EMPLOYMENT AND COMPENSATION AGREEMENT



         This EMPLOYMENT AND COMPENSATION AGREEMENT  ("Agreement") is made as of
the 1st day of July,  1997, by and between  ALLSTATE  FINANCIAL  CORPORATION,  a
Virginia corporation having its principal place of business at 2700 South Quincy
Street,  Suite  540,  Arlington,   Virginia  22206  (the  "Company"),  and  Wade
Hotsenpiller (the "Employee").  The Company and the Employee in consideration of
the mutual premises contained herein, mutually agree as follows:

         1. EMPLOYMENT. The Company employs the Employee and the Employee agrees
to serve the Company as Senior Vice President and Chief Operating  Officer.  The
Employee shall devote the Employee's  full business time and best efforts to the
affairs of the Company,  except as may otherwise be consented to by the Board of
Directors.  Employee  shall  perform  such other  duties  commensurate  with the
Employee's  position as may be specified  from time to time by the  President of
the corporation or the Board of Directors.

          2. TERM.  The term of this  Agreement  shall  commence on the date set
forth  above,  and shall end at the close of business on June 30,  1998,  unless
further extended or sooner terminated as hereinafter provided (the "Term").

         3. SALARY.  During the Term,  the Company shall pay to the Employee the
Employee's  salary at an annual rate of One Hundred  Twenty  Five  Thousand  and
00/100 Dollars ($125,000.00), which amount may be increased from time to time at
the discretion of the Board of Directors of the Company.


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         4. OTHER COMPENSATION.  The Company shall provide the Employee with the
following   additional   compensation:   (i)  Subject  to  meeting   eligibility
provisions,  any and all  general  Employee  benefit  plans,  including  without
limitation medical,  health, life and disability  insurance,  pension and profit
sharing plans,  now or hereafter  granted by the Company to the employees of the
Company as a group, shall be granted to the Employee.  If a disability insurance
plan is not  provided to all  employees,  the Company  will provide a reasonable
substitute  for Employee.  (ii) Employee shall be eligible to participate in any
employee  stock  option  plans  and any  performance  based  compensation  plans
(whether  cash,  stock or otherwise)  that may be adopted by the Company.  (iii)
Yearly  bonuses  to be  paid to  Employee  at the  discretion  of the  Board  of
Directors of the Company.  (iv) Use of a  Company-owned  automobile and coverage
under  customary  and  appropriate  Company-paid  hazard,  liability  and  other
insurance (or receipt of an automobile allowance of $500.00 per month).

         5.  REIMBURSEMENT.  Usual and normal monetary  allowances for bona fide
business expenses incurred by the Employee in connection with the performance of
the  Employee's  duties  hereunder  shall be  reimbursed  by the  Company.  Such
allowances  shall,   without  limitation,   include  expenses  such  as  travel,
entertainment,  meals,  hotels,  telephone,  telegraph,  postage  and such other
normal and customary business expenses.

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         6.  VACATION.  The  Employee  shall be  entitled to four (4) weeks paid
vacation  per year  during the term of  employment  hereunder.  The dates of any
vacation  periods  shall be arranged in order that such  vacation days shall not
materially hinder the normal functioning of the Company's business activities.

         7.  TRADE SECRETS; NON-COMPETITION.

         (a) In the course of the Employee's employment,  the Employee will have
access to confidential  records,  data, pricing information,  lists of customers
and prospective customers,  lists of vendors, books and promotional  literature,
leases and  agreements,  policies and similar  material and  information  of the
Company or used in the course of its business (hereinafter collectively referred
to as "confidential  information").  All such confidential information which the
Employee  shall use or come into contact with shall remain the sole  property of
the Company. The Employee will not, directly or indirectly,  disclose or use any
such  confidential  information,  except  as  required  in the  course  of  such
employment.  The Employee  shall not for a period of one (1) year  following the
end of the Term, disclose or use in any fashion any confidential  information of
the Company or any of its subsidiaries or affiliates,  whether such confidential
information is in the Employee's memory or embodied in writing or other physical
form,  PROVIDED,  that  the  foregoing  requirements  shall  not  apply  to  any
information (i) that (prior to disclosure by the Employee) has been disclosed by
the  Company  or any third  party or (ii)  that  Employee  discloses  (A) to any
branch, agency or regulatory authority of any federal, state or local government
to comply with any statute,  regulation,  rule, order or ordinance or (B) to any
federal, state or local court, tribunal or other adjudicatory body in connection
with any suit,  claim or question  arising before such court,  tribunal or other
adjudicatory body or otherwise.

