Exhibit 10.1

EXECUTION COPY

AMENDMENT NO. 2

Dated as of May 3, 2006

to

CREDIT AGREEMENT

Dated as of June 7, 2005

THIS AMENDMENT NO. 2 (“Amendment”) is made as of May 3, 2006 by and among Encore
Capital Group, Inc. (the “Borrower”), the financial institutions listed on the
signature pages hereof (the “Lenders”) and JPMorgan Chase Bank, National
Association, as Administrative Agent (the “Agent”), under that certain Credit
Agreement dated as of June 7, 2005 by and among the Borrower, the Lenders and
the Agent (as amended, supplemented or otherwise modified from time to time, the
“Credit Agreement”). Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Borrower has requested that the Lenders and the Agent agree to
certain amendments to the Credit Agreement;

WHEREAS, the Lenders party hereto and the Agent have agreed to such amendments
on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Lenders party hereto and the Agent have agreed to enter into this Amendment.

1. Amendments to Credit Agreement. Effective as of the date of satisfaction of
the conditions precedent set forth in Section 2 below, the Credit Agreement is
amended as follows:

(a) The definition of “Consolidated EBITDA” appearing in Article I of the Credit
Agreement shall be amended and restated in its entirety as follows:

“Consolidated EBITDA” means Consolidated Net Income plus, (1) to the extent not
included in such revenue, Amortized Collections, and (2) to the extent deducted
from revenues in determining Consolidated Net Income, (i) Consolidated Interest
Expense (whether actual or contingent), (ii) expense for taxes paid or accrued,
(iii) depreciation expense, (iv) amortization expense, (v) any extraordinary
losses, and (vi) non-cash charges arising from compensation expense as a result
of the adoption of amendments to Agreement Accounting Principles requiring
certain stock based compensation to be recorded as an expense within the
Borrower’s consolidated statement of operations,

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minus, to the extent included in Consolidated Net Income, (a) interest income,
(b) any extraordinary gains, (c) the income of any JV Entity or any other Person
(1) in which any Person other than the Borrower or any of its Subsidiaries has a
joint interest or a partnership interest or other ownership interest and (2) to
the extent the Borrower or any of its Subsidiaries does not control the Board of
Directors or other governing body of such JV Entity or Person or otherwise does
not control the declaration of a dividend or other distribution by such JV
Entity or Person, except in each case to the extent of the amount of dividends
or other distributions actually paid to the Borrower or any of its Subsidiaries
by such JV Entity or Person during the relevant period and (d) the income of any
Subsidiary of the Borrower to the extent that the declaration or payment of
dividends or distributions (including via intercompany advances or other
intercompany transactions but in each case up to and not exceeding the amount of
such income) by that Subsidiary of that income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary, all calculated for the Borrower and its Subsidiaries on a
consolidated basis.

(b) The definition of “Revolving Loan Termination Date” appearing in Article I
of the Credit Agreement shall be amended and restated in its entirety as
follows:

“Revolving Loan Termination Date” means the earlier of (a) May 3, 2010 (or such
later date as may be agreed upon pursuant to Section 2.21 hereof), and (b) the
date of termination in whole of the Aggregate Revolving Loan Commitment pursuant
to Section 2.2 hereof or the Revolving Loan Commitments pursuant to Section 8.1
hereof.

(c) Article I of the Credit Agreement is amended to delete the definitions of
“Adjusted Cash Flow Leverage Ratio” and “Adjusted Balance Sheet Leverage Ratio”
therefrom.

(d) Article I of the Credit Agreement is further amended to insert the following
new definitions thereto:

“Amortized Collections” means, for any period, the aggregate amount of
collections from receivable portfolios (including that portion attributable to
sales of receivables) of Borrower and its Subsidiaries calculated on a
consolidated basis for such period, in accordance with Agreement Accounting
Principles, that are not included in consolidated revenues by reason of the
application of such collections to principal of such receivable portfolios (for
purposes of illustration only, the Amortized Collections have been most recently
identified in the amount of $72,044,000 as “Collections applied to principal of
receivable portfolios” in the Borrower’s consolidated statement of cash flows
for the period ended December 31, 2005 as reflected in the Borrower’s Form 10-K
for such period).

