EMPLOYMENT AND COMPENSATION AGREEMENT



         This EMPLOYMENT AND COMPENSATION AGREEMENT  ("Agreement") is made as of
the 5th day of May,  1997,  by and  between  ALLSTATE  FACTORS,  a  division  of
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  Francis  Madden  of  Garden  City,  New York (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  of the Company and its  Allstate
Factors  division.  The Employee shall devote the Employee's  full business time
and best efforts to the establishment, supervision and operation of the Allstate
Factors division 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 Company 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 May 4,  2000,  unless
further  extended or sooner  terminated  as  hereinafter  provided (the "Term").
Without   limiting  any  other  rights  of  the  Company   hereunder,   Employee
acknowledges  and agrees that at any time on or after February 4, 1998 and on or
prior to

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May 4, 1998,  the Company may,  with or without  cause,  upon written  notice to
Employee,  terminate  the Term of this  Agreement  (such a  termination  being a
"Contemplated Early Termination").

         3. Salary.  During the Term,  the Company shall pay to the Employee the
Employee's  salary at an annual rate of One Hundred  Thirty  Five  Thousand  and
00/100 Dollars ($135,000.00), which amount may be increased from time to time at
the discretion of the Board of Directors of the Company.  In addition,  Employee
shall  receive on the date of  execution  of this  Agreement  by Employee  (i) a
payment of $7,500.00 and (ii) options under the Allstate  Financial  Corporation
Stock Option Plan (a copy of which has been  provided to Employee)  (the "Plan")
to purchase 10,000 shares of the Company's stock at a price equal to 100% of the
market price of such shares on the date of issuance of such options  exercisable
immediately  and  expiring  on the  earlier  of (i)  May 4,  2002  and  (ii)  in
connection  with any  termination  of Employee's  employment,  the date provided
under the terms and provisions of the Plan.

         4.  Other Compensation. The Company shall provide the
Employee with the following additional compensation during the
Term:
(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  (other  than any cash  incentive
plans), now or hereafter granted by

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the  Company to the  employees  of the Company as a group,  or to the  executive
officers  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 receive (a)
except as  provided  in clause (b)  below,  monthly  commissions  equal to three
percent  (3%)  of  the  Company's  gross  factoring  commissions,  gross  earned
discounts and gross interest income  (collectively,  the "Gross  Earnings"),  in
each case, on accounts  purchased from clients of the Company's Allstate Factors
division or from  clients  otherwise  introduced  to the Company by the Employee
(less  amounts  paid as  commissions  with  respect to such clients to any other
employee of the Company or the Allstate  Factors  division) and (b) in the event
that (X) the volume of receivables  factored by the Company's  Allstate  Factors
division equals or exceeds (i)  $50,000,000.00 in 1997, (ii)  $140,000,000.00 in
1998, (iii)  $250,000,000.00 in 1999, or (iv)  $140,000,000.00 from January 1 to
May 4, 2000 and (Y) the  average  factoring  commission  earned by the  Allstate
Factors division in such period exceeds 1.25% of the total volume of receivables
factored by Allstate  Factors in such period,  commissions for such period equal
to

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twenty  percent  (20%) of the amount by which the average  factoring  commission
earned by Allstate  Factors in such period  exceeds 1.25% of the total volume of
receivables  factored  by  Allstate  Factors  in such  period.  The  commissions
contemplated  herein  are  earned by the  Employee  and will be  payable  by the
Company only when the  receivable  with respect to which a commission  is due is
fully  collected by the Company or its Allstate  Factors  division.  Commissions
described in clause (a) of the first sentence  hereof shall be paid in the month
following  the month  during  which such  collection  is  received.  Commissions
described in clause (b) of the first sentence hereof shall be paid within ninety
(90) days  following the last day of the last month of the period for which such
commission is calculated;  provided, that in the event the Employee's employment
is  terminated  prior  to the  end of the  Term  (other  than  for  Cause),  the
Employee's  commission  (if any) under clause (b) of the first  sentence  hereof
shall be  calculated  solely on the basis of  transactions  between the Allstate
Factors  division  of the  Company  and  clients  that  entered  into  factoring
agreements with the Allstate  Factors  division of the Company prior to the date
of such  termination.  The Employee shall not be entitled to any commission as a
result of payment received from any obligor (including, without

