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APPROVAL OF OPTION GRANT TO JEFFERSON CAPITAL GROUP, LTD. The Board of Directors has authorized, and the Company has granted, an option (the "Option") to Jefferson Capital Group, Ltd. (the "Optionee") to purchase 25,000 shares of Common Stock of the Company (the "Option Shares") upon the terms of a certain Stock Option Agreement dated as of February 1, 1996 between the Company and the Optionee (the "Stock Option Agreement"), subject to Stockholder approval at the Meeting. The complete text of the Stock Option Agreement is attached as Exhibit A to this Proxy Statement. The following is a summary of the material terms of the Stock Option Agreement for which Stockholder approval is being sought. Purpose Optionee is an investment banking firm located in Richmond, Virginia, which has a longstanding advisory relationship with the Company. Optionee has served an instrumental role in structuring several of the Company's key strategic transactions, and has assisted the Company in its financing activities. Mr. R. Timothy O'Donnell, a director of the Company, and a member of its Compensation and Audit Committees, is the President and a principal shareholder of the Optionee. The purpose of the Option Grant is to reward the Optionee for prior performance and to incentivize the Optionee to continue providing superior service to the Company in the future. The Option is structured in such a way as to align the interests of the Optionee with the interests of the Company and its Stockholders by tying Option rewards to the appreciation in the price of the Company's Common Stock. Stockholder approval for the Option Grant is being sought in view of Mr. O'Donnell's relationship with the Company. Terms of the Option The Option entitles the Optionee to purchase the Option Shares at an exercise price equal to the fair market value of the Company's Common Stock on the date of grant, $13.50 per share, subject to dilution or adjustment in the event of a merger, recapitalization or the like. The Option is exercisable, in whole or in part, at any time after the approval of the Stock Option Agreement by the Company's Stockholders and before the expiration of five years from the date of grant. Payment of the purchase price may be made in cash, in the form of shares of Common Stock already owned by the Optionee for a minimum of six (6) months and having a fair market value on the date of exercise equal to the purchase price, or any combination of cash and shares of Common Stock. Neither the Option nor the Option Shares have been registered for resale under applicable Federal or state securities laws, but are being issued pursuant to an exemption from registration contained in the Act. Optionee has certain rights to cause the Option Shares to be registered in conjunction with other public offerings by the Company of its securities (i.e., "piggy- back" registration rights), but does not have any independent demand right to cause such registration to occur. Tax Implications Although the Optionee will not recognize income at the time of the grant of the Opt ion, the Optionee will recognize ordinary income upon the exercise of the Option in an amount equal to the exce ss, if any, of the fair market value of the Common Stock on the date of exercise of the Option over t he amount paid for the Common Stock. As a result of the Optionee's exercise of the Option, the Company will be entitled to deduct as compensation an amount equal to the amount included in the Optionee's gross i ncome. The deduction generally will be taken in the Company's taxable year in which the Option is exercised. The excess of the fair market value of the Common Stock on the date of exercise of the Option over the exercise price is not an item of "tax preference" as such term is used in the United States Internal Revenue Code of 1986, as amended (the "Code"). Termination The Option, to the extent not exercised, terminates upon the expiration of its five-year term or thirty (30) days after the occurrence of either of the following events: (i) the approval by the Stockholders of an agreement to merge or consolidate with or into another corporation (in which the Company is the non- surviving corporation) or an agreement to sell or otherwise dispose of all or substantially all of the Company's assets (including a plan of liquidation); or (ii) R. Timothy O'Donnell ceases to be the beneficial owner of at least 20% of the capital stock of the Optionee, on a fully diluted basis. If the Stockholders fail to approve the Option at the Meeting, the Stock Option Agreement will terminate and the Option granted thereunder will become void and of no force and effect.