date of grant of the stock option or within one year after the issuance of the
stock upon exercise of the option, will cause Employee to recognize income in
the year of the disqualifying disposition.

        b. WITHHOLDING REQUIRED. Each Optionee shall, no later than the date as
of which the value derived from Stock Options first becomes includable in the
gross income of the Optionee for income tax purposes, pay to the Company, or
make arrangements satisfactory to the Committee regarding payment of, any
federal, state or local taxes of any kind required by law to be withheld with
respect to the Stock Options or their exercise. The obligations of the Company
under the Plan shall be conditioned upon such payment or arrangements and the
Optionee shall, to the extent permitted by law, have the right to request that
the Company deduct any such taxes from any payment of any kind otherwise due to
the Optionee.

        c. WITHHOLDING RIGHT. The Committee may, in its discretion, grant to an
Optionee the right (a "Withholding Right") to elect to make such payment by
irrevocably requiring the Company to withhold from shares issuable upon exercise
of the Stock Options that number of full shares of Stock having a Fair Market
Value on the Tax Date (as defined below) equal to the amount (or portion of the
amount) required to be withheld. The Withholding Right may be granted with
respect to all or any portion of the Stock Options.

        d. EXERCISE OF WITHHOLDING RIGHT. To exercise a Withholding Right, the
Optionee must follow the election procedures set forth below, together with such
additional procedures and conditions as may be set forth in the related Stock
Option Agreement or otherwise adopted by the Committee.

               (i) The Optionee must deliver to the Company his or her written
        notice of election (the "Election") to have the Withholding Right apply
        to all (or a designated portion) of his or her Stock Options prior to
        the date of exercise of the Right to which it relates.

               (ii) Unless disapproved by the Committee as provided in
        Subsection (iii) below, the Election once made will be irrevocable.

               (iii) No Election is valid unless the Committee consents to the
        Election; the Committee has the right and power, in its sole discretion,
        with or without cause or reason therefor, to consent to the Election, to
        refuse to consent to the Election, or to disapprove the Election; and if
        the Committee has not consented to the Election on or prior to the date
        that the amount of tax to be withheld is, under applicable federal
        income tax laws, fixed and determined by the Company (the "Tax Date"),
        the Election will be deemed approved.


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              (iv) If the Optionee on the date of delivery of the Election to
        the Company is a person subject to Section 16(b) of the Securities
        Exchange Act of 1934, as amended ("Exchange Act"), the following
        additional provisions will apply:

                      (A) the Election cannot be made during the six calendar
               month period commencing with the date of the grant of the
               Withholding Right (even if the Stock Options to which such
               Withholding Right relates have been granted prior to such date);
               provided, that this Subsection (A) is not applicable to any
               Optionee at any time subsequent to the death, Disability or
               Retirement of the Optionee;

                      (B) the Election (and the exercise of the related Stock
               Option) can only be made during the specific period expressly
               provided in Rule 16b-3(e)(3); and

                      (C) notwithstanding any other provision of this Section,
               no Person subject to section 16(b) of the Exchange Act shall have
               the right to make any Election unless the Company has been
               subject to the reporting requirements of Section 13(a) of the
               Exchange Act for at least a year prior to the transaction and has
               filed all reports and statements required to be filed pursuant to
               that Section for that year.

        e. EFFECT. If the Committee consents to an Election of a Withholding
Right:

               (i) upon the exercise of the Stock Options (or any portion
        thereof) to which the Withholding Right relates, the Company will
        withhold from the shares otherwise issuable that number of full shares
        of Stock having an actual Fair Market Value equal to the amount (or
        portion of the amount, as applicable) required to be withheld under
        applicable federal, state and/or local income tax laws as a result of
        the exercise; and

               (ii) if the Optionee is then a person subject to Section 16(b) of
        the Exchange Act who has made an Election, the related Stock Options may
        not be exercised, nor may any shares of Stock issued pursuant thereto be
        sold, exchanged or otherwise transferred, unless such exercise, or such
        transaction, complies with an exemption from Section 16(b) provided
        under Rule 16b-3.

                                   SECTION 20
                                  UNFUNDED PLAN

        The Plan, insofar as it provides for grants, shall be unfunded, and the
Company shall not be required to segregate any assets that may at any time be
represented by granted under the Plan. Any liability of the Company to any
person with respect to any grant under the Plan shall be based solely upon any
contractual obligations that may be created pursuant to the Plan. No such
obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company.


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<PAGE>

                                   SECTION 21
                                     NOTICES

        All notices and demands of any kind which the Committee, or any
Optionee, or other person may be required or desires to give under the terms of
this Plan shall be in writing and shall be delivered in hand to the person or
persons to whom addressed (in the case of the Committee, with the Chief
Executive Officer or Chief Financial Officer, or Secretary of the Corporation),
or by mailing a copy thereof, properly addressed, by certified or registered
mail, postage prepaid, with return receipt requested. Notice to Optionee, if
mailed, shall be mailed to the last known address of Optionee.

                                   SECTION 22
                    LIMITATION ON OBLIGATIONS OF THE COMPANY

        All obligations of the Company arising under or as a result of this Plan
or Options granted hereunder shall constitute the general unsecured obligations
of the Company, and not of the Board of Directors of the Company, any member
thereof, the Committee, any member thereof, any officer of the Company, or any
other person or any Subsidiary, and none of the foregoing, except the Company,
shall be liable for any debt, obligation, cost or expense hereunder.

