Document:

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                                  Exhibit 10.13

Amended Loan and Security Agreement dated January 28, 2003, between the Company
and Israel Discount Bank of NY.

                           SECOND AMENDED AND RESTATED
                           LOAN AND SECURITY AGREEMENT

         THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") is executed and entered into as of January 28, 2003 by and among
ASTA FUNDING ACQUISITION II, LLC, a Delaware limited liability company and
PALISADES COLLECTION, L.L.C., a Delaware limited liability company (together,
"Borrower"), ASTA FUNDING, INC., a Delaware corporation ("Asta Funding") and
ISRAEL DISCOUNT BANK OF NEW YORK, a New York banking corporation ("Lender").

                                    RECITALS

                  A. The Borrower, Asta Funding and Lender are parties to an
Amended and Restated Loan and Security Agreement dated as of November 15, 2001
(the "Original Restated Agreement") pursuant to which Lender established a
$20,000,000 discretionary Line of Credit (the "Original Line of Credit") for the
purpose of financing the acquisition of portfolios of consumer loans and/or
receivables, which Original Line of Credit was guaranteed by the Original
Guarantors and secured by certain assets of the Borrower and the Original
Guarantors. As of the date of this Agreement the outstanding principal
obligations of the Borrower under the Original Line of Credit are $0.00 (the
"Existing Debt").

                  B. The Borrower and Asta Funding have requested that Lender
amend and restate the Original Restated Agreement and Original Line of Credit so
as to have available a revolving line of credit on the terms and conditions set
forth herein, in an amount not to exceed $25,000,000 at any one time
outstanding, but in no event shall the outstanding Advances (including, any
Advance then being requested) exceed the then effective Borrowing Base (the "New
Line of Credit"). This Agreement is an amendment and restatement of the terms
and conditions of the lending relationship between the parties as previously set
forth in the Original Restated Agreement and any amendments or supplements
thereto, and is not a new loan agreement, and all of the terms and conditions of
the Original Restated Agreement are herein restated. The execution and delivery
of this Agreement and the Loan Documents shall not in any circumstances be
deemed to have terminated, released, extinguished or discharged the Existing
Debt, the Obligations of any Existing Guarantor or the Collateral therefor, all
of which Existing Debt, Obligations and Collateral shall continue under and be
governed by this Agreement and the Loan Documents. To the extent of any
inconsistencies, the terms of this Agreement shall control.

                  C. Lender has agreed to establish the New Line of Credit for
the purpose of making Advances to permit the Borrower, Asta Funding and any
Affiliate to acquire Portfolios on the terms and conditions of this Agreement,
as amended from time to time.

                  D. These Recitals are incorporated and made a part of this
Agreement.

                  NOW THEREFORE, in consideration of Lender's financing of the
acquisition of Portfolios, and in further consideration of the inducement to
Lender to make payments to the Sellers, make Advances to, and to otherwise
extend credit to the Borrower, the parties hereto agree as follows:

Section 1. Definitions: For purposes of this Agreement, the following terms
shall mean:

                  All terms used in this Agreement which are defined in Article
1 or Article 9 of the Uniform Commercial Code ("UCC"), as each is amended from
time to time, shall have the meanings given therein, unless otherwise defined in
this Agreement and all references to the plural herein shall also mean the
singular.

1.1.     "Accounts" means all present and future accounts, contract rights,
         general intangibles, payment intangibles, promissory notes, supporting
         obligations, chattel paper, documents and instruments, as such terms
         are defined in the UCC, including, without limitation, all obligations
         for the payment of money arising out of any Consumer Loan.
1.2.     "Account Debtor" means each person, firm, or entity in any way
         obligated to make payment of any Account.
1.3.     "Advance" or "Advances" means individually a loan and collectively the
         loans made by Lender to Borrower pursuant to this Agreement.
1.4.     "Advance Request" means each written request by Borrower for an Advance
         submitted with the information and documents required by Section 2.3
         hereof.
1.5.     "Affiliate" means an entity that is wholly owned by Asta Funding and is
         engaged in the business of acquiring and/or managing Portfolios and
         executes and delivers to Lender an Affiliate Guaranty, an Affiliate
         Security Agreement and an Affiliate Confirmation.
1.6.     "Affiliate Confirmation" means the agreement executed by each Affiliate
         in form of Exhibit C annexed hereto.
1.7.     "Affiliate Guaranty" means a guaranty, in form acceptable to Lender at
         the time of execution, executed by an Affiliate of all of the
         Obligations.
1.8.     "Affiliate Security Agreement" means a security agreement, in form
         acceptable to Lender, at the time of execution, executed by an
         Affiliate granting to Lender a security interest in and lien on its
         Collateral.
1.9.     "Aging Report" means a report in detail satisfactory to Lender with
         respect to the outstanding Accounts as of the last day of each month,
         setting forth the name of each Account Debtor, the original amount and
         date of each Account and date and amount of each Payment with respect
         to each Account.
1.10.    "Asta I" means Asta Funding Acquisition I, LLC.
1.11.    "Asta II" means Asta Funding Acquisition II, LLC.
1.12.    "Asta Funding" means Asta Funding, Inc.
1.13.    "Auto Contract" means any agreement or contract or other evidence of
         debt executed by an Account Debtor in connection with an Auto Loan and
         any amendments thereto.

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1.14.    "Auto Loan" means all automobile loans or leases presently and
         hereafter owned, set forth in a written report or in computer discs,
         from time to time, delivered to Lender, which computer discs shall be
         in the current format or any other format acceptable to Lender,
         together with each Auto Contract, chattel paper, instrument, document,
         general intangible, guarantee and all collateral security held with
         respect to such loans.
1.15.    "Average Collections" shall mean an amount equal to the actual
         Collections received with respect to an Eligible Portfolio in the three
         (3) full calendar months immediately preceding the date of computation
         or determination multiplied by fifteen (15).
1.16.    "Banking Day" means any day on which Lender is open for business.
1.17.    "Books and Records" means all records, in any format whatsoever and the
         computer software, programs and access codes, relating to each Consumer
         Loan and the Collateral.
1.18.    "Borrower" means Asta II and Palisades.
1.19.    "Borrowing Base" shall mean an amount not to exceed fifty (50%) percent
         of the Collateral Value of each Eligible Portfolio, on a combined
         basis, as of the date of determination.
1.20.    "Borrowing Base Certificate" means the certificate in the form of
         Exhibit A annexed hereto, completed and signed by an officer of
         Borrower and delivered to Lender with each Advance Request and not
         later than fifteen (15) days after the last day of each month, with
         respect to the prior month.
1.21.    "Bulk Sale" shall mean the sale in whole or in part of the Accounts
         comprising a Portfolio.
1.22.    "Chattel Paper" shall have the meaning given such term in the UCC.
1.23.    "Closing Date" means the date on which all of the conditions precedent
         set forth in Section 11 hereof have been complied with to the sole
         satisfaction of Lender.
1.24.    "Collateral" means (a) each Debtor's (other than Asta Funding's)
         present and future Accounts, Chattel Paper, Deposit Accounts, Payment
         Intangibles and Collections, together with all of each Debtor's
         respective right, title and interest in and to all (i) Consumer Loans,
         (ii) all rights, claims, action and/or causes of action under any of
         the Consumer Loans, (iii) all Books and Records, (iv) all lawsuits
         (including, commercial tort claims) and judgments relating to each
         Consumer Loan, (v) all Support Obligations, guarantees and security
         with respect to each Consumer Loan, and (vi) all cash and non-cash
         proceeds of all of the foregoing, including insurance proceeds and the
         funds, if any, in the Operating Account and the Lockbox Account; and
         (b) all of Asta Funding's Auto Loans, Auto Contracts and the Accounts,
         Collections rights, claims, actions and/or causes of action, Books and
         Records, lawsuits, judgments and Support Obligations relating thereto
         that have been granted to Lender pursuant to the Original Restated
         Agreement.
1.25.    "Collateral Value" shall mean, as the date of determination, an amount
         equal to the lesser of (i) the aggregate of the Eligible Accounts, in
         each Eligible Portfolio, and (ii) the Average Collections in each
         Eligible Portfolio, but in no event more than the Portfolio Cost for
         each such Eligible Portfolio.
1.26.    "Collection Report" means a report in detail satisfactory to Lender as
         to all Collections received during each month and the Account or
         Consumer Loan to which it applies.
1.27.    "Collections" mean all Payments actually received and collected by or
         on behalf of the Borrower, any Debtor or any Servicing Agent with
         respect to any Consumer Loan, which is included in the Collateral and
         is remitted to the Lender as provided in this Agreement.
1.28.    "Consumer Loans" means all Credit Card Receivables, Auto Loans and any
         other type of consumer loan acceptable to Lender now or hereafter owned
         or held by the Borrower or any Debtor.
1.29.    "Credit Card Receivables" means each of the performing and
         non-performing credit card receivables and/or loans presently owned,
         and as, from time to time, fully set forth in a computer disc delivered
         to Lender, which shall be in a format acceptable to the Lender, whether
         such is deemed to consist of accounts or general intangibles under the
         UCC, together with any chattel paper, instrument, document, general
         intangible, guarantee and other collateral security held by Borrower
         with respect to such receivables and/or loans, together with the
         proceeds thereof.
1.30.    "Debtors" means all or any of Borrower and the Guarantors, but in no
         event a Non-Debtor Affiliate.
1.31.    "Default Rate" shall mean at the date of the occurrence of an Event of
         Default the then current Prime Rate plus five (5%) percent.
1.32.    "Deposit Account" shall have the meaning given such term in the UCC.
1.33.    "Deposit Control Agreement" shall mean the agreement in the form of
         Exhibit E annexed hereto.
1.34.    "EBITDA" shall mean, for any period, Asta Funding's Net Income, plus
         interest expenses (exclusive of interest on Non-Recourse Loans), plus
         taxes, plus depreciation, all as determined in accordance with GAAP and
         set forth in the Financial Statements.
1.35.    "Eligible Accounts" means an Account arising out of a Consumer Loan, as
         to which Lender has been granted a first and prior perfected security
         interest by a Debtor and with respect to which the Account Debtor has
         made a Payment within the last ninety (90) days and which is presently
         owned by a Debtor and is part of an Eligible Portfolio.
1.36.    "Eligible Portfolio" shall mean a Portfolio as to which a Debtor has
         acquired the legal right, title and interest to the Consumer Loans
         comprising each such Portfolio and the Collections and Accounts
         relating thereto, which is not a Rejected Portfolio. Each Eligible
         Portfolio shall be designated in each Debtor's Books and Records by a
         code name acceptable to the Lender, which code names shall be set forth
         in each Borrowing Base Certificate.
1.37.    "Events of Default" shall have the meaning set forth in Section 12
         hereof.
1.38.    "Examination Fee" means a field examination fee of Lender not to exceed
         $750.00 per each day of examination, plus Lender's out-of-pocket
         expenses, including, travel, meals and listed expenses, provided that
         so long as no Event of Default is continuing, Borrower shall not be
         required to pay for more than one field examination in any calendar
         quarter prior to an Event of Default.
1.39.    "Financial Statements" mean the financial statements to be furnished
         Lender pursuant to Section 9(v) hereof.
1.40.    "GAAP" means generally accepted accounting principles then in effect
         and consistent with those applied in the preparation of the Financial
         Statements to be delivered pursuant to Section 9(v) hereof.
1.41.    "Grid Note" means the note executed by Borrower in the form of Exhibit
         B annexed hereto, as amended, renewed or replaced from time to time.
1.42.    "Guarantees" means the guaranty of all of the Obligations executed by
         each Guarantor, including each Affiliate Guaranty, as each is amended
         from time to time.
1.43.    "Guarantors" shall mean Asta Funding, Asta I, E.R., Palisades I,
         Palisades II and each Affiliate, executing an Affiliate Guaranty, after
         the date hereof, but in no event a Non-Affiliate.
1.44.    "Indemnified Party" means Lender and each of its officers, directors,
         representatives and employees.

