10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2003

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                 to                                 

Commission file number 0-27812

MEDALLION FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

DELAWARE	No. 04-3291176
(State of Incorporation)	(IRS Employer Identification No.)

437 MADISON AVENUE, NEW YORK, NEW YORK 10022

(Address of principal executive offices) ( Zip Code)

(212) 328-2100

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered to Section 12(g) of the Act:

Common Stock, par value $0.01 per share

(Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No.  ¨

The number of outstanding shares of registrant’s Common Stock, par value $0.01, as of November 6, 2003 was 18,252,728.

MEDALLION FINANCIAL CORP.

FORM 10-Q

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION	3
ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS	3
ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41
ITEM 4.    CONTROLS AND PROCEDURES	41
PART II—OTHER INFORMATION	41
ITEM 1.    LEGAL PROCEEDINGS	41
ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS	41
ITEM 3.    DEFAULTS UPON SENIOR SECURITIES	41
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	41
ITEM 5.    OTHER INFORMATION	42
ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K	42
SIGNATURES	43
CERTIFICATIONS	48

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PART I

FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PREPARATION

Medallion Financial Corp. (the Company) is a closed-end management investment company organized as a Delaware corporation. The Company has elected to be regulated as a Business Development Company (BDC) under the Investment Company Act of 1940, as amended (the 1940 Act). The Company conducts its business through various wholly-owned subsidiaries including its primary operating company, Medallion Funding Corp. (MFC), a Small Business Investment Company (SBIC) which originates and services taxicab medallion and commercial loans. As an adjunct to the Company’s finance business, the Company operates a taxicab rooftop advertising business, Medallion Taxi Media, Inc. (Media).

The financial information is divided into two sections. The first section, Item 1, includes the unaudited consolidated financial statements of the Company including related footnotes. The second section, Item 2, consists of Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and nine months ended September 30, 2003.

The consolidated balance sheet of the Company as of September 30, 2003, the related consolidated statements of operations for the three and nine months ended September 30, 2003, and the consolidated statement of cash flows for the nine months ended September 30, 2003 included in Item 1 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary to summarize fairly the Company’s financial position and results of operations. The results of operations for the three and nine months ended September 30, 2003 or for any other interim period may not be indicative of future performance. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

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MEDALLION FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three months ended September 30,				Nine months ended September 30,
	2003		2002		2003		2002
Interest and dividend income on investments	$6,558,507		$7,845,929		$19,441,511		$25,929,295
Interest income on short-term investments	43,623		106,280		157,001		324,314
Medallion lease income	91,203		—		91,203		—
Total investment income	6,693,333		7,952,209		19,689,715		26,253,609
Interest on floating rate borrowings	1,840,736		4,021,628		6,074,940		12,921,691
Interest on fixed rate borrowings	971,067		1,023,211		3,263,850		2,870,335
Total interest expense	2,811,803		5,044,839		9,338,790		15,792,026
Net interest income	3,881,530		2,907,370		10,350,925		10,461,583
Gains on sales of loans	87,967		147,295		803,666		735,514
Other income	905,534		782,692		2,765,880		3,765,365
Total noninterest income	993,501		929,987		3,569,546		4,500,879
Salaries and benefits	2,070,463		2,220,918		6,943,720		6,958,765
Professional fees	430,916		557,842		819,241		2,074,370
Cost of debt extinguishment	123,057		5,870,517		63,302		8,972,299
Other operating expenses	1,554,510		1,649,581		4,781,360		5,002,790
Total operating expenses	4,178,946		10,298,858		12,607,623		23,008,224
Net investment income (loss)	696,085		(6,461,501	)	1,312,848		(8,045,762	)
Net realized gains (losses) on investments	4,494,411		(975,416	)	12,146,878		(5,044,686	)
Net change in unrealized appreciation (depreciation) on investments	(4,025,981	)	(878,499	)	(11,090,773	)	358,987
Net realized/unrealized gain (loss) on investments	468,430		(1,853,915	)	1,056,105		(4,685,699	)
Income tax provision	53,471		68,323		72,774		68,323
Net increase (decrease) in net assets resulting from operations	$1,111,044		($8,383,739	)	$2,296,179		($12,799,784	)
Net increase (decrease) in net assets resulting from operations per share
Basic	$0.06		($0.46	)	$0.13		($0.70	)
Diluted	0.06		(0.46	)	0.13		(0.70	)
Weighted average common shares outstanding
Basic	18,245,228		18,242,728		18,243,570		18,242,728
Diluted	18,517,491		18,242,728		18,355,123		18,242,728

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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MEDALLION FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30, 2003			December 31, 2002
Assets
Medallion loans	$	277,242,543		$	210,475,921
Commercial loans		104,849,594			138,360,895
Equity investments		1,596,499			7,409,628
Net investments ($228,783,000 at September 30, 2003 and $244,370,000 at December 31, 2002 pledged as collateral under borrowing arrangements)		383,688,636			356,246,444
Investment in and loans to Media		3,748,683			4,505,356
Total investments		387,437,319			360,751,800
Cash ($853,000 in 2003 and $1,050,000 in 2002 restricted as to use by lender)		16,867,843			35,369,285
Accrued interest receivable		2,230,247			2,546,101
Servicing fee receivable		2,765,172			2,838,417
Fixed assets, net		1,244,759			1,551,781
Goodwill, net		5,007,583			5,007,583
Other assets, net		15,488,674			17,222,825
Total assets	$	431,041,597		$	425,287,792
Liabilities
Accounts payable and accrued expenses	$	6,339,624		$	7,066,118
Accrued interest payable		308,697			5,589,754
Floating rate borrowings		209,978,623			182,922,241
Fixed rate borrowings		50,935,000			67,845,000
Total liabilities		267,561,944			263,423,113
Shareholders’ equity
Preferred stock (1,000,000 shares of $0.01 par value stock authorized— none outstanding)		—			—
Common stock (50,000,000 shares of $0.01 par value stock authorized— outstanding—18,252,728 shares at September 30, 2003 and 18,242,728 at December 31, 2002)		182,527			182,427
Capital in excess of par value		173,741,558			173,449,716
Accumulated net investment losses		(10,444,432	)		(11,767,464	)
Total shareholders’ equity		163,479,653			161,864,679
Total liabilities and shareholders’ equity	$	431,041,597		$	425,287,792
Number of common shares		18,252,728			18,242,728
Net asset value per share	$	8.96		$	8.87

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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MEDALLION FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase (decrease) in net assets resulting from operations	$	2,296,179		($	12,799,784	)
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash used in operating activities:
Depreciation and amortization		489,647			454,319
Amortization of origination costs		999,063			1,023,491
Increase in unrealized (appreciation) depreciation on investments		7,763,081			(3,628,782	)
Net realized (gains) losses on investments		(12,146,878	)		5,044,686
Net realized gains on sales of loans		(803,666	)		(735,514	)
Increase in unrealized depreciation on Media		3,327,692			3,269,795
(Increase) decrease in accrued interest receivable		315,854			(28,809	)
Decrease in servicing fee receivable		73,245			599,912
Increase in other assets		(708,024	)		(3,352,538	)
Decrease in accounts payable and accrued expenses		(726,487	)		(1,473,240	)
Increase (decrease) in accrued interest payable		(5,281,058	)		2,389,879
Net cash used in operating activities		(4,401,352	)		(9,236,585	)
CASH FLOWS FROM INVESTING ACTIVITIES
Originations of investments		(188,621,260	)		(99,365,716	)
Proceeds from sales and maturities of investments		167,788,292			168,772,597
Investment in and loans to Media, net		(2,562,486	)		(1,994,281	)
Capital expenditures		(169,808	)		(145,125	)
Net cash provided by (used in) investing activities		(23,565,262	)		67,267,475
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from floating rate borrowings		153,846,532			101,329,935
Repayments of floating rate borrowings		(126,790,150	)		(185,530,990	)
Net proceeds from (repayments of) fixed rate borrowings		(16,910,000	)		24,000,000
Proceeds from issuance of common stock		48,500			—
Payments of declared dividends to current stockholders		(729,710	)		(2,190,938	)
Net cash provided by (used in) financing activities		9,465,172			(62,391,993	)
NET DECREASE IN CASH		(18,501,442	)		(4,361,103	)
CASH, beginning of period		35,369,285			25,409,058
CASH, end of period	$	16,867,843		$	21,047,955
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest	$	12,348,230		$	15,153,646
Cash paid during the period for income taxes		42,805			40,096
Non-cash investing activities—net transfers from (to) other assets		2,051,473			(8,000,000	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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MEDALLION FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2003

(1) ORGANIZATION OF MEDALLION FINANCIAL CORP. AND ITS SUBSIDIARIES

Medallion Financial Corp. (the Company) is a closed-end management investment company organized as a Delaware corporation. The Company has elected to be regulated as a Business Development Company (BDC) under the Investment Company Act of 1940, as amended (the 1940 Act). The Company conducts its business through various wholly-owned subsidiaries including its primary operating company, Medallion Funding Corp. (MFC), a Small Business Investment Company (SBIC) which originates and services taxicab medallion and commercial loans. As an adjunct to the Company’s finance business, the Company operates a taxicab rooftop advertising business, Medallion Taxi Media, Inc. (Media), which includes a small operating subsidiary in Japan. (See Note 3)

The Company also conducts its business through Business Lenders, LLC (BLL), licensed under the Small Business Administration (SBA) section 7(a) program; Medallion Business Credit, LLC (MBC), an originator of loans to small businesses for the purpose of financing inventory and receivables; and Medallion Capital, Inc. (MCI), which operates a mezzanine financing business, and Freshstart Venture Capital Corp. (FSVC), which originates and services taxicab medallion and commercial loans, both SBIC’s.

In September 2002, MFC established a wholly-owned subsidiary, Taxi Medallion Loan Trust I (Trust), for the purpose of owning medallion loans originated by MFC or others. The Trust is a separate legal and corporate entity with its own creditors who, in any liquidation of the Trust, will be entitled to be satisfied out of the Trust’s assets prior to any value in the Trust becoming available to the Trust’s equity holders. The assets of the Trust are not available to pay obligations of its affiliates or any other party, and the assets of affiliates or any other party are not available to pay obligations of the Trust. The Trust’s loans are serviced by MFC.

In June 2003, MFC established several wholly-owned subsidiaries who, along with an existing subsidiary (together, Medallion Chicago), purchased certain City of Chicago taxicab medallions which are leased to a fleet operator while being held for long-term appreciation in value.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The accounting and reporting policies of the Company conform with generally accepted accounting principles and general practices in the investment company industry. The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reporting and disclosure of assets and liabilities, including those that are of a contingent nature, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, except for Media. All significant intercompany transactions, balances, and profits have been eliminated in consolidation. As a non-investment company, Media cannot be consolidated with the Company, which is an investment company under the 1940 Act. See Note 3 for the presentation of financial information for Media.

Investment Valuation

The Company’s loans, net of participations and any unearned discount, are considered investments under the 1940 Act and are recorded at fair value. Loans are valued at cost less unrealized depreciation. Since no ready market exists for these loans, the fair value is determined in good faith by management and approved by the Board of Directors. In determining the fair value, the Company and Board of Directors consider factors such as the financial condition of the borrower, the adequacy of the collateral, individual credit risks, historical loss experience, and the relationships between current and projected market rates and portfolio rates of interest and maturities.

Investments in equity securities and stock warrants are recorded at fair value, represented as cost, plus or minus unrealized appreciation or depreciation, respectively. The fair value of investments that have no ready market is determined in good faith by management and approved by the Board of Directors based upon an analysis of the assets and revenues of the underlying investee companies, as well as general market trends for businesses in the same industry. Included in equity investments at September 30, 2003 are marketable and non-marketable securities of approximately $583,000 and $1,014,000, respectively. At December 31, 2002, the respective

7

balances were approximately $592,000 and $6,818,000. Because of the inherent uncertainty of valuations, management’s estimates of the values of the investments may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.

The Company’s investments consist primarily of long-term loans to persons defined by SBA regulations as socially or economically disadvantaged, or to entities that are at least 50% owned by such persons. Approximately 72% and 59% of the Company’s investment portfolio at September 30, 2003 and December 31, 2002 had arisen in connection with the financing of taxicab medallions, taxicabs, and related assets, of which 81% and 83%, respectively, were in New York City. These loans are collateralized by the medallions, taxicabs, and related assets, and are personally guaranteed by the borrowers, or in the case of corporations, are generally guaranteed personally by the owners. A portion of the Company’s portfolio represents loans to various commercial enterprises, in a variety of industries, including wholesaling, food services, financing, broadcasting, communications, real estate and lodging. These loans are collateralized by various receivables, equipment, and/or real estate, and are generally guaranteed by the owners. These loans are made primarily in the metropolitan New York City area. The remaining portion of the Company’s portfolio is from the origination of loans guaranteed by the SBA under its Section 7(a) program, less the sold guaranteed portion of those loans. Funding for the Section 7(a) program depends on annual appropriations by the US Congress.

Collateral Appreciation Participation Loans

During the 2000 first half, the Company originated collateral appreciation participation loans collateralized by 500 City of Chicago taxicab medallions of $29,800,000, of which $20,850,000 was syndicated to other financial institutions. In consideration for modifications from its normal taxi medallion lending terms, the Company offered loans at higher loan-to-value ratios, and was entitled to earn additional interest income based upon any increase in the value of all $29,800,000 of the collateral. During 2003 and 2002, $0 additional interest income was recorded. During 2002, 400 of the medallions were returned to the Company in lieu of repayment of the loans. As a result, $8,000,000 of these loans were carried in other assets, and $950,000 was carried in medallion loans, in total representing 2% of the Company’s assets. In addition, the borrower had not paid interest due of $1,265,000. Subsequently, the Company reached agreement to sell 300 of the 400 medallions to new borrowers at book value upon the transfer of the ownership of the medallion licenses by the City of Chicago, and 263 medallions for $5,260,000 had been reclassified back to medallion loans through September 30, 2003, reflecting the transfers to date. The Company also reached an agreement on a term payout of the interest due with the original borrower, which is carried at $1,156,000 and is on nonaccrual. The remaining 100 medallions have been sold to Medallion Chicago, including the syndicated portion, funded by notes with several banks. These medallions are being leased to a fleet operator while being held for long-term appreciation in value. As a RIC, the Company is required to mark-to-market these investments on a quarterly basis, as it does on all of its other investments. The Company believes that it has adequately calculated the fair market value of these investments in each accounting period, by relying upon information such as recent and historical medallion sale prices. The remaining loans for 100 medallions were due in June 2005, and all 100 of the medallions were returned to the Company in lieu of repayment of the loans in the 2003 fourth quarter. The Company has entered into negotiations with certain fleet operators who would buy the medallions for full value, similar to the transactions described above. However, there can be no assurances that such refinancing will occur.

Investment Transactions and Income Recognition

Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment to the yield of the related loans. At September 30, 2003 and December 31, 2002, net origination costs totaled approximately $1,620,000 and $1,449,000. Amortization expense was approximately $403,000 and $999,000 for the 2003 third quarter and year-to-date, and was $223,000 and $1,023,000 for the comparable 2002 periods.

Interest income is recorded on the accrual basis. Loans are placed on nonaccrual status, and all uncollected accrued interest is reversed, when there is doubt as to the collectibility of interest or principal, or if loans are 90 days or more past due, unless management has determined that they are both well-secured and in the process of collection. Interest income on nonaccrual loans is recognized only when cash is received and not applied against principal amounts outstanding. At September 30, 2003, June 30, 2003, December 31, 2002, and September 30, 2002, total nonaccrual loans were $29,037,000, $31,670,000, $24,208,000, and $32,811,000. The cumulative amount of interest income on nonaccrual loans that would have been recognized if the loans had been paying in accordance with their original terms was approximately $3,938,000 and $5,823,000 as of September 30, 2003 and 2002, respectively, of which $677,000 and $2,009,000 would have been recognized in the three and nine months ended September 30, 2003, and $1,050,000 and $2,929,000 would have been recognized in the comparable 2002 periods.

Loan Sales and Servicing Fee Receivable

The Company currently accounts for its sales of loans in accordance with Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities- a Replacement of FASB Statement No. 125” (SFAS 140). SFAS 140 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. The principal portion of loans serviced for others by the Company was approximately $177,137,000 and $222,269,000 at September 30, 2003 and December 31, 2002.

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Gain or losses on loan sales are primarily attributable to the sale of commercial loans which have been at least partially guaranteed by the SBA. The Company recognizes gains or losses from the sale of the SBA-guaranteed portion of a loan at the date of the sales agreement when control of the future economic benefits embodied in the loan is surrendered. The gains are calculated in accordance with SFAS 140, which requires that the gain on the sale of a portion of a loan be based on the relative fair values of the loan sold and the loan retained. The gain on loan sales is due to the differential between the carrying amount of the portion of loans sold and the sum of the cash received and the servicing fee receivable. The servicing fee receivable represents the present value of the difference between the servicing fee received by the Company (generally 100 to 400 basis points) and the Company’s servicing costs and normal profit, after considering the estimated effects of prepayments and defaults over the life of the servicing agreement. In connection with calculating the servicing fee receivable, the Company must make certain assumptions including the cost of servicing a loan including a normal profit, the estimated life of the underlying loan that will be serviced, and the discount rate used in the present value calculation. The Company considers 40 basis points to be its cost plus a normal profit and uses the note rate plus 100 basis points for loans with an original maturity of ten years or less, and the note rate plus 200 basis points for loans with an original maturity of greater than ten years as the discount rate. The note rate is generally the prime rate plus 2.75%.