                                   SECTION 23
                                  SEVERABILITY

        If any provision of this Plan is applied to any person or to any
circumstance shall be adjudged by a court of competent jurisdiction to be void,
invalid, or unenforceable, the same shall in no way affect any other provision
hereof, the application of any such provision in any other circumstances, or the
validity or enforceability hereof.

                                   SECTION 24
                                  CONSTRUCTION

        Where the context or construction requires, all words applied int he
plural herein shall be deemed to have been used in the singular and vice versa,
and the masculine gender shall include the feminine and the neuter and vice
versa.

                                   SECTION 25
                                    HEADINGS

        The headings of the several paragraphs herein are inserted solely for
convenience of reference and are not intended to form a part of and are not
intended to govern, limit or aid in the construction of any term or provision
hereof.

                                   SECTION 26
                                   SUCCESSORS

        This Plan shall be binding upon the respective successors, assigns,
heirs, executors, administrators, guardians and personal representatives of the
Company and Optionees.


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<PAGE>

                                   SECTION 27
                                  GOVERNING LAW

        The provisions of this Plan shall be construed in accordance with the
laws of the State of Virginia.

               IN WITNESS WHEREOF, the parties have attached their signatures as
follows:

                            APPROVED FINANCIAL CORP.


                            By:

                            OPTIONEE:



                            Neil Phelan

                                       12

<PAGE>



                                                                       EXHIBIT A
                           INCENTIVE STOCK OPTION PLAN

                                    SECTION 1
                                   DEFINITIONS

        a. AFFILIATE means any "subsidiary" or "parent" corporation (within the
meaning of Section 422A of the Code) of the Company. "Subsidiary" means a
corporation, of which not less than 50% of the voting control is held by the
Company or a Subsidiary whether now existing or hereinafter organized or
acquired by the Company or a Subsidiary.

        b. AGREEMENT means a written agreement (including any amendment or
supplement thereto) between the Company and an Optionee specifying the terms and
conditions of an Option granted to such Optionee.

        c. BOARD means the Board of Directors of the Company.

        d. CODE means the Internal Revenue Code of 1954, as amended, and the
Internal Revenue Code of 1986, and any amendments thereto.

        e. COMMITTEE means the Plan Committee of the Board of Directors as
specified in Section 4. Only members of the Board of Directors who qualify as
"disinterested persons" under this Plan pursuant to the provisions of Rule
16b-3(c)(2)(i) as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934 may be appointed as members of the Committee
of the Board of Directors. The Board of Directors of the Company shall have the
right, in its sole and absolute discretion, to remove or replace any person from
or on the Committee at any time for any reason whatsoever.

        f. COMMON STOCK means the common stock of the Company.

        g.     COMPANY means Approved Financial Corp.

        h. DIRECTOR means a member of the Board.

        i. ELIGIBLE PARTICIPANTS means all employees (whether or not they are
also officers or directors) of the Company or any Subsidiary.

        j. FAIR MARKET VALUE means, on any given date the arithmetical average
between the bid and asked price of the Common Stock on the Bulletin Board of the
over-the-counter market (or if trading on the NASDAQ, then on the NASDAQ) on
such date, or if the stock market is closed on such date, the next preceding
date on which it was open.

        k. INCENTIVE STOCK OPTION means a Stock Option which is an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.

        l. OPTION means a stock option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price set forth in
an Agreement.

<PAGE>


      m. OPTIONEE means any Eligible Participant to whom a Stock Option has
been granted pursuant to this Plan, provided that at least part of the Stock
Option is outstanding and unexercised.

        n. OPTION SHARES means Common Stock covered by and subject to any
outstanding unexercised Stock Option granted pursuant to this Plan.

        o. PLAN means the Approved Financial Corp. 1996 Incentive Stock Option
Plan.

        p. TEN PERCENT SHAREHOLDER means any individual owning more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of an Affiliate. An individual shall be considered to own any voting
stock owned (directly or indirectly) by or for brothers, sisters, spouse,
ancestors or lineal descendants and shall be considered to own proportionately
any voting stock owned (directly or indirectly) by or for a corporation,
partnership, estate or trust of which such individual is a shareholder, partner
or beneficiary.

                                    SECTION 2
                                     PURPOSE

        The purpose of this Incentive Stock Option Plan (the "Plan") is to
promote the interest of Approved Financial Corp. (the "Company") and its
shareholders by providing additional incentive to those key individuals of the
Company whose judgment, initiative and efforts will be largely responsible for
the Company's successful operation. By encouraging such individuals to purchase
shares of Common Stock of the Company, the Company seeks to motivate these key
individuals by giving them an increased proprietary interest in the Company and
its success.

<PAGE>


                                    SECTION 3
                             ELIGIBILITY AND GRANTS

        Any employee (including officers and directors who are employees) of the
Company or of any Affiliate who, in the judgment of the Committee, has
contributed or can be expected to contribute to the profits or growth of the
Company or an Affiliate and who is not a member of the Committee may be granted
one or more Options.

        The Committee will designate individuals to whom Options are to be
granted and will specify the number of shares of Common Stock subject to each
grant. All Options granted under the Plan shall be evidenced by Agreements that
shall be subject to applicable provisions of the Plan and to such other
provisions as the Committee may adopt. No Eligible Participant may be granted
Incentive Stock Options (under all incentive stock option plans of the Company
and Affiliates) which are first exercisable in any calendar year for stock
having an aggregate fair market value (determined as of the date an Option is
granted) exceeding $100,000.


