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                               Asta Funding, Inc.
                                   Form 10-KSB
                               September 30, 2001
                                                                    Exhibit 10.3


                              EMPLOYMENT AGREEMENT

         AGREEMENT, dated as of the 1st day of October, 2001 by and between ASTA
FUNDING, INC., a Delaware corporation, with offices at 210 Sylvan Ave.,
Englewood Cliffs, NJ 07632 (the "Company") and MITCHELL HERMAN, an individual
residing at 20 Renshaw Drive, Montville, NJ 07045 ( the "Employee")

W I T N E S E T H:

         WHEREAS, the parties desire to enter this agreement to set forth the
terms of the Employee's employment by the Company.

         NOW, THEREFORE, in consideration of the mutual premises and covenants
set forth herein and for other good and value consideration, the receipt,
adequacy and legal sufficiency of which are hereby acknowledged, the Company and
the Employee mutually agree as follows:

         1.                Employment Duties.

                           (a)      Employment. The Company agrees to employ the
                                    Employee, and the Employee agrees to accept
                                    employment with the Company, on the terms
                                    and conditions set forth.

                           (b)      Scope of Duties. During the term of this
                                    Agreement, Employee shall devote his entire
                                    business time, attention and energy to the
                                    business, and to seeking improvement in the
                                    profitability, of the Company. He shall
                                    serve as Chief Financial Officer and
                                    Secretary of the Company and its
                                    subsidiaries and shall have the authority to
                                    perform and shall perform all of the duties
                                    that are customary for the offices of the
                                    Chief Financial Officer and Secretary,
                                    subject at all times to the control and
                                    direction of the President and Board of
                                    Directors of the Company, and shall perform
                                    such services as typically are provided by
                                    the Chief Financial Officer and Secretary of
                                    a corporation and such other services
                                    consistent therewith as shall be assigned to
                                    him from time to time by the President of
                                    the Board of Directors of the Company.






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                           (c)      Service. The Employee shall perform his
                                    duties in a diligent manner; shall not
                                    engage in activities, which are or could be
                                    detrimental to the existing or future
                                    business of the Company and its
                                    subsidiaries; and shall observe and conform
                                    to all laws, customs, and standards of
                                    business ethics and honest business
                                    practices. The Employee shall be requested,
                                    and does hereby agree, to be a full time
                                    employee of the Company. The Company
                                    acknowledges, however, that the Employee may
                                    serve as the Chief Financial Officer of Asta
                                    Group, Incorporated. During the term of this
                                    Agreement, Employee shall not engage in any
                                    other business activity which, in the
                                    reasonable judgement of the Company's Board
                                    of Directors, conflicts with the duties of
                                    Employee hereunder, whether or not such
                                    activity is pursued for gain, profit or
                                    other pecuniary advantage; provided,
                                    however, that it is understood that this
                                    Section 1 (c) shall not preclude Employee
                                    from making passive investments in other
                                    companies.


                           (d)      Professional Standards. Recognizing and
                                    acknowledging that it is essential for the
                                    protection and enhancement of the name and
                                    business of the Company and its subsidiaries
                                    and the good will pertaining thereto, the
                                    Employee shall perform his duties under this
                                    Agreement professionally and in accordance
                                    with the standards established by the
                                    Company from time to time; and the Employee
                                    shall not act, and shall refrain from
                                    acting, in any manner that could harm or
                                    tarnish the name, business or income of the
                                    Company and its subsidiaries or the good
                                    will pertaining thereto.

         2.                Compensation.

                           (a)      Base Salary. For all services rendered by
                                    the Employee during the term of this
                                    Agreement, the Company shall pay the
                                    Employee an annual base salary ("Base
                                    Salary") of $200,000 payable in accordance
                                    with the Company's customary payment
                                    policies and periods. The Employee's annual
                                    Base Salary may be increased as determined
                                    by the Board of Directors in its sole
                                    discretion.

                           (b)      Bonuses. The employee shall be eligible to
                                    receive bonuses as determined by the Board
                                    of Directors in its sole discretion.



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                           (c)      Stock Options. The Employee shall be
                                    eligible to receive stock options as
                                    determined by the Board of Directors in its
                                    sole discretion.


                           (d)      Fringe Benefits. During the term of this
                                    Agreement, the Company hall obtain and
                                    maintain a term life insurance policy in the
                                    amount of $600,000 naming the Employee's
                                    designee as beneficiary, (ii) shall maintain
                                    an excess disability insurance policy for
                                    the Employee, (iii) shall provide to the
                                    Employee and the Employee's family full
                                    health insurance coverage and extended
                                    medical coverage for the Employee and (iv),
                                    shall provide to the Employee a leased
                                    luxury automobile along with automobile
                                    insurance.