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1.45.    "Interest Coverage Ratio" shall mean the ratio of EBIDTA to interest
         expense (exclusive of interest on Non-Recourse Loans), at the date of
         determination.
1.46.    "Lender Fees" means all Line Fees, Unused Line Fees, Portfolio
         Examination Fees and Examination Fees from time to time payable to
         Lender under this Agreement.
1.47.    "Leverage Ratio" shall mean the ratio of Total Liabilities to Tangible
         Net Worth at the date of determination.
1.48.    "Line Fee" shall mean the sum of $62,500, which shall be payable in
         full to the Lender on the Closing Date, which shall be non-refundable
         and deemed earned as of the date hereof.
1.49.    "Loan Documents" means this Agreement, the Grid Note, the Guarantees,
         the Security Agreements and each of the other documents required to be
         executed and delivered to Lender pursuant to this Agreement.
1.50.    "Lockbox Account" means the segregated account to be established by
         Debtors after the occurrence and during the continuance of an Event of
         Default, into which the Account Debtors shall be instructed to send
         Payments and as to which account none of the Debtors shall have any
         control.
1.51.    "New Line of Credit" shall have the meaning given such term in Recital
         B above.
1.52.    "Non-Debtor Affiliate" means an entity that is wholly owned by Asta
         Funding or another Debtor which is not required by the Lender to
         execute and deliver an Affiliate Guaranty, an Affiliate Security
         Agreement and an Affiliate Confirmation pursuant to Section 2.3(d) of
         this Agreement.
1.53.    "Non-Recourse Loan" shall mean a loan or other extension of credit made
         by anyone other than the Lender to a Non-Debtor Affiliate for the
         purpose of acquiring a Rejected Portfolio, provided, that Asta Funding
         shall comply with Section 2.4(b) hereof.
1.54.    "Obligations" means all Advances and any and all loans, indebtedness,
         liabilities and obligations of any kind owing by Borrower to Lender and
         any of Lender's divisions, subsidiaries or affiliates, however
         evidenced, whether as principal, guarantor or otherwise, arising under
         this Agreement, or any supplement hereto, or otherwise, whether now
         existing or hereafter arising, whether direct or indirect, absolute or
         contingent, joint or several, due or not due, primary or secondary,
         liquidated or unliquidated, secured or unsecured, original, renewed or
         extended, and whether arising directly or acquired from others and
         including, without limitation, all Existing Debt, Lender Fees, charges,
         commissions, interest, expenses, costs and attorneys' fees chargeable
         to Borrower in connection with all of the foregoing and as to which
         Lender is entitled under any Loan Document.
1.55.    "Obligor" means any person, firm or entity, which has guaranteed or is
         liable for the repayment of any Account Debtor's obligation.
1.56.    "Operating Account" means each account currently maintained by any
         Debtor with Lender.
1.57.    "Original Guarantors" shall mean Asta Funding, Asta I, E.R. and
         Palisades I.
1.58.    "Palisades" means Palisades Collection, L.L.C.
1.59.    "Palisades I" means Palisades Acquisition I, LLC.
1.60.    "Palisades II" means Palisades Acquisition II, LLC
1.61.    "Payment Intangibles" shall have the meaning given such term in the
         UCC.
1.62.    "Payments" means the payments of whatsoever nature made by each Account
         Debtor with respect to the Accounts relating to such Account Debtor
         and/or the payments made by any Obligor with respect to any Account.
1.63.    "Permitted Debt" means the indebtedness (i) for borrowed monies of
         Borrower and the Guarantors set forth in Schedule A annexed hereto, but
         not any increase thereof, (ii) with respect to any Non-Recourse Loan to
         finance a Rejected Portfolio, (iii) of one Debtor to another Debtor,
         including the indebtedness set forth in Schedule A-1 annexed hereto,
         but not any increase thereof, (iv) the indebtedness permitted by
         Section 10(l) hereof, and (v) for the purchase or lease of equipment
         for use in the ordinary course of business of a Debtor.
1.64.    "Permitted Liens" means the security interests (i) of the Debtors in
         favor of the secured parties listed in Schedule B annexed hereto, (ii)
         in a Rejected Portfolio financed by another lender and (iii) granted by
         a Debtor to secure Permitted Debt.
1.65.    "Portfolio" means each group or pool of Consumer Accounts acquired by
         any of the Debtors from a single Seller and/or its Affiliates in the
         same transaction, which Consumer Accounts are recorded and administered
         in the Books and Records of the Debtor acquiring same as a separate
         group or pool of Consumer Accounts.
1.66.    "Portfolio Acquisition Cost" means the actual or final amount to be
         paid to the Seller of a Portfolio pursuant to the terms of the
         applicable Portfolio Acquisition Documents.
1.67.    "Portfolio Acquisition Documents" means the purchase and other
         agreements between a Debtor and the Seller of each Portfolio, as each
         may be amended.
1.68.    "Portfolio Bid" means the specific amount or the maximum of a range of
         amounts, which are to be bid to acquire a Portfolio.
1.69.    "Portfolio Examination Fee" means a fee of $750 per each day as
         required in Lender's sole discretion to review, examine and report as
         to the legal and financial status of each Portfolio Proposal, together
         with Lender's actual out-of-pocket expenses, including travel, meals
         and hotel expenses.
1.70.    "Portfolio Loans" means the Consumer Loans, which comprise each
         Portfolio, as more specifically detailed in the applicable Portfolio
         Proposal.
1.71.    "Portfolio Proposal" means a written proposal presented by Borrower or
         any other Debtor with respect to a Portfolio that such party intends to
         submit to a Seller for the purchase of such Portfolio, which shall set
         forth in sufficient detail the (i) Portfolio Bid and the terms of
         payment thereof, (ii) nature of the Consumer Loans comprising the
         Portfolio, (iii) a computer disc or written report containing a
         detailed description of the Consumer Loans, (iv) name of the Seller,
         and (v) Portfolio Acquisition Documents, all of which shall be in form,
         scope and substance acceptable to Lender.
1.72.    "Prime Rate" shall have the meaning given such term in the Grid Note.
1.73.    "Rejected Portfolio" means a Portfolio as to which the Lender declines
         to make an Advance to finance its acquisition by a Debtor.
1.74.    "Reports" mean the Aging Reports and the Collection Reports, including
         the computer discs containing all of the information contained therein.
1.75.    "Security Agreements" means the security agreement executed by
         Borrower, each Debtor and each Affiliate, granting Lender a security
         interest in the Collateral owned by each party executing same, as each
         is amended from time to time.
1.76.    "Seller" means the party or parties which have agreed to sell Portfolio
         Loans to a Debtor.
1.77.    "Servicing Agent" shall mean any third-party (other than collection
         attorneys) engaged or utilized by any Debtor for the purpose of
         administrating and/or collecting Payments made by an Account Debtor
         with respect to Accounts. A list of each Servicing Agent of each
         Portfolio, together with the address, telecopier and telephone numbers
         of each such Servicing Agent and the contact person(s) thereat, shall
         be delivered to the Lender within ninety (90) days after the date
         hereof.

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1.78.    "Small Portfolio" is defined in Section 2.2(c).
1.79.    "Subordinated Debt" means any indebtedness which is subordinated in
         right of payment to the Obligations, pursuant to the terms of an
         agreement in form and scope and on terms acceptable to the Lender, in
         its sole discretion.
1.80.    "Support Obligation" shall have the meaning given such term in the UCC.
1.81.    "Tangible Net Worth" means, for any period, the assets of Asta Funding,
         all as determined by GAAP and as reported in the Financial Statements,
         which shall exclude goodwill, all intangible assets and all loans,
         advances, exchanges and other indebtedness (other than Subordinated
         Debt) owing to Asta Funding by any shareholder, officer, employee or a
         relative thereof or any Affiliate or Non-Debtor Affiliate, as the case
         may be, less Total Liabilities.
1.82.    "Termination Date" means January 31, 2004.
1.83.    "Total Liabilities" means, for any period, all liabilities of Asta
         Funding, as determined by GAAP and as reported in the Financial
         Statements, which liabilities shall include the Advances then
         outstanding, but exclude each Non-Recourse Loan.
1.84.    "Unused Line Fee" shall mean an amount equal to one-quarter of
         one-percent (0.25%) per annum of the New Line of Credit less the
         average of amount of Advances outstanding in each calendar month, which
         shall be payable on the last day of each month, in arrears.

Section 2.  New Line of Credit and Advances

                2.1 (a) Lender shall from time to time upon Lender's receipt of
an Advance Request make an Advance to Borrower, provided, that (i) no Advance
shall, if the Advance is for the purpose of the acquisition of a Portfolio,
exceed 100% of the Portfolio Acquisition Cost set forth in the Advance Request
made with respect to such Advance; (ii) the outstanding Advances after giving
effect to the Advance requested in the Advance Request do not exceed the
Borrowing Base and the New Line of Credit, then in effect; and (iii) there
exists no Event of Default or an event which with the lapse of time and/or the
giving of notice would constitute an Event of Default.

                 (b) All Advances shall be payable on the earlier of (i) the
Termination Date, or (ii) the occurrence of an Event of Default.
                 (c) Borrower hereby irrevocably authorizes Lender to record on
the schedules annexed to the Grid Note and/or a loan account established on
Lender's computerized records the date and amount of each Advance under the New
Line of Credit and each repayment thereof, which notations shall be conclusively
binding on Borrower absent manifest error.
                 (d) All Advances shall bear interest prior to an Event of
Default at the rate per annum equal to Lender's Prime Rate as from time to time
in effect and interest at the rate on and after an Event of Default at the
Default Rate, which interest shall be due and payable as provided for in the
Grid Note.
                 (e) All installments of principal, interest and Lender Fees
shall be charged to the Operating Account when due.
                 (f) Prior to the Termination Date the Borrower shall be
permitted to borrow, repay and reborrow under the New Line of Credit provided
there is no existing Event of Default and Borrower is in compliance with Section
2.1(a) above.
                 (g) The Collateral Value of each Eligible Portfolio shall be
automatically reduced by the amount of Accounts involved in a Bulk Sale with
respect to each Eligible Portfolio and the most recent Borrowing Base
Certificate shall be adjusted accordingly.
                 (h) The Borrowing Base shall be automatically increased to
reflect the purchase of any Eligible Portfolio other than a Small Portfolio.