                                    SECTION 4
                           ADMINISTRATION OF THE PLAN

        The Plan shall be administered by a committee of two or three members
(provided it is not less than the minimum number of persons from time to time
required by both Rule 16b-3 and Section 162(m) of the Code) of the Board of
Directors of the Company (hereinafter called the "Committee"). The Committee's
members shall be appointed by the Board of Directors of the Company and all
members of the Committee shall serve at the pleasure of the Board. The Committee
shall hold meetings at such times and places as it may determine. If the
Committee has two members then all actions must be unanimous. If the Committee
has three members all three shall be required for a quorum but a majority vote
will be binding. The Committee may act by unanimous written consent of all
members without a meeting. The Committee shall from time to time at its
discretion determine which key individuals shall be granted Options and the
amount of stock covered by such Options. No director while a member of the
Committee shall be eligible to receive an Option under the Plan.

        The Committee shall have the sole authority and power, subject to the
express provisions and limitations of the Plan, to construe the Plan and
Agreements granted hereunder, and to adopt, prescribe, amend, and rescind rules
and regulations relating to the Plan, and to make all determinations necessary
or advisable for administering the Plan. The interpretation by the Committee of
any provision of the Plan or of any Agreement entered into hereunder shall be in
accordance with Section 422A of the Internal Revenue Code of 1954, as amended,
and the Regulations issued thereunder, as such Section or Regulations may be
amended from time to time, in order that the rights granted hereunder and under
said Agreements shall constitute "Incentive Stock Options" within the meaning of
such Section. Such interpretation shall also be in compliance with Rule 16b-3 of
the Securities Exchange Act of 1934 and regulations thereunder. The
interpretation and construction by the Committee of any provisions of the Plan
or of any option granted hereunder shall be final and conclusive, unless
otherwise determined by the Board. No member of the Board or the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan or any option granted under it.


<PAGE>

                                    SECTION 5
                            STOCK SUBJECT TO OPTIONS

        The maximum aggregate number of shares of Common Stock that may be
issued pursuant to Options granted under the Plan is 31,500, subject to
adjustment as provided in Section 16. If an Option is terminated, in whole or in
part, for any reason other than its exercise, the number of shares of Common
Stock allocated to the Option or portion thereof may be reallocated to other
Options to be granted under the Plan. The shares may be authorized but unissued
shares.


<PAGE>



                                    SECTION 6
                                  OPTION PRICE

        a. The price per share for Common Stock purchased by the exercise of any
Option granted under the Plan shall be determined by the Committee on the date
the Option is granted; provided, however, that the price per share shall not be
less than the Fair Market Value on the date of grant.

        b. An Option granted hereunder to an Eligible Participant who is a Ten
Percent Shareholder at the date of the grant of the Option shall not qualify as
an Incentive Stock Option unless: (i) the purchase price of the Option Shares
subject to said Option is at least one hundred and ten percent (110%) of the
Fair Market Value of the Option Shares, determined as of the date said Option is
granted. The attribution rules of Section 425(d) of the Internal Revenue Code of
1986 as amended, shall apply in the determination of indirect ownership of
stock.

                                    SECTION 7
                              MAXIMUM OPTION PERIOD

        No Option shall be exercisable after the expiration of ten years from
the date the Option was granted. For Ten Percent Shareholders no Option shall be
exercisable after five (5) years from the date it is granted. The terms of any
Option may provide that it is exercisable for a period less than such maximum
period.

                                    SECTION 8
                                WRITTEN AGREEMENT

        The details of each grant of Options shall be evidenced by an Agreement
covering terms and conditions, not inconsistent with the Plan, as the Committee
shall approve. Such Agreement shall be signed by each Optionee.

                                    SECTION 9
                               NONTRANSFERABILITY

        Any Option granted under the Plan shall be nontransferable except by
will or by the laws of descent and distribution and, during the lifetime of the
Optionee to whom the Option is granted, may be exercised only by the Optionee.
No right or interest of an Optionee in any Option shall be liable for, or
subject to, any lien, obligation, or liability of such Optionee.


<PAGE>

                                   SECTION 10
                            EXERCISE OF STOCK OPTIONS

        a. EXERCISE. Except as otherwise provided elsewhere herein, if an
Optionee shall not in any given period exercise any part of an Option which has
become exercisable during that period, the Optionee's right to exercise such
part of the Option shall continue until expiration of the Option or any part
thereof as may be provided in the related Agreement. No Option shall, except as
provided in Section 23 hereof, become exercisable until one (1) year following
the date of grant, and an Option first becomes exercisable as to one-third (1/3)
of the Option Shares called for thereby during the second year following the
date of the grant, as to an additional one-third (1/3) during the third year and
as to the remaining one-third (1/3) during the fourth year. No Option or part
thereof shall be exercisable except with respect to whole shares of Common
Stock, and fractional share interests shall be disregarded except that they may
be accumulated.

        b. NOTICE AND PAYMENT. Options granted hereunder shall be exercised by
written notice delivered to the Company specifying the number of Option Shares
with respect to which the Option is being exercised, together with concurrent
payment in full of the exercise price as hereinafter provided.

        c. PAYMENT OF EXERCISE PRICE. The exercise price of any Option Shares
purchased upon the proper exercise of an Option shall be paid in full at the
time of each exercise of an Option in cash or check and/or in Common Stock of
the Company which, when added to the cash payment, if any, has an aggregate fair
market value equal to the full amount of the exercise price of the Option, or
part thereof, then being exercised. Payment by an Optionee as provided herein
shall be made in full concurrently with the Optionee's notification to the
Company of his intention to exercise all or part of an Option. If all or any
part of a payment is made in shares of Common Stock as heretofore provided, such
payment shall be deemed to have been made only upon receipt by the Company of
all required share certificates, and all stock powers and all other required
transfer documents necessary to transfer the shares of Common Stock to the
Company. In addition, Options may be exercised and payment made by delivering a
properly executed exercise notice together with irrevocable instructions to a
broker or bank to promptly deliver to the Company the amount of sale proceeds
necessary to pay the exercise price and any applicable tax withholding. The date
of exercise shall be deemed to be the date the Company receives the notice
subject to execution of the Agreement and Company counsel's satisfaction of
compliance with all laws and regulations.