The servicing fee receivable is amortized as a charge to loan servicing fee income over the estimated lives of the underlying loans using the effective interest rate method. The Company reviews the carrying amount of the servicing fee receivable for possible impairment by stratifying the receivables based on one or more of the predominant risk characteristics of the underlying financial assets. The Company has stratified its servicing fee receivable into pools, generally by the year of creation, and within those pools, by the term of the loan underlying the servicing fee receivable. If the estimated present value of the future servicing income is less than the carrying amount, the Company establishes an impairment reserve and adjusts future amortization accordingly. If the fair value exceeds the carrying value, the Company may reduce future amortization. The servicing fee receivable is carried at the lower of amortized cost or fair value.

The estimated net servicing income is based, in part, on management’s estimate of prepayment speeds, including default rates, and accordingly, there can be no assurance of the accuracy of these estimates. If the prepayment speeds occur at a faster rate than anticipated, the amortization of the servicing asset will be accelerated and its value will decline; and as a result, servicing income during that and subsequent periods would decline. If prepayments occur slower than anticipated, cash flows would exceed estimated amounts and servicing income would increase. The constant prepayment rates utilized by the Company in estimating the lives of the loans depend on the original term of the loan, industry trends, and the Company’s historical data. During 2001, the Company began to experience an increase in prepayment activity and delinquencies. These trends continued to worsen during 2001, and as a result the Company revised its prepayment assumptions on certain loan pools to between 25% and 35% from the 15% rate historically used on all pools. This resulted in $2,171,000 of charges to operations, increasing the reserve for temporary impairment of the servicing fee receivable during 2001. Since late in 2002, prepayment patterns have slowed. The Company evaluates the temporary impairment to determine if any such temporary impairment would be considered to be permanent in nature. The Company determined that $856,000 of the temporary impairment reserve had suffered a permanent loss in value and was now permanent. Additionally, during the 2003 first quarter, the Company determined that $300,000 of the temporary impairment reserve was no longer warranted due to the above discussed prepayment patterns and consequently, was reversed and recognized as servicing fee income. The prepayment rate of loans may be affected by a variety of economic and other factors, including prevailing interest rates and the availability of alternative financing to borrowers.

The activity in the reserve for servicing fee receivable follows:

	2003	2002
Balance at December 31,	$2,293,000	$2,376,000
Adjustment to carrying values(1)	856,000	—
Reductions credited to operations	300,000	—
Balance at March 31,	1,137,000	2,376,000
Activity during second quarter	—	—
Balance at June 30,	1,137,000	2,376,000
Activity during third quarter	—	—
Balance at September 30,	$1,137,000	$2,376,000

⁽¹⁾ During the 2003 first quarter, the Company determined that a fully reserved portion of the servicing asset had suffered a permanent loss in value, and accordingly, reduced both the balance of the gross servicing fee receivable and the related reserve by $856,000. There was no impact on the consolidated statement of income.

The Company also has the option to sell the unguaranteed portions of loans to third party investors. The gain or loss on such sales is calculated in accordance with SFAS No. 140. The discount related to unguaranteed portions sold would be reversed and the Company would recognize a servicing fee receivable or liability based on servicing fees retained by the Company. The Company is required to retain at least 5% of the unguaranteed portion of SBA guaranteed loans. The Company sold unguaranteed portions of loans to third party investors of $3,815,000 during the 2003 nine months and $5,442,000 in the 2002 nine months.

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Unrealized Appreciation (Depreciation) and Realized Gains (Losses) on Investments

The change in unrealized appreciation (depreciation) on investments is the amount by which the fair value estimated by the Company is greater (less) than the cost basis of the investment portfolio. Realized gains or losses on investments are generated through sales of investments, foreclosure on specific collateral, and writeoffs of loans or assets acquired in satisfaction of loans, net of recoveries. Unrealized depreciation on net investments (which excludes Media and foreclosed properties) was $8,534,000 as of September 30, 2003, $958,000 as of December 31, 2002, and $3,744,000 as of September 30, 2002. The Company’s investment in Media, as a wholly-owned portfolio investment company, is also subject to quarterly assessments of its fair value. The Company uses Media’s actual results of operations as the best estimate of changes in its fair value, and records the result as a component of unrealized appreciation (depreciation) on investments. See Note 3 for the presentation of financial information for Media.

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The table below shows changes in unrealized appreciation (depreciation) on net investments during the nine months ended September 30, 2003 and 2002.

	Loans		Equity Investments		Total
Balance, December 31, 2002(1)	($6,997,426	)	$6,039,584		($957,842	)
Change in unrealized
Appreciation on investments	—		1,536,220		1,536,220
Depreciation on investments	86,610		39,600		126,210
Reversal of unrealized appreciation (depreciation) related to realized
Losses on investments	523,640		—		523,640
Balance March 31, 2003(1)	(6,387,176	)	7,615,404		1,228,228
Change in unrealized
Appreciation on investments	—		321,407		321,407
Depreciation on investments	(3,752,538	)	18,000		(3,734,538	)
Reversal of unrealized appreciation (depreciation) related to realized
Gains on investments	(11,811	)	(3,980,179	)	(3,991,990	)
Losses on investments	615,791		—		615,791
Balance as of June 30, 2003(1)	(9,535,734	)	3,974,632		(5,561,102	)
Change in unrealized
Depreciation on investments	395,815		(900	)	394,915
Reversal of unrealized appreciation (depreciation) related to realized
Gains on investments	—		(3,752,387	)	(3,752,387	)
Losses on investments	384,081		—		384,081
Balance as of September 30, 2003(1)	($8,755,838	)	$221,345		($8,534,493	)
	Loans		Equity Investments		Total
Balance, December 31, 2001(1)	($9,626,304	)	$2,125,252		($7,501,052	)
Change in unrealized
Appreciation on investments	—		757,822		757,822
Depreciation on investments	(890,020	)	—		(890,020	)
Reversal of unrealized appreciation (depreciation) related to realized
Gains on investments	(1,411	)	—		(1,411	)
Losses on investments	696,536		—		696,536
Balance March 31, 2002(1)	(9,821,199	)	2,883,074		(6,938,125	)
Change in unrealized
Appreciation on investments	—		569,841		569,841
Depreciation on investments	(922,895	)	(66,669	)	(989,564	)
Reversal of unrealized appreciation (depreciation) related to realized
Losses on investments	3,255,018		80,016		3,335,034
Balance as of June 30, 2002(1)	(7,489,076	)	3,466,262		(4,022,814	)
Change in unrealized
Appreciation on investments	—		49,874		49,874
Depreciation on investments	(521,067	)	(222,300	)	(743,367	)
Reversal of unrealized appreciation (depreciation) related to realized
Gains on investments	(1,311	)	—		(1,311	)
Losses on investments	974,086		—		974,086
Balance as of September 30, 2002(1)	($7,037,368	)	$3,293,836		($3,743,532	)

⁽¹⁾ Excludes $141,000 of unrealized depreciation on foreclosed properties at September 30, 2003, $158,000 at June 30, 2003, $28,875 at March 31, 2003, $121,250 at December 31 and September 30, 2002, $19,480 at June 30 and March 31, 2002, and $43,090 at December 31,2001.

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The table below summarizes components of unrealized/realized gains and losses.

	Three months ended						Nine months ended
	September 30, 2003			September 30, 2002			September 30, 2003			September 30, 2002
Increase in net unrealized appreciation (depreciation) on net investments
Unrealized appreciation	$	—		$	49,874		$	1,857,627		$	1,377,537
Unrealized depreciation		394,915			(743,367	)		(3,213,413	)		(2,622,951	)
Unrealized depreciation on Media		(1,052,971	)		(1,026,526	)		(3,327,692	)		(3,269,795	)
Realized gains		(3,752,387	)		(1,311	)		(7,744,377	)		(2,722	)
Realized losses		384,081			974,086			1,523,512			5,005,656
Other		381			(5	)		381			—
Unrealized losses on foreclosed properties		—			(131,250	)		(186,811	)		(128,738	)
Total	($	4,025,981	)	($	878,499	)	($	11,090,773	)	$	358,987
Net realized gains (losses) on investments
Realized gains	$	4,922,496		$	1,311		$	13,769,739		$	2,722
Realized losses		(384,081	)		(974,086	)		(1,523,512	)		(5,005,656	)
Direct recoveries (charge-offs)		7,767			(11,407	)		83,191			(50,068	)
Realized gains (losses) on foreclosed properties		(51,771	)		8,766			(182,540	)		8,316
Total	$	4,494,411		($	975,416	)	$	12,146,878		($	5,044,686	)

Goodwill

Cost of purchased businesses in excess of the fair value of net assets acquired (goodwill) was amortized on a straight-line basis over fifteen years. Effective January 1, 2002, coincident with the adoption of SFAS No.142, “Goodwill and Intangible Assets,” the Company ceased the amortization of goodwill, and engaged a consultant to help management evaluate its carrying value. The results of this evaluation demonstrated no impairment in goodwill. The Company intends to conduct an annual appraisal of its goodwill, and will recognize any impairment in the period any impairment is identified.

Fixed Assets

Fixed assets are carried at cost less accumulated depreciation and amortization, and are depreciated on a straight-line basis over their estimated useful lives of 3 to 10 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated economic useful life of the improvement. Depreciation and amortization expense was $165,000, $490,000, $153,000, and $454,000 for the 2003 and 2002 third quarters and nine months, respectively.

Deferred Costs

Deferred financing costs, included in other assets, represents costs associated with obtaining the Company’s borrowing facilities, and is amortized over the lives of the related financing agreements. Amortization expense was $491,000, $2,374,000, $3,558,000, and $6,623,000 for the 2003 and 2002 third quarters and nine months. In addition, the Company capitalizes certain costs for transactions in the process of completion, including those for acquisitions and the sourcing of other financing alternatives. Upon completion or termination of the transaction, any accumulated amounts will be amortized against income over an appropriate period or written off. The amounts on the balance sheet for all of these purposes were $3,323,000 and $5,135,000 as of September 30, 2003 and December 31, 2002.

Federal Income Taxes

Traditionally, the Company and each of its corporate subsidiaries other than Media (the RIC subsidiaries) have elected to be treated for federal income tax purposes as a regulated investment company (RICs) under the Internal Revenue Code of 1986, as amended (the Code). As RICs, the Company and each of the RIC subsidiaries are not subject to US federal income tax on any gains or investment company taxable income (which includes, among other things, dividends and interest income reduced by deductible expenses) that it distributes to its shareholders, if at least 90% of its investment company taxable income for that taxable year is distributed. It is the Company’s and the RIC subsidiaries’ policy to comply with the provisions of the Code. The Company did not qualify to be treated as a RIC for 2002, primarily due to a shortfall of interest and dividend income related to total taxable income caused primarily by losses in MFC and other subsidiaries. As a result, the Company was treated as a taxable entity in 2002, which had an immaterial effect on the Company’s financial position and results of operations for 2002. Although there can be no assurances, the Company expected to qualify as a RIC in 2003, but it now anticipates that it will not elect RIC status in 2003 in order to better utilize the net operating loss carryforwards generated in 2002 and prior years.

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As a result of the above, for 2003 and for 2002, income taxes were provided under the provisions of SFAS No. 109, “Accounting for Income Taxes,” as the Company was treated as a taxable entity for tax purposes. Accordingly, the Company recognized current and deferred tax consequences for all transactions recognized in the consolidated financial statements, calculated based upon the enacted tax laws, including tax rates in effect for current and future years. Valuation allowances were established for deferred tax assets when it was more likely than not that they would not be realized.

Media is not a RIC and continues to be taxed as a regular corporation. For 2003 and 2002, Media’s losses have been included in the tax calculation of the Company along with MFC. The Trust is not subject to federal income taxation. Instead, the Trust’s taxable income is treated as having been earned by MFC.

Net Increase (Decrease) in Net Assets Resulting from Operations per Share (EPS)

Basic earnings per share are computed by dividing net increase (decrease) in net assets resulting from operations available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if option contracts to issue common stock were exercised, and has been computed after giving consideration to the weighted average dilutive effect of the Company’s common stock and stock options. The table below shows the calculation of basic and diluted EPS for the three and nine months ended September 30, 2003 and 2002.

	September 30, 2003			September 30, 2002
Three months ended		# of Shares	EPS			# of Shares	EPS
Net increase (decrease) in net assets resulting from operations	$1,111,044			($8,383,739	)
Basic EPS
Income (loss) available to common shareholders	$1,111,044	18,245,228	$0.06	($8,383,739	)	18,242,728	($0.46	)
Effect of dilutive stock options (1)(2)		272,263	—	—		—	—
Diluted EPS
Income (loss) available to common shareholders	$1,111,044	18,517,491	0.06	($8,383,739	)	18,242,728	($0.46	)
Nine months ended
Net increase (decrease) in net assets resulting from operations	$2,296,179			($12,799,784	)
Basic EPS
Income (loss) available to common shareholders	$2,296,179	18,243,570	$0.13	($12,799,784	)	18,242,728	($0.70	)
Effect of dilutive stock options (1) (2)		111,553	—	—		—	—
Diluted EPS
Income (loss) available to common shareholders	$2,296,179	18,355,123	$0.13	($12,799,784	)	18,242,728	($0.70	)

⁽¹⁾ Included in the 2003 third quarter and nine month calculations are 19,000 and 7,000 of diluted shares relating to 70,000 shares of options granted in June 2002, but not included in public filings until the date of this quarterly report. The proper inclusion of these amounts in prior calculations would have had no impact on reported EPS.

⁽²⁾ Because there were losses in the 2002 periods, the effect of stock options is antidilutive, and therefore is not presented.

Derivatives

Through June 2002, the Company was party to certain interest rate cap agreements. These contracts were entered into as part of the Company’s management of interest rate exposure, and limited the amount of interest rate risk that could be taken on a portion of the Company’s outstanding debt. All interest rate caps are designated as hedges of certain liabilities; however, any hedge ineffectiveness is charged to earnings in the period incurred. Premiums paid on the interest rate caps were previously amortized over the lives of the cap agreements and amortization of these costs was recorded as an adjustment to interest expense. Upon adoption of SFAS 133, the interest rate caps were recorded as a reduction of interest expense over the life of the agreements. No amounts were charged to earnings in 2003 or 2002. The Company had no interest rate cap agreements outstanding as of September 30, 2003.

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Reclassifications

Certain reclassifications have been made to prior year balances to conform with the current year presentation.

(3) INVESTMENT IN AND LOANS TO MEDIA

The following table presents Media’s consolidated statements of operations.

	Three months ended September 30,						Nine months ended September 30,
	2003			2002			2003			2002
Advertising revenue	$	1,562,439		$	1,783,443		$	4,226,045		$	5,013,139
Cost of fleet services		1,004,775			1,213,320			3,349,970			3,635,272
Gross profit		557,664			570,123			876,075			1,377,867
Depreciation and other non cash adjustments		595,898			342,028			1,829,210			1,354,235
Other operating expenses		1,062,369			1,258,841			3,251,418			3,941,494
Loss from operations		(1,100,603	)		(1,030,746	)		(4,204,553	)		(3,917,862	)
Other income		42,124			—			877,336			—
Loss before taxes		(1,058,479	)		(1,030,746	)		(3,327,217	)		(3,917,862	)
Income tax provision (benefit)		(5,508	)		(4,220	)		475			(648,067	)
Net loss	($	1,052,971	)	($	1,026,526	)	($	3,327,692	)	($	3,269,795	)

The following table presents Media’s consolidated balance sheets.

	September 30, 2003			December 31, 2002
Cash	$	143,440		$	211,090
Accounts receivable		1,411,889			1,031,698
Federal income tax receivable		—			278,531
Equipment, net		1,036,578			2,089,830
Prepaid signing bonuses		1,566,198			2,201,315
Goodwill		2,082,338			2,082,338
Other		455,564			291,654
Total assets	$	6,696,007		$	8,186,456
Accounts payable and accrued expenses		1,332,570		$	1,031,549
Deferred revenue		1,286,280			789,846
Due to parent		12,958,974			10,388,562
Note payable to banks		371,901			1,858,815
Federal income tax payable		20,438			—
Total liabilities		15,970,163			14,068,772
Equity		1,001,000			1,001,000
Accumulated net losses		(10,275,156	)		(6,883,316	)
Total accumulated net losses		(9,274,156	)		(5,882,316	)
Total liabilities and equity	$	6,696,007		$	8,186,456

Beginning late in 2001, Media’s operations became constrained by a very difficult advertising environment compounded by the rapid expansion of taxicab tops inventory that occurred during 1999 and 2000. Media began to recognize losses as growth in operating expenses exceeded growth in revenue. Media is actively pursuing new sales opportunities, including expansion and upgrading of the sales force, and has taken steps to reduce operating expenses, including renegotiation of fleet payments for advertising rights to better align ongoing revenues and expenses, and to maximize cash flow from operations. Media’s growth prospects are currently constrained by the operating environment and distressed advertising market that resulted from the general economic downturn. Media has developed an operating plan to fund only necessary operations out of available cash flow and intercompany borrowings, and to escalate its sales activities to generate new revenues. Although there can be no assurances, Media and the Company believe that this plan will enable Media to weather this downturn in the advertising cycle and maintain operations at existing levels until such time as business returns to historical levels.