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         In the event of a breach or a threatened  breach by the Employee of the
provisions  of this  subparagraph  (a),  the  Company  shall be  entitled  to an
injunction  restraining the Employee from  disclosing any of the  aforementioned
confidential  information.  Nothing  contained  herein  shall  be  construed  as
prohibiting  the Company  from  pursuing  any other  remedies  available  to the
Company for such breach or threatened breach,  including the recovery of damages
from the Employee.

         Subject to  subparagraph  (c) below,  this provision  shall survive the
termination of this Agreement.

         (b) The  Employee  further  agrees  that,  during the Term (or,  if the
Employee's employment is terminated prior to the end of the Term (whether by the
Company or the Employee), during the period prior to such termination) and for a
period of one (1) year thereafter,  the Employee will not, except with the prior
written  consent  of the  Board  of  Directors,  (i) be  employed  either  as an
employee,   consultant,   officer  or  director,  by  any  other  non-bank-owned
commercial finance company,  (ii) solicit any business from or have any business
dealings  with,  either  directly or  indirectly  or through  corporate or other
entities or associates, any customer or client of the Company (or any subsidiary
or affiliate of the  Company),  (iii)  initiate any action,  either  directly or
indirectly  or through  corporate or other  entities or  associates,  that would
reasonably  be expected to encourage or to induce any employee of the Company or
of any subsidiary or affiliate of the Company to leave the employ of the Company
or of any such subsidiary or affiliate or (iv) solicit any business from or have
any business dealings  whatsoever with, either directly or indirectly or through
corporate  entities or  associates,  any brokers or referral  sources  that have
within the preceding year referred

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transactions  to  the  Company.  The  Employee  specifically   acknowledges  the
necessity for this subparagraph (b), given the nature of the Company's business.
The Employee  agrees that the Company shall be entitled to injunctive  relief in
the event of a breach of the  provisions  of this  subparagraph  (b),  the legal
remedies being inadequate to fully protect the Company. Nothing contained herein
shall be construed as  prohibiting  the Company from pursuing any other remedies
available to the Company for such breach, including the recovery of damages from
the Employee.

         Subject to  subparagraph  (c) below,  this provision  shall survive the
termination of this Agreement.

         (c) In the event of a Business  Combination  or Change of  Control  (as
defined  below)  involving the Company  (whether or not the  Company's  Board of
Directors recommends such Business Combination or Change of Control for approval
by the Company's  shareholders),  subparagraphs  (a) and (b) of this Paragraph 7
shall,  at  the  time  such  Business   Combination  or  Change  of  Control  is
consummated,  but only in the  event  Employee's  employment  is  terminated  in
connection  therewith  under the terms of  subparagraph  8(c) below, be null and
void  and of no  further  force  or  effect.  For  purposes  of this  Agreement,
"Business  Combination"  shall  mean (i) a  merger,  consolidation  or any other
business  combination  of the Company with any  non-affiliated  party,  (ii) the
disposition of all or substantially all of the securities, business or assets of
the Company or (iii) a joint venture,  reorganization  or other  transaction (or
series of  transactions)  as a result of which all or  substantially  all of the
business or assets of the Company are  transferred,  with or without a Change of
Control, or any other similar corporate combination or transaction (or series of
related transactions). For purposes of this Agreement, a "Change