<PAGE>


        d. MINIMUM EXERCISE. Not less than ten (10) Option Shares may be
purchased at any one time upon exercise of a Option unless the number of shares
purchased is the total number which remains to be purchased under the Option.

                                   SECTION 11
                             EFFECTIVE DATE OF PLAN

        This Plan shall become effective upon adoption by the Board of Directors
of the Corporation; provided that the Plan shall be submitted for approval by
the stockholders of the Corporation no later than twelve (12) months after the
date of adoption of the Plan by the Board of Directors. Should the stockholders
of the Corporation fail to approve the Plan within such twelve-month period, all
Options granted hereunder shall be and become null and void. The Board of
Directors approved the Plan on June 19, 1996.



<PAGE>



                                   SECTION 12
                                   TERMINATION

        Unless previously terminated as aforesaid, the Plan shall automatically
terminate on June 18, 2006. No Options shall be granted under the Plan
thereafter, but such termination shall not affect any Option granted before such
date.

                                   SECTION 13
               COMPLIANCE WITH LAW AND REPRESENTATIONS OF OPTIONEE

        No shares of Common Stock shall be issued upon exercise of any Option,
and an Optionee shall have no right or claim to such shares, unless and until:
(i) payment in full has been received by the Company with respect to the
exercise of any Option; (ii) in the opinion of the counsel for the Company, all
applicable requirements of law and of regulatory bodies having jurisdiction over
such issuance and delivery have been fully complied with; (iii) if required by
federal or state law or regulation, the Optionee shall have paid to the Company
the amount, if any, required to be withheld on the amount deemed to be
compensation to the Optionee as a result of the exercise of his or her Option,
or made other arrangements satisfactory to the Company, in its sole discretion,
to satisfy applicable income tax withholding requirements, and (iv) execution by
Optionee and the Company of the Agreement and compliance with all requirements
in the Agreement, including but not limited to required notices,
representations, warranties and covenants contained therein or as may be
requested by the Committee or counsel for the Company.

        Unless the shares of Common Stock covered by this Plan have been
registered with the Securities and Exchange Commission pursuant to the
registration requirements under the Securities Act of 1933, each Optionee shall:
(i) by and upon accepting shares or an Option, represent and agree in writing,
that the Common Stock will be acquired for investment purposes and not for
resale or distribution; and (ii) by and upon the exercise of an Option, or a
part thereof, furnish evidence satisfactory to counsel for the Company,
including written and signed representations to the effect that the Common Stock
is being acquired for investment purposes and not for resale or distribution,
and that the Common Stock being acquired shall not be sold or otherwise
transferred by the Optionee except in compliance with the registration
provisions under the Securities Act of 1933, as amended, or an applicable
exemption therefrom. Furthermore, the Company, at its sole discretion, to assure
itself that any sale or distribution by the Optionee complies with this Plan and
any applicable federal or state securities law, may take all reasonable steps,
including placing stop transfer instructions with the Company's transfer agent
prohibiting transfers in violation of the Plan and affixing the following legend
(and/or such other legend or legends as the Committee shall require) on
certificates evidencing the shares:

        THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
        PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN
        THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM
        UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF,
        WHICH OPINION SHALL BE ACCEPTABLE TO APPROVED FINANCIAL CORP., THAT
        REGISTRATION IS NOT REQUIRED.


<PAGE>


                                   SECTION 14
                EXCULPATION AND INDEMNIFICATION OF THE COMMITTEE

        The present, former and future members of the Committee, and each of
them, who is or was a director, officer or employee of the Company shall be
indemnified by the Company to the extent authorized in and permitted by the
Company's Certificate of Incorporation, and/or Bylaws in connection with all
actions, suits and proceedings to which they or any of them may be a party by
reason of any act or omission of any member of the Committee under or in
connection with the Plan or any Option granted thereunder.

                                   SECTION 15
                               COSTS AND EXPENSES

        All costs and expenses involved in administrating this Plan, direct and
indirect, shall be borne by the Company.

                                   SECTION 16
                   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

        In the event of any change in the number of issued and outstanding
shares of stock of the Company which results from a stock split, reverse stock
split, the payment of a stock dividend or any other change in the capital
structure of the Company such as merger, consolidation, reorganization or
recapitalization, the Committee shall appropriately adjust (a) the maximum
number of shares which may be issued under the Plan, (b) the number of shares
subject to each outstanding Option, and (c) the price per share thereof (but not
the total price), so that upon exercise of the Option, the Optionee shall
receive the same number of shares he would have received had he been holder of
all shares subject to his outstanding Options immediately before the effective
date of such change in the number of issued shares of stock of the Company. Such
adjustment shall not result in the issuance of fractional shares.

        The foregoing adjustments shall be made by the Committee, subject to
approval by the Board of Directors. No Option granted pursuant to this Plan
shall be adjusted in a manner that causes the Option to fail to continue to
qualify as an "Incentive Option" within the meaning of Section 422A of the
Internal Revenue Code or to fail to comply with Rule 16b-3 of the Securities
Exchange Act of 1934 or regulations thereunder. 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 in its capital
or business structure or to merge or consolidate or dissolve, liquidate or sell,
or transfer all or any part of its business or assets.


