<PAGE>
                                                                   Exhibit 10.42


                        AMENDMENT NO. 1 TO INTERCREDITOR
                        --------------------------------
                                    AGREEMENT
                                    ---------

     AMENDMENT NO. 1 TO INTERCREDITOR AGREEMENT dated as of June 29, 2001 (this
"Amendment"), by and among (i) Fleet National Bank (f/k/a Fleet Bank, National
 ---------
Association) ("Fleet"), acting in its capacity as agent (in such capacity, the
"Bank Agent") for and on behalf of the various financial institutions
(collectively, the "Banks") which are, or may from time to time hereafter
become, parties to the Loan Agreement (as defined in the Intercreditor
Agreement), (ii) the Banks, (iii) the Senior Noteholders (as defined in the
Intercreditor Agreement), (iv) Fleet, acting as collateral agent for the Senior
Noteholders (the "Senior Note Collateral Agent") and (v) Fleet, acting in its
individual capacity and in its capacity as intercreditor collateral agent for
the Senior Creditors (together with its successors and assigns, the "Collateral
Agent").

     WHEREAS, the Bank Agent, the Banks, the Senior Noteholders, the Senior Note
Collateral Agent and the Collateral Agent are parties to an Intercreditor
Agreement dated as of June 1, 1999 (as amended and in effect from time to time,
the "Intercreditor Agreement", capitalized terms defined therein having the same
     -----------------------
meanings herein as therein), pursuant to which the Banks and the Senior
Noteholders have made certain arrangements with respect to the collateral
granted to the Banks and the Senior Noteholders by Medallion Funding Corp. (the
"Borrower"); and
 --------

     WHEREAS, the Banks are amending the Loan Agreement to delete the Minimum
Asset Coverage test therein, and the Bank Agent, the Banks, the Senior
Noteholders, the Senior Note Collateral Agent and the Collateral Agent have
agreed to amend the Intercreditor Agreement to delete the Minimum Asset Coverage
test and as further set forth herein;

     NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Intercreditor Agreement as follows:

     1.  Amendment to Section 2 of the Intercreditor Agreement. Section 2 of the
         -----------------------------------------------------
Intercreditor Agreement is hereby amended by deleting the third paragraph of
Section 2 in its entirety and substituting in lieu thereof the following new
text:

         "The Banks agree that they shall not, without prior notice to the
     Senior Noteholders and without the prior written consent of the Required
     Noteholders, amend or revise the Loan Agreement in any manner that would
     (i) permit the Borrowing Base (as defined in the Loan Agreement as in
     effect on June 29, 2001) to exceed the aggregate unpaid balance of all
     Senior Debt (as defined in the Loan Agreement as in effect on June 29,
     2001) at such time, (ii) modify any required payment dates so as to cause
     the maturity date of the Loan Agreement to occur earlier, or (iii) modify
     Section 2.5(e) of the Loan Agreement. The Noteholders agree

<PAGE>

                                      -2-

          that they shall not, without prior written notice to the Senior
          Creditors and without the prior written consent of the Required Banks,
          amend or revise any Note Purchase Agreements in any manner that would
          increase the principal amount of or the rate of interest on, the
          Senior Notes, increase the Make-Whole Amount, increase the dollar
          limitation set forth in Section 10.2 of the Note Purchase Agreements,
          decrease the ratio set forth in Section 10.3 or 10.14 of the Note
          Purchase Agreements, increase the ratio set forth in Sections 10.4,
          10.5 or 10.15 of the Note Purchase Agreements, modify the definition
          of "Bank Debt Prepayment" in, or Section 8.8 or 10.13 of, the Note
          Purchase Agreements or modify any required payment dates so as to
          reduce the average life of the Senior Notes."

          2. Amendment to Section 5 of the Intercreditor Agreement. Section 5(a)
             -----------------------------------------------------
of the Intercreditor Agreement is hereby amended by deleting the first sentence
of Section 5(a) in its entirety and substituting in lieu thereof the following
new text:

             "Upon (w) the receipt of any proceeds or awards arising from any
          condemnation or eminent domain proceedings concerning the Collateral,
          (x) the receipt of any insurance proceeds arising from damage to the
          Collateral by fire or any other casualty which are not used for
          restoration of the Collateral in accordance with the terms of the
          Security Document governing same, (y) the receipt of any proceeds
          arising from any asset sale, disposition or transfer, the sale or
          issuance of any indebtedness, or the sale or issuance of any capital
          stock or other equity interests, or (z) the exercise of any rights and
          remedies by the Collateral Agent under the Security Documents, any and
          all proceeds from the sale, foreclosure or other disposition of
          Collateral pursuant thereto shall, promptly following their receipt by
          the Collateral Agent, be applied and distributed by the Collateral
          Agent as follows:"

          3. Representations and Warranties.
             ------------------------------

             (a)  Neither the Collateral Agent, the Bank Agent, the Senior Note
          Collateral Agent nor any Senior Creditor makes any representation or
          warranty to any other party hereto with respect to the effectiveness,
          enforceability, validity or due execution of the Security Documents or
          as to any of the Collateral.

             (b)  Each Senior Creditor represents, warrants and covenants that
          it has not and will not have or accept any security, collateral or
          other credit enhancement from the Borrower or any subsidiary or
          affiliate thereof with respect to any of the Senior Obligations
          without making adequate provision to cause such security, collateral
          or credit enhancement to be subject to the terms and provisions of the
          Intercreditor Agreement.

          4. Effectiveness. This Amendment shall become effective as of the date
             -------------
first written above (the "Effective Date"), upon the satisfaction of each of the


<PAGE>

                                      -3-

following conditions, in each case in a manner satisfactory in form and
substance to the Collateral Agent:

      (a) This Amendment shall have been duly executed and delivered by each of
the Bank Agent, the Banks, the Senior Noteholders, the Senior Note Collateral
Agent and the Collateral Agent and shall be in full force and effect.