                           (e)      Vacation. The Employee shall be entitled to
                                    an annual vacation of fifteen (15) working
                                    days for each full calendar year of
                                    employment hereunder, which may be taken all
                                    at once or from time to time; provided,
                                    however, that (i) the Employee shall
                                    schedule such vacation time so as to
                                    mitigate the adverse effects to the Company
                                    of the Employee's absence; (ii) the Employee
                                    shall give the Company at least thirty days
                                    (30) days notice of consecutive vacation
                                    days in excess of five (5) to be taken by
                                    the Employee at any one time; and (iii) up
                                    to one (1) week unused vacation time during
                                    the calendar year may be carried over and
                                    used by the Employee in the following
                                    calendar year.

         3.                Non-Competition.

                           (a)      In view of the Employee's  knowledge of the
                                    trade secrets and other proprietary
                                    information relating to the business of the
                                    Company and its subsidiaries and their
                                    customers which the Employee has heretofore
                                    obtained and is expected to obtain during
                                    the term the Employee is employed under this
                                    Agreement (the "Employment Period"), and in
                                    consideration of the compensation to be
                                    received hereunder, the Employee agrees: (i)
                                    that he will not during the Employment
                                    Period Participate In (as such term
                                    hereinafter defined) any other business or
                                    organization if such business or
                                    organization now is or shall then be
                                    competing with or be of a nature similar to
                                    the business of the Company or its
                                    subsidiaries and (ii) (A) for a period of
                                    twelve (12) months after the Termination
                                    Date (as defined in Section 7) due to a
                                    termination of this Agreement for Cause or
                                    (B) for such period as the Company shall
                                    continue to pay to the Employee his Base
                                    Salary and insurance benefits in accordance
                                    with Section 9(b) after a termination of the
                                    Employee's employment Without Cause, he will
                                    not in any geographic area in which the
                                    Company does business as of the Termination
                                    Date compete with or be engaged in the same
                                    business as, or Participate In, any other
                                    business or organization which competes with
                                    or is engaged in the same business as, the
                                    Company or its subsidiaries with respect to
                                    any service offered or activity engaged in
                                    up to the Termination Date, except that in
                                    each case the provisions of this Section 3
                                    will not be deemed breached merely because
                                    the Employee owns not more than 2% of the
                                    outstanding common stock of a corporation,
                                    if, at the time of its acquisition by the
                                    Employee, such stock is listed on a national
                                    securities exchange, is reported on NASDAQ,
                                    or is regularly traded in the
                                    over-the-counter market by a member of a
                                    national securities exchange.


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                           (b)      The term "Participate In" shall mean:
                                    "directly or indirectly, for his own
                                    benefit, firm, or corporation, own, manage,
                                    operate, control or loan money to (provide,
                                    that an investment in debt instruments
                                    issued pursuant to an effective registration
                                    statement under the Securities Act of 1993,
                                    as amended shall not be deemed to be a
                                    loan), or participate in the ownership,
                                    management, operation, or control of, or be
                                    connected as a director, officer, employee,
                                    partner, agent, or otherwise with, or
                                    acquiesce in the use of his name in."

                           (c)      During the Employment Period and, in the
                                    case of the termination of the Employee's
                                    employment for Cause only, for a period one
                                    (1) year after the Termination Date, the
                                    Employee will not directly or indirectly:

                                      (i)   Reveal the name of, solicit, use or
                                            interfere with, or endeavor to
                                            entice away from the Company (or any
                                            of its subsidiaries) any of their
                                            customers, vendors, or employees, or

                                     (ii)   Employ any person who, at any time
                                            up to the Termination Date, was an
                                            employee of the Company or its
                                            subsidiaries without the written
                                            consent of the Company.

                           (d)      The Employee agrees that the provisions of
                                    this Section 3 are necessary and reasonable
                                    to protect the Company in the conduct of its
                                    business. If any restriction contained in
                                    this Section 3 shall be deemed to be
                                    invalid, illegal, or unenforceable by reason
                                    of the extent, duration, or geographical
                                    scope thereof, or otherwise, then the court
                                    making such determination shall have the
                                    right to reduce such extent, duration,
                                    geographical scope, or other provisions
                                    hereof, and in its reduced from such
                                    restriction shall then be enforceable in the
                                    manner contemplated hereby.