<PAGE>



                                   SECTION 17
                              RIGHTS AS SHAREHOLDER

        An Optionee of an Option shall have no rights with respect to any shares
covered by an Option until the date of the issuance of a stock certificate for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 16 hereof.

                                   SECTION 18
                      TERMINATION OR AMENDMENT OF THE PLAN

        The Board of Directors may without the consent of the shareholders, at
any time, suspend, amend, or terminate this Plan, provided that except as set
forth in Section 16 hereof, no amendment may be adopted that will: (A) increase
the number of shares reserved for Options under the Plan; (b) change the Option
price or the method of determining the Option price; (c) change the provisions
required for compliance with Section 422A of the Internal Revenue Code and
Regulations issued thereunder; or (d) cause noncompliance with Rule 16b-3. The
Board shall not amend the Plan so as to materially increase the benefits
accruing to participants under the Plan or materially modify the requirements
for eligibility for participation in the Plan without the approval of the
shareholders of the Company. The amendment or termination of this Plan shall
not, without the consent of the Optionee, alter or impair any rights or
obligations under any Option previously granted hereunder.

                                   SECTION 19
                                   AFFILIATION

        Except as provided in Section 20 hereof, if, for any reason other than
disability or death, an Optionee ceases to be affiliated with the Company or a
Subsidiary as an employee, the Options granted to such Optionee shall expire on
the expiration dates specified for said Options at the time of their grant, or
three (3) months after the Optionee ceases to be employed, whichever is earlier.
During such period after cessation of affiliation, such Options shall be
exercisable only as to those increments, if any which had become exercisable as
of the date on which such Optionee ceased to be so affiliated with the Company
or the Subsidiary, and any Options or increments which had not become
exercisable as of such date shall expire automatically on such date.

                                   SECTION 20
                              TERMINATION FOR CAUSE

        If an Optionee's employment with the Company or a Subsidiary is
terminated for cause, the Options granted to such Optionee shall automatically
expire and terminate in their entirety immediately upon such termination;
provided, however, that the Committee may, in its sole discretion, within thirty
(30) days of such termination, reinstate such Options by giving written notice
of such reinstatement to the Optionee. In the event of such reinstatement, the
Optionee may exercise the Options only to such extent, for such time, and upon
such terms and conditions as if the Optionee had ceased to be employed by or
affiliated with the Company or a Subsidiary


<PAGE>


upon the date of such termination for a reason other than cause, disability or
death. The Committee shall within its sole discretion determine whether
termination was for cause. The determination of the Committee with respect
thereto shall be final and conclusive. For the purpose of this Section 20
"cause" shall include but not be limited to: (i) a breach of any employment
agreement or any policy, rule, instruction, or order of the Company; (ii) any
act or omission by Optionee which involves moral turpitude, gross negligence,
dishonesty, bad faith, conflict of interest, intentionally lying to the Company,
taking action prohibited by the Company, or breach of fiduciary duty; (iii)
violation of any law or regulation applicable to the business of the Company;
(iv) repeated neglect of duties; or (v) failure to follow any lawful directive
from the President or Board of Directors.

                                   SECTION 21
                                DEATH OF OPTIONEE

        If an Optionee dies while employed by the Company or a Subsidiary, or
during the three-month period referred to in Section 19 hereof, the Options
granted to such Optionee shall expire on the expiration dates specified for said
Options at the time of their grant, or six (6) months after the date of such
death, whichever is earlier. After such death, but before such expiration,
subject to the terms and provisions of the Plan and the related Agreements, the
person or persons to whom such Optionee's rights under the Options shall have
passed by will or by the applicable laws of descent and distribution, or the
executor of administrator of the Optionee's estate, shall have the right to
exercise such Options to the extent that increments, if any, had become
exercisable as of the date on which the Optionee died.

                                   SECTION 22
                             DISABILITY OF OPTIONEE

        If an Optionee is disabled while employed by the Company or a
Subsidiary, the Options granted to such Optionee shall expire on the expiration
dates specified for said Options at the time of their grant, or one (1) year
after the date such disability occurred, whichever is earlier. After such
disability occurs, but before such expiration, the Optionee or the guardian or
conservator of the Optionee's estate, as duly appointed by a court of competent
jurisdiction, shall have the right to exercise such Options to the extent that
increments, if any, had become exercisable as of the date on which the Optionee
became disabled or ceased to be employed by or affiliated with the Company or a
Subsidiary as a result of the disability. An Optionee shall be deemed to be
"disabled" if it shall appear to the Committee, upon written certification
delivered to the Company of a qualified licensed physician, that the Optionee
has become permanently and totally unable to engage in any substantial gainful
activity by reason of a medically determinable physical or mental impairment
which can be expected to result in the Optionee's death, or which has lasted or
can be expected to last for a continuous period of not less than 12 months. The
Committee shall have the right (but not the obligation) to obtain and to rely
solely upon the opinion of a duly licensed medical doctor appointed by the
Committee. The Committee shall have the right to require any other proof deemed
appropriate to the Committee.

