Execution copy

                            FIRST AMENDMENT TO THIRD
                      AMENDED AND RESTATED CREDIT AGREEMENT

                  This FIRST  AMENDMENT  TO THIRD  AMENDED AND  RESTATED  CREDIT
AGREEMENT (this "Amendment"),  made and entered into as of December 22, 1998, is
by and among PILGRIM GROUP,  INC., a Delaware  corporation f/k/a PILGRIM AMERICA
GROUP, INC. ("PAG"), PILGRIM AMERICA CAPITAL CORPORATION, a Delaware corporation
("PACC") (together the "Borrowers"  and each a "Borrower"),  the banks which are
signatories  hereto pursuant to Section 9.6, the "Banks"  and U.S. Bank National
Association,  a national banking association,  one of the Banks as agent for the
Banks (in such capacity, the "Agent").

                                    RECITALS

                  1. The Agent, the Banks and the Borrowers entered into a Third
Amended and  Restated  Credit  Agreement  dated as of July 31, 1998 (the "Credit
Agreement"); and

                  2. The  Borrowers  desire to amend  certain  provisions of the
Credit Agreement, and the Banks have agreed to make such amendments,  subject to
the terms and conditions set forth in this Amendment.

                                    AGREEMENT

                  NOW,  THEREFORE,  for good  and  valuable  consideration,  the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
covenant and agree to be bound as follows:

                  Section 1. Capitalized  Terms.  Capitalized  terms used herein
and not otherwise defined herein shall have the meanings assigned to them in the
Credit Agreement, unless the context shall otherwise require.

                  Section 2. Amendments.  The Credit Agreement is hereby amended
as follows:

                  2.1 Section 1.1 of the Credit  Agreement is hereby  amended by
         adding the following definition thereto in alphabetical order:

                           "12b-1 Sale":  The sale by PASI of certain 12b-1 Fees
                  and related  Contingent  Deferred Sales Charges  pursuant to a
                  Pilgrim Program Master Agreement by and among PAG, PAII, PASI,
                  PLT Finance,  L.P.,  Putnam,  Lovell,  de Guardiola & Thornton
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                  Inc.  and Bankers  Trust  Company,  as Funding and  Collection
                  Agent,  dated  December  11, 1998,  and the other  agreements,
                  documents and instruments  contemplated thereby, as originally
                  in effect and as amended,  supplemented or otherwise  modified
                  with the consent of the Agent.

                  2.2 Section 2.7(a) of the Credit  Agreement is amended to read
         in its entirety as follows:

                  2.7(a)  Proceeds  of Asset  Sales.  Within  one  Business  Day
                  following  the  receipt of the  initial  proceeds of the 12b-1
                  Sale, the Borrowers shall prepay the Loans,  and the Aggregate
                  Commitment  Amounts  shall be reduced,  by an amount  equal to
                  Eleven   Million   Seven  Hundred   Fifty   Thousand   Dollars
                  ($11,750,000).  Within one Business Day  following the sale of
                  any CLO Investments,  Advisory Contracts, other 12b-1 Fees and
                  the related  Contingent  Deferred Sales Charges,  or interests
                  therein  (including  but not  limited  to  stock  in  Advisory
                  Subsidiaries or other  Subsidiaries) by either Borrower or any
                  Subsidiary  occurring  after  the  Closing  Date,  other  than
                  further  sales of 12b-1  Fees and  Contingent  Deferred  Sales
                  Charges as part of the 12b-1  Sale made on or before  December
                  11,  1999,  to the extent the sum of the  proceeds of all such
                  sales  received after the Closing Date, net of the actual cash
                  expenses  and taxes paid or  incurred  by any  Borrower or any
                  Subsidiary  thereof in  connection  with such  sales,  exceeds
                  Three Million Dollars ($3,000,000), the Borrowers shall prepay
                  the  Loans  and the  Aggregate  Commitment  Amounts  shall  be
                  reduced  by an  amount  equal to fifty  percent  (50%) of such
                  excess;  provided,  however that this Section 2.7(a) shall not
                  be deemed to authorize  any sale or other  transfer that would
                  otherwise be prohibited by Section 6.2.

                  Section  3.   Effectiveness  of  Amendments.   The  amendments
contained  in  this  Amendment  shall  become  effective  upon  delivery  by the
Borrowers of, and compliance by the Borrowers with, the following:

                  3.1 This Amendment duly executed by each of the Borrowers.

                  3.2 A Certificate  by the Secretary or Assistant  Secretary of
         each  of  PAG,   Pilgrim   Securities,   Inc.,  f/k/a  Pilgrim  America
         Securities,  Inc. ("PASI"),  Pilgrim  Investments,  Inc., f/k/a Pilgrim
         America Investments,  Inc. ("PAII"), and PACC (i) certifying that there
         has been no amendment to the Certificate of  Incorporation or Bylaws of
         PAG,  PASI,  PAII,  and PACC,  other  than  amendments  to  change  the
         corporate  name of PAG,  PAII and PASI (in each case  deleting the word
         "America"  from such names) since true and accurate  copies of the same
         were  delivered to the Agent with a certificate of the Secretary of the
         respective  entity  dated  July  31,  1998,  and (ii)  identifying  the

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         officers  of PAG,  PAII,  PASI  and PACC  authorized  to  execute  this
         Amendment  and any other  instrument  or  agreement  to be  executed in
         connection   with  this   Amendment   (collectively,   the   "Amendment
         Documents").