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         4.                Confidential Information. All confidential
                           information which the employee may now possess, may
                           obtain during or after the Employment Period, or may
                           create prior to the end of the Employment Period
                           relating to the business of the Company or its
                           subsidiaries or of any of their respective customers
                           or vendors shall not be published, disclosed, or made
                           accessible by him except to any other person, firm or
                           corporation either during or after the Employment
                           Period or used by him during the Employment Period in
                           the business and for the benefit of the Company or
                           its subsidiaries without the prior written consent of
                           the Company. The Employee shall return all tangible
                           evidence of such confidential information to the
                           Company prior to or at the end of the Employment
                           Period.

         5.                Rights of the Company.

                           (a)      Any interest in copyrights, copyrightable
                                    works, developments, discoveries, designs
                                    and processes, patents, patent applications,
                                    inventions and technological innovations
                                    (collectively, "Inventions") which the
                                    Employee (i) owns, conceives of or develops,
                                    alone or with others, (A) relating to the
                                    business of the Company or its subsidiaries
                                    or any business in which the Company (or its
                                    subsidiaries) contemplates being engaged or
                                    (B) which anticipate research or development
                                    of the Company or its subsidiaries, or (ii)
                                    conceives of or develops utilizing the time,
                                    material, facilities or information of the
                                    Company or its subsidiaries, in either case
                                    during the Employment Period, shall belong
                                    to the Company.

                           (b)      As soon as the Employee owns, conceives of
                                    or develops any Invention, the Employee
                                    shall immediately communicate such fact in
                                    writing to the Board of Directors of the
                                    Company. Upon the request of the Company,
                                    the Employee shall, without further
                                    compensation but at the Company's expense
                                    (subject to clause (i) below) execute all
                                    such assignments and other documents
                                    (including applications for trademarks,
                                    copyrights and patents and assignments
                                    thereof) and take all such other action as
                                    the Company may reasonably request,
                                    including obtaining spousal consents or
                                    waivers, (i) to vest in the Company all
                                    right, title and interest of the Employee in
                                    and to such Inventions, free and clear of
                                    all liens, mortgages, security interests,
                                    pledges, charges and encumbrances ( the
                                    Employee to take such action, at his
                                    expense, as is necessary to remove all such
                                    liens) and (ii) if patentable or
                                    copyrightable, to obtain patents or
                                    copyrights (including extensions and
                                    renewals) therefor in any and all
                                    jurisdictions in and outside the United
                                    States in the name of the Company or in such
                                    other names(s) as the Company shall
                                    determine.


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         6.                Insurance. The Employee agrees to submit to such
                           medical examinations as may be reasonably required by
                           the Company to enable the Company to obtain, at its
                           opinion, key man life insurance on the life of the
                           Employee in such amount and with such insurer as the
                           Company may determine in its sole discretion.

         7.                Employment Period. The Employment Period shall
                           commence on the date of this Agreement and shall
                           continue for a term ending on September 30, 2004 or
                           such earlier date on which any of the following
                           events occurs (the "Termination Date"):

                           (a)      the death of the Employee;

                           (b)      the voluntary resignation of the Employee;

                           (c)      the termination by the Board of Directors of
                                    the Employee's employment for Disability (as
                                    hereinafter defined);

                           (d)      the termination by the Board of Directors of
                                    the Employee's employment for Cause (as
                                    hereinafter defined); or

                           (e)      the termination by the Board of Directors of
                                    the Employee's employment Without Cause (as
                                    hereafter defined)

         8.                Definitions Relating to Termination

                           (a)      Disability

                                    The term "Disability" shall mean any
                                    physical or mental condition f the Employee
                                    which, in the reasonable discretion of the
                                    Board of Directors, after consultation with
                                    the Employee's physician, materially impairs
                                    the Employee's ability to render the
                                    services to be performed by him hereunder
                                    for a period of 180 consecutive days or for
                                    at least 240 days in any consecutive 360 day
                                    period.