“Consolidated Funded Indebtedness” means at any time the aggregate dollar amount
of Consolidated Indebtedness which has actually been funded and is outstanding
at such time, whether or not such amount is due or payable at such time.

 

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“Consolidated Indebtedness” means, at any time, the Indebtedness of the Borrower
and its Subsidiaries that would be reflected on a consolidated balance sheet of
Borrower prepared in accordance with Agreement Accounting Principles as of such
time.

“Consolidated Net Worth” means at any time, with respect to any Person, the
consolidated stockholders’ equity of such Person and its Subsidiaries calculated
on a consolidated basis in accordance with Agreement Accounting Principles.

(e) Section 2.5.3(i) of the Credit Agreement is amended to (i) delete the
reference to “$225,000,000” appearing in clause (A) thereof and substitute
“$250,000,000” in lieu thereof and (ii) delete the reference to “$25,000,000”
appearing in clause (C) thereof and substitute “$50,000,000” in lieu thereof.

(f) A new Section 2.21 is added to the Credit Agreement and shall read as
follows:

2.21 Extension of Revolving Loan Termination Date. The Borrower may request a
one-year extension of the Revolving Loan Termination Date by submitting a
request for an extension to the Administrative Agent (an “Extension Request”) no
more than 90 and no less than 30 days prior to each anniversary of the Closing
Date. Promptly upon receipt of an Extension Request, the Administrative Agent
shall notify each Lender thereof and shall request each Lender to consider
approval of the Extension Request. Each Lender approving the Extension Request
shall deliver its written consent no later than 15 days prior to the proposed
extended Revolving Loan Termination Date. If the consent of each of the Lenders
is received by the Administrative Agent, the Revolving Loan Termination Date
shall be extended by one year and the Administrative Agent shall promptly notify
the Borrower and each Lender of the new Revolving Loan Termination Date.

(g) Section 6.21 of the Credit Agreement is amended and restated in its entirety
to read as follows:

6.21.1 Cash Flow Leverage Ratio. The Borrower will not permit the ratio (the
“Cash Flow Leverage Ratio”), determined as of the end of each of its fiscal
quarters, of (i) Consolidated Funded Indebtedness of the Borrower to
(ii) Consolidated EBITDA for the then most-recently ended four fiscal quarters
to be greater than 1.75 to 1.0 for each fiscal four-quarter period.

The Cash Flow Leverage Ratio shall be calculated based upon (a) for Consolidated
Funded Indebtedness, as of the last day of each such fiscal quarter and (b) for
Consolidated EBITDA, the actual amount as of the last day of each fiscal quarter
for the most recently ended four consecutive fiscal quarters.

6.21.2 Minimum Net Worth. The Borrower will not permit its Consolidated Net
Worth to be less than the sum of (i) $106,500,000, plus (ii) 50% of Consolidated
Net Income earned in each fiscal quarter beginning with the quarter ending
March 31, 2006 (without deduction for losses), plus (iii) 100% of the amount by
which the Borrower’s “total stockholders’ equity” is increased after May 3, 2006
as a result of the issuance or

 

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sale by the Borrower or any of its Subsidiaries of, or the conversion of any
Indebtedness of such Person into, any equity interests (including warrants and
similar investments) in such Person.

(h) Section 6.23 of the Credit Agreement is amended to delete the reference to
“$5,000,000” appearing therein and substitute “$6,000,000” in lieu thereof.

(i) Section 6.24 of the Credit Agreement is amended to delete the reference to
“$3,500,000” appearing therein and substitute “$5,000,000” in lieu thereof.

(j) In connection with certain assignments being entered into by certain of the
Lenders, the Revolving Loan Commitments of certain of the Lenders are amended
and increased and therefore, upon the effectiveness hereof, the Revolving Loan
Commitments of all of the Lenders are amended as set forth in the schedule on
Annex I hereto. The Borrower hereby agrees to compensate each Lender for any and
all losses, expenses and liabilities incurred by such Lender in connection with
the sale and assignment of any Eurodollar Loans and the reallocation described
in Section 2(a) below, in each case on the terms and in the manner set forth in
Section 3.4 of the Credit Agreement.