In the 2003 third quarter, continued negotiations with certain fleets were concluded with the result that $324,000 that Media had accrued as payments to these fleets was reversed against Media’s cost of fleet services. Also, in the 2003 nine months, Media settled a claim against one of its fleet operators. The result was a termination of certain contractual relations, the payment of $1,052,000 to Media, the transfer of certain assets to the fleet operator, and the forgiveness of certain liabilities Media owed the fleet operator. The net result of this settlement was an $835,000 gain reflected as other income in the accompanying statement of operations. A portion of the proceeds

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from this settlement was used by Media to repay the balance of its US third-party outstanding debt. Also during the 2003 second quarter, Media determined that certain tops were no longer usable, and $398,000 of these tops were written off to depreciation expense.

In 2001, Media recorded a $1,350,000 tax provision to establish a valuation allowance against the future realization of a deferred tax asset that was recorded in prior periods relating to actual tax payments made for taxable revenue that had not been recorded for financial reporting purposes, of which $656,000 was reversed in the 2002 first quarter as a result of changes in the tax laws. During 2001, primarily as a result of expansion into numerous cities and the lag associated with selling those taxicab tops, Media began to incur losses for both financial reporting and tax purposes, indicating that this deferred tax asset now represented a receivable or refund from the tax authorities for those taxes previously paid. However, due to statutory limitations in 2001 on Media’s ability to carry these tax losses back more than two years, and the uncertainties concerning the level of Media’s taxable income in the future, Media determined to reserve against the receivable. In March 2002, Congress passed, and the President signed, an economic stimulus bill that among its provisions included a carryback provision for five years. As a result, Media carried back an additional $656,000 in the 2002 first quarter and retains a net operating loss carryforward of $6,163,287 at September 30, 2003.

The increase in amounts due to parent primarily reflected charges for salaries and benefits and corporate overhead paid by the parent on Media’s behalf. The decrease in equipment and prepaid signing bonuses included the adjustments related to the contract settlement and the tops writeoff described above. The increase in accounts receivable and deferred revenue reflect increased sales activity to be recognized in future periods. The reduction in federal income tax receivable reflected the collection of the refunds, the balance of which was received in the 2003 first quarter.

(4) FLOATING RATE BORROWINGS

In September 2002, the Company and MFC renegotiated a substantial portion of their outstanding debt. The Trust entered into a revolving line of credit with Merrill Lynch Bank, USA (MLB) for the purpose of acquiring medallion loans from MFC and to provide for future growth in the medallion lending business. The funds paid to MFC by the Trust were used to pay down notes payable to banks and senior secured notes. As a result of these paydowns, the Company and MFC were able to negotiate amendments to their existing facilities with the banks and noteholders. As of September 30, 2003, the Company and MFC had fully paid off its previous notes payable to banks and senior secured notes, were current on all debt obligations, and in full compliance with all terms and conditions.

Borrowings under the Trust’s revolving line of credit are collateralized by the Trust’s assets and borrowings under the notes payable to banks and the senior secured notes were collateralized by the assets of MFC and the Company.

The outstanding balances were as follows:

	September 30, 2003		December 31, 2002
Revolving line of credit	$	199,325,000	$	132,590,000
Notes payable to banks (1)		10,654,000		48,018,000
Senior secured notes		—		2,314,000
Total	$	209,979,000	$	182,922,000

(1) In the 2003 third and second quarters, the Company and MFC entered into lending arrangements with banks unconnected to the previous bank debt agreements. See additional information presented below.

(A) REVOLVING LINE OF CREDIT

In September 2002, and as renegotiated in September 2003, the Trust entered into a revolving line of credit agreement with Merrill Lynch Commercial Finance Corp., as successor to MLB, to provide up to $250,000,000 of financing to acquire medallion loans from MFC (MLB line), which increases to $300,000,000 in September 2004. MFC is the servicer of the loans owned by the Trust. The MLB line includes a borrowing base covenant and rapid amortization in certain circumstances. In addition, if certain financial tests are not met, MFC can be replaced as the servicer. The MLB line matures in September 2005. The interest rate is generally LIBOR plus 1.25% with an unused facility fee of 0.125%, effective September 2003, and was LIBOR plus 1.50% and 0.375%, previously. The facility fee was $375,000 at the September 2003 loan closing and $900,000 on the first anniversary date.

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(B) NOTES PAYABLE TO BANKS AND SENIOR SECURED NOTES

New Bank Loans

On April 30, 2003, the Company entered into a $7,000,000 note agreement with Atlantic Bank of New York, collateralized by certain assets of MBC. The note matures on November 1, 2003 and bears interest at Atlantic Bank’s prime rate plus 0.25%, payable monthly. Principal is due at maturity. Subsequent to quarter end, this note was renewed and extended to May 1, 2004 on the same terms and conditions.

On June 30, 2003, an operating subsidiary of MFC entered into a $2,000,000 note agreement with Banco Popular North America, collateralized by certain taxicab medallions owned by Medallion Chicago. The note matures June 1, 2007 and bears interest at the bank’s prime rate less 0.25%, payable monthly. Principal and interest payments of $18,000 are due monthly, with the balance due at maturity.

On July 11, 2003 certain operating subsidiaries of MFC entered into an aggregate $1,700,000 of note agreements with Atlantic Bank of New York and Israel Discount Bank, collateralized by certain taxicab medallions owned by Medallion Chicago. The notes mature July 8, 2006 and bear interest at the LIBOR plus 2%, adjusted annually, payable monthly. Principal and interest payments of $3,000 are due monthly, with the balance due at maturity.

The Company Bank Loan

The Company Bank Loan was paid off in the 2003 second quarter. It bore interest at the rate per annum of prime plus 0.5%. The Company Bank Loan permitted the payment of dividends solely to the extent necessary to enable the Company to maintain its status as a RIC, and to avoid the payment of excise taxes, consistent with the Company’s dividend policy. The Company Bank Loan was collateralized by all receivables and various other assets owned by the Company. All financial covenants except for the borrowing base covenants were waived during the term of the loan.

On July 31, 1998 (and as subsequently amended and restated), the Company and MBC entered into the Company Bank Loan, a committed revolving credit agreement with a group of banks. On September 21, 2001, the Company Bank Loan was extended to November 5, 2001 to allow for continuation of renewal discussions which were completed and an amendment signed on February 20, 2002. The Company Bank Loan was further amended on September 13, 2002. As of December 31, 2002, amounts available under this loan agreement were $0.

The MFC Bank Loan

The MFC Bank Loan was paid off in the 2003 second quarter. It bore interest at the rate per annum of prime, which increased to prime plus 0.5% on January 11, 2003, and further increased to prime plus 1% on May 11, 2003. The MFC Bank Loan permitted the payment of dividends solely to the extent necessary to enable MFC to maintain its status as a RIC and to avoid the payment of excise taxes, consistent with MFC’s dividend policy. The MFC Bank Loan was collateralized by all receivables and various other assets owned by MFC. The collateral for the MFC Bank Loan collateralized both the MFC Bank Loan and the MFC Note Agreements on an equal basis. All financial covenants except for the borrowing base covenants were waived during the term of the loan.

On March 27, 1992 (and as subsequently amended and restated), MFC entered into the MFC Bank Loan, a line of credit with a group of banks. Effective on June 1, 1999, MFC extended the MFC Bank Loan until September 30, 2001 at an aggregate credit commitment amount of $220,000,000, an increase from $195,000,000 previously, pursuant to the Amended and Restated Loan Agreement dated December 24, 1997. Amounts available under the MFC Bank Loan were reduced by amounts outstanding under the commercial paper program as the MFC Bank Loan acted as a liquidity facility for the commercial paper program. The MFC Bank Loan was further amended on March 30, 2001, September 30, 2001, December 31, 2001, April 1, 2002, and September 13, 2002. As of December 31, 2002, amounts available under the MFC Bank Loan were $0.

MFC Note Agreements

The MFC Note Agreements were paid off in the 2003 second quarter, and had similar terms to the MFC Bank Loan, except the initial interest rate was 8.85%, which increased to 9.35% on January 12, 2003, and further increased to 9.85% on May 12, 2003. A prepayment penalty of approximately $3,500,000 was paid in accordance with the prepayment provisions of the agreement.

On June 1, 1999, MFC issued $22,500,000 of Series A senior secured notes and on September 1, 1999, MFC issued $22,500,000 of Series B senior secured notes (together, the Notes). The Notes ranked pari passu with the Bank Loans through inter-creditor agreements, and were generally subject to the same terms, conditions, and covenants as the MFC Bank Loans.

16

Amendments to the Company Bank Loan, MFC Bank Loan, and MFC Note Agreements

Previously, in the 2001 fourth quarter, the Company Bank Loan matured and MFC was in default under its bank loan and its senior secured notes. As of April 1, 2002 and September 13, 2002, the Company and MFC obtained amendments to their bank loans and senior secured notes. The amendments, in general, waived all defaults through September 13, 2002, changed the maturity dates of the loans and notes, modified the interest rates borne on the bank loans and the secured notes, required certain immediate, scheduled or other prepayments of the loans and notes and reductions in the commitments under the bank loans, required the Company and MFC to engage or seek to engage in certain asset sales, and instituted additional operating restrictions and reporting requirements, with the final amendment reducing such rates.

In addition to the changes in maturity, the interest rates on the Company and MFC’s Bank Loans and MFC’s Note Agreements were modified, and additional fees were charged to renew and maintain the facilities and notes. The last amendments contained substantial limitations on our ability to operate and in some cases required modifications to our previous normal operations. Covenants restricting investment in certain subsidiaries, elimination of various intercompany balances between affiliates, limits on the amount and timing of dividends, the tightening of operating covenants, and additional reporting obligations were added as a condition of renewal.

Interest and Principal Payments

Interest and principal payments were paid monthly. Interest on the bank loans was calculated monthly at a rate indexed to the banks’ prime rate. Substantially all promissory notes evidencing the Company’s and MFC’s investments, other than those held by the Trust, were held by a bank as collateral agent under the agreements. The Company and MFC were required to pay an amendment fee of 25 basis points on the amount of the aggregate commitment for the Company. As noted above, the amendments to the Company’s bank loans and senior secured notes, entered into during 2002, involved changes, and in some cases increases, to the interest rates payable thereunder. In addition, during events of default, the interest rate borne on the lines of credit was based upon a margin over the prime rate rather than LIBOR. In addition to the interest rate charges, $15,062,000 had been incurred through September 30, 2003 for attorneys and other professional advisors, most working on behalf of the lenders, and for prepayment penalties and default interest charges, of which $123,000, $63,000, $5,871,000, and $8,972,000 were expensed as part of costs of debt extinguishment during the three and nine months ended September 30, 2003 and 2002, respectively, $312,000, $1,995,000, $182,000, and $642,000 were expensed as part of interest expense during the three and nine months ended September 30, 2003 and 2002, respectively, and $0, $0, $0, and $173,000 was expensed as part of professional fees in the three and nine months ended September 30, 2003 and 2002. The balance of $1,638,000, which relates solely to the Trust’s new line of credit with MLB, will be charged to interest expense over the remaining term of the line of credit.

(C) INTEREST RATE CAP AGREEMENTS

On June 22, 2000, MFC entered into an interest rate cap agreement limiting the Company’s maximum LIBOR exposure on $10,000,000 of MFC’s revolving credit facility to 7.25% until June 24, 2002. Premiums paid under interest rate cap agreements were fully expensed by the end of 2001. There were no unamortized premiums as of September 30, 2003.

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(5) FIXED RATE BORROWINGS

Outstanding SBA debentures, all of which mature more than 5 years from September 30, 2003, were as follows:

(Dollars in thousands) Due Date	September 30, 2003	December 31, 2002	Interest Rate(1)
September 1, 2011	$17,985	$17,985	6.77	%
March 1, 2013	16,300	15,000	5.51
March 1, 2012	10,500	10,500	7.22
September 1, 2013	3,150	—	2.49
September 1, 2012	3,000	3,000	5.55
March 1, 2007	—	4,210	—
September 1, 2007	—	4,060	—
March 1, 2006	—	2,000	—
December 1, 2006	—	5,500	—
June 1, 2007	—	3,000	—
March 1, 2013	—	1,300	—
June 1, 2005	—	520	—
December 1, 2005	—	520	—
June 1, 2006	—	250	—
Totals	$50,935	$67,845	6.12	%

⁽¹⁾ As of September 30, 2003

During 2001, FSVC and MCI were approved by the SBA to receive $36,000,000 each in funding over a period of five years. MCI drew down $10,500,000 during June 2001 and $4,500,000 during December 2001. FSVC drew down $7,485,000 in July 2001, $6,000,000 in January 2002, $3,000,000 in April 2002, $15,000,000 in September 2002, $1,300,000 in November 2002, and $3,150,000 in September 2003.

(6) SEGMENT REPORTING

The Company has two reportable business segments, lending and taxicab rooftop advertising. The lending segment originates and services medallion and secured commercial loans. The taxicab rooftop advertising segment sells advertising space to advertising agencies and companies in several major markets across the US and Japan, conducted by Media. Media is reported as a portfolio investment of the Company and is accounted for using the equity method of accounting. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The lending segment is presented in the consolidated financial statements of the Company. Financial information relating to the taxicab rooftop advertising segment is presented in Note 3.

For taxicab rooftop advertising, the increase in unrealized appreciation (depreciation) on the Company’s investment in Media represents Media’s net income or loss, which the Company uses as the basis for assessing the fair market value of Media. Taxicab rooftop advertising segment assets are reflected in investment in and loans to Media on the consolidated balance sheets.

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(7) OTHER INCOME AND OTHER OPERATING EXPENSES

The major components of other income were as follows:

	Three months ended September 30,				Nine months ended September 30,
	2003		2002		2003		2002
Late charges and prepayment penalties	$	360,983	$	300,145	$	936,577	$	983,958
Servicing fee income		239,250		211,032		987,496		722,062
Accretion of discount		85,391		136,809		395,405		476,560
Revenue sharing income		—		17,600		34,275		949,811
Other		219,910		117,106		412,127		632,974
Total other income	$	905,534	$	782,692	$	2,765,880	$	3,765,365

Included in servicing fee income was $300,000 in the 2003 first quarter to reduce the valuation reserve for the servicing fee receivable, which resulted from improvements in prepayment patterns (see Note 2). The reduction in accretion of discount in both periods was primarily due to the lower amounts of SBA Section 7 (a) loans outstanding. Included in revenue sharing income was a success fee earned on a mezzanine investment of $873,000 in the 2002 second quarter, and included in other income was, $115,000 of termination fees earned on deals that weren’t consummated in the 2003 third quarter, and referral fees and insurance proceeds of $111,000 in the 2002 second quarter.

The major components of other operating expenses were as follows:

	Three months ended September 30,				Nine months ended September 30,
	2003		2002		2003		2002
Facilities expense	$	289,290	$	281,704	$	888,604	$	803,375
Loan collection expense		204,246		185,766		587,971		515,853
Depreciation and amortization		164,784		153,430		489,647		454,319
Insurance		141,770		138,717		463,366		426,581
Travel, meals, and entertainment		120,475		125,367		352,688		438,253
Computer expense		69,164		81,553		188,522		209,177
Office expense		54,550		89,413		218,154		283,529
Directors fees		54,062		45,064		172,039		124,918
Telephone		45,192		47,490		136,026		157,800
Bank charges		38,748		35,651		179,772		159,374
Dues and subscriptions		18,976		34,286		81,387		81,669
Other expenses		353,253		431,140		1,023,184		1,347,942
Total operating expenses	$	1,554,510	$	1,649,581	$	4,781,360	$	5,002,790

The decreases in travel, meals, and entertainment; office; telephone; dues and subscriptions; and other expenses were primarily due to the Company’s continued efforts to decrease overall expenses. Directors fees increased primarily due to increases in the amounts paid to directors, in the number of directors serving on the Board, in the number of board meetings held.