2.2   Portfolio Proposal

                 (a) From time to time Borrower shall deliver by hand, email,
telecopier or overnight courier a Portfolio Proposal to Lender. Upon Lender's
request, in the event the Portfolio Bid is in excess of $3,000,000, Borrower
shall deliver to Lender all information and documents as Lender shall request
with respect to the Portfolio and the Portfolio Proposal and shall cause the
Seller to cooperate with Lender's examination of Seller's books and records, in
order to enable Lender to determine if it shall consider making an Advance.
                  (b) In the event Lender in its sole discretion approves a
Portfolio Proposal it shall promptly notify Borrower by telecopier and Borrower
may request an Advance pursuant to Section 2.3(a) below. Each such Portfolio
approved by Lender shall be deemed an Eligible Portfolio.
                  (c) Notwithstanding anything set forth in this Agreement,
Lender shall not be required to approve the acquisition of any Portfolio which
has a Portfolio Acquisition Cost of $3,000,000, or less ("Small Portfolio"),
provided , that (i) Borrower shall comply with the provisions of Section 2.3
with respect to any such Portfolio, and (ii) after giving effect to such Advance
Borrower is in compliance with Section 2.1(a) hereof.
                  (d) Lender agrees to keep strictly confidential, subject to
disclosure under applicable law, all information relating to any Portfolio
Proposal or possible Portfolio Proposal, including, without limitation, the fact
that a Portfolio is for sale and the terms of the proposed bid.
                  (e) Within five (5) Banking Days of its receipt of a Portfolio
Proposal, Lender shall notify Borrower in writing of Lender's acceptance or
rejection of the Portfolio.

2.3  Notice of Advances

                  (a) Each Advance Request, for the purchase of a Portfolio
(other than a Small Portfolio), shall, if the Lender requests, be accompanied by
a signed and completed Borrowing Base Certificate, to be delivered to Lender
prior to 1:00 p.m., New York City time of any Banking Day. Each Advance Request
shall be signed by any of the President, Chairman of the Board or Chief
Financial Officer of Borrower, and shall specify (i) the amount and purpose of
the requested Advance, if the Advance is not for the purchase of a Portfolio,
(ii) if the Advance is for the purchase of a Portfolio, (other than a Small
Portfolio), a description in detail approved by the Lender of the Portfolio,
(iii) if the Advance is for the purchase of a Portfolio, the name of the Seller
of the Portfolio and (iv) the amount of the Portfolio Bid, if applicable. Each
Advance Request and related documents shall be sent by telecopier to Lender at
(212) 986-4786 or by overnight courier, to the attention of Kevin Lord. Upon
Lender's request Borrower shall deliver to Lender all information and documents
as Lender shall request with respect to each Portfolio to be acquired, other
than a Small Portfolio.
                  (b) Within five (5) Banking Days after the actual receipt by
Lender of an Advance Request made for a Portfolio Proposal with a Portfolio Bid
in excess of $3,000,000, and within one (1) Banking Day after the actual receipt
by Lender of any other Advance Request made pursuant to Section 2.3(a) herein,
and provided there is no Event of Default and after giving effect to any Advance
Request and the Borrower is in compliance with the Borrowing Base, Lender shall
credit the amount of such Advance to the Borrower's Operating Account or remit
such amount by wire transfer in accordance with the Advance Request.
                  (c) Each Advance Request shall constitute a representation by
Borrower that (i) the Advance shall only be used for working capital or the
purchase of the Portfolio described in the Advance Request; (ii) the statements
contained therein are true and correct; (iii) no Event of Default has occurred;
(iv) there has been no material adverse change in the business of any Debtor;
and (v) there has been no material change in the officers of Asta Funding which
have theretofore been certified to Lender; and (vi) each Debtor is controlled by
Asta Funding or another Affiliate.

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                  (d) In the event any Advance Request relates to a Portfolio to
be acquired by an Affiliate, irrespective of the Portfolio Acquisition Cost of
such Portfolio, prior to Lender making such Advance, such Affiliate shall
execute and deliver its Affiliate Guaranty, Affiliate Security Agreement,
Affiliate Confirmation, UCC-1 Financing Statements and all such other documents
as Lender shall request, including, evidence of the good standing of such
Affiliate and UCC Searches, all in form acceptable to Lender.

2.4 Rejected Portfolios

                  (a) Lender shall not be required to advise Borrower or any
Debtor for the reason for Lender's failure to approve any Portfolio. A Rejected
Portfolio may be acquired by any Debtor in the event that such acquisition is
made pursuant to the use of its own cash or availability under the Borrowing
Base, provided, that (i) the Lender shall have a first, prior and perfected
security in such Rejected Portfolio, and (ii) such Rejected Portfolio shall be
included in the Collateral.
                  (b) A Non-Debtor Affiliate may finance the acquisition of a
Rejected Portfolio, pursuant to a Non-Recourse Loan, provided, that (i) Asta
Funding gives the Lender written notice of any proposed Non-Recourse Loan and
(ii) in such notice represents and warrants to the Lender that such Non-Recourse
Loan is not directly or indirectly guaranteed by any Debtor nor is any Debtor
signatory or party to any participation agreement, put agreement, indemnity
agreement or any other agreement which obligates any Debtor to purchase,
reimburse or in any manner whatsoever become responsible or liable for all or
any portion of such Non-Recourse Loan, provided that representations, warranties
and indemnities from a Debtor in favor of a lender as to matters that are
customarily included in a consumer portfolio loan and servicing agreement shall
not disqualify a loan from being treated as a Non-Recourse Loan.

Section 3.        Payments

3.1 (a) In addition to the payments required by this Agreement, the Borrower
shall within one (1) Banking Day pay to Lender the amount by which any
outstanding Advances exceed the Borrowing Base then in effect.
                  (b) Borrower shall be permitted from time to time to make
payment of the then outstanding Advances, in whole or in part, without payment
of any premium or penalty, provided, that all accrued and unpaid interest on the
amount then being paid is paid to Lender.

Section 4. Waiver of Right of Setoff

4.1 Borrower hereby acknowledges and agrees that the obligation of Borrower to
make the payments required to be made hereunder shall be absolute and
unconditional and shall not be subject to diminution or delay by setoff,
counterclaim, abatement or otherwise.

Section 5. Relationship of the Parties

5.1 Borrower acknowledges and agrees that the relationship between Borrower and
Lender created by this Agreement is that of debtor-creditor and not that Lender
is not a joint venturer with Borrower or any other Debtor with respect to the
acquisition of any Portfolio or otherwise, and that Borrower will make no
representations to others to the contrary.

Section 6. Grant of Security Interest

6.1 The Debtors have secured the payment by Borrower of the Obligations, each
Debtor pursuant to the terms of a Security Agreement to which it is a party
shall grant to Lender a first and prior security interest in the Collateral, and
the Collateral now or hereafter owned by each Debtor provided for in each
Debtor's Security Agreement.

6.2 Each Debtor will perform any and all steps reasonably requested by Lender to
create and maintain in Lender's favor a first and valid lien on, and security
interest in the Collateral, including, without limitation, the execution,
delivery, filing and recording of financing statements and continuation
statements, supplemental security agreements, notes, filings with federal
government offices and any other documents necessary, in the opinion of Lender
or Lender's counsel, to protect its interest in the Collateral, which liens
shall be exclusive except for those liens expressly permitted elsewhere herein,
including, without limitation, any Permitted Liens. Each Debtor shall, at
Lender's request, enter into a Deposit Control Agreement in the form of Exhibit
E annexed hereto. Lender and its designated officers are each hereby appointed
each of Debtor's attorney-in-fact to do all acts and things which Lender may
deem necessary to perfect and continue perfected the security interests provided
for in this Agreement, including, but not limited to, preparing and filing
financing statements on behalf of each Debtor.

Section 7.        Representations and Warranties of Debtors

                  To induce Lender to make Advances pursuant to this Agreement,
Borrower and Asta Funding on behalf of itself and as to each Debtor hereby
represent and warrant to Lender as follows:
                  (a) Each Debtor is a corporation duly incorporated or a
limited liability company duly organized and validly existing under the laws of
the State of Delaware and qualified to do business in the State of New Jersey.
Each Debtor has all requisite power and authority and legal right to own its
property, to carry on its business as it is now being conducted, to enter into
this Agreement and the other Loan Documents entered into by it and to perform
all of its obligations hereunder and thereunder.

                  (b) The execution and delivery by each Debtor of the Loan
Documents to which it is a party, and the performance of its obligations
thereunder, have been duly authorized by all necessary action, corporate or
otherwise, and do not and will not: (i) require any further action, consent or
approval on the part of its members or shareholders; (ii) violate any material
provision of law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect on any Debtor, or the articles of
organization or operating agreement of any Debtor; or (iii) result in any breach
of or constitute a default under any indenture or loan or credit agreement or
any other agreement, lease or instrument to which any Debtor is a party or by
which any Debtor or its properties may be bound or affected the violation of
which would have a material adverse effect on any Debtor, and none of the
Debtors is in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument, the violation of which would have a material
adverse effect on any Debtor.

<PAGE>

                  (c) The Loan Documents to which each Debtor is a party have
been duly executed and delivered by such Debtor and are legal, valid and binding
obligations of that Debtor, enforceable against that Debtor in accordance with
their respective terms.

                  (d) The financing statements as and when filed with the
Secretary of State of Delaware and/or in such other jurisdiction as Lender shall
direct will constitute valid perfected first liens against the Collateral owned
by each Debtor in favor of the Lender.

                  (e) Except as previously disclosed to Lender, there is no
material action, suit, proceeding, inquiry or investigation, at law or in
equity, or before any court, governmental instrumentality, public board or
arbitrator pending or threatened against or affecting any Debtor or any of its
properties or rights, wherein an unfavorable decision, ruling or finding would
(i) result in any material adverse change in the financial condition, business,
properties or operations of such Debtor; (ii) materially or adversely affect the
transactions evidenced by the Loan Documents; (iii) materially impair the right
of any Debtor to carry on its business substantially as now conducted; or (iv)
adversely affect the validity or enforceability of the Loan Documents.

                  (f) To the best of each Debtor's knowledge, it is in
compliance with all laws applicable to such Debtor or its properties or assets
the violation of which would result in any material adverse change in the
financial condition, business, properties or operations of such Debtor.

                  (g) The proceeds of the Advances will be used for general
corporate purposes and/or the purchase of Portfolios and none of the proceeds of
any Advance will be paid over or diverted to any member, manager, officer,
director or member of any Debtor.

                  (h) Each Debtor other than Asta Funding is wholly owned by
Asta Funding, or, as to future Debtors, by another Debtor or Asta Funding, each
Debtor has adequate capital to conduct its business, and each current Debtor
other than Asta Funding, has no subsidiaries and shall have no material assets
other than the Collateral and any Rejected Portfolio subject to compliance with
Section 2.4 hereof, any licenses and permits, the loan(s) referred to in Section
10(g) below, and any Rejected Portfolios purchased by such Debtor.

                  (i) The Collateral is free and clear of all mortgages,
pledges, liens, charges or other encumbrances, except in favor of Lender and the
Permitted Liens.

                  (j) Each Debtor has filed all federal, state and other income
or franchise tax returns which are required to be filed and have paid all taxes
due or which may become due pursuant to such returns or pursuant to any
assessment received by it.

                  (k) All timely authorizations, permits, approvals and consents
of governmental authorities which may be required in connection with the valid
execution and delivery of this Agreement and the other Loan Documents and the
carrying out or performance of any of the activities or transactions required or
contemplated hereunder or thereunder have been obtained (and remain in full
force and effect) where the failure to do so would have a material adverse
effect on any Debtor.

                  (l) All Financial Statements, Reports, information and other
financial data furnished by each Debtor to Lender in connection with this
Agreement (i) were true, correct and complete in all material respects, as of
the date thereof and (ii) present fairly the financial condition of such Debtor
at the respective dates thereof and the results of operations and changes in
financial position for the period to which they apply. Each Debtor represents
there have been no material adverse changes in the financial condition of each
Debtor since the delivery by each Debtor to Lender of its most recent Financial
Statements.