(k) The Pricing Schedule is amended and restated in its entirety to read as set
forth on Annex II hereto.

2. Conditions of Effectiveness. The effectiveness of this Amendment is subject
to the conditions precedent that (a) in connection with the assignments and
increases described in Section 1(j) above, the Agent and the Lenders shall have
administered the reallocation of the Aggregate Outstanding Revolving Credit
Exposure among the Lenders such that after giving effect to the reallocations of
the Revolving Loan Commitments, each Lender’s Revolving Loan Pro Rata Share of
the Aggregate Outstanding Revolving Credit Exposure is equal to such Lender’s
Revolving Loan Pro Rata Share of the Aggregate Revolving Loan Commitments,
(b) the Agent shall have received (i) counterparts of this Amendment duly
executed by the Borrower, the Lenders and the Agent and the Consent and
Reaffirmation attached hereto duly executed by the Guarantors, (ii) such other
opinions, instruments and documents as are reasonably requested by the Agent,
(iii) for the ratable account of each Lender, an amendment fee in an amount
equal to 0.075% of such Lender’s Revolving Loan Commitment and (c) the Borrower
shall have paid, to the extent invoiced, all expenses of the Agent (including
attorneys’ fees and expenses) in connection with this Amendment and the other
Loan Documents.

3. Representations and Warranties of the Borrower. The Borrower hereby
represents and warrants as follows:

(a) This Amendment and the Credit Agreement as amended hereby constitute legal,
valid and binding obligations of the Borrower and are enforceable against the
Borrower in accordance with their terms.

(b) As of the date hereof and giving effect to the terms of this Amendment,
(i) there exists no Default or Unmatured Default and (ii) the representations
and warranties contained in Article V of the Credit Agreement, as amended
hereby, are true and correct, except for representations and warranties made
with reference solely to an earlier date.

 

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4. Reference to and Effect on the Credit Agreement.

(a) Upon the effectiveness hereof, each reference to the Credit Agreement in the
Credit Agreement or any other Loan Document shall mean and be a reference to the
Credit Agreement as amended hereby.

(b) Except as specifically amended above, the Credit Agreement and all other
documents, instruments and agreements executed and/or delivered in connection
therewith shall remain in full force and effect and are hereby ratified and
confirmed.

(c) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the Agent or the Lenders,
nor constitute a waiver of any provision of the Credit Agreement or any other
documents, instruments and agreements executed and/or delivered in connection
therewith.

5. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of New York, but giving effect to
federal laws applicable to national banks.

6. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

7. Counterparts. This Amendment may be executed by one or more of the parties
hereto on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year
first above written.

 

ENCORE CAPITAL GROUP, INC.,
as the Borrower

By:  

/s/ J. Brandon Black

Name:

 

J. Brandon Black

Title:

 

President and CEO

 

JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION,
as Administrative Agent, as LC Issuer and as a Lender

By:  

/s/ Steven J. Krakoski

Name:

 

Steven J. Krakoski

Title:

 

Senior Vice President

Signature Page to Amendment No. 2

Encore Capital Group, Inc.

Credit Agreement dated as of June 7, 2005

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BANK OF SCOTLAND, as a Lender By:  

/s/ Karen Weich

Name:

 

Karen Weich

Title:

 

Assistant Vice President

 

BANK OF AMERICA, N.A., as a Lender

By:  

/s/ Gordon W. Wiens

Name:

 

Gordon W. Wiens

Title:

 

Senior Vice President

 

CALIFORNIA BANK & TRUST, as a Lender

By:  

/s/ Michael Powell

Name:

 

Michael Powell

Title:

 

Senior Vice President

 

GUARANTY BANK, as a Lender

By:  

/s/ Michael Ansolabehere

Name:

 

Michael Ansolabehere

Title:

 

Senior Vice President

 

FIRST BANK, as a Lender

By:  

/s/ Susan J. Pepping

Name:

 

Susan J. Pepping

Title:

 

Vice President

 

CITIBANK (WEST) F.S.B., as a Lender

By:  

/s/ Dennis J. Jans

Name:

 

Dennis J. Jans

Title:

 

Vice President

Signature Page to Amendment No. 2

Encore Capital Group, Inc.