<PAGE>


                                   SECTION 23
                            EFFECT OF CERTAIN CHANGES

        a. LIQUIDATING EVENT. In the event of the proposed dissolution or
liquidation of the Company, or in the event of any corporate separation or
division, including, but not limited to, split-up, split-off or spin-off (each,
a "Liquidating Event"), the Committee may provide that the holder of any Stock
Options then exercisable shall have the right to exercise such Stock Options (at
the price provided in the agreement evidencing the Stock Options) subsequent to
the Liquidating Event, and for the balance of its term, solely for the kind and
amount of shares of Stock and other securities, property, cash or any
combination thereof receivable upon such Liquidating Event by a holder of the
number of shares of Stock for or with respect to which such Stock Options might
have been exercised immediately prior to such Liquidating Event; or the
Committee may provide, in the alternative, that each Stock Option granted under
the Plan shall terminate as of a date to be fixed by the Board; provided,
however, that not less than 30 days written notice of the date so fixed shall be
given to each Optionee and if such notice is given, each Optionee shall have the
right, during the period of 30 days preceding such termination, to exercise his
or her Stock Options as to all or any part of the shares of Stock covered
thereby, without regard to any installment or vesting provisions in his or her
Stock Options agreement, on the condition, however, that the Liquidating Event
actually occurs; and if the Liquidating Event actually occurs, such exercise
shall be deemed effective (and, if applicable, the Optionee shall be deemed a
shareholder with respect to the Stock Options exercised) immediately preceding
the occurrence of the Liquidating Event (or the date of record for shareholders
entitled to share in such Liquidating Event, if a record date is set).

        b. MERGER OR CONSOLIDATION. In the case of any capital reorganization,
any reclassification of the Stock (other than a change in par value or
recapitalization described in Section 16 of the Plan), or the consolidation of
the Company with, or a sale of substantially all of the assets of the Company to
(which sale is followed by a liquidation or dissolution of the Company), or
merger of the Company with another person (a "Reorganization Event"), the
Committee may provide in the Stock Option Agreement, or if not provided in the
Stock Option Agreement, may determine, in its sole and absolute discretion, to
accelerate the vesting of outstanding Stock Options (a "Liquidity Event") in
which case the Company shall deliver to the Optionees at least 15 days prior to
such Reorganization Event (or at least 15 days prior to the date of record for
shareholders entitled to share in the securities or property distributed in the
Reorganization Event, if a record date is set) a notice which shall (i) indicate
whether the Reorganization Event shall be considered a Liquidity Event and (ii)
advise the Optionee of his or her rights pursuant to the agreement evidencing
such Stock Options. If the Reorganization Event is determined to be a Liquidity
Event, (i) the Surviving Corporation may, but shall not be obligated to, tender
stock options or stock appreciation rights to the Optionee with respect to the
Surviving Corporation, and such new options and rights shall contain terms and
provisions that substantially preserve the rights and benefits of the applicable
Stock Options then outstanding under the Plan, or (ii) in the event that no
stock options or stock appreciation rights have been tendered by the Surviving
Corporation pursuant to the terms of item (i) immediately above, the Optionee
shall have the right, exercisable during a 10 day period ending on the fifth day
prior to the Reorganization Event (or ending on the fifth day prior to the date
of record for shareholders entitled to share in the securities or property
distributed in the Reorganization Event, if a record date is set), to exercise
his or her rights as to all or any part of the shares of Stock covered

<PAGE>


thereby, without regard to any installment or vesting provisions in his or her
Stock Options agreement, on the condition, however, that the Reorganization
Event is actually effected; and if the Reorganization Event is actually
effected, such exercise shall be deemed effective (and, if applicable, the
Optionee shall be deemed a shareholder with respect to the Stock Options
exercised) immediately preceding the effective time of the Reorganization Event
(or on the date of record for shareholders entitled to share in the securities
or property distributed in the Reorganization Event, if a record date is set).
If the Reorganization Event is not determined to be a Liquidity Event, the
Optionee shall thereafter be entitled upon exercise of the Stock Options to
purchase the kind and number of shares of stock or other securities or property
of the Surviving Corporation receivable upon such event by a holder of the
number of shares of the Stock which the Stock Options would have entitled the
Optionee to purchase from the Company if the Reorganization Event had not
occurred, and in any such case, appropriate adjustment shall be made in the
application of the provisions set forth in this Plan with respect to the
Optionee's rights and interests thereafter, to the end that the provisions set
forth in the agreement applicable to such Stock Options (including the specified
changes and other adjustments to the Exercise Price) shall thereafter be
applicable in relation to any shares or other property thereafter purchasable
upon exercise of the Stock Options.

        c. DECISION OF COMMITTEE FINAL. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Committee, whose determination in that respect shall be final,
binding and conclusive; provided, however, that each Incentive Stock Option
granted pursuant to the Plan shall not be adjusted without the prior consent of
the holder thereof in a manner that causes such Stock Option to fail to continue
to qualify as an Incentive Stock Option.

        d. NO OTHER RIGHTS. Except as expressly provided in this Section 23, no
Optionee shall have any rights by reason of any subdivision or consolidation of
shares of Stock or the payment of any dividend or any other increase or decrease
in the number of shares of Stock of any class or by reason of any Liquidating
Event, merger, or consolidation of assets or stock of another corporation, or
any other issued by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class; and except as provided in this
Section 23, none of the foregoing events shall affect, and no adjustment by
reason thereof shall be made with respect to, the number of price or shares of
Stock subject to Stock Options. The grant of Stock Options pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassification, reorganizations or changes of its capital or
business structures or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or part of its business or assets.


<PAGE>

                                   SECTION 24
                              EFFECT ON EMPLOYMENT

        Neither the adoption of the Plan, its operation, nor any documents
describing or referring to the Plan (or any part thereof) shall confer upon any
employee any right to continue in the employ of the Company or an Affiliate or
in any way affect any right and power of the Company or an Affiliate to
terminate the employment of any employee at any time with or without assigning a
reason therefor.