                  (m) Borrower's assets, at a fair valuation, exceed Borrower's
liabilities (including, without limitation, contingent liabilities). Borrower is
paying its debts as they become due and Borrower anticipates the continuing
ability to pay its debts as they become due. Borrower has assets sufficient to
carry on its business.

                  (n) Each Debtor is not in violation of or in default under
(nor on the Closing Date is there any waiver in effect which, if not in effect,
would result in a violation or default under) any provision of its respective
Certificate of Incorporation, Certificate of Formation or Operating Agreement,
or under any provision of any agreement, indenture, evidence of indebtedness,
loan or financing agreement, certificate, lease or other instrument to which it
is a party, or by which it is bound, or of any law, governmental order, rule or
regulation, in any such case under this subparagraph (n) so as to affect
adversely in any material manner the business, assets or financial conditions of
Asta Funding individually and the Debtors collectively.

                  (o) All statements, representations and warranties made by
each Debtor in this Agreement, any other Loan Document and any other agreement,
document, certificate or instrument previously furnished or to be furnished to
Lender under this Agreement or in connection with the Advances; (i) are and
shall be true, correct and complete in all material respects at the time they
were made and, in the case of those made prior to the Closing Date, on and as of
the Closing Date, (ii) do not and shall not contain any untrue statement of a
material fact at the time made, and (iii) do not and shall not omit to state a
material fact at the time made necessary in order to make the information
contained herein or therein not misleading or incomplete. Debtors understand
that all such statements, representations and warranties shall be deemed to have
been relied upon by Lender as a material inducement to establish the Line of
Credit.

                  (p) No person is entitled to receive from Debtor or Lender any
brokerage commission, finder's fee or similar fee or payment in connection with
the consummation of the transactions contemplated by this Agreement other than
the acquisition of a Portfolio, which shall be fully disclosed in each Portfolio
Proposal.

                  (q) Each Debtor's chief executive office and is the only
location where such Debtor keeps its Books and Records concerning its Collateral
is at 210 Sylvan Avenue, Englewood Cliffs, New Jersey 07632.

<PAGE>

                  (r) Borrower does not own any material trademarks, trade
names, patents or copyrights.

                  (s) Each Debtor warrants and represents that it has not and
will not violate any applicable federal or state law relating to unfair
collection practices in connection with any of the Consumer Loans and Accounts,
the violation of which will have a material adverse effect on any Debtor or the
Collateral. Each Debtor agrees to indemnify each Indemnified Party and to hold
each Indemnified Party harmless from and against any and all claims, demands,
losses, damages, penalties, fines, forfeitures, judgments, legal fees and other
costs, fees and expenses heretofore or hereafter incurred by each Indemnified
Party as a result of (i) any breach by a Debtor of the aforesaid warranty and
representation; or (ii) any acts and/or omissions by a Debtor resulting in any
claim, demand or assertion that Lender or any other Indemnified Party,
subsequent to the Closing Date, was in any way involved in, or had in any way
authorized, any unlawful collection practices in connection with any Consumer
Loans and Accounts. Each party agrees to notify the other within ten (10)
Banking Days of notice or knowledge of any such claim, demand or assertion. The
indemnity provisions of this Section 7(s) shall survive the repayment of the
Obligations.

                  (t) Each Debtor warrants, represents and agrees that it will
not institute any legal action in the name of Lender or continue to prosecute or
defend in the name of Lender any legal action; nor shall either Debtor
intentionally or unintentionally, through misrepresentation or nondisclosure,
mislead any person as to, or conceal from any person, the identity of each
Debtor as owner of the Consumer Loans and Accounts. NOR SHALL DEBTORS USE OR
REFER TO THE NAME ISRAEL DISCOUNT BANK OF NEW YORK OR ANY NAME DERIVED THEREFROM
OR CONFUSINGLY SIMILAR THEREWITH TO PROMOTE DEBTORS' MARKETING, ADVERTISING,
SALE OR TRANSFER OF ANY CONSUMER LOAN OR ACCOUNT OR THE COLLECTION OR MANAGEMENT
THEREOF.

                  (u) As of the date of this Agreement the outstanding amount of
the Consumer Loans of each Debtor is listed on Schedule C annexed hereto, and
the computer discs delivered to Lender with respect to same at the Closing Date
are each a true, correct and complete list thereof.

Section 8.  Survival of Representations and Warranties

                  The representations and warranties set forth in Section 7
above, shall survive the execution of this Agreement, the Closing Date and the
repayment of the Obligations and be deemed restated on the date of each Advance.

Section 9.  Affirmative Covenants

                  To induce Lender to make the Advances pursuant to this
Agreement, the Borrower and Asta Funding on its own behalf and as to each other
Debtor hereby covenants and agrees that so long as any Obligations shall remain
outstanding hereunder, the Debtors shall comply with the following covenants:

                  (a) Debtors shall keep and maintain complete and accurate
Books and Records. Debtors shall permit access thereto and examination thereof
by Lender and any authorized representatives of Lender, at all reasonable times
and places during normal business hours (including the right to make copies
thereof at the cost and expense of Borrower) upon at least two (2) Banking Days
prior written notice and without notice at any time after and during the
continuance of an Event of Default.

                  (b) Debtors shall comply in all material respects with all
applicable federal, state, county and municipal laws, rules, regulations and
orders of any governmental authority having jurisdiction over Debtors, except to
the extent contested in good faith and by proper proceedings or where the
failure to so comply would not have a material adverse affect on Debtors.

                  (c) Debtors shall promptly notify Lender of the occurrence of
any Event of Default.

                  (d) Debtors shall, jointly and severally, indemnify, protect,
defend and save harmless each Indemnified Party from and against any and all
losses, damages, expenses or liabilities of any kind or nature and from any
suits, claims, or demands, by third parties including reasonable counsel fees
incurred in investigating or defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way connected
with this Agreement and the transactions contemplated herein, provided, however,
Debtors shall not be obligated to indemnify, protect, defend and save harmless
any Indemnified Party, if the loss, damage, expense or liability was caused by
or resulted from the gross negligence of willful misconduct of that Indemnified
Party. In case any action shall be brought against an Indemnified Party based
upon any of the above and in respect to which indemnity may be sought against
Debtors, the Indemnified Party against whom such action was brought, shall
promptly notify Borrower in writing, and Debtors shall assume the defense
thereof, including the employment of counsel selected by Debtors and reasonably
satisfactory to the Indemnified Party, the payment of all costs and expenses and
the right to negotiate and consent to settlement. Upon reasonable determination
made by the Indemnified Party, the Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof at the Indemnified Party's cost and expense. Debtors shall not be liable
for any settlement of any such action effected without its consent, but if
settled with Debtor's consent, or if there be a final judgment for the claimant
in any such action, Debtors agree to indemnify and save harmless said
Indemnified Party against whom such action was brought from and against any loss
or liability by reason of such settlement or judgment. The provisions of this
sub-paragraph (d) shall survive the termination of this Agreement and the final
repayment of the Obligations.

                  (e) After the occurrence and during the continuance of an
Event of Default, each Debtor shall at Lender's request establish and maintain a
Lockbox Account, in accordance with Lender's instructions and Lender shall be
authorized to send a notice directing all Account Debtors to remit all Payments
to said Lockbox Account and each Servicing Agent shall deposit all Collections
to the Lockbox Account. Any and all remittances received in said Lockbox Account
shall be applied to the Obligations of Borrower to Lender in accordance with
sub-paragraph (s) hereof. Debtors shall bear all risk of loss of any funds
deposited in the Lockbox Account and pay all fees and charges related thereto.

                  (f) Debtors shall direct each Servicing Agent prior to an
Event of Default (to the extent provided in each contract with each Servicing
Agent) to send to an account in the name of a Debtor by transfer at the
frequency and in the manner provided for in each contract with each Servicing
Agent, an amount equal to all Collections (after deducting such Servicing
Agent's contractual fees for such period) received by such Servicing Agent. All
Collections received by the Debtors from Servicing Agents shall be promptly
remitted to the Lender.

<PAGE>

                  (g) If, notwithstanding the notices to Account Debtors and the
Servicing Agents to remit Payments to the Lockbox Account, any Debtor receives
any Payments on the Collateral, each Debtor agrees to hold such Payments in
trust for Lender and to immediately forward to Lender any and all Payments and
other remittances on the Collateral, including cash, checks, drafts, notes,
acceptances or other forms of payment in the identical form in which they were
received, together with Collection Reports in form satisfactory to Lender.

                  (h) Notwithstanding, the provisions of sub-paragraphs (e), (f)
and (g) above, (prior to the occurrence and continuance of an Event of Default),
until such time as Lender and the Debtors establish a Lockbox Account, the
Debtors shall be permitted to deposit Payments in, and the Servicing Agents
shall be permitted to remit Collections to, an account maintained in the name of
a Debtor, provided, that the funds from time to time on deposit in each such
account are transferred to the Lender on the first Banking Day of each week or
at such other time as the Lender and the Debtors shall agree upon.

                  (i) All Payments and Collections which are delivered to or
otherwise received by Lender for application to the Advances provided for
herein, shall be deemed received as of the date of actual receipt by Lender, and
shall be applied by Lender on account of the Obligations upon Lender's receipt
of same; provided, however, that no checks, drafts, or other instruments
received by Lender shall constitute payment to Lender unless and until such item
of payment has actually been collected by Lender. For the sole purpose of
calculation of interest due to Lender from Borrower, all Payments shall not be
considered applied on account of the Obligations until actual clearance of such
Payments.

                  (j) Debtors shall exercise reasonable efforts to cause each
Servicing Agent to maintain accurate Books and Records of all Collateral and all
Collections.

                  (k) Each Debtor, as the case may be, shall, within fifteen
(15) days of the end of each month, deliver to Lender Reports and related
computer discs with respect to the immediately preceding month, in such form as
may be reasonably acceptable to Lender, certified by the Chief Financial Officer
of each Debtor.

                  (l) Debtors will continue to hold all materially necessary
licenses and permits for the operations of its business.

                  (m) Lender (by any of its officers, employees and agents)
shall have the right, at reasonable times during each Debtor's usual business
hours (provided reasonable prior notice is given except if an Event of Default
has occurred and is continuing), to inspect the Collateral, all Books and
Records of the Debtors and to the extent each contract between a Debtor and each
such Servicing Agent permits (and to make extracts from such Books and Records)
and the premises upon which any of the Collateral is located or administered,
and to verify the amount, quality, quantity, value and condition of, or any
other matter relating to, the Collateral.

                  (n) Lender shall have the right, after, and during the
continuance of, an Event of Default:

                           (i) to notify Account Debtors to make Payments to the
Lockbox Account established by Lender, to endorse all items of Payment which may
come into its hands payable to a Debtor, to take control of any cash or non-cash
proceeds of Accounts; to compromise, extend or renew any Account or deal with it
as it may deem advisable, and to make exchanges, substitutions or surrenders of
Collateral, to notify the postal authorities to deliver all mail, correspondence
or parcels addressed to any Debtor to Lender at such address as Lender may
choose; and
                           (ii) to endorse in Debtor's name on any checks,
notes, acceptances, drafts or any other instrument or document requiring said
endorsement and to sign any Debtor's name on any invoice relating to any
Account, or drafts against its customers, or schedules or confirmatory
assignment on Accounts, or notices of assignment, financing statements under the
UCC, and other public records, and in verification of Accounts and in notices to
Account Debtors. For the purposes set forth herein, each Debtor does hereby
irrevocably appoint Lender or its designees as Attorney-in-Fact to sign in such
Debtor's name or to otherwise execute documents as set forth herein.