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(8) SELECTED FINANCIAL RATIOS AND OTHER DATA

The following table provides selected financial ratios and other data:

	Three months ended September 30,						Nine months ended September 30,
	2003			2002			2003			2002
Per share data:
Net asset value at the beginning of the period	$	8.93		$	9.35		$	8.87		$	9.59
Net investment income(loss)		0.04			(0.35	)		0.07			(0.44	)
Realized gains (losses) on investments		0.24			(0.05	)		0.67			(0.28	)
Net unrealized appreciation (depreciation) on investments		(0.22	)		(0.06	)		(0.61	)		0.02
Net increase (decrease) in net assets resulting from operations		0.06			(0.46	)		0.13			(0.70	)
Issuance of common stock		0.00			0.00			0.00			0.00
Distribution of net investment income		(0.03	)		(0.03	)		(0.04	)		(0.03	)
Other		0.00			(0.00	)		0.00			0.00
Net asset value at the end of the period	$	8.96		$	8.86		$	8.96		$	8.86
Per share market value at beginning of period	$	6.97		$	5.28		$	3.90		$	7.90
Per share market value at end of period		6.30			4.77			6.30			4.77
Total return (1)		(36	%)		(9	%)		83	%		(39	%)
Ratios/supplemental data
Average net assets	$	163,151,000		$	167,300,000		$	162,071,000		$	170,998,000
Ratio of operating expenses to average net assets (2)		10	%		11	%		10	%		11	%
Ratio of net investment income (loss) to average net assets (2) (3)		1.99	%		1.73	%		1.14	%		0.62	%

(1) Total return is calculated by comparing the change in value of a share of common stock assuming the reinvestment of dividends on the payment date.

(2) For the 2003 and 2002 third quarter and nine months, excludes $123,0000, $63,000, $5,871,000, and $8,972,000, respectively, of costs of debt extinguishment from the calculation. Unadjusted, the ratios would have been 10% and 1.69% for operating expenses and net investment income for the 2003 third quarter, 10% and 1.08% for the 2003 nine months, 24% and (15.32%) for the 2002 third quarter, and 18% and (6.29%) for the 2002 nine months.

(3) Amounts shown for the 2002 third quarter and nine months are as reported in the 2002 Form 10Q. Amounts calculated using current methodology for the 2002 three and nine months would have been (1.40%) and 0.72%, respectively.

(9) SUBSEQUENT EVENT

On October 2, 2003, the Federal Deposit Insurance Corporation (FDIC) approved the application of Medallion Bank (MB), a wholly-owned subsidiary of the Company, for Federal deposit insurance, subject to certain conditions. This allows the Company to begin the process of capitalizing MB and commencing operations, which is expected in late 2003 or early in 2004.

Subsequent to quarter-end, BLL had an exit interview with the State of Connecticut (State) relating to a recently completed exam which raised concerns about BLL’s progress under the existing agreement. BLL disagreed with a number of points that were raised and has formally responded to the State. Certain of the State’s concerns covered $550,000 of potential additional valuation adjustments, which BLL believes were not necessary. If not satisfactorily resolved, these adjustments could impact BLL’s and the Company’s financial position in the future. Although there can be no assurances, BLL and the Company believe the State’s concerns will be satisfactorily addressed without material financial consequences.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial statements, the notes to those statements, and other financial information appearing elsewhere in this report.

This report contains forward-looking statements relating to future events and future performance of the Company within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without

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limitation, statements regarding the Company’s expectations, beliefs, intentions, or future strategies that are signified by the words expects, anticipates, intends, believes, or similar language. Actual results could differ materially from those anticipated in such forward-looking statements. All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any forward-looking statements. The Company cautions investors that its business and financial performance are subject to substantial risks and uncertainties.

GENERAL

Medallion Financial Corp. (the Company) is a specialty finance company that has a leading position in originating and servicing loans that finance taxicab medallions and various types of commercial businesses. Since 1996, the year in which the Company went public, it has increased its medallion loan portfolio at a compound annual growth rate of 11%, and its commercial loan portfolio at a compound annual growth rate of 15%. Total assets under our management, which includes assets serviced for third party investors, were approximately $608,179,000 as of September 30, 2003, and have grown from $215,000,000 at the end of 1996, a compound annual growth rate of 17%.

The Company’s loan-related earnings depend primarily on its level of net interest income. Net interest income is the difference between the total yield on the Company’s loan portfolio and the average cost of borrowed funds. The Company funds its operations through a wide variety of interest-bearing sources, such as revolving bank facilities, debentures issued to and guaranteed by the SBA, and bank term debt. Net interest income fluctuates with changes in the yield on the Company’s loan portfolio and changes in the cost of borrowed funds, as well as changes in the amount of interest-bearing assets and interest-bearing liabilities held by the Company. Net interest income is also affected by economic, regulatory, and competitive factors that influence interest rates, loan demand, and the availability of funding to finance the Company’s lending activities. The Company, like other financial institutions, is subject to interest rate risk to the degree that its interest-earning assets reprice on a different basis than its interest-bearing liabilities.

The Company also invests in small businesses in selected industries through its subsidiary MCI. MCI’s investments are typically in the form of secured debt instruments with fixed interest rates accompanied by warrants to purchase an equity interest for a nominal exercise price (such warrants are included in equity investments on the consolidated balance sheets). Interest income is earned on the debt investments.

Realized gains or losses on investments are recognized when the investments are sold or written off. The realized gains or losses represent the difference between the proceeds received from the disposition of portfolio assets, if any, and the cost of such portfolio assets. In addition, changes in unrealized appreciation or depreciation of investments are recorded and represent the net change in the estimated fair values of the portfolio assets at the end of the period as compared with their estimated fair values at the beginning of the period. Generally, realized gains (losses) on investments and changes in unrealized appreciation (depreciation) on investments are inversely related. When an appreciated asset is sold to realize a gain, a decrease in the previously recorded unrealized appreciation occurs. Conversely, when a loss previously recorded as an unrealized loss is realized by the sale or other disposition of a depreciated portfolio asset, the reclassification of the loss from unrealized to realized causes a decrease in net unrealized depreciation and an increase in realized loss.

The Company’s investment in Media, as a wholly-owned portfolio investment company, is also subject to quarterly assessments of fair value. The Company uses Media’s actual results of operations as the best estimate of changes in fair value, and records the result as a component of unrealized appreciation (depreciation) on investments.

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Trends in the Investment Portfolio

The Company’s investment income is primarily a component of the principal amount and yield on its investment portfolio. To identify trends in the yields, the portfolio is grouped by medallion loans, commercial loans, and equity investments. The following table illustrates the Company’s investments at fair value and the portfolio yields at the dates indicated.

	September 30, 2003					June 30, 2003					December 31, 2002					September 30, 2002
(Dollars in thousands)	Interest Rate (1)		Principal Balance			Interest Rate (1)		Principal Balance			Interest Rate (1)		Principal Balance			Interest Rate (1)		Principal Balance
Medallion loans
New York	6.23	%	$	223,810		6.55	%	$	220,599		7.41	%	$	174,682		7.95	%	$	169,758
Chicago	7.08			25,266		7.67			18,964		7.52			13,571		8.95			11,267
Boston	7.85			14,088		8.46			12,759		10.60			9,741		11.64			8,717
Newark	9.51			7,867		9.67			7,927		10.17			7,665		10.29			7,485
Cambridge	7.48			3,297		7.74			2,906		9.69			2,151		10.38			2,227
Other	9.86			3,124		9.94			3,330		10.55			3,548		10.79			3,704
Total medallion loans	6.54			277,452		6.87			266,485		7.74			211,358		8.33			203,158
Deferred loan acquisition costs				860					726					309					409
Unrealized depreciation on loans				(1,069	)				(1,146	)				(1,191	)				(1,106	)
Net medallion loans			$	277,243				$	266,065				$	210,476				$	202,461
Commercial loans
Secured mezzanine	13.43	%	$	34,686		12.86	%	$	34,449		12.87	%	$	33,361		12.48	%	$	36,077
Asset based	6.50			21,976		6.55			22,299		9.92			42,525		9.23			49,728
SBA Section 7(a)	6.90			21,811		7.54			24,740		7.38			32,665		7.94			47,133
Other secured commercial	8.73			33,669		9.35			33,138		9.20			36,013		9.79			43,794
Total commercial loans	9.39			112,142		9.47			114,626		9.85			144,564		9.14			176,732
Deferred loan acquisition costs				759					808					1,140					1,214
Discount on SBA section 7(a) loans sold				(364	)				(1,278	)				(1,537	)				(2,675	)
Unrealized depreciation on loans				(7,687	)				(8,390	)				(5,806	)				(5,931	)
Net commercial loans			$	104,850				$	105,766				$	138,361				$	169,340
Equity investments	0.00	%	$	1,375		0.00	%	$	1,370		0.00	%	$	1,370		0.00	%	$	1,510
Unrealized appreciation on equities				221					3,975					6,039					3,294
Net equity investments			$	1,596				$	5,345				$	7,409				$	4,804
Net investments at cost	7.36	%	$	390,969		7.65	%	$	382,481		8.60	%	$	357,292		8.70	%	$	381,400
Deferred loan acquisition costs				1,619					1,534					1,449					1,623
Discount on SBA section 7(a) loans sold				(364	)				(1,278	)				(1,537	)				(2,675	)
Unrealized appreciation on equities				221					3,975					6,039					3,294
Unrealized depreciation on loans				(8,756	)				(9,536	)				(6,997	)				(7,037	)
Net investments			$	383,689				$	377,176				$	356,246				$	376,605

(1) Represents the weighted average interest rate of the respective portfolio as of the date indicated.

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Investment Activity

The following table sets forth the components of activity in the net investment portfolio for the period indicated.

	Three months ended September 30,						Nine months ended September 30,
	2003			2002			2003			2002
Net investments at beginning of period	$	377,176,405		$	401,028,679		$	356,246,444		$	455,595,383
Investments originated		50,652,267			36,531,117			188,621,260			99,365,716
Sales and maturities of investments		(44,347,442	)		(52,174,481	)		(167,788,292	)		(168,772,597	)
Net transfers from (to) other assets		(1,050,394	)		(8,000,000	)		2,051,473			(8,000,000	)
Increase in unrealized appreciation (depreciation)(1)		(2,973,010	)		279,277			(7,576,270	)		3,757,520
Realized gains (losses) net(2)		4,546,182			(984,182	)		12,329,418			(5,053,001	)
Realized gain on sales of loans		87,967			147,295			803,666			735,514
Amortization of origination costs		(403,339	)		(222,661	)		(999,063	)		(1,023,491	)
Net increase (decrease) in investments		6,512,231			(24,423,635	)		27,442,192			(78,990,339	)
Net investments at end of period	$	383,688,636		$	376,605,044		$	383,688,636		$	376,605,044

(1) Excludes unrealized depreciation of $0, $186,811, $131,250, and $128,738 for the three and nine months ended September 30, 2003 and 2002, respectively, related to foreclosed properties, which are carried in other assets on the consolidated balance sheet.

(2) Excludes realized gains (losses) of ($51,771), ($182,540), $8,766, and $8,316 for the three and nine months ended September 30, 2003 and 2002 periods, respectively, related to foreclosed properties, which are carried in other assets on the consolidated balance sheet.

Portfolio Summary

Total Portfolio Yield

The weighted average yield of the total portfolio at September 30, 2003 was 7.36%, decreases of 29 basis points from 7.65% at June 30, 2003, 124 basis points from 8.60% at December 31, 2002, and 134 basis points from 8.70% at September 30, 2002. The decreases primarily reflected the reductions in the general level of interest rates in the economy, demonstrated by the reduction in the prime rate from 9.5% at the beginning of 2001 to 4% at quarter end. The general rate decrease was partially mitigated by the sizable number of fixed-rate medallion loans which reprice at longer intervals, and the generally high yields, including some at fixed rates, on the commercial portfolio. The Company is working on increasing both the percentage of commercial loans in the total portfolio and the origination of floating and adjustable-rate loans and non-New York City medallion loans.

Medallion Loan Portfolio

The Company’s medallion loans comprised 72% of the total investment portfolio of $383,689,000 at September 30, 2003, compared to 71% at the prior quarter end, 59% at year-end, and 53% a year ago. The medallion loan portfolio increased by $11,177,000 or 4% in the quarter, and $66,767,000 or 32% year-to-date, reflecting increases in most markets, particularly in New York City and Chicago, as loans were originated and refinanced in order to qualify for sale to the Trust at more favorable rates. The Company had $32,742,000 of loans participated to third party lenders for which the Company earns a fee for servicing the loans.

The weighted average yield of the medallion loan portfolio at September 30, 2003 was 6.54%, decreases of 33 basis points from 6.87% at the prior quarter-end, 120 basis points from 7.74% at December 31, 2002, and 179 basis points from 8.33% at September 30, 2002. The decreases in yield primarily reflected the generally lower level of interest rates in the economy as maturing and renewing loans are repriced at the lower current market rates. New York City medallion loans were 81% of the medallion portfolio compared to 83% at year-end, up 1% from 80% a year ago. The Company continues to focus its efforts on originating higher yielding medallion loans outside the New York City market.

Commercial Loan Portfolio

The Company’s commercial loans, which historically have had higher yields than medallion loans, comprised 27% of the total investment portfolio as of September 30, 2003 and the prior quarter-end, 39% at year-end, and 46% a year ago, generally reflecting decreases in all business lines, particularly in the asset-based lending and SBA Section 7(a) businesses, reflecting the slowdown in originations due to liquidity constraints, and the sales or participations of certain assets.

The weighted average yield of the commercial loan portfolio at September 30, 2003 was 9.39%, a decrease of 8 basis points from 9.47% at the prior quarter end, a decrease of 46 basis points from 9.85% at December 31 2002, and an increase of 25 basis points from

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9.14% at September 30, 2002. The changes generally related to changes in the portfolio mix between lower yielding and higher yielding portfolios, including the sales or participations resulting from our refinancing activities. The Company continues to originate adjustable-rate and floating-rate loans to help mitigate its interest rate risk in a rising interest rate environment. At September 30, 2003 and June 30, 2003, floating-rate loans represented approximately 51% of the commercial portfolio, compared to 62% and 68% at December 31, 2002 and September 30, 2002. Although this strategy initially produces a lower yield, we believe that this strategy mitigates interest rate risk by better matching our earning assets to their adjustable-rate funding sources.

Delinquency Trends

The following table shows the trend in loans 90 days or more past due:

	September 30, 2003			June 30, 2003				December 31, 2002			September 30, 2002
Dollars in thousands	$		%(1)	$		%(1)		$		%(1)	$		%(1)
Medallion loans	$	5,258	1.4%	$	4,579	1.2	%	$	7,519	2.1%	$	9,801	2.6	%
Commercial loans
Secured mezzanine		10,682	2.7		11,877	3.1			9,669	2.7		11,681	3.1
SBA Section 7(a) loans		5,279	1.4		6,565	1.7			8,326	2.3		10,106	2.7
Asset-based receivable		—	0.0		—	0.0			—	0.0		—	0.0
Other commercial secured loans		2,990	0.8		2,775	0.8			4,071	1.1		9,575	2.5
Total commercial loans		18,951	4.8		21,217	5.6			22,066	6.1		31,362	8.3
Total loans 90 days or more past due	$	24,209	6.2%	$	25,796	6.8	%	$	29,585	8.2%	$	41,163	10.9	%

(1) Percentage is calculated against the total investment portfolio.

In general, collection efforts over the past 18 months have substantially contributed to the sizable reduction in the overall delinquency patterns. The decrease in medallion delinquencies from a year ago primarily represents improvements as the economic fallout from the events of September 11, 2001 have receded and business for many fleet owners and individual drivers has returned to more normal patterns of delinquencies. The increase from the second quarter is viewed as a temporary spike. The overall increase in secured mezzanine financing delinquencies primarily reflected the impact of the economy on certain concession and media properties, some of which is believed to be of temporary nature, and is not unusual given the nature of this kind of business and the current stage of the economic cycle. The continued improvement in the trend of delinquencies in the SBA Section 7(a) portfolio and the other commercial secured loan portfolio primarily reflected management’s efforts to collect and restructure nonperforming loans, and the foreclosure of certain loans, transferring them to other assets. Included in the SBA Section 7(a) delinquency figures are $983,000, $2,028,000, $2,292,000, and $3,262,000 at September 30, 2003, June 30, 2003, December 31, 2002, and June 30, 2002, respectively, which represent loans repurchased for the purpose of collecting on the SBA guarantee. The Company is actively working with each delinquent borrower to bring them current, and believes that any potential loss exposure is reflected in the Company’s mark-to-market estimates on each loan. Although there can be no assurances as to changes in the trend rate, management believes that any loss exposures are properly reflected in reported asset values.

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The following table presents credit-related information for the net investment portfolio.

	Three months ended September 30,						Nine months ended September 30,
	2003			2002			2003			2002
Total loans
Medallion loans							$	277,242,543		$	202,461,476
Commercial loans								104,849,594			169,339,795
Total loans								382,092,137			371,801,271
Equity investments (1)								1,596,499			4,803,773
Net investments							$	383,688,636		$	376,605,044
Realized gains (losses) on loans and equity investments
Medallion loans	($	60,000	)	($	58,950	)	($	104,219	)	($	340,691	)
Commercial loans (2)		(316,315	)		(916,466	)		(1,332,863	)		(4,623,978	)
Total loans		(376,315	)		(975,416	)		(1,437,082	)		(4,964,669	)
Equity investments		4,870,726			—			13,583,960			(80,017	)
Total realized gains (losses) on loans and equity investments	$	4,494,411		($	975,416	)	$	12,146,878		($	5,044,686	)
Realized gains (losses) as a % of average balances outstanding (3)
Medallion loans		(0.09	%)		(0.11	%)		(0.05	%)		(0.18	%)
Commercial loans(2)		(1.19	)		(2.10	)		(1.73	)		(3.79	)
Total loans		(0.40	)		(1.00	)		(0.53	)		(1.60	)
Equity investments		764.34			0.00			337.63			(2.41	)
Net investments		4.69			(0.99	)		4.41			(1.61	)
Net unrealized appreciation (depreciation) on investments
Medallion loans							($	1,069,395	)	($	1,105,890	)
Commercial loans								(7,686,443	)		(5,931,478	)
Total loans								(8,755,838	)		(7,037,368	)
Equity investments								221,345			3,293,836
Total net unrealized depreciation on investments							($	8,534,493	)	($	3,743,532	)
Unrealized appreciation (depreciation) as a % of balances outstanding
Medallion loans								(0.39	%)		(0.55	%)
Commercial loans								(7.33	)		(3.50	)
Total loans								(2.29	)		(1.89	)
Equity investments								13.86			68.57
Net investments								(2.22	)		(0.99	)

(1) Represents common stock and warrants held as investments.