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of Control" shall mean a transaction (or series of  transactions) or other event
(or series of events) that results in the acquisition of a controlling  interest
in the Company by a person or entity (or group of persons and/or  entities) that
did not have a controlling  interest in AFC prior to such transaction (or series
of  transactions)  or event (or  series  of  events).  As used in the  preceding
sentence,  the  term  "controlling  interest"  means  possession,   directly  or
indirectly,  of power to direct or cause the direction of management or policies
(whether  through  ownership of voting  securities,  by contract or  otherwise);
provided  that, in any event,  any person or entity (or group of persons  and/or
entities) which beneficially acquires,  directly or indirectly,  25% or more (in
number of votes) of the securities having ordinary voting power for the election
of directors of the Company shall be conclusively presumed to have a controlling
interest in the Company. This provision shall be construed so that if a Business
Combination  or Change of Control  (as defined  herein)  occurs on more than one
occasion,  the terms and  provisions of this  Agreement  shall apply to the most
recent Business Combination or Change in Control.

          8.  PAYMENTS UPON  TERMINATION.  The Company shall pay to the Employee
upon termination of employment during the Term, as follows:

         (a) If the  Employee's  employment is terminated by death,  the Company
shall continue to pay and provide to the daughter  (Andrea) and son (Gregory) of
the Employee for a period equal to six months,  Employee's  then applicable base
salary pursuant to the provisions of Paragraph 3 for such period,  in bi-monthly
installments.

         In addition,  the Company, as soon as reasonably possible, but not past
the end of the fiscal year of the death of the  Employee,  shall also pay to the
daughter  and son of the  Employee  (on a pro  rata  basis up to the date of the
Employee's death) compensation otherwise due and

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unpaid to the Employee as of the date of, or in connection  with, the Employee's
death,  pursuant and subject to the provisions of subparagraphs  4(i), 4(ii) and
4(iii) herein.

         (b) In the event the  Employee's  employment is  terminated  because of
permanent  disability (as defined below),  for a period equal to six months, the
Company shall  continue to pay and provide to the Employee the  Employee's  then
applicable  salary for such period in bi-monthly  installments,  pursuant to the
provisions  of  Paragraph  3  herein,  and  benefits  for such  period as if the
Employee  were  still  employed  to be paid not later  than the last day of such
period under  subparagraphs  4(i), 4(ii) and 4(iii) herein. As used herein,  the
Employee  shall be  deemed to be  permanently  disabled  in the  event  that the
Employee has not been able (due to mental or physical  illness or incapacity) to
render  services  required  by  this  Agreement  for a  period  of  ninety  (90)
consecutive days.

         Any salary  payments to be made by the Company under the  provisions of
this subparagraph (b) are to be offset by payments, if any, made to the Employee
under any disability insurance plan maintained by the Company.

         Payments  of  compensation  to  the  Employee  as  set  forth  in  this
subparagraph  (b)  shall  be made by the  Company  to the  Employee  only if the
Employee is not otherwise subject to termination for Cause (defined below).

         (c) In the event that (i) the  employment of the Employee is terminated
by the Company other than under the provisions as set forth in Paragraph 8(a) or
(b) herein or (ii) following a Business  Combination  or Change of Control,  (A)
the Employee is not offered a position  with the Company that  involves  duties,
responsibilities,  powers  and  functions  comparable  to those  enjoyed  by the
Employee immediately prior to such Business Combination or Change of Control

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at an annual rate of compensation at least equal to that annual rate paid to the
Employee immediately prior to such Business Combination or Change of Control and
(B) the  Employee's  employment  is  terminated  prior  to the  end of the  Term
(whether by the  Employee  or the  Company),  then the Company  shall pay to the
Employee in addition to any other amounts  otherwise  payable to the Employee as
of the date of, or in connection  with,  such  termination,  on the date of such
termination  a lump sum payment  equal to the  Employee's  base salary (on a pro
rata basis) for six months.  In  addition,  for six  months,  the Company  shall
provide to the Employee  benefits for such period as if the Employee  were still
employed  to be  paid  not  later  than  the  last  day  of  such  period  under
subparagraphs 4(i), 4(ii) and 4(iii) hereof.