                  3.3 Certified copies of all documents evidencing any necessary
         corporate  action,  consent or governmental or regulatory  approval (if
         any) with respect to this Amendment.

                  3.4 A consent  by PASI in the form of  Exhibit A  attached  to
         this Amendment, duly executed by PASI.

                  3.5  Confirmation  of  Security  Agreements  in  the  form  of
         Exhibits B-1 and B-2 attached to this Amendment,  duly executed by each
         of PASI and PAII.

                  3.6 The Borrowers  shall have performed and complied with such
         other  conditions as specified by the Banks,  including  payment of all
         unpaid legal fees and expenses  incurred by the Agent  through the date
         of this  Amendment  in  connection  with the Credit  Agreement  and the
         Amendment Documents.

                  Section 4. Representations,  Warranties, Authority, No Adverse
Claim.

                  4.1 Reassertion of Representations and Warranties, No Default.
The  Borrowers  hereby  represent  that on and as of the date  hereof  and after
giving effect to this  Amendment (a) all of the  representations  and warranties
contained in Article IV of the Credit  Agreement are true,  correct and complete
in all  respects  as of the date  hereof as though  made on and as of such date,
except for changes permitted by the terms of the Credit Agreement, and (b) there
will exist no Default or Event of Default under the Credit  Agreement as amended
by this Amendment on such date which has not been waived.

                  4.2 Authority, No Conflict, No Consent Required. The Borrowers
each  represent and warrant that each Borrower has the power and legal right and
authority  to enter into the  Amendment  Documents  and has duly  authorized  as
appropriate  the  execution  and delivery of the  Amendment  Documents and other
agreements  and documents  executed and delivered by such Borrower in connection
herewith or  therewith by proper  corporate  action,  and none of the  Amendment
Documents  nor  the  agreements   contained  herein  or  therein  contravene  or
constitute a default under any agreement,  instrument or indenture to which such
Borrower is a party or a signatory or a provision of such Borrower"s Certificate
of Incorporation, Bylaws or any other agreement or requirement of law, or result
in the imposition of any Lien on any of its property under any agreement binding
on or applicable to the Borrower or any of its property except, if any, in favor
of the Agent. Each Borrower represents and warrants that no consent, approval or
authorization of or registration or declaration  with any Person,  including but
not limited to any  governmental  authority,  is required in connection with the

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execution  and  delivery by such  Borrower of the  Amendment  Documents or other
agreements  and  documents  executed and delivered by the Borrower in connection
therewith or the performance of obligations of the Borrower  therein  described,
except for those which the Borrower has obtained or provided and as to which the
Borrower has delivered certified copies of documents evidencing each such action
to the Agent.

                  4.3  No  Adverse   Claim.   The  Borrowers   hereby   warrant,
acknowledge and agree that no events have been taken place and no  circumstances
exist at the date  hereof  which  would give the  Borrowers  a basis to assert a
defense,  offset or  counterclaim  to any  claim of the Agent or the Banks  with
respect to the Borrowers" obligations under the Credit Agreement,  as amended by
this Amendment.

                  Section   5.   Affirmation   of  Credit   Agreement,   Further
References,  Affirmation  of Security  Interest and Guaranty.  The Banks and the
Borrowers  each  acknowledge  and affirm  that the Credit  Agreement,  as hereby
amended,  is hereby  ratified  and  confirmed  in all  respects  and all  terms,
conditions  and  provisions of the Credit  Agreement,  except as amended by this
Amendment,  shall remain unmodified and in full force and effect. All references
in any document or  instrument to the Credit  Agreement  are hereby  amended and
shall refer to the Credit Agreement as amended by this Amendment.  The Borrowers
confirm to the Agent that the Borrowers" respective obligations under the Credit
Agreement,  as amended by this  Amendment  are and continue to be secured by the
security interest granted by the Borrowers in favor of the Agent for the benefit
of the Banks under the Security  Agreement dated as of July 31, 1998 executed by
PAG, the Collateral  Assignment  (Trademarks) dated as of July 31, 1998 executed
by PAG, and the Pledge  Agreements  each dated as of July 31, 1998,  and made by
each  Borrower  in  favor  of the  Banks,  and  all of  the  terms,  conditions,
provisions, agreements,  requirements,  promises, obligations, duties, covenants
and  representations of the Borrowers under such documents and any and all other
documents and agreements  entered into with respect to the obligations under the
Credit  Agreement are  incorporated  herein by reference and are hereby ratified
and affirmed in all respects by the Borrowers.