                                   SECTION 25
                                  UNFUNDED PLAN

        The Plan, insofar as it provides for grants, shall be unfunded, and the
Company shall not be required to segregate any assets that may at any time be
represented by granted under the Plan. Any liability of the Company to any
person with respect to any grant under the Plan shall be based solely upon any
contractual obligations that may be created pursuant to the Plan. No such
obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company.

                                   SECTION 26
                  DISQUALIFYING DISPOSITION; WITHHOLDING TAXES

        a. DISQUALIFYING DISPOSITION. Optionees who make a "disposition" (as
defined in the Code) of all or any of the Stock acquired through the exercise of
Stock Options within two years from the date of grant of the Stock Option, or
within one year after the issuance of Stock relating thereto, must immediately
advise the Company in writing as to the occurrence of the sale and the price
realized upon the sale of such Stock; and each Optionee agrees that he or she
shall maintain all such Stock in his or her name so long as he or she maintains
beneficial ownership of such Stock. A "disposition" within two years from the
date of grant of the stock option or within one year after the issuance of the
stock upon exercise of the option, will cause Employee to recognize income in
the year of the disqualifying disposition.

        b. WITHHOLDING REQUIRED. Each Optionee shall, no later than the date as
of which the value derived from Stock Options first becomes includable in the
gross income of the Optionee for income tax purposes, pay to the Company, or
make arrangements satisfactory to the Committee regarding payment of, any
federal, state or local taxes of any kind required by law to be withheld with
respect to the Stock Options or their exercise. The obligations of the Company
under the Plan shall be conditioned upon such payment or arrangements and the
Optionee shall, to the extent permitted by law, have the right to request that
the Company deduct any such taxes from any payment of any kind otherwise due to
the Optionee.

        c. WITHHOLDING RIGHT. The Committee may, in its discretion, grant to an
Optionee the right (a "Withholding Right") to elect to make such payment by
irrevocably requiring the Company to withhold from shares issuable upon exercise
of the Stock Options that number of full shares of Stock having a Fair Market
Value on the Tax Date (as defined below) equal to the amount (or portion of the
amount) required to be withheld. The Withholding Right may be granted with
respect to all or any portion of the Stock Options.

<PAGE>


        d. EXERCISE OF WITHHOLDING RIGHT. To exercise a Withholding Right, the
Optionee must follow the election procedures set forth below, together with such
additional procedures and conditions as may be set forth in the related Stock
Option Agreement or otherwise adopted by the Committee.

               (i) The Optionee must deliver to the Company his or her written
        notice of election (the "Election") to have the Withholding Right apply
        to all (or a designated portion) of his or her Stock Options prior to
        the date of exercise of the Right to which it relates.

               (ii) Unless disapproved by the Committee as provided in
        Subsection (iii) below, the Election once made will be irrevocable.

               (iii) No Election is valid unless the Committee consents to the
        Election; the Committee has the right and power, in its sole discretion,
        with or without cause or reason therefor, to consent to the Election, to
        refuse to consent to the Election, or to disapprove the Election; and if
        the Committee has not consented to the Election on or prior to the date
        that the amount of tax to be withheld is, under applicable federal
        income tax laws, fixed and determined by the Company (the "Tax Date"),
        the Election will be deemed approved.

               (iv) If the Optionee on the date of delivery of the Election to
        the Company is a person subject to Section 16(b) of the Securities
        Exchange Act of 1934, as amended ("Exchange Act"), the following
        additional provisions will apply:

                    (A) the Election cannot be made during the six calendar
               month period commencing with the date of the grant of the
               Withholding Right (even if the Stock Options to which such
               Withholding Right relates have been granted prior to such date);
               provided, that this Subsection (A) is not applicable to any
               Optionee at any time subsequent to the death, Disability or
               Retirement of the Optionee;

                    (B) the Election (and the exercise of the related Stock
               Option) can only be made during the specific period expressly
               provided in Rule 16b-3(e)(3); and

                    (C) notwithstanding any other provision of this Section, no
               person subject to Section 16(b) of the Exchange Act shall have
               the right to make any Election unless the Company has been
               subject to the reporting requirements of Section 13(a) of the
               Exchange Act for at least a year prior to the transaction and has
               filed all reports and statements required to be filed pursuant to
               that Section for that year.

        e. EFFECT. If the Committee consents to an Election of a Withholding
Right:

               (i) upon the exercise of the Stock Options (or any portion
        thereof) to which the Withholding Right relates, the Company will
        withhold from the shares otherwise issuable that number of full shares
        of Stock having an actual Fair Market Value equal to the amount (or
        portion of the amount, as applicable) required to be withheld under
        applicable federal, state and/or local income tax laws as a result of
        the exercise; and

<PAGE>

               (ii) if the Optionee is then a person subject to Section 16(b) of
        the Exchange Act who has made an Election, the related Stock Options may
        not be exercised, nor may any shares of Stock issued pursuant thereto be
        sold, exchanged or otherwise transferred, unless such exercise, or such
        transaction, complies with an exemption from Section 16(b) provided
        under Rule 16b-3.

                                   SECTION 27
                                     NOTICES

        All notices and demands of any kind which the Committee, or any
Optionee, or other person may be required or desires to give under the terms of
this Plan shall be in writing and shall be delivered in hand to the person or
persons to whom addressed (in the case of the Committee, with the Chief
Executive Officer or Chief Financial Officer, or Secretary of the Corporation),
or by mailing a copy thereof, properly addressed, by certified or registered
mail, postage prepaid, with return receipt requested. Notice to Optionee, if
mailed, shall be mailed to the last known address of Optionee. No notice will be
effective without compliance with all requirements in the written Agreement.