                           (b)      Cause

                                    The term "Cause" shall mean the good faith
finding by the Board Directors of the Company upon resolution adopted by it of
the existence of any one of the following:




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                           (i)      The Employee's failure or refusal to perform
                                    specific written directives consistent with
                                    his duties and responsibilities as set forth
                                    in Section 1 hereof, which lack of
                                    performance is not cured within 15 days
                                    after written notice thereof or 30 days if
                                    at the 15th day and thereafter the Employee
                                    is diligently attempting to cure;

                           (ii)     Excessive use of alcohol or the use of
                                    illegal drugs, which interferes with the
                                    performance of the Employee's obligations
                                    under this Agreement;

                           (iii)    Conviction of a felony or of any crime
                                    involving moral turpitude or fraud;

                           (iv)     The commission by the Employee of any
                                    willful or intentional act which the
                                    Employee reasonably should have contemplated
                                    would have the effect of injuring the
                                    reputation, financial condition, business or
                                    business relationships of the Company (and
                                    its subsidiaries, individually or taken as a
                                    whole) and / or the Employee; or

                           (v)      Any material breach (not covered by any of
                                    the clauses (i) through hereof) of any of
                                    the provisions of this Agreement, if such
                                    breach is not cured within 30 days after
                                    written notice thereof to by the Board of
                                    Directors.

                           (c)      Without Cause

                                    The term "Without Cause" shall mean a
                                    determination of the Board of Directors to
                                    terminate the Employee for any reason other
                                    than death, Disability or for Cause.


         9.                Effect of Termination

                           (a)      If the Employee's employment is terminated
                                    for Disability, for Cause or upon his death,
                                    the Employee or his estate shall be paid the
                                    Employee's Base Salary and other benefits
                                    hereunder through the Termination Date.

                           (b)      If the Employee's employment is terminated
                                    Without Cause, the Employee or his estate
                                    shall be paid the Employee's Base Salary and
                                    other benefits hereunder for a maximum
                                    period of 18 months after the date of
                                    termination or until such time the Employee
                                    becomes a full time employee of another
                                    employer if this occurs prior to the 18
                                    months.

                           (c)      Irrespective of the basis for the
                                    termination of the Employee's Employment
                                    with the Company, all benefits (including
                                    fringe benefits), if any, due the Employee
                                    hereunder shall cease as of the Termination
                                    Date, other than (i) COBRA rights which
                                    shall continue to the extent provided
                                    thereunder, (ii) Base Salary as provided in
                                    Section 9(b), (iii) insurance as provided in
                                    Section 9(b) and (iv) rights under any stock
                                    options the Employee may have been granted.



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         10.               Arbitration. Any controversy or claim arising out of
                           or relating to this Agreement, or any breach or
                           termination thereof, shall be settled by arbitration
                           in New Jersey, in accordance with the laws of the
                           State of New Jersey and the then current rules of the
                           American Arbitration Association or any successor
                           thereto. Within ten (10) days after a request for
                           arbitration by one party to the other, the Company
                           and the Employee shall each select one arbitrator.
                           Within ten (10) days after the second of such
                           arbitrators has been selected, the two arbitrators
                           thereby selected shall choose a third arbitrator who
                           shall be the Chairman of the panel. If the first two
                           arbitrators selected cannot agree upon a third
                           arbitrator, the American Arbitration Association
                           shall name the third arbitrator. The arbitrators may
                           grant injunctions or other relief in such dispute or
                           controversy. In the arbitration, the parties shall be
                           entitled to pre-hearing discovery. The decision of
                           the arbitrators shall be final, conclusive and
                           binding on the parties to the arbitration. In
                           connection with such arbitration and the enforcement
                           of any award rendered as a result thereof, the
                           parties hereto irrevocably consent to the personal
                           jurisdiction of the federal and state courts located
                           in New Jersey, and further consent that any process
                           or notice of motion or other application to the said
                           Courts or Judges thereof may be served inside or
                           outside the State of New Jersey by registered mail or
                           personal service, provided a time period of at least
                           twenty (20) days for appearance is allowed. The
                           Company shall not be required to seek injunctive
                           relief from the arbitrators but may seek such
                           injunctive relief in a court proceeding. This Section
                           6 shall survive the termination (by expiration or
                           otherwise) of this Agreement.

         11.               Modification. This Agreement sets forth the entire
                           understanding of the parties with respect to the
                           subject matter hereof, supersedes all existing
                           agreements between them concerning such subject
                           matter, and may be modified only by a written
                           instrument duly executed by each party.

         12.               Notices. Any notice or communication to be given
                           hereunder by any party to the other shall be in
                           writing and shall be deemed to have been given when
                           personally delivered or transmitted by facsimile, or
                           three (3) days after the date sent by registered or
                           certified mail, postage prepaid, as follows:



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                           (a)      if to the Company, addressed to it at:

                                    210 Sylvan Avenue
                                    Englewood Cliffs, NJ  07632
                                    Attention: President

                           with copies to:

                                    Lowenstein Sandler P.C.
                                    65 Livingston Avenue
                                    Roseland, NJ  07068
                                    Attn: John D. Schupper, Esq.