                  Section 6. Merger and Integration,  Superseding  Effect.  This
Amendment,  from and after the date hereof,  embodies the entire  agreement  and
understanding between the parties hereto and supersedes and has merged into this
Amendment  all prior oral and  written  agreements  on the same  subjects by and
between the parties  hereto with the effect that this  Amendment,  shall control
with respect to the specific subjects hereof and thereof.

                  Section 7. Severability.  Whenever possible, each provision of
this  Amendment  and the other  Amendment  Documents  and any  other  statement,
instrument or transaction  contemplated  hereby or thereby or relating hereto or
thereto  shall be  interpreted  in such  manner  as to be  effective,  valid and
enforceable under the applicable law of any jurisdiction,  but, if any provision
of this  Amendment,  the  other  Amendment  Documents  or any  other  statement,
instrument or transaction  contemplated  hereby or thereby or relating hereto or

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thereto  shall be held to be  prohibited,  invalid  or  unenforceable  under the
applicable law, such provision shall be ineffective in such jurisdiction only to
the  extent  of  such  prohibition,  invalidity  or  unenforceability,   without
invalidating or rendering  unenforceable  the remainder of such provision or the
remaining  provisions of this Amendment,  the other  Amendment  Documents or any
other  statement,  instrument or transaction  contemplated  hereby or thereby or
relating hereto or thereto in such jurisdiction, or affecting the effectiveness,
validity or enforceability of such provision in any other jurisdiction.

                  Section  8.  Successors.  The  Amendment  Documents  shall  be
binding upon the Borrowers  and the Banks and their  respective  successors  and
assigns, and shall inure to the benefit of the Borrowers and the Banks and their
respective successors and assigns.

                  Section 9. Legal  Expenses.  As provided in Section 8.2 of the
Credit Agreement, the Borrowers agrees to reimburse the Agent, upon execution of
this Amendment,  for all reasonable out-of-pocket expenses (including attorneys"
fees and legal expenses of Dorsey & Whitney LLP, counsel for the Agent) incurred
in  connection  with the Credit  Agreement,  including  in  connection  with the
negotiation,  preparation and execution of the Amendment Documents and all other
documents  negotiated,  prepared and executed in  connection  with the Amendment
Documents, and in enforcing the obligations of the Borrowers under the Amendment
Documents,  and to pay and save the Agent  harmless from all liability  for, any
stamp or other  taxes  which may be payable  with  respect to the  execution  or
delivery of the Amendment  Documents,  which  obligations of the Borrowers shall
survive any termination of the Credit Agreement.

                  Section 10. Headings. The headings of various sections of this
Amendment  have been inserted for reference only and shall not be deemed to be a
part of this Amendment.

                  Section  11.  Counterparts.  The  Amendment  Documents  may be
executed in several  counterparts  as deemed  necessary or  convenient,  each of
which,  when so executed,  shall be deemed an original,  provided  that all such
counterparts shall be regarded as one and the same document, and either party to
the  Amendment   Documents  may  execute  any  such  agreement  by  executing  a
counterpart of such agreement.

                  Section 12.  Governing Law. THE AMENDMENT  DOCUMENTS  SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA,  WITHOUT  GIVING EFFECT
TO  CONFLICT  OF LAW  PRINCIPLES  THEREOF,  BUT GIVING  EFFECT TO  FEDERAL  LAWS
APPLICABLE TO NATIONAL BANKS, THEIR HOLDING COMPANIES AND THEIR AFFILIATES.

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                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Agreement to be executed as of the date first above written.

                                         PILGRIM AMERICA CAPITAL
                                         CORPORATION

                                         By __________________________
                                         Title _______________________

                                         Address for Borrower:
                                         Two Renaissance Square, Ste. 1200
                                         40 North Central Avenue
                                         Phoenix, AZ  85004-4424
                                         Attention:  James R. Reis
                                         Telecopier:  (602) 417-8301

                                         PILGRIM GROUP, INC.

                                         By __________________________
                                         Title _______________________

                                         Address for Borrower:
                                         Two Renaissance Square, Ste. 1200
                                         40 North Central Avenue
                                         Phoenix, AZ  85004-4424
                                         Attention:  James M. Hennessy
                                         Telecopier:  (602) 417-8301

                                         U.S. BANK NATIONAL ASSOCIATION

                                         By __________________________
                                         Title _______________________

                                         Address:
                                         U.S. Bank Place - MPFP0702
                                         601 Second Avenue South
                                         Minneapolis, MN 55402-4302
                                         Attention:  Mark A. Bagley
                                         Telecopier:  (612) 973-0832

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                                         BANK ONE ARIZONA, NA

                                         By __________________________
                                         Title _______________________

                                         Address:
                                         201 North Central Avenue
                                         21st Floor AZ1-1178
                                         Phoenix, AZ   85004
                                         Attention:  Michelle Schechner

                                         STATE STREET BANK AND
                                         TRUST COMPANY

                                         By___________________________
                                         Its__________________________

                                         Address:
                                         1776 Heritage Drive
                                         JAB4SW
                                         North Quincy, MA   02171
                                         Attention:  Edward A. Siegel

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