(2) Includes realized losses of $51,771 and $182,540 for the three and nine months ended September 30, 2003, and realized gains of $8,766 and $8,316 for the comparable 2002 periods, related to foreclosed properties, which are carried in other assets on the consolidated balance sheet.

(3) Realized (gains) losses as a % of average balance outstanding has been annualized.

Equity Investments

Equity investments were 1%, 1%, 2%, and 1% of the Company’s total portfolio at September 30, 2003, June 30, 2003, December 31, 2002, and September 30, 2002. Equity investments are comprised of common stock and warrants, primarily at MCI. The increase in equities over the last two years is primarily a result of the unrealized appreciation recorded on a publicly traded investment, all of which was sold in the 2003 third quarter and nine months.

Investment in and loans to Media

The investments and loans to Media represent the Company’s investment in its taxicab advertising business, including contributed capital, the Company’s share of accumulated losses, and intercompany loans provided to Media for operating capital.

Trend in Interest Expense

The Company’s interest expense is driven by the interest rate payable on its short-term credit facilities with banks, fixed-rate, long-term debentures issued to the SBA, and other short-term notes payable. As a result of amendments to the credit facilities and senior secured notes, the Company’s cost of funds increased during the first nine months of 2002, and decreased thereafter. As noted below, the amendments to the credit facilities and senior secured notes entered into during 2002 involved changes, and in some cases increases, to the interest rates payable thereunder. In addition, during events of default, the interest rate on the loans was increased by 2 percentage points. See the table on page 28 for the average cost of borrowed funds. The September 13, 2002 amendments repriced the bank loans to 5.25%

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for the Company and 4.75% for MFC, and repriced MFC’s senior secured notes to 8.85%. In addition to the interest rate charges, $15,062,000 had been incurred through September 30, 2003 for attorneys and other professional advisors, most working on behalf of the lenders, and for prepayment penalties and default interest charges, of which $123,000, $63,000, $5,871,000, and $8,972,000 were expensed as part of costs of debt extinguishment during the three and nine months ended September 30, 2003 and 2002, respectively, $312,000, $1,995,000, $182,000, and $642,000 were expensed as part of interest expense during the three and nine months ended September 30, 2003 and 2002, respectively, and $0, $0, $0, and $173,000 was expensed as part of professional fees in the three and nine months ended September 30, 2003 and 2002. The balance of $1,638,000, which relates solely to the Trust’s new line of credit with MLB, will be charged to interest expense over the remaining term of the line of credit.

During the 2002 third quarter, the Trust closed a $250,000,000 line of credit with MLB for lending on medallion loans, which was priced at LIBOR plus 1.50%, excluding fees and other costs. All of the draws on this line were paid to MFC for medallion loans purchased, and were used by MFC to repay higher priced debt with the banks and noteholders, and to purchase loans for the Trust from participants and affiliates. During the 2003 third quarter, this line was renegotiated and borrowings are now generally at LIBOR plus 1.25%.

The Company’s cost of funds is primarily driven by the rates paid on its various debt instruments and their relative mix, and changes in the levels of average borrowings outstanding. See Notes 4 and 5 to the consolidated financial statements for details on the terms of all outstanding debt. The Company’s debentures issued to the SBA typically have terms of ten years.

The Company measures its borrowing costs as its aggregate interest expense for all of its interest-bearing liabilities divided by the average amount of such liabilities outstanding during the period. The following table shows the average borrowings and related borrowing costs for the three and nine months ended September 30, 2003 and 2002. Average balances have declined from a year ago, primarily reflecting the sale or participation of loans to other financial institutions, reductions in the level of loan originations, and the usage of operating cash flow to raise capital for debt reductions and other corporate purposes. The decline in borrowing costs reflected the utilization of the lower cost revolving line of credit with MLB, and the trend of declining interest rates in the economy, partially offset by higher cost bank debt and related renewal expenses, and additional long-term SBA debt also at higher rates.

	Three Months Ended						Nine Months Ended
	Interest Expense		Average Balance		Average Cost of Funds		Interest Expense (1)		Average Balance		Average Cost of Funds
September 30, 2003
Floating rate borrowings	$	1,841,000	$	205,946,000	2.95	%	$	6,075,000	$	190,455,000	3.16	%
Fixed rate borrowings		971,000		56,281,000	6.44			3,264,000		62,841,000	6.50
Total	$	2,812,000	$	262,227,000	3.70		$	9,339,000	$	253,296,000	3.98
September 30, 2002
Floating rate borrowings	$	4,022,000	$	216,080,000	8.65	%	$	12,922,000	$	241,377,000	7.40	%
Fixed rate borrowings		1,023,000		53,334,000	7.11			2,870,000		51,350,000	6.90
Total	$	5,045,000	$	269,414,000	8.34		$	15,792,000	$	292,727,000	7.31

(1) Included in interest expense in the 2003 nine months was $538,000 of interest reversals. Adjusted for this amount, the floating rate borrowings average cost of borrowed funds and the total average cost of borrowed funds were 3.53% and 4.27%, respectively, in the 2003 nine months.

The Company will continue to seek SBA funding to the extent it offers attractive rates. SBA financing subjects its recipients to limits on the amount of secured bank debt they may incur. The Company uses SBA funding to fund loans that qualify under the Small Business Investment Act of 1958 (SBIA) and SBA regulations. The Company believes that its transition to financing operations primarily with short-term LIBOR-based secured bank debt has generally decreased its interest expense, but has also increased the Company’s exposure to the risk of increases in market interest rates, which the Company mitigates with certain hedging strategies. At September 30, 2003, December 31, 2002, and September 30, 2002, short-term LIBOR-based debt, constituted 80%, 73%, and 74% of total debt, respectively.

Taxicab Advertising

In addition to its finance business, the Company also conducts a taxicab rooftop advertising business through Media, which began operations in November 1994. Media’s revenue is affected by the number of taxicab rooftop advertising displays currently showing advertisements, and the rate charged customers for those displays. At September 30, 2003, Media had approximately 6,800 installed displays in the United States. The Company expects that Media will continue to expand its operations by entering new markets on its own or through acquisition of existing taxicab rooftop advertising companies. Although Media is a wholly-owned subsidiary of the Company, its results of operations are not consolidated with the Company’s operations because SEC regulations prohibit the consolidation of non-investment companies with investment companies.

26

Beginning late in 2001, Media’s operations became constrained by a very difficult advertising environment compounded by the rapid expansion of taxicab tops inventory that occurred during 1999 and 2000. Media began to recognize losses as growth in operating expenses exceeded growth in revenue. Media is actively pursuing new sales opportunities, including expansion and upgrading of the sales force, and has taken steps to reduce operating expenses, including renegotiation of fleet payments for advertising rights to better align ongoing revenues and expenses, and to maximize cash flow from operations. Media’s growth prospects are currently constrained by the operating environment and distressed advertising market that resulted from the general economic downturn. Media has developed an operating plan to fund only necessary operations out of available cash flow and intercompany borrowings, and to escalate its sales activities to generate new revenues. Although there can be no assurances, Media and the Company believe that this plan will enable Media to weather this downturn in the advertising cycle and maintain operations at existing levels until such time as business returns to historical levels.

In the 2003 third quarter, continued negotiations with certain fleets were concluded with the result that $324,000 that Media had accrued as payments to these fleets was reversed against Media’s cost of fleet services. Also, in the 2003 nine months, Media settled a claim against one of its fleet operators. The result was a termination of certain contractual relations, the payment of $1,052,000 to Media, the transfer of certain assets to the fleet operator, and the forgiveness of certain liabilities Media owed the fleet operator. The net result of this settlement was an $835,000 gain reflected as other income in the accompanying statement of operations. A portion of the proceeds from this settlement was used by Media to repay the balance of its US third-party outstanding debt. Also during the 2003 second quarter, Media determined that certain tops were no longer usable, and $398,000 of these tops were written off to depreciation expense.

In 2001, Media recorded a $1,350,000 tax provision to establish a valuation allowance against the future realization of a deferred tax asset that was recorded in prior periods relating to actual tax payments made for taxable revenue that had not been recorded for financial reporting purposes, of which $656,000 was reversed in the 2002 first quarter as a result of changes in the tax laws. During 2001, primarily as a result of expansion into numerous cities and the lag associated with selling those taxicab tops, Media began to incur losses for both financial reporting and tax purposes, indicating that this deferred tax asset now represented a receivable or refund from the tax authorities for those taxes previously paid. However, due to statutory limitations in 2001 on Media’s ability to carry these tax losses back more than two years, and the uncertainties concerning the level of Media’s taxable income in the future, Media determined to reserve against the receivable. In March 2002, Congress passed, and the President signed, an economic stimulus bill that among its provisions included a carryback provision for five years. As a result, Media carried back an additional $656,000 in the 2002 first quarter and retains a net operating loss carryforward of $6,163,287 at September 30, 2003.

The increase in amounts due to parent primarily reflected charges for salaries and benefits and corporate overhead paid by the parent on Media’s behalf. The decrease in equipment and prepaid signing bonuses included the adjustments related to the contract settlement and the tops writeoff described above. The increase in accounts receivables and deferred revenue reflect increased sales activity to be recognized in future periods. The reduction in federal income tax receivable reflected the collection of the refunds, the balance of which was received in the 2003 first quarter.

Factors Affecting Net Assets

Factors that affect the Company’s net assets include net realized gain or loss on investments and change in net unrealized appreciation on depreciation on investments. Net realized gain or loss on investments is the difference between the proceeds derived upon sale or foreclosure of a loan or an equity investment and the cost basis of such loan or equity investment. Change in net unrealized appreciation or depreciation on investments is the amount, if any, by which the Company’s estimate of the fair value of its investment portfolio is above or below the previously established fair value or the cost basis of the portfolio. Under the 1940 Act and the SBIA, the Company’s loan portfolio and other investments must be recorded at fair value.

Unlike certain lending institutions, the Company is not permitted to establish reserves for loan losses, but adjusts quarterly the valuation of our loan portfolio to reflect the Company’s estimate of the current value of the total loan portfolio. Since no ready market exists for the Company’s loans, fair value is subject to the good faith determination of the Company. In determining such fair value, the Company and its Board of Directors consider factors such as the financial condition of its borrowers and the adequacy of its collateral. Any change in the fair value of portfolio loans or other investments as determined by the Company is reflected in net unrealized depreciation or appreciation of investments and affects net increase in net assets resulting from operations but has no impact on net investment income or distributable income.

The Company’s investment in Media, as a wholly-owned portfolio investment company, is also subject to quarterly assessments of its fair value. The Company uses Media’s actual results of operations as the best estimate of changes in fair value and records the result as a component of unrealized appreciation (depreciation) on investments.

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SELECTED FINANCIAL DATA

Summary Consolidated Financial Data

You should read the consolidated financial information below with the Consolidated Financial Statements and Notes thereto for the quarters ended September 30, 2003 and 2002.

	Three months ended September 30,						Nine months ended September 30,
	2003			2002			2003			2002
Statement of Operations Data
Investment income	$	6,693,333		$	7,952,209		$	19,689,715		$	26,253,609
Interest expense		2,811,803			5,044,839			9,338,790			15,792,026
Net interest income		3,881,530			2,907,370			10,350,925			10,461,583
Gain on sale of loans		87,967			147,295			803,666			735,514
Other noninterest income		905,534			782,692			2,765,880			3,765,365
Operating expenses		4,178,946			10,298,858			12,607,623			23,008,224
Net investment income (loss) (1)		696,085			(6,461,501	)		1,312,848			(8,045,762	)
Net realized gains (losses) on investments		4,494,411			(975,416	)		12,146,878			(5,044,686	)
Net change in unrealized appreciation (depreciation) on investments (2)		(4,025,981	)		(878,499	)		(11,090,773	)		358,987
Income tax provision		53,471			68,323			72,774			68,323
Net increase (decrease) in net assets resulting from operations (3)	$	1,111,044		($	8,383,739	)	$	2,296,179		($	12,799,784	)
Per Share Data
Net investment income (loss) (1)	$	0.04		($	0.35	)	$	0.07		($	0.44	)
Realized gain (loss) on investments		0.24			(0.05	)		0.67			(0.28	)
Net unrealized appreciation (depreciation) on investments		(0.22	)		(0.06	)		(0.61	)		0.02
Net increase (decrease) in net assets resulting from operations (3)	$	0.06		($	0.46	)	$	0.13		$	0.70
Dividends declared	($	0.03	)	($	0.03	)	($	0.04	)	($	0.03	)
Weighted average common shares outstanding
Basic		18,245,228			18,242,728			18,243,570			18,242,728
Diluted		18,517,491			18,242,728			18,355,123			18,242,728
Balance Sheet Data
Net investments							$	383,688,636		$	376,605,043
Total assets								431,041,597			433,388,345
Total borrowed funds								260,913,623			261,643,945
Total liabilities								267,561,944			271,804,131
Total shareholders’ equity								163,479,653			161,584,214

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	Three months ended September 30,				Nine months ended September 30,
	2003		2002		2003		2002
Selected Financial Ratios And Other Data
Return on average assets (ROA) (4)
Net investment income (loss)	0.66	%	(5.41	)%	0.41	%	(2.27	)%
Net increase (decrease) in net assets resulting from operations	1.05		(7.02	)	0.72		(3.62	)
Return on average equity (ROE) (5)
Net investment income (loss)	1.69		(15.32	)	1.08		(6.29	)
Net increase (decrease) in net assets resulting from operations	2.70		(19.88	)	1.89		(10.01	)
Weighted average yield	6.83	%	7.93	%	7.04	%	8.22	%
Weighted average cost of funds	2.91		5.00		3.36		4.91
Net interest margin (6)	3.92	%	2.93	%	3.68	%	3.31	%
Noninterest income ratio (7)	1.04	%	0.94	%	1.30	%	1.44	%
Operating expense ratio (8)	4.37		10.42		4.58		7.35
As a percentage of net investment portfolio
Medallion loans					72	%	53	%
Commercial loans					27		46
Equity investments					1		1
Investments to assets (9)					89	%	87	%
Equity to assets (10)					38		37
Debt to equity (11)					160		162

(1) Excluding the costs related to debt extinguishment of $123,000, $63,000, $5,871,000, and $8,972,000 for the 2003 third quarter and nine months and comparable 2002 periods, net investment income would have been $819,000 or $0.05 per share, $1,376,000 or $0.08 per share, ($591,000) or ($0.03) per share, and $927,000 or $0.05 for the respective periods.

(2) Change in unrealized appreciation (depreciation) on investments represents the increase (decrease) for the period in the fair value of the Company’s investments, including the results of operations for Media.

(3) Excluding the costs described in note (1) above, net increase (decrease) in net assets resulting from operations would have been $1,234,000 or $0.07 per share, $2,359,000 or $0.13 per share, ($2,513,000) or ($0.14) per share, and ($3,827,000) or ($0.21) per share for the 2003 third quarter and nine months and the comparable 2002 periods.

(4) ROA represents the net investment income (loss) or net increase (decrease) in net assets resulting from operations for the period indicated, divided by average total assets. Excluding the costs described in note (1) above, ROA’s would have been 0.77% and 1.16% for the 2003 third quarter and 0.43% and 0.74% for the 2003 nine months. ROA’s would have been (0.49% )and (2.10%) for the 2002 third quarter and 0.26% and (1.08%) for the 2002 nine months.

(5) ROE represents the net investment income (loss) or net increase (decrease) in net assets resulting from operations for the period indicated, divided by average shareholders’ equity. Excluding the costs described in note (1) above, ROE’s would have been 1.99% and 3.00% for the 2003 third quarter and 1.14% and 1.95% for the 2003 nine months. ROE’s would have been (1.40%) and (5.96%) for the 2002 third quarter and 0.72% and (2.99%) for the 2002 nine months.

(6) Net interest margin represents net interest income for the period divided by average interest earning assets.

(7) Noninterest income ratio represents noninterest income for the period indicated divided by average interest earning assets.

(8) Operating expense ratio represents operating expenses for the period divided by average interest earning assets. Excluding the costs described in note (1) above, the ratios would have been 4.24% and 4.56% for the 2003 third quarter and nine months, and 4.48% for the 2002 third quarter and nine months.

(9) Represents net investments divided by total assets.

(10) Represents total shareholders’ equity divided by total assets.