      (b) The Collateral Agent shall have received evidence of the effectiveness
of an amendment of the Funding Agreement, in the form attached hereto as Exhibit
A.

      (c) Bingham Dana LLP shall have received payment of all fees and expenses
outstanding as of the date hereof, including, but not limited to, fees and
expenses in the connection with the preparation of this Amendment and ancillary
documentation.

      (d) The Collateral Agent shall have received such other items, documents,
agreements or actions as the Collateral Agent may reasonably request in order to
effectuate the transactions contemplated hereby.

     5.   Miscellaneous Provisions.
          ------------------------

     (a)  Each of the Senior Creditors hereby ratifies and confirms all of its
obligations under the Intercreditor Agreement, as amended hereby. Except as
expressly amended hereby, the Intercreditor Agreement shall continue in full
force and effect. This Amendment and the Intercreditor Agreement shall hereafter
be read and construed together as a single document, and all references to the
Intercreditor Agreement in the Intercreditor Agreement or any agreement or
instrument related to the Intercreditor Agreement shall hereafter refer to the
Intercreditor Agreement as amended by this Amendment.

     (b)  Without limiting the expense reimbursement requirements set forth in
Section 10.6 of the Loan Agreement, the Borrower agrees to pay on demand all
costs and expenses, including reasonable attorneys' fees, of the Collateral
Agent incurred in connection with this Amendment.

     (c)  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS).

     (d)  This Amendment may be executed in any number of counterparts, and all
such counterparts shall together constitute but one instrument. In making proof
of this Amendment it shall not be necessary to produce or account for more than
one counterpart signed by each party hereto by and against which enforcement
hereof is sought.

<PAGE>

     IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned
has caused this Amendment to be executed on its behalf by its officer thereunto
duly authorized, as of the date first above written.


                                  FLEET NATIONAL BANK, (f/k/a Fleet Bank, N.A.),
                                  as Collateral Agent, Bank Agent and a Bank


                                  By /s/ Kevin J. Foley
                                     ------------------
                                     Name:   Kevin J. Foley
                                     Title:  Sr VP


                                  HSBC BANK USA


                                  By: /s/ Bruce Wicks
                                      ---------------
                                      Name:  Bruce Wicks
                                      Title: Vice President


                                  THE BANK OF NEW YORK


                                  By: /s/ Gordon Smith
                                      ----------------
                                      Name:   Gordon Smith
                                      Title:  Vice President


                                  THE CHASE MANHATTAN BANK


                                  By: /s/ Carol A. Kornbluth
                                      ----------------------
                                      Name:   Carol A. Kornbluth
                                      Title:  Vice President

<PAGE>

                                  ISRAEL DISCOUNT BANK OF NEW YORK


                                  By: /s/ Robert J. Fainelli
                                      ----------------------
                                      Name:  Robert J. Fainelli
                                      Title: First Vice President


                                  By: /s/ Howard Weinberg
                                      -------------------
                                      Name:   Howard Weinberg
                                      Title:  Senior Vice President


                                  EUROPEAN AMERICAN BANK

                                  By: /s/ George L. Stirling
                                      ----------------------
                                  Name:   George L. Stirling
                                  Title:  V.P.


                                  BANK LEUMI


                                  By: /s/ Paul Tine       /s/ John Koenigsberg
                                      -------------       --------------------
                                  Name:  Paul Tine        John Koenigsberg
                                  Title: VP               First Vice President


                                  THE BANK OF TOKYO-MITSUBISHI TRUST COMPANY


                                  By: /s/ Jeffrey Millar
                                      ------------------
                                  Name:   J. Millar
                                  Title:  Vice President


                                  HARRIS TRUST AND SAVINGS BANK


                                  By: /s/ Michael S. Cameli
                                      ---------------------
                                  Name:    Michael S. Cameli
                                  Title:   V. P.




<PAGE>

                                   THE TRAVELERS INSURANCE COMPANY


                                   By: /s/ A William Carnduff
                                       ----------------------
                                       Name:   A. William Carnduff
                                       Title:  Second Vice President


                                   FIRST CITICORP LIFE INSURANCE COMPANY
                                   BY: TRAVELERS ASSET MANAGEMENT INTERNATIONAL
                                   COMPANY LLC


                                   By: /s/ A William Carnduff
                                       ----------------------
                                       Name:  A. William Carnduff
                                       Title: Second Vice President


                                   CITICORP LIFE INSURANCE COMPANY
                                   BY: TRAVELERS ASSET MANAGEMENT INTERNATIONAL
                                   COMPANY LLC


                                   By: /s/ A William Carnduff
                                       ----------------------
                                       Name:  A. William Carnduff
                                       Title: Second Vice President


                                   UNITED OF OMAHA LIFE INSURANCE COMPANY


                                   By: /s/ Edwin H. Garrison, Jr.
                                       --------------------------
                                       Name:  Edwin H. Garrison, Jr.
                                       Title: First Vice President


                                   COMPANION LIFE INSURANCE COMPANY


                                   By: /s/ Edwin H. Garrison, Jr.
                                       --------------------------
                                       Name:  Edwin H. Garrison, Jr.
                                       Title: Assistant Treasurer





<PAGE>


ACKNOWLEDGED AND AGREED:
------------------------

MEDALLION FUNDING CORP.


By: /s/ Alvin Murstein
    ------------------
    Name:  Alvin Murstein
    Title: President


By: /s/ James Jack
    --------------
    Name:  James J. Jack
    Title: Executive Vice President &
           Chief Financial Officer