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                              EMPLOYMENT AGREEMENT

         AGREEMENT, dated as of the 1st day of October, 1998 by and between ASTA
FUNDING, INC., a Delaware corporation, with offices at 210 Sylvan Ave.,
Englewood Cliffs, NJ 07632 (the "Company") and GARY STERN, an individual
residing at 1252 Lyle Terrace, Fair Lawn, NJ 07410 ( 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
President and Chief Executive Officer 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 President and Chief Executive Officer, subject
at all times to the control and direction of the Board of Directors of the
Company, and shall perform such services as typically are provided by the
President and Chief Executive Officer of a corporation and such other services
consistent therewith as shall be assigned to him from time to time by the Board
of Directors of the Company.

            (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 Executive 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.





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            (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 $151,250 payable in accordance with the Company's
customary payment policies and periods. In the sole discretion of the Board of
Directors, the Employee's annual Base Salary may be increased by up to 10% of
the amount of his then current salary.

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

            (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
shall obtain and maintain a term life insurance policy in the amount of
$1,000,000 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 (iv),
shall provide to the Employee a leased luxury automobile along with automobile
insurance. Employee shall use such automobile principally for business purposes.

            (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 and dealers 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 







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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 eighteen (18) 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.

            (b) The term "Participate In" shall mean: "directly or indirectly,
for his own benefit or for, or through any other person, firm, or corporation,
own, manage, operate, control, 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, consultant, agent,
independent contractor, 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, dealers which originate loans purchased by the Company
("Dealers") 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



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extent, duration, geographical scope, or other provisions hereof, and in its
reduced from such restriction shall then be enforceable in the manner
contemplated hereby.

         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, vendors
or Dealers shall not be published, disclosed, or made accessible by him to any
other person, firm or corporation either during or after the Employment Period
or used by him except 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.

         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





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of this Agreement and shall continue for a term ending on September 30, 2001 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 of 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 90 consecutive days or for at least 120 days in any consecutive
180 day period.

            (b) Cause

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

                (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







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                (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
Company shall until September 30, 2001 (i) pay the Employee's his Base Salary
and (ii) maintain the term life insurance policy provided in Section 2(d)(i)
hereof.

            (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.

         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





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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:

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

                  210 Sylvan Avenue
                  Englewood Cliffs, NJ  07632
                  Attention: Chairman

            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:

                  1252 Lyle Terrace
                  Fair Lawn, NJ 07410


         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.






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         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.

         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






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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.

         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: /s/ Gary Stern
                                                         -----------------------
                                                         Gary Stern, President

                                                    /s/ Mitchell Herman
                                                        ------------------------
                                                         Mitchell Herman
                                                         Chief Financial Officer