(11) Represents total borrowed funds divided by total shareholders’ equity.

Consolidated Results of Operations

2003 Third Quarter and Nine Months compared to the 2002 Periods

Net increase in net assets resulting from operations was $1,111,000 or $0.06 per diluted common share and $2,296,000 or $0.13 per share in the 2003 third quarter and nine months, up $9,495,000 and $15,096,000 from losses of $8,384,000 or $0.46 per share and $12,800,000 or $0.70 per share in the 2002 third quarter and nine months, primarily reflecting the costs of debt extinguishment, appreciation on investments, and lower operating expenses in both periods, and also higher net interest income in the quarter, and was partially offset by lower noninterest income in the nine months. Included in all periods were costs related to the debt extinguishment efforts of the Company including prepayment penalties, default interest charges, loan fees, legal fees, and consultant costs of $123,000 and $63,000 for the 2003 quarter and nine months, and $5,871,000 and $8,972,000 for the 2002 periods. Net increase in net assets resulting from operations excluding the costs related to debt extinguishment was $1,234,000 or $0.07 per share and $2,359,000 or $0.13 per share in

29

the 2003 quarter and nine months, increases of $3,747,000 and $6,187,000 from losses of $2,513,000 or $0.14 per share and $3,828,000 or $0.21 per share the 2002 periods. Net investment income was $696,000 or $0.04 per share and $1,313,000 or $0.07 per share in the 2003 quarter and nine months, increases of $7,158,000 and $9,359,000 from losses of $6,462,000 or $0.35 per share and $8,046,000 or $0.44 per share in the 2002 periods. Excluding the costs related to debt extinguishment, net investment income was $819,000 or $0.04 per share and $1,376,000 or $0.07 per share for the 2003 quarter and nine months, increases of $1,410,000 and $450,000 or 49% from a loss of $591,000 or $0.03 per share and income of $926,000 or $0.05 per share the 2002 periods.

Investment income was $6,693,000 and $19,690,000 in the 2003 third quarter and nine months, down $1,259,000 or 16% and $6,564,000 or 25% from $7,952,000 and $26,254,000 in the year ago periods, primarily reflecting the significant drop in interest rate, and also in the nine months, in average total investments. The yield on the investment portfolio was 6.83% and 7.04% in the 2003 quarter and nine months, both down 14% from yields of 7.93% and 8.22% in the year ago periods, reflecting the reduced level of market interest rates compared to a year ago. Average investments outstanding were $383,585,000 and $371,990,000 in the quarter and nine months, down 4% and 12% from $397,791,000 and $424,541,000 in the year ago periods, primarily reflecting the nonrenewal of certain business and sales of participation interests, so the Company could raise cash as the banks and senior noteholders required the Company to reduce the level of borrowings in the revolving lines of credit and senior notes.

Medallion loans were $277,243,000 at quarter end, up $11,177,000 or 4% from $266,066,000 in the prior quarter, and up $66,767,000 or 32% from $210,476,000 a year ago, representing 72% of the investment portfolio compared to 71% in the prior quarter, and 59% at yearend, and were yielding 6.54%, compared to 6.87% at the end of the second quarter, and 7.74% at yearend. The increase in loans primarily reflected efforts to book new business and repurchase certain participations, primarily in the Chicago, New York City, and Boston markets, to maximize the utilization of the lower cost MLB line. As medallion loans renewed during the year and new business was booked, they were priced at generally lower current market rates. The commercial loan portfolio was $104,850,000 at quarter end, compared to $105,766,000 at the prior quarter end, a decrease of $916,000 or 1%, and compared to $138,361,000 at yearend, a decrease of $33,511,000 or 24%. Commercial loans represented 27% of the investment portfolio, compared to 28% at the prior quarter end and 39% at yearend, and yielded 9.39% at quarter end, compared to 9.47% at the prior quarter end and 9.85% at yearend, reflecting the continued drops in the prime lending rate during the period. The decrease in commercial loans from yearend occurred in most business lines, especially the asset-based lending and SBA Section 7(a) businesses. The decreases in the loan portfolios were primarily a result of the banks and senior noteholders requiring the Company to reduce the level of outstandings in the revolving lines of credit and senior notes. See page 24 for a table which shows loan balances and portfolio yields by type of loan.

Interest expense was $2,812,000 and $9,339,000 in the 2003 third quarter and nine months, down $2,233,000 or 44% and $6,453,000 or 41% from $5,045,000 and $15,792,000 in the 2002 third quarter and nine months. Included in interest expense in the 2003 third quarter and nine months was $313,000 and $1,994,000 related to the amortization of debt origination costs, partially offset by $538,000 of interest reversals in the 2003 nine months. The 2002 third quarter and nine months had $0 and $1,389,000 in of additional costs associated with the debt refinancings during the preceding 18 months. The decreases in interest expense were due primarily to lower borrowing costs, and in the nine months, also to lower average debt outstanding. The cost of borrowed funds was 4.25% and 4.93% in the quarter and nine months, compared to 7.71% and 7.16% in the year ago periods, decreases of 45% and 31%, primarily attributable to the increased utilization of the lower cost MLB line compared to the higher priced bank and noteholder debt that resulted from amendments entered into in late 2001 and early 2002. Average debt outstanding was $262,227,000 and $253,296,000 in the quarter and nine months, compared to $257,930,000 and $289,144,000 in the year ago periods, an increase of 2% and a decrease of 12%, respectively, reflecting the final payout of bank and noteholder debt during 2003, partially offset by the increasing utilization of the MLB line. Approximately 80% of the Company’s debt was short-term and floating or adjustable rate at quarter end, compared to 78% at the end of the second quarter and 73% at yearend. See page 24 for a table which shows average balances and cost of funds for the Company’s funding sources.

Net interest income was $3,882,000 and $10,351,000, and the net interest margin was 3.92% and 3.69%, for the 2003 quarter and nine months, up $974,000 or 34% and down $111,000 or 1% from $2,907,000 and $10,462,000 in the 2002 periods, representing net interest margins of 2.93% and 3.31% for the 2002 periods, reflecting the items discussed above.

Noninterest income was $994,000 and $3,570,000 in the 2003 third quarter and nine months, up $64,000 or 7% and down $931,000 or 21% from $930,000 and $4,501,000 in the year ago periods. Gains on the sale of loans were $88,000 and $804,000 in the 2003 quarter and nine months, down $59,000 or 40% and up $68,000 or 9% from $147,000 and $736,000 in the 2002 periods, which included gains from the sales of unguaranteed portions of the SBA portfolio of $179,000 in the 2003 nine months and $108,000 in the 2002 nine months. During 2003, $1,095,000 and $6,778,000 of loans were sold under the SBA program in the quarter and nine months, compared to $1,846,000 and $11,146,000 in 2002, declines of 41% and 39%. The decrease in gains on sale under the SBA program reflected a decrease in loans sold, partially offset by a higher level of market-determined premiums received on the sales in the 2003 periods. Other income, which is comprised of servicing fee income, prepayment fees, late charges, and other miscellaneous income, was $906,000 and $2,766,000 in the 2003 quarter and nine months, up $123,000 or 16% and down $999,000 or 27% from $783,000 and $3,765,000 in the year ago periods. Included in the 2003 quarter was $132,000 from deal-termination fees and $60,000 from profit-sharing income, and also in the nine months was $300,000 related to reversing a portion of the servicing asset impairment reserve which was no longer required due to improved prepayment patterns in the servicing asset pools. The 2002 nine months included a success fee earned on a mezzanine investment of $873,000, unusually large prepayment penalties of $127,000 for two loans, a $56,000 referral fee, and $55,000 from insurance proceeds received on a customer. Excluding those items, other income was $714,000 and $2,274,000 in the 2003 quarter

30

and nine months, compared to $783,000 and $2,654,000 in the 2002 periods, decreases of $25,000 or 3% and $380,000 or 14%, generally reflecting a reduced level of fees from a smaller investment portfolio.

Operating expenses were $4,179,000 and $12,608,000 in the 2003 third quarter and nine months, compared to $10,299,000 and $23,008,000 in the 2002 periods, and included costs related to debt extinguishment of $123,000 and $63,000 in the 2003 quarter and nine months, and $5,871,000 and $8,972,000 in the 2002 periods for prepayment penalties, default interest charges, loan fees, legal fees, and consultant costs. Excluding these costs, operating expenses were $4,056,000 and $12,545,000 in the 2003 periods, down $372,000 or 8% and $1,491,000 or 11% from $4,428,000 and $14,036,000 in the 2002 quarter and nine months. Salaries and benefits expense was $2,070,000 and $6,944,000 in the quarter and nine months, down $150,000 or 7% and $15,000 from $2,221,000 and $6,959,000 in the 2002 periods, primarily reflecting savings from headcount reductions, partially offset by salary-related expenses associated with the organization costs connected with Medallion Bank, severance accruals for terminated employees, and increased bonus accruals. Professional fees were $431,000 and $819,000 in the 2003 periods, down $127,000 or 23% and $1,255,000 or 61% from $558,000 and $2,074,000 in the 2002 periods, primarily reflecting sharply reduced legal and accounting fees in 2003 as a result of new accounting and legal counsel relationships and efficiencies, compared to substantially higher levels in 2002, which also included legal and consultant costs related to debt negotiations. Other operating expenses of $1,555,000 and $4,781,000 in the 2003 quarter and nine months were down $95,000 or 6% and $222,000 or 4% from $1,650,000 and $5,003,000 in 2002, reflecting the Company efforts to reduce expenses.

Net unrealized depreciation on investments was $4,026,000 and $11,091,000 in the 2003 third quarter and nine months, compared to $878,000 and appreciation of $359,000 in the 2002 quarter and nine months. Net unrealized depreciation on investments net of Media was $2,973,000 and $7,763,000, compared to appreciation of $148,000 and $3,629,000 in the year ago periods, decreases of $3,121,000 and $11,392,000. Unrealized appreciation (depreciation) arises when the Company makes valuation adjustments to the investment portfolio. When investments are sold or written off, any resulting realized gain (loss) is grossed up to reflect previously recorded unrealized components. As a result, movement between periods can appear distorted. The 2003 third quarter activity resulted from the reversals of unrealized appreciation associated with appreciated equity investments that were sold of $3,752,000 ($7,744,000 for the nine months) and net unrealized depreciation of $187,000 for the nine months on foreclosed property, partially offset by net unrealized appreciation on loans and equities of $395,000 ($3,213,000 of depreciation for the nine months), reversals of unrealized depreciation associated with fully depreciated loans which were charged off of $384,000 ($1,524,000 for the nine months), and increases in the valuation of equity investments of $1,857,000 for the nine months. The 2002 third quarter activity resulted from the reversals of unrealized depreciation associated with fully depreciated loans and equities which were charged off of $974,000 ($5,007,000 for the nine months) and the increase in valuation of equity investments of $49,000 ($1,378,000 for the nine months), partially offset by unrealized depreciation on loans and equities of $874,000 ($2,752,000 for the nine months).

Also included in unrealized appreciation (depreciation) on investments were the net losses of the Media division of the Company. Media generated net losses of $1,053,000 and $3,328,000 in 2003 third quarter and nine months, up $26,000 or 3% and $58,000 or 2% from net losses of $1,027,000 and $3,270,000 in the 2002 periods. Included in the 2003 third quarter was a $324,000 reversal of accrued fleet costs which resulted from continued contract renegotiations, and in the nine months was an $835,000 net gain from the settlement of a lawsuit with one of our fleet operators, partially offset by a $398,000 writeoff of damaged/missing tops, and in the 2002 nine months was a $656,000 tax benefit to reverse a portion of the $1,350,000 charge taken in 2001 to establish a reserve against the realizability of deferred tax benefits previously recorded due to changes in Media’s tax situation and the greater costs associated with the rapid increase in tops under contract and cities serviced, which outpaced the increase in revenue. The reversal resulted from the change in the tax law allowing for an additional two year carryback of net operating losses. Adjusted for these items, Media lost $1,380,000 and $4,092,000 in the 2003 third quarter and nine months, compared to $1,027,000 and $3,926,000 in the 2002 periods, increased losses of $353,000 or 34% and $166,000 or 4%. The overall net loss position is primarily a result of decreased revenue, which continued to be impacted by the depressed advertising market, and high fixed overhead, partially offset by reduced fleet costs which declined at a slower rate than revenue as fleet contracts were renegotiated. Advertising revenues were $1,562,000 and $4,226,000 in the 2003 periods, down $221,000 or 12% and $787,000 or 16% from $1,783,000 and $5,013,000 in 2002. Vehicles under contract in the US were 6,800, down 2,900 or 30% from 9,700 a year ago, primarily reflecting efforts to reduce fleet costs. Media’s results also included losses of $263,000 and $702,000 for the 2003 periods, and $200,000 and $519,000 for the related 2002 periods, related to foreign operations (5,800 tops/racks under contract), which are suffering from the same slowdown in advertising that is hurting the US market.

The Company’s net realized gain on investments was $4,494,000 and $12,147,000 in the 2003 third quarter and nine months, compared to losses of $975,000 and $5,045,000 for the 2002 periods, reflecting the above, and direct gains on sales of equity investments of $1,170,000 in the quarter ($6,025,000 for the nine months) and by net recoveries of $8,000 ($83,000 for the nine months), partially offset by $52,000 of realized losses on foreclosed properties in both periods, compared to 2002 net chargeoffs of $83,000 ($41,000 for the nine months).

The Company’s net realized/unrealized gains on investments were $468,000 and $1,056,000 in the 2003 third quarter and nine months, compared to losses of $1,854,000 and $4,686,000 for the 2002 periods, reflecting the above.

31

ASSET/LIABILITY MANAGEMENT

Interest Rate Sensitivity

The Company, like other financial institutions, is subject to interest rate risk to the extent its interest-earning assets (consisting of medallion loans and commercial loans) reprice on a different basis over time in comparison to its interest-bearing liabilities (consisting primarily of credit facilities with banks and subordinated SBA debentures).

Having interest-bearing liabilities that mature or reprice more frequently on average than assets may be beneficial in times of declining interest rates, although such an asset/liability structure may result in declining net earnings during periods of rising interest rates. Abrupt increases in market rates of interest may have an adverse impact on our earnings until we are able to originate new loans at the higher prevailing interest rates. Conversely, having interest-earning assets that mature or reprice more frequently on average than liabilities may be beneficial in times of rising interest rates, although this asset/liability structure may result in declining net earnings during periods of falling interest rates. This mismatch between maturities and interest rate sensitivities of our interest-earning assets and interest-bearing liabilities results in interest rate risk.

The effect of changes in interest rates is mitigated by regular turnover of the portfolio. Based on past experience, the Company anticipates that approximately 40% of the portfolio will mature or be prepaid each year. The Company believes that the average life of its loan portfolio varies to some extent as a function of changes in interest rates. Borrowers are more likely to exercise prepayment rights in a decreasing interest rate environment because the interest rate payable on the borrower’s loan is high relative to prevailing interest rates. Conversely, borrowers are less likely to prepay in a rising interest rate environment.

In addition, the Company manages its exposure to increases in market rates of interest by incurring fixed-rate indebtedness, such as ten year subordinated SBA debentures. The Company had outstanding SBA debentures of $50,935,000 with a weighted average interest rate of 6.12%, constituting 20% of the Company’s total indebtedness as of September 30, 2003.

Interest Rate Cap Agreements

The Company seeks to manage the exposure of the portfolio to increases in market interest rates by entering into interest rate cap agreements to hedge a portion of its variable-rate debt against increases in interest rates and by incurring fixed-rate debt consisting primarily of subordinated SBA debentures and private term notes.

We entered into an interest rate cap agreement on a notional amount of $10,000,000 limiting our maximum LIBOR exposure on our revolving credit facility until June 24, 2002 to 7.25%.

Total premiums paid under the interest rate cap agreements have been expensed. There are no unamortized premiums on the balance sheet as of September 30, 2003. The Company will seek to manage interest rate risk by originating adjustable-rate loans, by incurring fixed-rate indebtedness, by evaluating appropriate derivatives, pursuing securitization opportunities, and by other options consistent with managing interest rate risk.

Liquidity and Capital Resources

Our sources of liquidity are the revolving line of credit with MLB, unfunded commitments from the SBA for long-term debentures that are issued to or guaranteed by the SBA, loan amortization and prepayments, and participations or sales of loans to third parties. As a RIC, we have been required to distribute at least 90% of our investment company taxable income; consequently, we historically have primarily relied upon external sources of funds to finance growth. In September 2002, the Trust entered into a $250,000,000 revolving line of credit with MLB for the purpose of funding medallion loans acquired from MFC and others. At September 30, 2003, $50,675,000 of this line was available for future use. In May 2001, the Company applied for and received $72,000,000 of additional funding with the SBA ($113,400,000 to be committed by the SBA in total), subject to the infusion of additional equity capital into the respective subsidiaries. At September 30, 2003, $21,065,000 of this commitment is still available. Since SBA financing subjects its recipients to certain regulations, the Company will seek funding at the subsidiary level to maximize its benefits.