                                   SECTION 28
                    LIMITATION ON OBLIGATIONS OF THE COMPANY

        All obligations of the Company arising under or as a result of this Plan
or Options granted hereunder shall constitute the general unsecured obligations
of the Company, and not of the Board of Directors of the Company, any member
thereof, the Committee, any member thereof, any officer of the Company, or any
other person or any Subsidiary, and none of the foregoing, except the Company,
shall be liable for any debt, obligation, cost or expense hereunder.

                                   SECTION 29
                              LIMITATION OF RIGHTS

        Except as otherwise provided by the terms of the Plan, the Committee, in
its sole and absolute discretion, is entitled to determine who, if anyone, is an
Eligible Optionee under this Plan, and which, if any, Eligible Optionee shall
receive any grant. No oral or written agreement by any other person not acting
on behalf of the Committee relating to this Plan is authorized, and such may not
bind the Company or the Committee to make any grant to any person.

                                   SECTION 30
                                  SEVERABILITY

        If any provision of this Plan is applied to any person or to any
circumstance shall be adjudged by a court of competent jurisdiction to be void,
invalid, or unenforceable, the same shall in no way affect any other provision
hereof, the application of any such provision in any other circumstances, or the
validity or enforceability hereof.

<PAGE>


                                   SECTION 31
                                  CONSTRUCTION

        Where the context or construction requires, all words applied int he
plural herein shall be deemed to have been used in the singular and vice versa,
and the masculine gender shall include the feminine and the neuter and vice
versa.

                                   SECTION 32
                                    HEADINGS

        The headings of the several paragraphs herein are inserted solely for
convenience of reference and are not intended to form a part of and are not
intended to govern, limit or aid in the construction of any term or provision
hereof.

                                   SECTION 33
                                   SUCCESSORS

        This Plan shall be binding upon the respective successors, assigns,
heirs, executors, administrators, guardians and personal representatives of the
Company and Optionees.

                                   SECTION 34
                                  GOVERNING LAW

        The provisions of this Plan shall be construed in accordance with the
laws of the State of Virginia.


<PAGE>




                                                                       EXHIBIT B
                          NOTICE OF EXERCISE OF OPTION


        The undersigned ("Optionee") hereby exercises his option for ________
shares of common stock of APPROVED FINANCIAL CORP. ("Company"). The Optionee
hereby agrees to pay the sum of $_____________ per share.

        The Optionee hereby represents and warrants that he is executing his
option and making the contribution provided herein for his own account for
investment purposes and not with any view toward or intention of resale or
redistribution of any part of the stock acquired in the Company.

        The Optionee hereby acknowledges that he is acquiring an investment
which is not now nor anticipated to be registered under any federal or state
securities law and agrees that he shall not transfer, sell, assign, pledge or
otherwise dispose of his stock interest (or any rights under this Agreement)
unless the common stock is registered under the Securities Act of 1933 and
applicable state Blue Sky Laws, or, in the opinion of counsel for the Company,
prepared at the expense of the Optionee and the Optionee's future transferee,
there is available an exemption from such registration with respect to the
proposed transfer. The Optionee further acknowledges that there shall be no
obligation on the part of the Company or of any Officer or Director to permit or
cause such state or federal registration.

               THE OPTIONEE HEREBY CONSENTS TO THE FOLLOWING ACTIONS OF THE
COMPANY:

               1. A legend shall be placed on any certificate issued referring
to or evidencing the stock interest stating that the common stock has not been
registered under the Securities Act of 1933 or any state Blue Sky Law and
setting forth the limitations on resale;

               2. Appropriate records of the Company shall contain stop transfer
instructions reflecting the restrictions on transfer; and

               3. The same actions shall be taken in connection with any
certificate evidencing a stock interest issued in replacement of the Optionee's
interest or issued to any transferee of the Optionee.

               THE OPTIONEE REPRESENTS AND WARRANTS THAT HE:

        1. Has received and reviewed the most recent annual report of the
Company;

        2. Has executed his option relying solely on the information set forth
in the most recent annual report and information furnished by the Company
pursuant to Optionee's own request;

        3. Is aware that with respect to such information, the Company warrants
only that it was assembled by it in good faith from sources which it deemed
reliable and it has no knowledge which would lead it to believe that any such
information is incorrect or misleading;

<PAGE>


        4. Is aware that the Company is willing upon request to provide to the
Optionee any additional information which the Company has access to in respect
to the Company and to answer any questions of Optionee;

        5. Is aware that there is no public market for this investment and it
may not be possible to liquidate this investment;

        6. Understands and acknowledges that under current interpretations of
relevant securities laws that an exemption from registration whereby the
Optionee could resell his shares does not exist but may only come into being
after the Optionee has held the investment for at least several years and the
potential for any exemption can change if applicable laws, regulations or court
interpretations change;

        7. Understands and acknowledges that no registration under federal or
state securities laws is planned, or assured, and that the Company has no
intention of ever attempting to register the common stock now or in the future;

        8. Has read the Incentive Stock Option Plan of the Company, a copy of
which is attached to and incorporated into the Option contract between Optionee
and the Company; and

        9. Understands that counsel for the Company may file relevant forms with
the Securities and Exchange Commission within a specified time after receipt of
this letter and will cooperate in providing any necessary information to the
Company in that regard, promptly and that the Company shall have the absolute
right to defer the date of exercise until counsel for Company determines that
all laws and regulations are complied with including sufficient time to file the
appropriate forms or any other required filings or notices.



OPTIONEE INFORMATION (Type or Print):


Name of Optionee

Address

                                                                         Zip

Social Security/Fed. ID #

Telephone No. (        )

Date Executed:
                                                   (Signature of Optionee)