                           (b)      If to the Employee, addressed to him at:

                                    20 Renshaw Drive
                                    Montville, NJ  07045


         or to such other persons or addressed as may be designated in writing
         by the party to receive such notice.

         13.               Waiver. Any waiver by either party of a breach of any
                           provision of this Agreement shall not operate as or
                           be construed to be a waiver of any other breach of
                           such provision or of any breach of any other
                           provision of this Agreement. The failure of a party
                           to insist upon strict adherence to any term of this
                           Agreement on one or more occasions shall not be
                           considered a waiver or deprive that party of the
                           right thereafter to insist upon strict adherence to
                           that term or any other term of this Agreement. Any
                           waiver must be in writing.

         14.               Assignment. The Employee's rights and obligations
                           under this Agreement shall not be transferable by
                           assignment or otherwise. The Company may assign its
                           rights and obligations hereunder to any of its
                           subsidiaries or affiliates. The Company will provide
                           notice of such assignment to the Employee.

         15.               Successors and Assigns. The provisions of this
                           Agreement shall be binding upon and inure of the
                           benefit of the Employee and his heirs and personal
                           representatives, and shall be binding upon and inure
                           to the benefit of the Company and its successors and
                           assigns.

         16.               Headings. The headings in this Agreement are solely
                           for the convenience of reference and shall be given
                           no effect in the construction or interpretation of
                           this Agreement.




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         17.               Injunctive Relief. As it would be very difficult to
                           measure the damages, which would result to the
                           Company from a breach of any of the covenants
                           contained in Section 3, 4 or 5 of this Agreement, in
                           the event of such a breach the Company shall have the
                           right to have such covenants specifically enforced by
                           a court of competent jurisdiction. Employee hereby
                           recognizes and acknowledges that irreparable injury
                           or damage shall result to the business of the Company
                           in the event of a breach or threatened breach by
                           Employee of the terms and provisions of Section 3, 4
                           or 5. Therefore, Employee agrees that the Company
                           shall be entitled to an injunction-restraining
                           Employee from engaging in any activity constituting
                           such breach or threatened breach. Nothing contained
                           herein shall be construed as prohibiting the Company
                           from pursuing any other remedies available to the
                           Company at law or in equity for such breach or
                           threatened breach, including, but not limited to,
                           recovery of damages from Employee and, if Employee is
                           still employed by the Company, terminating the
                           employment of Employee in accordance with the terms
                           and provisions hereof.

         18.               Jurisdiction. The validity and interpretation of this
                           Agreement shall be construed in accordance with and
                           be governed by the laws of the State of New Jersey.

         19.               Attorney's Fees. If a legal action or other
                           proceeding is brought for enforcement of this
                           Agreement because of an alleged dispute, breach,
                           default, or misrepresentation in connection with any
                           of the provisions of this Agreement, the successful
                           or prevailing party shall be entitled to recover
                           reasonable attorney's fees and cost incurred, in
                           addition to any other relief to which they may be
                           entitled.

         20.               Severability. The provisions of this Agreement are
                           severable and should any provision hereof be void,
                           voidable or unenforceable under any applicable law,
                           such void, voidable or unenforceable provision shall
                           not affect or invalidate any other provision of this
                           Agreement, which shall continue to govern the
                           relative rights and duties of the parties as though
                           the void, voidable or unenforceable provision were
                           not a part hereof.

         21.               Survival. All warranties, representations,
                           indemnities, covenants and other agreements of the
                           parties hereto shall survive the execution, delivery
                           and termination of this Agreement and shall,
                           notwithstanding the execution, delivery and
                           termination of this Agreement, continue in full force
                           and effect.



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         22.               Acknowledgement. The Employee specifically
                           acknowledges that: the Employee has read and
                           understands all of the terms of this Agreement; in
                           executing this Agreement, the Employee does not rely
                           on any inducements, agreements, promises or
                           representations of the Company or any agent of the
                           Company, other than the terms and conditions
                           specifically set forth in this Agreement; the
                           Employee has had an opportunity to consult with
                           independent counsel with respect to the execution of
                           this Agreement; and that the Employee has made such
                           investigation of the facts pertaining to this
                           Agreement and of all the matters pertaining hereto as
                           he deems necessary.


                  IN WITNESS WHEREOF, the Company and the Employee have executed
                  this Agreement on the day and year first above written.


                                                  ASTA FUNDING, INC.


                                                  By:___________________________
                                                     Gary Stern, President & CEO


                                                  ______________________________
                                                     Mitchell Herman