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The components of our debt were as follows at September 30, 2003:

	Balance		Percentage		Rate(1)
Revolving line of credit	$	199,325,000	76	%	2.55	%
SBA debentures		50,935,000	20		6.12
Notes payable to banks		10,654,000	4		3.98
Total outstanding debt	$	260,914,000	100	%	3.31

(1) Weighted average contractual rate as of September 30, 2003.

The Company values its portfolio at fair value as determined in good faith by management and approved by the Board of Directors in accordance with the Company’s valuation policy. Unlike certain lending institutions, the Company is not permitted to establish reserves for loan losses. Instead, the Company must value each individual investment and portfolio loan on a quarterly basis. The Company records unrealized depreciation on investments and loans when it believes that an asset has been impaired and full collection is unlikely. The Company records unrealized appreciation on equities if it has a clear indication that the underlying portfolio company has appreciated in value and, therefore, the Company’s security has also appreciated in value. Without a readily ascertainable market value, the estimated value of the Company’s portfolio of investments and loans may differ significantly from the values that would be placed on the portfolio if there existed a ready market for the investments. The Company adjusts the valuation of the portfolio quarterly to reflect management’s estimate of the current fair value of each investment in the portfolio. Any changes in estimated fair value are recorded in the Company’s statement of operations as net unrealized appreciation (depreciation) on investments. The Company’s investment in Media, as a wholly-owned portfolio investment company, is also subject to quarterly assessments of its fair value. The Company uses Media’s actual results of operations as the best estimate of changes in fair value and records the result as a component of unrealized appreciation (depreciation) on investments.

In addition, the illiquidity of our loan portfolio and investments may adversely affect our ability to dispose of loans at times when it may be advantageous for us to liquidate such portfolio or investments. In addition, if we were required to liquidate some or all of the investments in the portfolio, the proceeds of such liquidation may be significantly less than the current value of such investments. Because we borrow money to make loans and investments, our net operating income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income. In periods of sharply rising interest rates, our cost of funds would increase, which would reduce our net operating income before net realized and unrealized gains. We use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. Our long-term fixed-rate investments are financed primarily with short term floating rate debt, and to a lesser extent with long-term fixed-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. The Company has analyzed the potential impact of changes in interest rates on interest income net of interest expense. Assuming that the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical immediate 1% change in interest rates would have affected net increase (decrease) in assets by approximately $659,000 for 2003. Although management believes that this measure is indicative of the Company’s sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the balance sheet, and other business developments that could affect net increase (decrease) in assets in a particular quarter or for the year taken as a whole. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by this estimate.

The Company continues to work with investment banking firms and other financial intermediaries to investigate the viability of a number of other financing options which include, among others, the development of a securitization conduit program and other independent financing for certain subsidiaries or asset classes. These financing options would also provide additional sources of funds for both external expansion and continuation of internal growth.

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The following table illustrates sources of available funds for the Company and each of the subsidiaries, and amounts outstanding under credit facilities and their respective end of period weighted average interest rates at September 30, 2003.

(Dollars in thousands)	The Company	MFC	BLL		MCI	MBC	FSVC	Total	December 31, 2002
Cash	$548	$3,262	($93	)	$6,510	$3,406	$3,235	$16,868	$35,369
Bank loans(1)
Amounts outstanding	7,000	3,654						10,654	48,018
Average interest rate	4.25%	3.45%						3.98%	4.83%
Maturity	11/03	7/06-6/07						11/03-6/07	8/03
Lines of Credit (2)		250,000						250,000	250,000
Amounts undisbursed		50,675						50,675	117,410
Amounts outstanding		199,325						199,325	132,590
Average interest rate		2.55%						2.55%	3.11%
Maturity		9/05						9/05	9/03
SBA debentures(3)					36,000		36,000	72,000	92,060
Amounts undisbursed					21,000		65	21,065	24,215
Amounts outstanding					15,000		35,935	50,935	67,845
Average interest rate					6.90%		5.80%	6.12%	6.24%
Maturity					3/06-3/12		3/07-3/13	3/06-3/13	6/05-3/13
Senior secured notes(1)								—	2,314
Average interest rate								—	8.85%
Maturity								—	8/03
Total cash and remaining amounts undisbursed under credit facilities	$548	$53,937	($93	)	$27,510	$3,406	$3,300	$88,608	$176,994
Total debt outstanding	$7,000	$202,979	$—		$15,000	$—	$35,935	$260,914	$250,767

⁽¹⁾ The bank loans and senior secured notes were paid off in April 2003 for the Company and May 2003 for MFC. On April 30, the Company entered into a $7,000,000 note with Atlantic Bank secured by certain loans of MBC, which subsequent to quarter end which was renewed and extended to May 1, 2004 on the same terms and conditions. On June 30, 2003 Medallion Chicago entities entered into a $2,000,000 note with Banco Popular secured by certain owned operating medallions. On July 11, 2003 Medallion Chicago entities entered into an additional $1,700,000 of notes, split between IDB and Atlantic Bank, secured by certain owned operating medallions.

⁽²⁾ Line of credit with MLB for medallion lending. Line was extended on September 12, 2003 until September 2005 at improved pricing, fees, terms, and conditions. The committed amount can grow to $300,000,000 in September 2004.

⁽³⁾ The remaining amounts under the approved commitment from the SBA may be drawn down through May 2006, upon submission of a request for funding by MCI and/or FSVC, and its subsequent acceptance by the SBA.

Loan amortization, prepayments, and sales also provide a source of funding for the Company. Prepayments on loans are influenced significantly by general interest rates, medallion loan market rates, economic conditions, and competition. Loan sales are a major focus of the SBA Section 7(a) loan program conducted by BLL, which is primarily set up to originate and sell loans. Increases in SBA 7(a) loan balances in any given period generally reflect timing differences in selling and closing transactions.

Furthermore, the Company has been approved to receive FDIC insurance on deposits in an Industrial Loan Corporation (ILC) to be headquartered in Salt Lake City, Utah. It is expected MB will be capitalized and begin operations, including the soliciting of deposits, late in 2003 or early in 2004. The Company believes that its credit facilities with MLB and the SBA, and cash flow from operations (after distributions to shareholders), and deposits generated at MB will be adequate to fund the continuing operations of the Company’s loan portfolio and advertising business.

Media funds its operations through internal cash flow and intercompany debt. Media is not a RIC and, therefore, is able to retain earnings to finance growth. Media’s growth prospects are currently constrained by the operating environment and distressed advertising market that resulted from the general economic downturn. Media has developed an operating plan to fund only necessary operations out of available cash flow and intercompany borrowings, and to escalate its sales activities to generate new revenues. Although there can be no assurances, Media and the Company believe that this plan will enable Media to weather this downturn in the advertising cycle and maintain operations at existing levels until such times as business returns to historical levels.

Recently Issued Accounting Standards

In December 2002, the Financial Accounting Standards Board (FASB) issued Statement No. 148, “Accounting for Stock-Based Compensation- Transition and Disclosure- An Amendment of FASB Statement No. 123,” which provides optional transition guidance for those companies electing to voluntarily adopt the accounting provisions of SFAS No. 123. In addition, the statement mandates certain interim disclosures that are incremental to those required by Statement No. 123. The Company will continue to account for stock-based

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compensation in accordance with APB No. 25. As such, the Company does not expect this standard to have a material impact on its consolidated financial position or results of operations. The Company adopted the disclosure-only provisions of SFAS No. 148 at December 31, 2002.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which expands previously issued accounting guidance and disclosure requirements for certain guarantees. The Interpretation requires an entity to recognize an initial liability for the fair value of an obligation assumed by issuing a guarantee. The provision for initial recognition and measurement of the liability will be applied on a prospective basis to guarantees issued or modified after December 31, 2002. The Company does not expect this Interpretation to have a material impact on its consolidated financial position or results of operations.

In April, 2002, the FASB issued Statement No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” This statement updates, clarifies, and simplifies existing accounting pronouncements, including the criteria used to classify gains and losses from extinguishment of debt. The Company adopted this standard in the 2002 second quarter in its accounting for extinguishment of debt.

In June 2001, the FASB issued Statement No. 142, “Goodwill and Other Intangible Assets,” requiring that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually, effective for fiscal years beginning after December 15, 2001. The Company adopted this standard effective January 1, 2002, and has determined there is no financial statement impact of adoption. At September 30, 2003, the Company had $5,008,000 of goodwill on its consolidated balance sheet and $2,082,000 recorded on the balance sheet of Media, its wholly-owned subsidiary, that will be subject to the asset impairment review required by SFAS 142.

Common Stock

Our common stock is quoted on the Nasdaq National Market under the symbol “TAXI.” Our common stock commenced trading on May 23, 1996. As of November 11, 2003, there were approximately 124 holders of record of the Company’s common stock.

On November 11, 2003, the last reported sale price of our common stock was $8.40 per share. Historically, our common stock has traded at a premium to net asset value per share, and although there can be no assurance, the Company anticipates that its stock will again trade at a premium in the future.

The following table sets forth, for the periods indicated, the range of high and low closing prices for the Company’s common stock on the Nasdaq National Market.

2003	HIGH		LOW
Third Quarter	$	7.08	$	6.28
Second Quarter		7.03		3.70
First Quarter		4.82		3.19
2002
Fourth Quarter	$	5.17	$	3.90
Third Quarter		5.20		3.02
Second Quarter		7.20		3.64
First Quarter		9.20		7.77

As a non RIC in 2002, and due to the expected election not to be a RIC in 2003, dividend distributions are at management’s discretion. Prior to 2002, as required, we distributed at least 90% of our investment company taxable income to our stockholders, and if the expected RIC election is made in 2004 and subsequent years, we intend to distribute at least 90% of our investment company taxable income to our shareholders as well. Distributions of our income were generally required to be made within the calendar year the income was earned as a RIC; however, in certain circumstances distributions can be made up to a full calendar year after the income has been earned. Investment company taxable income includes, among other things, dividends and interest reduced by deductible expenses. Our ability to make dividend payments as a RIC is restricted by certain asset coverage requirements under the 1940 Act and has been dependent upon maintenance of our status as a RIC under the Code in the past, by SBA regulations, and under the terms of the SBA debentures. There can be no assurances, however, that we will have sufficient earnings to pay such dividends in the future.

We have adopted a dividend reinvestment plan pursuant to which stockholders may elect to have distributions reinvested in additional shares of common stock. When we declare a dividend or distribution, all participants will have credited to their plan accounts the number of full and fractional shares (computed to three decimal places) that could be obtained with the cash, net of any applicable withholding taxes that would have been paid to them if they were not participants. The number of full and fractional shares is computed at the weighted average price of all shares of common stock purchased for plan participants within the 30 days after the dividend or

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distribution is declared plus brokerage commissions. The automatic reinvestment of dividends and capital gains distributions will not release plan participants of any incoming tax that may be payable on the dividend or capital gains distribution. Stockholders may terminate their participation in the dividend reinvestment plan by providing written notice to the Plan Agent at least 10 days before any given dividend payment date. Upon termination, we will issue to a stockholder both a certificate for the number of full shares of common stock owned and a check for any fractional shares, valued at the then current market price, less any applicable brokerage commissions and any other costs of sale. There are no additional fees or expenses for participation in the dividend reinvestment plan. Stockholders may obtain additional information about the dividend reinvestment plan by contacting the Plan Agent at 59 Maiden Lane, New York, NY, 10038.

INVESTMENT CONSIDERATIONS

Interest rate fluctuations may adversely affect the interest rate spread we receive on our taxicab medallion and commercial loans.

Because we borrow money to finance the origination of loans, our income is dependent upon the difference between the rate at which we borrow funds and the rate at which we loan funds. While the loans in our portfolio in most cases bear interest at fixed-rates or adjustable-rates (which adjust at various intervals), we finance a substantial portion of such loans by incurring indebtedness with adjustable or floating interest rates (which adjust immediately to changes in rates). As a result, our debt may adjust to a change in interest rates more quickly than the loans in our portfolio. In periods of sharply rising interest rates, our costs of funds would increase, which would reduce our portfolio income before net realized and unrealized gains. Accordingly, like most financial services companies, we face the risk of interest rate fluctuations. Although we intend to continue to manage our interest rate risk through asset and liability management, including the use of interest rate caps, general rises in interest rates will tend to reduce our interest rate spread in the short term. In addition, we rely on our counterparties to perform their obligations under such interest rate caps.

A decrease in prevailing interest rates may lead to more loan prepayments, which could adversely affect our business.

Our borrowers generally have the right to prepay their loans upon payment of a fee ranging from 30 to 120 days interest. A borrower is likely to exercise prepayment rights at a time when the interest rate payable on the borrower’s loan is high relative to prevailing interest rates. In a lower interest rate environment, we will have difficulty re-lending prepaid funds at comparable rates, which may reduce the net interest spread we receive.

We have traditionally been a RIC, and because as a RIC we must distribute our income, we may have a continuing need for capital if we continue to qualify as a RIC in the future.

We have a continuing need for capital to finance our lending activities. Our current sources of capital and liquidity are the following:

• line of credit for medallion lending;

• loan amortization and prepayments;

• sales of participation interests in loans;

• fixed-rate, long-term SBA debentures that are issued to the SBA; and

• borrowings from other financial intermediaries.

As a RIC, we have been required to distribute at least 90% of our investment company taxable income. Consequently, we historically have primarily relied upon external sources of funds to finance growth. At September 30, 2003, we had $50,675,000 available under the Company’s revolving line of credit with MLB, $21,065,000 available under outstanding commitments from the SBA, and $7,672,000 available under a loan sale agreement with a participant bank. In addition, once MB begins operations and raises deposits, it is expected to generate additional liquidity for the Company.

We may have difficulty raising capital to finance our planned level of lending operations.

Although the Company has demonstrated an ability to meet significant debt amortization requirements in the last 18 months, and has received approval to operate MB and begin raising federally-insured deposits and has several refinancing options in progress and under consideration, there can be no assurance that additional funding sources to meet amortization requirements or future growth targets will be successfully obtained. See the additional discussion related to the credit facilities and note agreements in the Liquidity and Capital Resources section on page 32.

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Lending to small businesses involves a high degree of risk and is highly speculative.

Lending to small businesses involves a high degree of business and financial risk, which can result in substantial losses and should be considered speculative. Our borrower base consists primarily of small business owners that have limited resources and that are generally unable to achieve financing from traditional sources. There is generally no publicly available information about these small business owners, and we must rely on the diligence of our employees and agents to obtain information in connection with our credit decisions. In addition, these small businesses often do not have audited financial statements. Some smaller businesses have narrower product lines and market shares than their competition. Therefore, they may be more vulnerable to customer preferences, market conditions or economic downturns, which may adversely affect the return on, or the recovery of, our investment in these businesses.

Our borrowers may default on their loans.

We primarily invest in and lend to companies that may have limited financial resources. Numerous factors may affect a borrower’s ability to repay its loan, including:

• the failure to meet its business plan;

• a downturn in its industry or negative economic conditions;

• the death, disability or resignation of one or more of the key members of management; or

• the inability to obtain additional financing from traditional sources.

Deterioration of a borrower’s financial condition and prospects may be accompanied by deterioration of the collateral for the loan. Expansion of our portfolio and increases in the proportion of our portfolio consisting of commercial loans could have an adverse impact on the credit quality of the portfolio.

We borrow money, which may increase the risk of investing in our common stock.

We use financial leverage through banks and our long-term subordinated SBA debentures. Leverage poses certain risks for our stockholders, including the following:

• it may result in higher volatility of both our net asset value and the market price of our common stock;

• since interest is paid to our creditors before any income is distributed to our stockholders, fluctuations in the interest payable to our creditors may decrease the dividends and distributions to our stockholders; and

• in the event of a liquidation of the Company, our creditors would have claims on our assets superior to the claims of our stockholders.

Our failure to remedy certain internal control deficiencies at our BLL subsidiary could have an adverse affect on our business operations.

Subsequent to quarter-end, BLL had an exit interview with the State of Connecticut (State) relating to a recently completed exam which raised concerns about BLL’s progress under the existing agreement. BLL disagreed with a number of points that were raised and has formally responded to the State. Certain of State’s concerns covered $550,000 of potential additional valuation adjustments, which BLL believes were not necessary. If not satisfactorily resolved, these adjustments could impact BLL’s and the Company’s financial position in the future. Although there can be no assurances, BLL and the Company believe the State’s concerns will be satisfactorily addressed without material financial consequences.

The Company’s BLL subsidiary has been operating under an agreement with the State of Connecticut to, among other things, improve BLL’s liquidity and capital ratios, correct certain operational weaknesses, improve the quality of assets, and increase the level of valuation allowances, the latter of which has already been reflected in these financial statements. The Board of Directors of BLL has entered into an agreement to address these areas of concern, which are similar to those in previous reports. There can be no assurance that BLL will be able to fully comply with its provisions. BLL has historically represented less than 1% of the profits of the Company.

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If we are unable to continue to diversify geographically, our business may be adversely affected if the New York City taxicab industry experiences a sustained economic downturn.

Although we have diversified from the New York City area, a significant portion of our taxicab advertising and loan revenue is derived from New York City taxicabs and medallion loans collateralized by New York City taxicab medallions. An economic downturn in the New York City taxicab industry could lead to an increase in defaults on our medallion loans and may also adversely affect the operation of our taxicab rooftop advertising business. There can be no assurance that we will be able to sufficiently diversify our operations geographically.