         Notwithstanding  anything else contained in this  subparagraph  (c), no
compensation shall be payable under this subparagraph (c) or subparagraph (b) if
the Employee's  employment was or is terminated for Cause (as defined below). As
used herein,  the term "Cause" shall mean (i) the  Employee's  conviction of (or
entry of a plea of nolo  contendre  with  respect  to) a felony  or other  crime
involving moral turpitude or (ii) a willful,  substantial and continual  failure
by  the   Employee  in  breach  of  this   Agreement   to  perform  the  duties,
responsibilities  or obligations  assigned to the Employee pursuant to the terms
hereof and the  failure to cure such  breach  within 15 days  following  written
notice from the Company  containing  specific findings by the Board of Directors
of the Company detailing such failures.

         9.  VALIDITY.  In the  event  that any  provision  or  portion  of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining  provisions and portions of this Agreement shall be unaffected thereby
and shall  remain in full force and effect to the fullest  extent  permitted  by
law.

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          10.  AMENDMENT  AND  WAIVER.  This  Agreement  constitutes  the entire
agreement  between the parties as to  employment  by the Company of the Employee
and may not be  changed  orally  but only by a written  document  signed by both
parties.

         No waiver by either party hereto at any time of any breach by the other
party hereto of any condition or provision of this  Agreement to be performed by
such other party  shall be deemed a waiver of any other  breach by such party at
that  time  or any  other  time.  No  agreements  or  representations,  oral  or
otherwise,  express or implied,  with respect to the subject  matter hereof have
been made by either party which are not set forth expressly in this Agreement.

         11. ARBITRATION. Any dispute whatsoever relating to the interpretation,
validity,  or performance of this Agreement and any other dispute arising out of
this Agreement  which cannot be resolved by the parties to such a dispute shall,
upon  thirty  (30)  days  written  notice  by  either  party,  be  settled  upon
application of any such party by arbitration in Arlington County,  Virginia,  in
accordance  with  the  rules  then   prevailing  of  the  American   Arbitration
Association,  and judgment  upon the award  rendered by the  arbitrators  may be
entered  in any court of  competent  jurisdiction.  The cost of any  arbitration
proceedings  under this paragraph shall be shared equally by the parties to such
a dispute.


          12.  APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the  Commonwealth of Virginia  (without regard to
conflicts of law principles).

          13. BINDING EFFECT.  This Agreement shall be binding upon and inure to
the  benefit  of  the  parties  hereto  and  their   respective   heirs,   legal
representatives,   successors  and  assigns  and  shall  become  effective  upon
execution by the Company.

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         14. NOTICE. All notices, and other communications made pursuant to this
Agreement  shall be made in  writing  and shall be deemed to have been  given if
delivered personally or mailed,  postage prepaid, to the applicable party hereto
at the applicable address first above written,  or in either case, to such other
address as the Company or Employee shall have specified by written notice to the
other party.

          15. PARAGRAPH HEADINGS. All paragraph headings are included herein for
convenience  and  are  not  intended  to  affect  in  any  way  the  meaning  or
interpretation of this Agreement.

          16.  COUNTERPARTS.  This  Agreement  may be  executed  in one or  more
counterparts,  each of which shall be deemed to be an original  but all of which
together will constitute one and the same instrument.


         17.  PRIOR  AGREEMENTS  SUPERSEDED.  In the event that the Employee has
heretofore  entered into an  employment  agreement  with the Company,  then this
Agreement hereby revokes, replaces and supersedes the prior employment agreement
between the Company and the Employee.

         IN WITNESS  WHEREOF,  the parties have  executed  this  agreement,  the
Company  acting herein by its duly  authorized  officer,  the day and year first
above written.

                                                 COMPANY:

                                                 ALLSTATE FINANCIAL CORPORATION



                                            By:  
                                                 -------------------------------
                                                 Craig Fishman, President


                                                 EMPLOYEE:


                                                 -------------------------------
                                                 Wade Hotsenpiller

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