Credit Agreement dated as of June 7, 2005

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BANK LEUMI USA, as a Lender

By:  

/s/ Jacques Delvoye

Name:

 

Jacques Delvoye

Title:

 

Vice President

 

MANUFACTURERS BANK, as a Lender

By:  

/s/ Robert Brito

Name:

 

Robert Brito

Title:

 

Senior Vice President

Signature Page to Amendment No. 2

Encore Capital Group, Inc.

Credit Agreement dated as of June 7, 2005

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CONSENT AND REAFFIRMATION

Each of the undersigned hereby acknowledges receipt of a copy of the foregoing
Amendment No. 2 to the Credit Agreement dated as of June 7, 2005 (as the same
may be amended, restated, supplemented or otherwise modified from time to time,
the “Credit Agreement”) by and among Encore Capital Group, Inc. (the
“Borrower”), the financial institutions from time to time party thereto (the
“Lenders”) and JPMorgan Chase Bank, National Association, in its individual
capacity as a Lender and in its capacity as contractual representative (the
“Agent”), which Amendment No. 2 is dated as of May 3, 2006 (the “Amendment”).
Capitalized terms used in this Consent and Reaffirmation and not defined herein
shall have the meanings given to them in the Credit Agreement. Without in any
way establishing a course of dealing by the Agent or any Lender, each of the
undersigned consents to the Amendment and reaffirms the terms and conditions of
the Guaranty Agreement, the Pledge and Security Agreement and any other Loan
Document executed by it and acknowledges and agrees that such agreement and each
and every such Loan Document executed by the undersigned in connection with the
Credit Agreement remains in full force and effect and is hereby reaffirmed,
ratified and confirmed. All references to the Credit Agreement contained in the
above-referenced documents shall be a reference to the Credit Agreement as so
modified by the Amendment and as the same may from time to time hereafter be
amended, modified or restated.

[Signature Page Follows]

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Dated: May 3, 2006

 

MIDLAND CREDIT MANAGEMENT, INC.,

as a Guarantor

   

MIDLAND FUNDING NCC-2 CORPORATION,

as a Guarantor

By:

 

/s/ J. Brandon Black

   

By:

 

/s/ J. Brandon Black

Name:

 

J. Brandon Black

   

Name:

 

J. Brandon Black

Title:

 

President

   

Title:

 

President

 

MIDLAND ACQUISITION CORPORATION,

as a Guarantor

   

MIDLAND RECEIVABLES 98-1 CORPORATION,

as a Guarantor

By:

 

/s/ J. Brandon Black

   

By:

 

/s/ J. Brandon Black

Name:

 

J. Brandon Black

   

Name:

 

J. Brandon Black

Title:

 

President

   

Title:

 

President

 

MIDLAND RECEIVABLES 99-1 CORPORATION,

as a Guarantor

   

MIDLAND FUNDING 98-A CORPORATION,

as a Guarantor

By:

 

/s/ J. Brandon Black

   

By:

 

/s/ J. Brandon Black

Name:

 

J. Brandon Black

   

Name:

 

J. Brandon Black

Title:

 

President

   

Title:

 

President

 

MIDLAND FUNDING NCC-1 CORPORATION,

as a Guarantor

   

MIDLAND PORTFOLIO SERVICES, INC.,

as a Guarantor

By:

 

/s/ J. Brandon Black

   

By:

 

/s/ J. Brandon Black

Name:

 

J. Brandon Black

   

Name:

 

J. Brandon Black

Title:

 

President

   

Title:

 

President

 

   

MIDLAND FUNDING LLC,

as a Guarantor

     

By:

 

/s/ J. Brandon Black

     

Name:

 

J. Brandon Black

     

Title:

 

President

Signature Page to Consent and Reaffirmation to Amendment No. 2

Encore Capital Group, Inc.