                  (o) Each Debtor will furnish Lender with at least ten (10)
days' prior written notice of any change in location of or addition to its chief
executive office or the office where it keeps its Books and Records concerning
its Accounts.

                  (p) Pay and discharge when due, all taxes, assessments or
other governmental charges imposed on its or any of its properties, unless the
same are currently being contested in good faith by appropriate proceedings and
adequate reserves are maintained therefor.

                  (q) Operate its properties or cause to be operated in
compliance with all material applicable orders, rules and regulations
promulgated by the jurisdictions and agencies thereof where such properties are
located and duly file or cause to be filed such reports and/or information
returns as may be required or appropriate under applicable orders, regulations
or law the violation of which would have a material adverse effect on any
Debtor.

                  (r) Permit the Lender's representatives and/or agents full and
complete access to any or all of Debtors' Books and Records and other financial
records, to make extracts from and/or audit such records and to examine and
discuss the Debtors' business, finances and affairs with the Debtors' officers
and if an Event of Default exists, outside accountants and Servicing Agents.

                  (s) After an Event of Default, Lender shall apply all Payments
and Collections deposited in the Lockbox Account, as follows:

                  First: to the payment of all unpaid costs and expenses of
                  Lender, including, its legal fees;
                  Second: to the payment of any unpaid Lender Fees then due;
                  Third: to the payment of all accrued and unpaid interest under
                  the Grid Note; and
                  Fourth: to the repayment of each of the then unpaid Advances.

<PAGE>

                  (t) Within thirty (30) days of the date hereof, Asta I shall
deliver to Lender executed UCC-3 Termination Statements executed by the secured
party listed on Schedule B relating thereto.

                  (u) Each Debtor agrees that it shall, from time to time
promptly execute and deliver all instruments and documents, and take all further
action, that may be necessary or appropriate, or that Lender may request, in
order to perfect against such Debtor and all third parties, and in order to
protect and continue the security interest granted or purported to be granted
hereby, or to enable Lender to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing each Debtor authorizes Lender to prepare and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or appropriate, or as Lender may request, in order
to perfect and preserve the security interest in all of the Collateral granted
or purported to be granted hereby.

                  (v) So long as any of the Obligations shall remain outstanding
Debtors shall deliver to Lender, the following:

                           (i) within ninety (90) days after the end of each
fiscal year of Asta Funding, a balance sheet, income statement and cash flow
statement of Asta Funding, prepared in accordance with GAAP on a consolidated
basis, by an independent certified public accountant acceptable to Lender, on a
audited basis and without material exception or qualification and in the case of
the other Debtors, a trial balance prepared by management and certified by the
Chief Financial Officer of each Debtor;
                           (ii) within fifteen (15) days after the end of each
month a Borrowing Base Certificate as of the last business day of the previous
month, prepared by and certified by the chief financial officer of each Debtor,
together with a payment in reduction of the Obligations of an amount equal to
the Advances, if any, in excess of the Borrowing Base in such Borrowing Base
Certificate; and
                           (iii) together with each Borrowing Base Certificate a
Report as to each Debtor as of the last business day of the previous month;

                  (w) Each Debtor certifies that any information concerning the
business organization or financial condition of such Debtor furnished to Lender
is and shall be true and correct and fairly presents and will present the
financial condition of such Debtor in accordance with GAAP.

                  (x) Each Debtor covenants to promptly give Lender notice in
writing of any (a) threatened or actual actions or suits and of all
investigations or proceedings by or before any court, arbitrator or any
governmental department, board, agency or other instrumentality, state or
federal, affecting either Debtor or their respective properties which involves
uninsured potential liability of any Debtor (other than Asta Funding) in excess
of $1,000,000 and $2,000,000 as to Asta Funding in any individual case; (b)
material adverse change in the condition (financial or otherwise) of any Debtor;
(c) notice of intent to seize, levy or assess or of any actual seizure, levy or
assessment upon or against any material property of any Debtor, and (d) change
in any Debtor's name and any change in its chief executive office or place(s) of
business or incorporation or formation.

Section 10.  Negative Covenants of Debtors

                  To induce Lender to make the Advances pursuant to this
Agreement, Borrower and Asta Funding on its own behalf and as to each Debtor,
hereby covenants and agrees that so long as any of the Obligations shall remain
outstanding, Debtors shall not:

                  (a) Except for the security interests in favor of Lender and
the Permitted Liens, at any time: (i) create, incur, assume or suffer to exist
any mortgage, deeds of trust, pledge, security interest, encumbrance, lien,
hypothecation, or charge of any nature upon or with respect to the Collateral;
or (ii) prepare and/or file under the UCC of any jurisdiction a financing
statement which names a Debtor as a debtor as to any Collateral; or (iii) sign
any security agreement authorizing any secured party thereunder to file such
financing statement. Debtors further covenant and agree not to grant any similar
negative pledge to any other lender.

                  (b) Permit Asta Funding's Tangible Net Worth on a consolidated
basis to be less than $15,000,000.00.

                  (c) Permit Asta Funding's Interest Coverage Ratio on a
consolidated basis to exceed 2:1.

                  (d) Permit Asta Funding's Leverage Ratio on a consolidated
basis to exceed 2.5:1.

                  (e) Permit any Debtor to make a Bulk Sale, if an Event of
Default has occurred and is continuing or will occur as a result of such Bulk
Sale, provided, that Lender shall be given written notice prior to any Bulk Sale
of $3,000,000 or more and, provided, further that all cash proceeds (after
reasonable closing costs) from each such Bulk Sale shall be sent by wire
transfer to a Debtor's deposit account with Lender at the closing of each such
sale, which proceeds shall be applied in reduction of the Obligations then
outstanding. Each Debtor shall send Lender written notice of any Bulk Sale of
less than $3,000,000 not less than five(5) Banking Days after each such Bulk
Sale.

                  (f) Permit Asta Funding to enter into an agreement for the
repurchase, redemption or retirement of its outstanding capital if after giving
effect to such repurchase (i) the Debtors shall not be in compliance with the
provisions of Section 10(b), or (ii) there shall exist an Event of Default or a
default with the giving of notice or the lapse of time shall result in an Event
of Default. At Lender's request Asta Funding shall render a report as to any of
the transactions covered by this Section 10(f).

                  (g) As to Borrower only, without the prior written consent of
Lender, make any advance, loan, extension of credit or capital contribution to,
or purchase any stock, bonds, notes, debentures or other securities of or any
assets constituting a business unit of, or make any other investment in any
other person, firm or entity, other than a loan to any other Debtor that is
acquiring a Portfolio, a Rejected Portfolio or a Small Portfolio with an
Advance, provided, that any such Portfolio, Rejected Portfolio or Small
Portfolio is included in the Collateral.

<PAGE>

                  (h) Without the prior written consent of Lender, (i) enter
into any merger or consolidation, except with another Debtor or if it is the
survivor, or (ii) liquidate or wind-up or dissolve itself (or suffer any
liquidation or dissolution), or (iii) convey, sell, lease, assign, transfer or
otherwise dispose of all or substantially all of its property, business or
assets, except to another Debtor, or (iv) make any material change in its
present method of conducting business or permit any Debtor to do any of the
foregoing.

                  (i) Materially change, amend, alter or modify its Certificate
of Formation, Certificate of Incorporation, Operating Agreement, or other
governing documents of a Debtor to do any of the foregoing.

                  (j) As to Borrower only, enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any member or manager of Borrower, or with any
officer, director, shareholder or partner of Asta Funding or any of the
foregoing, except for arm's length transactions with Affiliates.

                  (k) As to Borrower only, declare or pay any dividends on,
distributions on or make any payment on account of, or set apart assets or a
sinking fund for the purchase, redemption, defeasance, retirement or other
acquisition of, any member interest, shares or any class of stock or any
warranty or option to purchase any such stock whether now or hereafter
outstanding or make any other distribution in respect thereof, directly or
indirectly whether in cash or property or obligations, other than payments to
Asta Funding in the ordinary course of business so long as no Event of Default
exists after giving effect thereto. At Lender's request Borrower shall render a
report as to the payments made to Asta Funding.

                  (l) Create, incur or suffer to exist any indebtedness, except
(i) indebtedness in respect of the Advances; and (ii) indebtedness for expenses
incurred in the ordinary course of business and (iii) Permitted Debt.

                  (m) Without prior written consent of Lender, remove any
material portion of the Collateral from its present location.

                  (n) Allow its existence to be other than in good standing and
will not, without the prior written consent of Lender, (i) reincorporate or
reorganize under the laws of any other State than Delaware, dissolve or
liquidate, or (ii) merge or consolidate with or acquire or affiliate with any
other business entity, unless a Debtor is the survivor or acquirer.

                  (o) Change its name without furnishing to Lender at least ten
(10) days' prior written notice thereof.

                  (p) Change in any material respect the nature of its business.

                  (q) Permit Asta Funding to sell, assign, transfer or dispose
of any majority controlling ownership interest in any Debtor, voluntarily or
involuntarily, by operation of law or otherwise, except to another Affiliate.

Section 11. Conditions Precedent to Advances

                  As a condition to the execution and delivery of this Agreement
and the making of any Advance, the Debtors shall or cause the execution and
delivery of each of the Loan Documents listed in Exhibit D annexed hereto, all
in form, scope and substance satisfactory to Lender.

Section 12. Events of Default

                  At Lender's option, the happening of any of the following
events or conditions shall, if not cured within any applicable cure period,
constitute an "Event of Default" under this Agreement and the Grid Note, whether
happening to any Debtor:

                  (a) Failure to pay any Obligation when due or when duly
demanded by Lender;
                  (b) Failure to perform or observe any non-monetary obligation
or agreement in this Agreement or any other Loan Document, which failure shall
continue for five (5) Banking Days after the giving of notice by Lender to
Borrower;
                  (c) Loss, theft, substantial damage or destruction of a
material portion of the Collateral taken as a whole except as herein permitted
or the making of any levy, seizure, garnishment, or attachment thereof or
thereon that is not discharged or bonded within ten (10) days;
                  (d) Any material representation and warranty contained in this
Agreement, any Loan Document, Borrowing Base Certificate, Report, Financial
Statement or in any Advance Request shall be or become false in any material
respect;
                  (e) The making of an assignment for the benefit of creditors,
filing a petition in bankruptcy, the petition to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial part of
its assets, or the commencement of any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect, or any
such petition is filed against any Debtor, or any such proceeding is commenced
against it, which is not dismissed within forty-five (45) days;
                  (f) The admission in writing of its inability, or it is
generally unable, to pay its debts as they become due, or any act or omission,
indicating its consent to, approval of or acquiescence in any petition,
application, proceeding or order for relief or the appointment of a custodian,
receiver or trustee for such Debtor or any substantial part of any of its
properties, or suffers any such custodianship, receivership or trusteeship;
                  (g) Any event or occurrence of whatever nature (including any
adverse determination in any litigation, arbitration, investigation or
proceeding), which in Lender's reasonable judgment has a material adverse effect
on the business, operations, revenues, financial condition, property, or
business prospects of the Debtors collectively, or the value of the Collateral,
or the ability of the Debtors collectively to timely pay or perform their
Obligations to Lender.
                  (h) Merger (unless, as to Asta Funding, if it is the
survivor), consolidation, change of voting control or transfer or sale of
substantially all the assets of any Debtor, without Lender's prior written
consent;
                  (i) There is a change in any Debtor's managerial control,
including a change resulting from a management contract or a change in any
Debtor's executive officers;