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limitation, the Company's factor) or client after such client is in default with
the Company.  Any collections  effectuated from any obligor (including,  without
limitation, the Company's factor) or client after default shall be applicable to
the Company's shortfall and expenses,  including reasonable attorney's and other
professional  fees incurred in connection with  effectuating  collection of said
shortfall.  After any such  shortfall and expenses are fully  recovered,  if the
Company  should  realize  any  earnings   thereafter  of  the  type  subject  to
commissions,  Employee  shall  be  entitled  to  commissions  on such  earnings.
Employee  shall not be entitled to any  commissions as a result of the "payment"
of any account by the client  either by  replacement  invoice or other  non-cash
repurchase  of any  invoice  pursuant to client's  recourse  obligations.  (iii)
Yearly  bonuses  to be  paid to  Employee  at the  discretion  of the  Board  of
Directors of the Company. (iv) 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,  meals,
hotels, telephone, telegraph, postage and such other

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normal and customary business  expenses.  In addition the Company will reimburse
Employee for (i) up to $2,000.00 per year of membership  dues otherwise  payable
by Employee to permit  Employee to  maintain  his  membership  with the New York
Athletic  Club,  (ii) up to $2,000.00  per year for  membership  dues  otherwise
payable by Employee  to permit  Employee to  maintain  his  membership  with the
Hempstead  Country  Club,  (iii) up to $4,000.00  per year for  membership  dues
otherwise  payable by Employee for membership in professional  organizations and
associations  authorized  by the  President  and (iv)  reasonable  and necessary
travel  and other out of pocket  costs of  attendance  (x) by  Employee  and his
spouse at the annual  convention of the National  Association of Credit Managers
and the mid-year  convention of the Commercial  Finance  Association  and (y) by
Employee at the annual business meeting of the Commercial Finance Association.

         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

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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.

         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

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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 (six (6)  months  in the  event of a  Contemplated  Early
Termination)  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  (including,   without
limitation,  the Allstate Factors division of the Company) (or any subsidiary or
affiliate  of the  Company) or (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
(including, without limitation, any employee of the Allstate Factors division 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.  The  Employee
specifically acknowledges the necessity

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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(d) 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

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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 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.

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         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 estate of the  Employee  for a period
equal to one year,  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
estate of the  Employee  (on a pro rata  basis up to the date of the  Employee's
death) compensation  otherwise due and 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 one year, 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

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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.

         (c) In the event the Employee's employment is terminated by the Company
prior to February 4, 1998,  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 (i)  the  Employee's  annual  base  salary  as of  such  date
multiplied  by 1.25,  minus (ii) the total base  salary  previously  paid to the
Employee as of such date.

         (d) In the event of a  Contemplated  Early  Termination by the Company,
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
one-half of the Employee's annual base salary as of such date.

         (e) 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),
(b),  (c) or (d) 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

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enjoyed by the Employee immediately prior to such Business Combination or Change
of Control at an annual  rate of  compensation  (including  commission  rate) 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 one year. In addition,
for one year, 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.

         (f) Notwithstanding  anything else contained in subparagraphs (b), (c),
(d) or (e) above, no compensation shall be payable under subparagraphs (b), (c),
(d) or (e) above 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  contendere  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
lawful duties, responsibilities or obligations assigned to the Employee pursuant
to the terms hereof and the failure to cure such breach

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within 15 days  following  written notice from the Company  containing  specific
findings by the Board of Directors of the Company detailing such failures.

         (g) Except as specifically set forth above, and except any amounts that
may  otherwise  be payable to the  Employee as of the date of, or in  connection
with, any termination, the Company shall have no obligation to make any payments
to Employee in the event the  Employee's  employment is terminated  prior to the
end of the Term.

         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.

         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.

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         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.  Nothing contained in this paragraph shall limit the Company's rights
to obtain  injunctive  relief to enforce the  provisions of paragraphs  7(a) and
7(b) above.

         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.

         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
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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:



                      Francis Madden

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