Credit Agreement dated as of June 7, 2005

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ACG MANAGEMENT LLC,

as a Guarantor

   

MIDLAND INTERNATIONAL LLC,

as a Guarantor

By: ACG HOLDING, INC., as Manager    

By: MIDLAND CREDIT MANAGEMENT,

INC., its Sole Member

By:

 

/s/ J. Brandon Black

   

By:

 

/s/ J. Brandon Black

Name:

 

J. Brandon Black

   

Name:

 

J. Brandon Black

Title:

 

President

   

Title:

 

President

 

ACG HOLDING, INC.,

as a Guarantor

   

ASCENSION CAPITAL GROUP, LP,

as a Guarantor

By:

 

/s/ J. Brandon Black

    By: ACG HOLDING, INC., its General Partner

Name:

 

J. Brandon Black

     

Title:

 

President

   

By:

 

/s/ J. Brandon Black

     

Name:

 

J. Brandon Black

     

Title:

 

President

Signature Page to Consent and Reaffirmation to Amendment No. 2

Encore Capital Group, Inc.

Credit Agreement dated as of June 7, 2005

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ANNEX I

Revolving Loan Commitments

 

Lender

   Amount of Revolving Loan
Commitment    % of Aggregate Revolving
Loan Commitment  

JPMorgan Chase Bank, National Association

   $ 40,000,000    20 %

Bank of Scotland

   $ 35,000,000    17.5 %

Bank of America, N.A.

   $ 35,000,000    17.5 %

California Bank & Trust

   $ 25,000,000    12.5 %

Guaranty Bank

   $ 20,000,000    10.0 %

First Bank

   $ 15,000,000    7.5 %

Citibank (West) F.S.B.

   $ 15,000,000    7.5 %

Bank Leumi USA

   $ 10,000,000    5.0 %

Manufacturers Bank

   $ 5,000,000    2.5 %

TOTAL

   $ 200,000,000    100 %

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ANNEX II

PRICING SCHEDULE

 

APPLICABLE MARGIN

  

LEVEL I

STATUS

   

LEVEL II

STATUS

   

LEVEL III

STATUS

 

Eurodollar Rate

   1.75 %   2.00 %   2.25 %

Floating Rate

   0.00 %   0.00 %   0.00 %

APPLICABLE FEE RATE

  

LEVEL I

STATUS

   

LEVEL II

STATUS

   

LEVEL III

STATUS

 

Commitment Fee

   0.300 %   0.375 %   0.500 %

For the purposes of this Schedule, the following terms have the following
meanings, subject to the final paragraph of this Schedule:

“Financials” means the annual or quarterly financial statements of the Borrower
delivered pursuant to Section 6.1.1 or 6.1.2.

“Level I Status” exists at any date if, as of the last day of the fiscal quarter
of the Borrower referred to in the most recent Financials, the Cash Flow
Leverage Ratio is less than 1.0 to 1.0.

“Level II Status” exists at any date if, as of the last day of the fiscal
quarter of the Borrower referred to in the most recent Financials, (i) the
Borrower has not qualified for Level I Status and (ii) the Cash Flow Leverage
Ratio is less than 1.5 to 1.0.

“Level III Status” exists at any date if, as of the last day of the fiscal
quarter of the Borrower referred to in the most recent Financials, the Borrower
has not qualified for Level I Status or Level II Status.

“Status” means either Level I Status, Level II Status or Level III Status.

The Applicable Margin and Applicable Fee Rate shall be determined in accordance
with foregoing table based on the Borrower’s Status as reflected in the then
most recent Financials. Adjustments, if any, to the Applicable Margin or
Applicable Fee Rate shall be effective five Business Days after the
Administrative Agent has received the applicable Financials. If the Borrower
fails to deliver the Financials to the Administrative Agent at the time required
pursuant to Section 6.1, then the Applicable Margin and Applicable Fee Rate
shall be the highest Applicable Margin and Applicable Fee Rate set forth in the
foregoing table until five days after such Financials are so delivered.

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Notwithstanding the foregoing, Level II Status shall be deemed to be applicable
until the Administrative Agent’s receipt of the applicable Financials for the
Borrower’s fiscal quarter ending on or about March 31, 2006 (unless such
Financials demonstrate that a higher Applicable Margin/Applicable Fee Rate
should have been applicable during such period, in which case the applicable
Level based on such higher Applicable Margin/Applicable Fee Rate shall be deemed
to be applicable during such period) and adjustments to the Applicable Margin
and Applicable Fee Rate shall thereafter be effected in accordance with the
preceding paragraph.