<PAGE>

                  (j) Any final judgment(s) for the payment of money are
rendered against any or all Debtors (except Asta Funding) in excess of
$1,000,000 in the aggregate or $250,000 individually, or against Asta Funding in
excess of $2,500,000 in the aggregate, excluding judgments for claims covered by
insurance, and the same shall remain undischarged for a period of thirty (30)
consecutive days during which execution shall not be effectively stayed, or
notice of intent to levy by any governmental agency or body (whether local,
state or federal) is issued to or against any or all Debtors (except Asta
Funding) or any of its properties for an amount in excess of $1,000,000 in the
aggregate or $250,000 individually, or against Asta Funding or any of its
properties for an amount in excess of $2,500,000 and the same shall remain
undischarged for a period of ten (10) consecutive days during which execution
shall not be effectively stayed;
                  (k) Any consent, approval, franchise, license or permit of any
governmental agency, which is necessary for the ownership of any Debtor's assets
or for the operation of its business, is cancelled, revoked or modified in a
manner which materially adversely affects the Debtors or their properties taken
as a whole;
                  (l) The termination of any of the Guarantees; or
                  (m) Any Debtor shall default in the performance of any
agreement with any person other than Lender if the effect of such default is, or
with notice or the passage of time or both would be, to accelerate the maturity
of any indebtedness for borrowed money in excess of $500,000, or any Debtor
shall fail to pay any indebtedness for borrowed money at maturity in excess of
$500,000, except if the Debtor shall in good faith contest that said
indebtedness is due and payable and shall have established a reserve in the
amount of the contested indebtedness on the books of the Debtor.

Section 13. Remedies

                  Upon the earlier of (i) the Borrower's failure to pay in full
the Obligations when duly demanded by Lender, or (ii) the occurrence of any
Event of Default, or (iii) the Termination Date, the New Line of Credit shall be
terminated and any obligation of Lender to make Advances to Borrower hereunder
shall be terminated. In the Event of a Default Lender shall have the right to
terminate this Agreement, without demand or notice, and in such event, all
Obligations secured hereby, shall immediately become due and payable without
demand or notice and Lender may take immediate possession of the Collateral
(including, without limitation the right to offset any funds in the Lockbox
Account, the Operating Account or any other account maintained by any Debtor
with Lender) without demand, notice or legal process; and for the purpose and in
furtherance thereof, Debtors shall, if Lender so requests, assemble the
Collateral and make it available to Lender at a reasonably convenient place
designated by Lender, and Lender shall have the right (and each Debtor hereby
authorizes and empowers Lender to do so) to notify Account Debtors and to
exercise all of its rights under the Loan Documents and the UCC. Lender may, in
its sole discretion, sell the Collateral by private or public sale for the
account of Debtors after giving reasonable notice of the time and place of sale
to Asta Funding as agent for each Debtor. Any notice from Lender placed in the
U.S. Mail, postage prepaid, addressed to Asta Funding as agent for each Debtor
at its address shown on Lender's records at least ten (10) days prior to any
action or sale shall be reasonable notice under the UCC. Any proceeds of the
disposition of any Collateral may be applied by Lender toward the reasonable
expenses of retaking, holding, or toward preparing for sale and selling the
Collateral or toward Lender's reasonable attorneys' fees and legal expenses
incurred by Lender, or toward Obligations of Borrower to Lender in any order
Lender may elect. Each Debtor shall be liable for any deficiency and Lender
shall be entitled to interest thereon at the Default Rate. In the event of
repossession of the Collateral by Lender, then the rights and remedies
applicable under the UCC in effect in the State of New York shall apply, except
as permitted to be modified by agreement and which were so modified herein. In
conjunction with or in lieu of any of the remedies provided for in this Section
13, and at Lender's sole option, each Debtor shall allow Lender or any agent or
designee thereof to enter upon such Debtor's premises for the purpose of taking
possession of, holding, and controlling the disposition of, in any manner deemed
appropriate by Lender, all Collateral and the Books and Records. Each Debtor
hereby grants to Lender an irrevocable power of attorney, which power of
attorney shall be coupled with an interest in the Collateral, and hereby
appoints Lender or any of Lender's officers as such Debtor's attorney-in-fact if
an Event of Default exists to execute on Borrower's behalf all documents, and to
do any and all things in the name of and on behalf of such Debtor, to enable
Lender to fully exercise its rights in and to the Collateral as provided in this
Agreement and under applicable law, including, the establishment of a Lockbox
Account. In addition to the foregoing, Lender shall be entitled to exercise all
of its rights under the Loan Documents, which rights may be exercised at any
time and not in lieu of the rights herein provided.

Section 14. Miscellaneous

14.1  Notices

                  All notices and other communications to any party hereto
required or permitted under this Agreement or any other agreement or document
executed or delivered pursuant hereto or thereto shall be in writing and given
(unless otherwise provided herein) (a) by hand delivery; (b) certified mail,
return receipt requested, postage prepaid; (c) one (1) Business Day after being
entrusted to a reputable commercial overnight delivery service if by overnight
delivery service or (d) by telecopier with respect to Advance Requests and the
response of Lender thereto. All notices to the Debtors shall be sent to the
address and telecopier number indicated below the signature of Asta Funding
hereto. The Debtors each hereby irrevocably designate and appoint Asta Funding
as its agent for the purpose of receiving notices under this Agreement and each
Loan Document.

14.2. Expenses

                  Debtors shall pay all expenses of every kind for the
enforcement of any of Lender's rights mentioned herein during the existence of
an Event of Default and reimburse Lender for any expenditures, including
expenses incurred in realizing on Collateral, court costs, other legal expenses
and reasonable attorneys' fees incurred in consultation or in judicial,
administrative or arbitration proceedings, both at trial and appellate levels,
and such expenses shall bear interest at the Default Rate, until paid and shall
be secured by the Collateral.

14.3. No Waiver

                  No waiver of any default or non-exercise of a right hereunder
shall waive any other default, or the same default on a future occasion, or
preclude exercising any other right or the same right on a future occasion.
Acceptance of any payment after its due date shall not be deemed a waiver of the
right to require prompt payment when due or all other sums, and acceptance of
any payment after Lender has declared its entire indebtedness due and payable
shall not cure any Event of Default or operate as a waiver of any right of
Lender hereunder.

<PAGE>

14.4. Successors and Assigns

                  Lender's rights hereunder shall inure to the benefit of its
successors and assigns, and Lender may without notice to or the consent of any
Debtor sell one or more participations in the Obligations and Collateral, except
to a direct competitor of Asta Funding engaged in the same type of business. In
the event Lender proposes to assign more than fifty (50%) percent of the then
outstanding Obligations to another person or entity, the Lender shall give the
Debtors sixty (60) days prior written notice of the name of such assignee. Each
Debtor's obligations hereunder shall bind its successors and assigns.

14.5. Severability

                  If any provision of this Agreement shall for any reason be
held to be invalid, illegal or unenforceable in any respect under applicable
law, the same shall not affect any other provision of this Agreement and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.

14.6. Entire Agreement; Amendments

                  This Agreement and any other agreement or document executed or
delivered pursuant hereto, or in connection or arising with the Advances or
transactions contemplated by this Agreement, embody the entire agreement and
understanding between the parties hereto, supersede all prior agreements and
understandings relating to the subject matter hereof, and may not be modified or
varied except in a writing signed by Lender and each Debtor.

14.7. Conflicts

                  In the event any conflict arises between the terms of this
Agreement and the terms of any Advance Request or any other document or
agreement between Lender and any Debtor, the terms of this Agreement shall
govern.

14.8. Counterpart Copies

                  This Agreement may be executed in counterpart copies all of
which shall constitute one instrument and manually signed counterpart copies may
be sent by telecopier to the other parties.

14.9. Cumulative Remedies

                  No provision of this Agreement or any other agreement, shall
limit the right of Lender (a) to foreclose against the Collateral by the
exercise of a power of sale under this Agreement or applicable law; (b) to
exercise self-help remedies including, without limitation, setoff and
repossession; (c) to obtain provisional or ancillary remedies such as injunctive
relief, attachment, or the appointment or a receiver from a court having
jurisdiction before, during, or after the pendency of any arbitration
proceeding; or (d) to otherwise exercise its rights in and to the Collateral or
its remedies as a secured party under Article 9 of the UCC.

14.10. Waiver of Jury Trial; Consent to Jurisdiction

                  EACH DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION ARISING OUT OF
OR IN CONNECTION WITH (1) THIS AGREEMENT, THE GRID NOTE OR ANY OTHER LOAN
DOCUMENT; (2) ALL PAST, PRESENT AND FUTURE AGREEMENTS INVOLVING THE PARTIES; (3)
ANY TRANSACTION CONTEMPLATED HEREBY, AND ALL PAST, PRESENT, AND FUTURE
TRANSACTIONS INVOLVING THE PARTIES; AND (4) ANY ASPECT OF THE PAST, PRESENT, OR
FUTURE RELATIONSHIPS OF THE PARTIES. THIS WAIVER OF TRIAL BY JURY PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS AGREEMENT AND TO MAKE ADVANCES
TO BORROWER.

                  EACH DEBTOR AND LENDER AGREE THAT ANY ACTION, SUIT OR
PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AGREEMENT, THE GRID NOTE, OR ANY
OTHER LOAN DOCUMENT RELATING TO THE LINE OF CREDIT, MAY BE INITIATED AND
PROSECUTED IN THE STATE OR FEDERAL COURTS, AS THE CASE MAY BE, LOCATED IN NEW
YORK COUNTY, NEW YORK.

14.11. Governing Law

                  This Agreement shall be governed by and construed and enforced
under the internal laws of the State of New York without regard to any conflict
of laws of principles.

14.12. Special Covenants of Asta Funding

                  In order to induce Lender to enter into this Agreement
increasing the Original Line of Credit, Asta Funding hereby agrees that (a) it
and the Borrowers shall each maintain its Operating Accounts with Lender, (b) in
the event it (in a borrowing capacity) or any other Debtor, with the written
consent of Lender, enters into a financing arrangement with another lender
(other than with respect to the financing of a Rejected Portfolio) on terms
providing for interest and/or fees payable to such lender in excess of the
Lender Fees and/or interest payable to Lender hereunder, the Debtors shall enter
into an amendment hereto to grant Lender the same terms, and (c) it shall cause
each Affiliate and/or Debtor to execute and deliver each document required in
this Agreement and to observe each covenant provided hereunder.

<PAGE>

14.13. Releases for Rejected Portfolios etc.

                  Lender will provide releases reasonably requested by any other
lender with respect to Lender's security interests, if any, in any Rejected
Portfolio and the proceeds and other rights related thereto. Upon the
indefeasible payment in full of all Obligations, the Lender shall authorize in
writing the termination of its security interests in the Collateral.

                  IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed under its hand and seal by its duly authorized
representative as of the date and year first written above.

                        ISRAEL DISCOUNT BANK OF NEW YORK

                                 By:  /s/ Kevin Lord
                                      -----------------------------------
                                      Name: Kevin Lord
                                      Title:  Vice President

                                 By:  /s/ Jerry Hertzman
                                      -----------------------------------
                                      Name: Jerry Hertzman
                                      Title: Senior Vice President

                                      Address: 511 Fifth Avenue
                                               New York, New York 10017
                                               Attention:  Kevin Lord

                        ASTA FUNDING ACQUISITION II, LLC

                                     By:  /s/ Gary Stern
                                          -------------------------------
                                              Name: Gary Stern, Manager

                                     By: /s/ Mitchell Herman
                                         --------------------------------
                                             Mitchell Herman, Manager

                          Palisades Collection, L.L.C.

                                     By: /s/ Gary Stern
                                         --------------------------------
                                             Gary Stern, Manager

                                     By: /s/ Mitchell Herman
                                         --------------------------------
                                             Mitchell Herman, Manager

                                     ASTA FUNDING, INC.

                                     By:  /s/ Gary Stern
                                          -------------------------------
                                              Gary Stern
                                              Title: CEO & President

                                     By:  /s/ Mitchell Herman
                                          -------------------------------
                                              Mitchell Herman
                                              Title: EVP, Secretary & CFO

                                     Address: 210 Sylvan Avenue
                                              Englewood Cliffs, New Jersey 07632
                                              Attention: Mitchell Herman
                                     Telecopier No: 201-569-4595

Agreed:

Asta Funding Acquisition I, LLC

By: /s/ Gary Stern
--------------------------------
        Gary Stern, Manager

<PAGE>

By: /s/ Mitchell Herman
--------------------------------
       Mitchell Herman, Manager

E.R. Receivables Corp., L.L.C.

By: /s/ Gary Stern
--------------------------------
        Gary Stern, Manager

By: /s/ Mitchell Herman
--------------------------------
        Mitchell Herman, Manager

PALISADES ACQUISITION I, LLC

By: /s/ Gary Stern
--------------------------------
        Gary Stern, Manager

By: /s/ Mitchell Herman
--------------------------------
        Mitchell Herman, Manager

PALISADES ACQUISITION II, LLC

By: /s/ Gary Stern
--------------------------------
        Gary Stern, Manager

By: /s/ Mitchell Herman
--------------------------------
        Mitchell Herman, Manager<PAGE>
                                                                    Exhibit 10.1

                    Amended and Restated Settlement Agreement
                    -----------------------------------------

         This Amended and Restated Settlement Agreement ("Agreement") made this
7th day of May, 2003, between Net2Phone, Inc. a Delaware corporation having
offices at 520 Broad Street, Newark, New Jersey ("N2P"), and Deutsche Bank AG
London, having offices at Winchester House, 1 Great Winchester Street, London,
England EC2N 2DB ("Assignee"),

                                 Witnesseth That
                                 ---------------

         WHEREAS, N2P previously entered into Settlement Agreements in May and
July, 2001 with certain former shareholders of Aplio, S.A. arising out of the
acquisition by N2P of direct and indirect ownership of all of the capital stock
of Aplio, S.A. ("Original Settlement Agreements"); and

         WHEREAS, Assignee has received assignments from such former
shareholders of all of their rights under the Original Settlement Agreements and
has acquired all of the total of 585,325 shares of the common stock of N2P which
are the subject matter of the Original Settlement Agreements pursuant to
Assignment Agreements dated the date hereof and substantially in the form set
forth in Exhibit 2 hereto, for a total purchase price of $19,213,371.00, of
which sum, $4,999,267.76 (the "Purchase Price") is allocated to the 152,300
shares ("Shares") that are the subject of this Agreement; and

         WHEREAS, Assignee and N2P have agreed to amend and restate in their
entirety the Original Settlement Agreements as hereinafter provided; and

         WHEREAS, the balance of the shares acquired by Assignee from such
former shareholders together with their rights under the Original Settlement
Agreements are the subject matter of substantially identical Amended and
Restated Settlement Agreements entered into between N2P and Assignee
simultaneously herewith.

         NOW THEREFORE, on the basis of the foregoing premises and the
understandings and premises hereinafter set forth, the parties hereto agree as
follows:

1. Definitions.

               As used in this Agreement, the following terms shall have the
following meanings:

         "Affiliate" means, with respect to any party to this Agreement, any
entity controlling, controlled by or under common control with such party. As
used in this definition, "controlling," "controlled by" and "under common
control with" mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of another entity
whether through the ownership of voting securities, by contract or otherwise.

1

<PAGE>

         "Business Day" means any day, other than a Saturday or Sunday, on which
banks in New York, New York are open for the transaction of ordinary banking
business.

         "Market Value" of the shares of N2P common stock means the aggregate
proceeds from the sale of all Shares (net of brokerage commissions and fees)
remaining after all Interim Transfers received or payable to Assignee by reason
of regular way sale of such Shares on the NASDAQ National Market System or other
national exchange during the Sales Period by Smith Barney as agent for Assignee
and as reflected in sales confirmations delivered by Assignee to N2P.

         "Sales Period" means the period from January 2, 2006 through April 25,
2006.

         "Security" means a stand-by letter of credit issued by Wachovia Bank,
National Association, dated the date hereof in an initial amount equal to the
obligations to be secured hereunder, including the Purchase Amount (as defined
below) and cumulative interest payments pursuant to paragraph 4 below payable
from the date hereof through the Purchase Date (as defined below), and having a
termination date of August 4, 2006.

         "Share Price" means initially $32.83, as adjusted pursuant to Section
5.

         "Transfer" shall mean any sale, assignment, transfer, conveyance,
distribution or other disposition of Shares, whether voluntary or by operation
of law.

2. Share Purchase. On May 1, 2006 ("Purchase Date"), N2P shall purchase from
Assignee, and the Assignee shall sell to N2P, the maximum aggregate sum of
152,300 Shares of N2P common stock at a price of $32.83 per Share for a total
aggregate purchase price of $4,999,267.76, subject to appropriate adjustments
for Interim Transfers pursuant to paragraph 3 below, ("Purchase Amount"). For
the avoidance of doubt, it is hereby specified that the Purchase Amount and the
maximum number of shares of N2P common stock covered by this paragraph 2 shall
be reduced only pursuant to the provisions of paragraphs 3 and 5 hereof.

         Notwithstanding the foregoing, provided that the Shares are then
registered for sale under the Act or N2P provides Assignee with the opinion of
reputable securities counsel that the Shares may be sold or otherwise
transferred without the requirement of registration under the Act, N2P, at its
sole and exclusive option, shall have the right to notify Assignee (a "Sales
Notice"), on or before December 31, 2005, of N2P's election to pay to Assignee
on May 1, 2006 the excess of $32.83 per Share over the Market Value of the
Shares. Upon receipt of such notice, Assignee shall be required to sell all of
its Shares in regular way transactions over the NASDAQ or other major stock
exchange during the Sales Period, provided that it shall not offer more than
2,602 Shares for sale in any one trading day (the "Daily Maximum"), without
N2P's prior written consent. It is agreed by the parties hereto that the sales
shall be effectuated through Smith Barney, as agent for Assignee. If the Market
Value equals or exceeds the product of $32.83 times the number of Shares
remaining after all Interim Transfers , then N2P shall pay $0. If the Market
Value is less than the product of $32.83 times the number of Shares remaining
after all Interim Transfers ("Maturity Amount"), then N2P shall pay the
difference to Assignee on May 1, 2006.

2

<PAGE>

         Payment with respect to the Shares as provided in each of the previous
two paragraphs shall be made on the Purchase Date. Upon making such payment, N2P
shall have no further rights or obligations with respect to such Shares.

3. Interim Transfers. In the event that, between the date hereof and the
Purchase Date, Assignee shall Transfer any Shares of N2P common stock without an
accompanying assignment of all of Assignee's rights under this Agreement (other
than sales during the Sales Period following Assignee's receipt of the notice
from N2P provided for in paragraph 2 above) ("Interim Transfer"), within five
(5) Business Days of such Transfer, Assignee shall provide written notice of
such Transfer to N2P (a "Transfer Notice"). Such Transfer Notice shall be
substantially in the form of Exhibit 3 and shall contain an acknowledgment by
the Assignee that the Security is to be reduced by the product of $32.83 times
the number of Shares being transferred plus the amount of the cumulative unpaid
and unaccrued interest payments through the Purchase Date for each Share so
transferred. Upon such a Transfer, the number of Shares that Assignee shall be
entitled to sell and that N2P shall be required to purchase shall be reduced by
each Share transferred. N2P shall then provide the Transfer Notice to Wachovia
Bank, National Association ("Wachovia"), and such Transfer Notice shall be
deemed to be authority for Wachovia to reduce the Security by $32.83 times the
number of Shares transferred plus cumulative unpaid and unaccrued interest
payments through the Purchase Date for each Share so transferred as provided by
N2P to Wachovia.

         Transfers of Shares between Assignee and any Affiliate of Assignee
shall be excluded from the provisions of this paragraph 3 and shall not operate
to reduce the number of shares that Assignee is entitled to sell on the Purchase
Date or the amount of the Security. For the avoidance of doubt, it is specified
that a transferee that is an Affiliate of Assignee shall automatically and
without the need for any formalities succeed to the Assignee's rights (and
obligations) under this Agreement with respect to the Shares transferred to such
Affiliate.

4. Interest Payments. N2P shall pay to Assignee interest at the rate of 3.5% per
annum (calculated on the basis of a 360 day year, comprised of twelve 30-day
months) on the Purchase Amount (as reduced by Interim Transfers, if any)
commencing as of and including the date hereof and to and including the date of
payment in full of the Purchase Amount. The Purchase Amount shall be reduced
from time to time as the number of Shares required to be purchased by N2P is
reduced as the result of Interim Transfers. Interest shall be paid semi-annually
in cash on May 1 and November 1 or the next Business Day if May 1 or November 1
is not a Business Day. The first interest payment payable to the Assignee
hereunder shall be payable on November 1, 2003. Upon receipt of any interest
payment hereunder, Assignee shall provide written notice (substantially in the
form of Exhibit 4 hereto) simultaneously to Wachovia and N2P, and Wachovia shall
thereupon be authorized to reduce the Security by the amount of such interest
payment. It is understood and agreed that the Assignee shall make a good faith
effort to provide the foregoing notice to Wachovia and N2P, but any failure of
Assignee to provide such notice shall not create any liability for the Assignee
or give rise to any claim of Wachovia, N2P or any other person against the
Assignee or its affiliates; all such claims are hereby waived.

3

<PAGE>

5. Effect of Stock Splits, Reverse Stock Splits, Mergers, Consolidations and
Other Transactions Involving Exchanges or Conversions of Shares . The 152,300
Shares shall be adjusted to account for any stock splits, reverse stock splits
or dividends or distributions payable in stock (other than distributions in the
form of stock made by N2P to employees under employee benefit, retirement or
compensation arrangements or plans) effected by N2P during the period covered by
this Agreement. If there is a stock split, a reverse stock split or a dividend
or distribution payable in stock, (i) the number of Shares subject to this
Agreement and the Daily Maximum shall be adjusted immediately after the
occurrence of any such event to equal the number of shares of Common Stock which
a record holder of the same number of shares immediately prior to the occurrence
of such event would own or be entitled to receive after the occurrence of such
event, and (ii) the Share Price shall be adjusted to equal (A) the Share Price
multiplied by the number of Shares subject to this Agreement immediately prior
to the adjustment divided by (B) the number of Shares subject to this Agreement
immediately after such adjustment.

In the event of merger or consolidation of N2P into IDT Corporation or another
transaction in which the Shares are converted into or exchanged for stock of IDT
Corporation as described in paragraph 8 below, the 152,300 number of shares and
$32.83 per share price shall be appropriately adjusted to reflect the conversion
or exchange.

If N2P shall take any action in respect of its Common Stock other than any
action described in this Section 5, the number of Shares subject to this
Agreement shall be adjusted in such manner as may be equitable in the
circumstances.

6. Method of Payment and Transfer of Shares. All payments of interest and the
Purchase Amount to be made hereunder shall be made by wire transfer in
accordance with instructions provided by Assignee from time to time. Any and all
Shares purchased by N2P shall be delivered to N2P duly endorsed for Transfer.
Within 5 days of Assignee's receipt of full payment of the Purchase Amount and
all required interest, it shall return the Security to N2P for submission to
Wachovia for cancellation.

7. Posting of Security. In order to secure payment by N2P of the Purchase Amount
and the interest provided for herein, simultaneous with the execution and the
delivery of this Agreement, N2P has posted Security in the amount of
$5,522,501.92. substantially in the form set forth in Exhibit 1 hereto. The
amount of the Security shall be subject to reduction as interest payments are
made and the Purchase Amount is reduced by reason of Interim Transfers, as
provided for in paragraphs 3 and 4 above. All Transfers shall be subject to the
provisions of the Security documents.

4

<PAGE>

8. Defaults. N2P shall be in default of its obligations under this Agreement in
the event that (A) N2P fails to pay to Assignee any sum due to it pursuant to
paragraphs 2 or 4 hereof, or (B) if the shares of common stock of N2P or, in the
event of a merger of N2P into IDT Corporation ("IDT") in which the merger
consideration is IDT common stock, IDT, cease to be traded on the NASDAQ
National Market System and are not, at that time, traded on either the New York
Stock Exchange or the American Stock Exchange, or (C) involuntary proceedings
are initiated against N2P under the United States Bankruptcy Code, which
proceedings are not dismissed within 60 days, or (D) N2P becomes insolvent and
cannot pay its debts as they become due, or (E) a receiver is appointed for the
property of N2P, or (F) N2P consolidates or amalgamates with, or merges with or
into, or transfers all or substantially all its assets to, another entity,
unless (i) the resulting surviving or transferee entity is N2P or IDT, and, if
IDT, IDT assumes all of N2P's obligations under this Agreement and (ii) the
Assignee is issued shares of IDT common stock in exchange for the Shares in the
same proportion as issued to all other holders of shares of N2P common stock or
(G) N2P shall amend, modify, cancel or terminate the Security, or (H) N2P shall
withdraw in whole or in part the cash collateral issued in support of the
Security, except as otherwise provided for in the documents evidencing the
Security, or (I) there occurs a consolidation or merger of N2P with another
entity in which N2P is not the surviving entity unless such consolidation or
merger is a stock merger with IDT or (J) there occurs a material breach by N2P
under the documents evidencing the Security resulting in an acceleration by
Wachovia of its rights against N2P under such documents or (K) voluntary
proceedings are initiated by N2P under the United States Bankruptcy Code. In the
event of such a default, Assignee shall be entitled to require N2P to acquire
immediately, and N2P shall be obliged to acquire immediately, from Assignee, all
of the Shares held by Assignee for a price of $32.83 per share, subject to any
adjustment pursuant to paragraph 5 above, and Assignee shall be entitled to
obtain payment of any and all sums due, including the Purchase Amount and
accrued but unpaid interest to the date of payment pursuant to paragraph 4
above, by resorting to the Security. Any draw under the Security shall be
accompanied by a tender of the Shares that are to be purchased by such draw.

N2P shall remain fully responsible for all of its payment obligations hereunder,
notwithstanding any failure of the bank issuing the Security to fulfill its
obligations under the Security. To the extent such payment obligations are not
satisfied by the Assignee's recourse to the Security, N2P shall be liable for
all damages arising out of or in connection with its default, including, without
limitation, taxes, fines, penalties, losses, expenses, court and other costs,
attorneys' fees and disbursements and interest on any unpaid amount at the
annual rate of 9% until such amount is paid ("Damages").

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<PAGE>

9. Integration Clause. This Agreement constitutes the complete and entire
agreement between N2P and Assignee and supersedes all proposals, prior
agreements (including without limitation the Original Settlement Agreements),
and all other communications between the parties, whether oral or in writing,
including any representations or warranties, relating to the subject matter of
this Agreement.

10. Notices. All notices and other communications hereunder shall be in writing
and shall be deemed duly given only if sent by facsimile transmission and by
Federal Express (or other recognized international overnight courier service)
and addressed to the intended recipient as follows:

         If to N2P:                         If to Assignee:

         Bruce D. Shoulson,                 Deutsche Bank AG London
         General Counsel                    Winchester House
         Net2Phone, Inc.                    1 Great Winchester Street
         520 Broad Street                   London, England EC2N 2DB
         Newark, New Jersey 07102
         USA
         Telecopy: 973-438-3090

Any notice or other communication hereunder shall be deemed duly given and
received three business days after it is transmitted by the foregoing methods.
Any party may change the address to which notices and other communications under
this Agreement are to be delivered by giving notice of such change in the manner
provided for herein.

11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflict of
law principles. Any disputes arising under this Agreement and any action brought
to enforce this Agreement must be brought exclusively in a state or federal
court of competent jurisdiction located in New York County, New York. The
parties hereto consent to personal jurisdiction of such courts and waive any
defense of forum non-conveniens.

12. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns (other than pursuant to Interim Transfers). It is specifically agreed
and understood that Assignee shall have the right to assign its rights hereunder
in whole, but not in part, or the Shares (in whole or in part) separate from its
rights under this Agreement (subject to the provisions of paragraph 3 above), so
long as such assignment complies with applicable restrictions (and/or available
exemptions from registration) under the Securities Act of 1933 (the "Act") and
the transferee is not an "affiliate" of N2P as such term is defined in Rule 144
issued pursuant to the Act . In addition, Assignee shall have the right request
the removal of any restrictive legend on the Share certificates. In order to
effect such assignment or delegending of the Share certificates, including at
N2P's request pursuant to Section 2, Assignee shall provide N2P with the
favorable opinion of reputable securities counsel (which shall include, without
limitation, ____________________) that the proposed assignment does not require
registration under the provisions of the Act or that the Shares are freely
tradable under Rule 144. N2P shall pay the reasonable fees of such counsel for
examining the matter and rendering its opinion.

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<PAGE>

         Upon receipt by N2P of a favorable opinion of outside counsel that the
proposed assignment does not require registration under the provisions of the
Act or that the Shares are freely tradable under Rule 144, N2P shall promptly,
but in any event within three (3) Business Days following the date of its
receipt of such opinion, instruct its transfer agent to remove the legend
described in paragraph 14(b) (ii) below. All transfer agent costs shall be borne
by N2P.

      In the event the Shares are not freely tradable under Rule 144 or
otherwise during the period between May 8, 2005 and the Purchase Date and
Assignee shall notify N2P of its intention to dispose of all of the Shares, then
N2P shall take all reasonably required actions to register the Shares so that
the same will be saleable. In the event N2P is unable to register the Shares to
enable Assignee to sell them, including pursuant to paragraph 2, Assignee shall
have no obligation to dispose of the Shares.

13. Counterparts. This Agreement may be executed in counterparts, each of which
shall, for all purposes, be deemed an original and all of such counterparts,
taken together, shall constitute the same agreement.

14. Certain Representations and Warranties and Covenants.

         (a) N2P hereby represents and warrants and covenants to the Assignee
that:

                  (i) All corporate action on the part of N2P, its officers,
directors and shareholders necessary for the authorization, execution and
delivery of this Agreement, and the other agreements contemplated hereby
("Agreements") and the performance of all obligations of N2P hereunder and
thereunder has been taken prior to the date hereof, and the Agreements, when
executed and delivered by N2P, shall constitute valid and legally binding
obligations of N2P, enforceable against N2P in accordance with their terms;

                  (ii) the transactions contemplated hereby are being entered
into by N2P in compliance with all applicable federal and state securities laws;

                  (iii) the transactions contemplated hereby will be accounted
for in N2P's financial statements in accordance with generally accepted
accounting principles;

                  (iv) First Albany Corporation is acting as exclusive agent on
behalf of N2P with respect to the transactions contemplated hereby and will
receive a placement fee from N2P upon the execution of this Agreement pursuant
to an engagement letter dated March 19, 2003;

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<PAGE>

                  (v) N2P will pay its own out-of-pocket expenses incurred in
connection with the transactions contemplated hereby;

                  (vi) the Security and the documentation entered into by N2P in
connection therewith constitute valid and legally binding obligations of N2P,
enforceable against N2P in accordance with their terms;

                  (vii) N2P (x) owns assets whose fair saleable value is greater
than the amount required to pay all of its indebtedness (including contingent
debts, which will be computed at the amounts which, in light of all the facts
and circumstances existing on the date hereof, represents the amounts that can
reasonably be expected to become an actual or matured liability), (y) is able to
pay all of its indebtedness as such indebtedness matures in the ordinary course
of business and (z) has capital sufficient to carry on its business and
transactions in the ordinary course of its business and all business and
transactions in which it is about to engage; and

                  (viii) N2P shall, with respect to (x) the representations,
warranties and agreements made by N2P herein arising from the untruth,
inaccuracy or breach of any such representations, warranties or agreements of
N2P hereunder and (y) any actions by third parties against Assignee in
connection with any Transfers by Assignee under the second paragraph of Section
2 above, indemnify, defend and hold Assignee harmless against all liability,
loss or damage, together with all reasonable costs and expenses related thereto
(including legal and accounting fees and expenses) arising therefrom.

         (b) Assignee hereby represents and warrants and covenants to N2P that:

                  (i) All corporate action on the part of Assignee, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement and the Agreements and the performance of all
obligations of Assignee hereunder and thereunder has been taken prior to the
date hereof, and the Agreements, when executed and delivered by Assignee, shall
constitute valid and legally binding obligations of Assignee, enforceable
against Assignee in accordance with their terms;

                  (ii) Assignee is a qualified institutional buyer within the
meaning of Rule 144A of the Securities Act of 1933, as amended, (the "Act") and
represents that it is acquiring the Shares for investment and not for
distribution and Assignee recognizes and acknowledges that the Shares may not be
disposed of except in accordance with an effective registration statement, the
provisions of Rule 144 under the Act or another exemption to the Act and,
subject to the provisions of paragraph 12 above, that the Shares will carry a
restrictive legend to such effect;

                  (iii) Assignee is entering into this Agreement solely based on
the documentation included in this Agreement and the Agreements and has not
relied on or requested any other information in making its investment decision
hereunder;

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<PAGE>

                  (iv) Assignee understands that First Albany Corporation is
acting as an exclusive agent on behalf of N2P and will not receive any
compensation from the Assignee;

                  (v) Assignee has relied on its own legal counsel and tax
experts for legal and tax advice in connection with the transactions
contemplated hereby;

                  (vi) Assignee will pay its own out-of-pocket expenses incurred
in connection with the transactions contemplated hereby; and

                  (vii) Assignee shall be responsible for any transfer fees or
taxes incurred as a result any assignment by the Assignee of this Agreement or
the Security.

         In Witness Hereof, the parties have caused this Agreement to be
executed the date and year first-above mentioned.

                                      Net2Phone, Inc.

                                      By:  ________________________
                                      Name:
                                      Title:

                                      Deutsche Bank AG London

                                      By:  ________________________
                                      Name:
                                      Title:

9

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