The current economic downturn has resulted in certain of our commercial loan customers experiencing declines in business activities, which could lead to difficulties in their servicing of their loans with us. If the economic downturn continues, the level of delinquencies, defaults, and loan losses in our commercial loan portfolio could increase. The terrorist attack on New York City on September 11, 2001 and a general economic downturn have affected our revenues by increasing loan delinquencies and non-performing loans, increasing prepayments, stressing collateral value, and decreasing taxi advertising. Although the Company believes the estimates and assumptions used in determining the recorded amounts of net assets and liabilities at September 30, 2003 are reasonable, actual results could differ materially from the estimated amounts recorded in the Company’s financial statements.

The loss of certain key members of our senior management could adversely affect us.

Our success is largely dependent upon the efforts of senior management. The death, incapacity, or loss of the services of certain of these individuals could have an adverse effect on our operations and financial results. There can be no assurance that other qualified officers could be hired.

Acquisitions may lead to difficulties that could adversely affect our operations.

By their nature, corporate acquisitions entail certain risks, including those relating to undisclosed liabilities, the entry into new markets, and personnel matters. We may have difficulty integrating acquired operations or managing problems due to sudden increases in the size of our loan portfolio. In such instances, we might be required to modify our operating systems and procedures, hire additional staff, obtain and integrate new equipment, and complete other tasks appropriate for the assimilation of new business activities. There can be no assurance that we would be successful, if and when necessary, in minimizing these inherent risks or in establishing systems and procedures which will enable us to effectively achieve our desired results in respect of any future acquisitions.

Competition from entities with greater resources and less regulatory restrictions may decrease our profitability.

We compete with banks, credit unions, and other finance companies, some of which are SBICs, in the origination of taxicab medallion loans and commercial loans. Many of these competitors have greater resources than the Company and certain competitors are subject to less restrictive regulations than the Company. As a result, there can be no assurance that we will be able to continue to identify and complete financing transactions that will permit us to continue to compete successfully.

Our taxicab rooftop advertising business competes with other taxicab rooftop advertisers as well as with all segments of the out-of-home advertising industry. We also compete with other types of advertising media, including cable and network television, radio, newspapers, magazines, billboards and other forms of outdoor advertising and direct mail marketing. Certain of these competitors have also entered into the taxicab rooftop advertising business. Many of these competitors have greater financial resources than the Company and offer multiple types of advertising as well as production facilities. There can be no assurance that we will continue to compete with these businesses successfully.

The valuation of our loan portfolio is subjective and we may not be able to recover our estimated value in the event of a foreclosure or sale of a substantial portion of portfolio loans.

Under the 1940 Act, our loan portfolio must be recorded at fair value or “marked-to-market.” Unlike other lending institutions, we are not permitted to establish reserves for loan losses. Instead, we adjust quarterly the valuation of our portfolio to reflect our estimate of the current realizable value of our loan portfolio. Since no ready market exists for this portfolio, fair value is subject to the good faith determination of our management and the approval of our Board of Directors. Because of the subjectivity of these estimates, there can be no assurance that in the event of a foreclosure or the sale of portfolio loans we would be able to recover the amounts reflected on our balance sheet. If liquidity constraints required the sale of a substantial portion of the portfolio, such an action may require the sale of certain assets at amounts less than their carrying amounts.

In determining the value of our portfolio, management may take into consideration various factors such as the financial condition of the borrower and the adequacy of the collateral. For example, in a period of sustained increases in market interest rates, management

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could decrease its valuation of the portfolio if the portfolio consists primarily of fixed-rate loans. Our valuation procedures are designed to generate values which approximate the value that would have been established by market forces and are therefore subject to uncertainties and variations from reported results.

Considering these factors, we have determined that the fair value of our portfolio is below its cost basis. At September 30, 2003, our net unrealized depreciation on investments was approximately $8,534,000 or 2.22% of our net investment portfolio. Based upon current market conditions and current loan-to-value ratios, management believes, and our Board of Directors concurs, that the net unrealized depreciation on investments is adequate to reflect the fair value of the portfolio.

Changes in taxicab industry regulations that result in the issuance of additional medallions could lead to a decrease in the value of our medallion loan collateral.

Every city in which we originate medallion loans, and most other major cities in the US, limits the supply of taxicab medallions. This regulation results in supply restrictions that support the value of medallions. Actions that loosen these restrictions and result in the issuance of additional medallions into a market could decrease the value of medallions in that market. If this were to occur, the value of the collateral securing our then outstanding medallion loans in that market could be adversely affected. There has been discussion that New York City may increase the number of medallions by as many as 900, auctioned over a three year period beginning in 2004. Although there can no be no assurances, our experience in past auctions has been that medallion values held or appreciated. We are unable to forecast with any degree of certainty whether any other potential increases in the supply of medallions will occur.

In New York City, Chicago, Boston, and in other markets where we originate medallion loans, taxicab fares are generally set by government agencies. Expenses associated with operating taxicabs are largely unregulated. As a result, the ability of taxicab operators to recoup increases in expenses is limited in the short term. Escalating expenses can render taxicab operations less profitable, and could cause borrowers to default on loans from the Company, and could potentially adversely affect the value of the Company’s collateral.

A significant portion of our taxicab advertising and loan revenue is derived from loans collateralized by New York City taxicab medallions. According to New York City Taxi and Limousine Commission data, over the past 20 years New York City taxicab medallions have appreciated in value an average of 10% each year. However, for sustained periods during that time, taxicab medallions have declined in value. During the 2003 quarter and nine months, the value of New York City taxicab medallions increased by approximately 2% and 6% for individual medallions and 4% and 8% for corporate medallions.

Our failure to re-establish our RIC status in 2003 and beyond could lead to a substantial reduction in the amount of income distributed to our shareholders.

In 2003, changes were enacted to the federal tax laws which, among other things, significantly reduced the tax rate on dividends paid to shareholders from a corporation’s previously taxed income. Assuming we qualify as a RIC for 2003 or subsequent taxable years, we are unable to predict the effect of such changes upon our common stock.

As noted above, we did not qualify as a RIC in 2002, and expect to not elect RIC status in 2003 in order to take advantage of corporate net operating loss carryforwards, although we expect that we would meet all RIC qualification tests. If we do not file as a RIC for more than two consecutive years, and then seek to requalify and elect RIC status, we would be required to recognize gain to the extent of any unrealized appreciation on our assets unless we make a special election to pay corporate-level tax on any such unrealized appreciation recognized during the succeeding 10-year period. Absent such special election, any gain we recognize would be deemed distributed to our stockholders as a taxable distribution. Prior to 2002, we (along with some of our subsidiaries) elected to be treated as RICs under the Code. As RICs, we generally were not subject to federal income tax on investment company taxable income (which includes, among other things, dividends and interest reduced by deductible expenses) distributed to our shareholders. If we or those of our subsidiaries that were also RICs fail to qualify or elect to not be treated as RICs in 2003 or beyond, our respective income would become fully taxable and a substantial reduction in the amount of income available for distribution to us and to our shareholders could result.

To qualify as a RIC, we must meet certain income, distribution, and diversification requirements. However, because we use leverage, we are subject to certain asset coverage ratio requirements set forth in the 1940 Act. These asset coverage requirements could, under certain circumstances, prohibit us from making distributions that are necessary to maintain our RIC status or require that we reduce our leverage.

In addition, the asset coverage and distribution requirements impose significant cash flow management restrictions on us and limit our ability to retain earnings to cover periods of loss, provide for future growth and pay for extraordinary items. Certain of our loans, including the medallion collateral appreciation participation loans, could also be re-characterized in a manner that would generate non-qualifying income for purposes of the RIC rules. In this event, if such income exceeds the amount permissible, we could fail to satisfy the requirement that a RIC derive at least 90% of its gross income from qualifying sources, with the result that we would not meet the requirements of Subchapter M for qualification as a RIC. Qualification as a RIC is made on an annual basis and, although we and some of

39

our subsidiaries qualified as regulated investment companies in the past, no assurance can be given that each will qualify for such treatment in 2003 and beyond. Failure to qualify as a RIC would subject us to tax on our income and could have material adverse effects on our financial condition and results of operations.

Our SBIC subsidiaries may be unable to meet the investment company requirements, which could result in the imposition of an entity-level tax.

The SBIA regulates some of our subsidiaries. The SBIA restricts distributions by a SBIC. Our SBIC subsidiaries that are also RICs could be prohibited by SBA regulations from making the distributions necessary to qualify as a RIC. Each year, in order to comply with the SBA regulations and the RIC distribution requirements, we must request and receive a waiver of the SBA’s restrictions. While the current policy of the SBA’s Office of SBIC Operations is to grant such waivers if the SBIC makes certain offsetting adjustments to its paid-in capital and surplus accounts, there can be no assurance that this will continue to be the SBA’s policy or that our subsidiaries will have adequate capital to make the required adjustments. If our subsidiaries are unable to obtain a waiver, compliance with the SBA regulations may result in loss of RIC status and a consequent imposition of an entity-level tax.

The Internal Revenue Code’s diversification requirements may limit our ability to expand our taxicab rooftop advertising business and our medallion collateral appreciation participation loan business.

We intend to continue to pursue an expansion strategy in our taxicab rooftop advertising business. We believe that there are growth opportunities in this market. However, the asset diversification requirements for RICs could restrict such expansion. These requirements provide that to qualify as a RIC, not more than 25% of the value of our total assets may be invested in the securities (other than US Government securities or securities of other RICs) of any one issuer. While our investments in RIC subsidiaries are not subject to this diversification test so long as these subsidiaries qualify as RICs, our investment in Media would be subject to this test should we elect to qualify as a RIC in the future.

At the time of our original investment, Media represented approximately 1% of our total assets, which is in compliance with the diversification test. Assuming we had maintained our RIC status, the subsequent growth in the value of Media by itself would not re-trigger the test even if Media represented in excess of 25% of our assets. However, under the RIC rules, the test would have to be reapplied in the event that we made a subsequent investment in Media, loaned to it or acquired another taxicab rooftop advertising business. The application of this assets valuation rule to us and our investment in Media in light of our loss of RIC status in 2002 is unclear, although compelling arguments can be made that it should continue to apply if we re-qualify as a RIC in the future. Provided that it does apply, it will be important that we take actions to satisfy the 25% diversification requirement in order to maintain our RIC status during those years. As a result, maintenance of RIC status in the future could limit our ability to expand our taxicab rooftop advertising business. It will be our policy to expand our advertising business through internally generated growth. We expect to consider an acquisition in this area only if we will be able to meet RIC diversification requirements.

The fair value of the collateral appreciation participation loan portfolio at September 30, 2003 was $6,053,000, which represented approximately 2% of the total investment portfolio, and the owned medallion portion was $6,740,000 or 2% of total assets. We will continue to monitor the levels of these asset types in conjunction with the diversification tests, assuming we re-qualify for RIC status.

Our past use of Arthur Andersen LLP as our independent auditors may pose risks to us and also limit your ability to seek potential recoveries from them related to their work.

Effective July 29, 2002, the Company dismissed its independent auditors, Arthur Andersen LLP (Andersen), in view of recent developments involving Andersen, and engaged PricewaterhouseCoopers LLP to serve as the Company’s independent public accountants and to audit the financial statements for the years ended December 31, 2002 and 2003.

As a public company, we are required to file periodic financial statements with the SEC that have been audited or reviewed by an independent accountant. As our former independent auditors, Andersen provided a report on our consolidated financial statements as of and for each of the five fiscal years in the period ended December 31, 2001. SEC rules require us to obtain Andersen’s consent to the inclusion of its audit report in our public filings. However, Andersen was indicted and found guilty of federal obstruction of justice charges, and has informed the Company that it is no longer able to provide such consent as a result of the departure from Andersen of the former partner and manager responsible for the audit report. Under these circumstances, Rule 437A under the Securities Act of 1933, as amended, permits the Company to incorporate the audit report and the audited financial statements without obtaining the consent of Andersen.

The SEC has recently provided regulatory relief designed to allow public companies to dispense with the requirement that they file a consent of Andersen in certain circumstances. Notwithstanding this relief, the inability of Andersen to provide either its consent or customary assurance services to us now and in the future could negatively affect our ability to, among other things, access the public capital

40

markets. Any delay or inability to access the public markets as a result of this situation could have a material adverse impact on our business, financial condition, and results of operations.

We depend on cash flow from our subsidiaries to make dividend payments and other distributions to our shareholders.

We are primarily a holding company, and we derive most of our operating income and cash flow from our subsidiaries. As a result, we rely heavily upon distributions from our subsidiaries to generate the funds necessary to make dividend payments and other distributions to our shareholders. Funds are provided to us by our subsidiaries through dividends and payments on intercompany indebtedness, but there can be no assurance that our subsidiaries will be in a position to continue to make these dividend or debt payments.

We operate in a highly regulated environment.

We are regulated by the SEC and the SBA. In addition, changes in the laws or regulations that govern BDCs, RICs, or SBICs may significantly affect our business. Laws and regulations may be changed from time to time, and the interpretations of the relevant laws and regulations also are subject to change. Any change in the laws or regulations that govern our business could have a material impact on our operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change in disclosure regarding quantitative and qualitative disclosures about market risk since the Company filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation of the Company’s disclosure controls and procedures as of a date within 90 days of the filing of this report, the Chief Executive Officer and Acting Chief Financial Officer have concluded that such controls and procedures are effective.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect such controls subsequent to the date of their evaluation.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company and its subsidiaries are currently involved in various legal proceedings incident to the ordinary course of its business, including collection matters with respect to certain loans. The Company intends to vigorously defend any outstanding claims and pursue its legal rights. In the opinion of the Company’s management and based upon the advice of legal counsel, there is no proceeding pending, or to the knowledge of management threatened, which in the event of an adverse decision would result in a material adverse effect on the Company’s results of operations or financial condition.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

41

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

Number	Description
4.1	Amended and Restated Promissory Note, dated September 12, 2003, in the amount of $300,000,000, from Taxi Medallion Loan Trust I, payable to Merrill Lynch Commercial Finance Corp.
10.1	Amended and Restated Loan and Security Agreement, dated as of September 12, 2003, by and between Taxi Medallion Loan Trust I and Merrill Lynch Commercial Finance Corp. (as successor to Merrill Lynch Bank USA).
31.1	Certification of Alvin Murstein pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of The Sarbanes-Oxley Act of 2002. Filed herewith.
31.2	Certification of Larry D. Hall pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of The Sarbanes-Oxley Act of 2002. Filed herewith.
32.1	Certification of Alvin Murstein pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.2	Certification of Larry D. Hall pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

(B) REPORTS ON FORM 8-K

On July 31, 2003, the Company filed a Current Report on Form 8-K, announcing by press release the financial results for the quarter ended June 30, 2003.

42

IMPORTANT INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in such statements. In connection with certain forward-looking statements contained in this Form 10-Q, and those that may be made in the future by or on behalf of the Company, the Company notes that there are various factors that could cause actual results to differ materially from those set forth in any such forward-looking statements. The forward-looking statements contained in this Form 10-Q were prepared by management and are qualified by, and subject to, significant business, economic, competitive, regulatory, and other uncertainties and contingencies, all of which are difficult or impossible to predict, and many of which are beyond the control of the Company. Accordingly, there can be no assurance that the forward-looking statements contained in this Form 10-Q will be realized, or that actual results will not be significantly higher or lower. The statements have not been audited by, examined by, compiled by, or subjected to agreed-upon procedures by independent accountants, and no third-party has independently verified or reviewed such statements. Readers of this Form 10-Q should consider these facts in evaluating the information contained herein. In addition, the business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in the forward-looking statements contained in this Form 10-Q. The inclusion of the forward-looking statements contained in this Form 10-Q should not be regarded as a representation by the Company or any other person that the forward-looking statements contained in this Form 10-Q will be achieved. In light of the foregoing, readers of this Form 10-Q are cautioned not to place undue reliance on the forward-looking statements contained herein. These risks and others that are detailed in this Form 10-Q and other documents that the Company files from time to time with the Securities and Exchange Commission, including quarterly reports on Form 10-Q, annual reports on Form 10-K, and any current reports on Form 8-K must be considered by any investor or potential investor in the Company.

SIGNATURES

Pursuant to the requirements of the Securities Exchange of Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MEDALLION FINANCIAL CORP.

Date: November 13, 2003

By: /s/ Alvin Murstein

Alvin Murstein

Chairman and Chief

Executive Officer

By: /s/ Larry D. Hall

Larry D. Hall

Acting Chief Financial Officer

Signing on behalf of the registrant as

principal financial and accounting officer.

43

EX-4.1

Exhibit 4.1

AMENDED AND RESTATED PROMISSORY NOTE

$300,000,000	September 12, 2003
	New York, New York

FOR VALUE RECEIVED, TAXI MEDALLION LOAN TRUST I, a Delaware business trust (the “Borrower”), hereby promises to pay to the order of MERRILL LYNCH COMMERCIAL FINANCE CORP. (the “Lender”), at the principal office of the Lender at 15 W. South Temple, Suite 300, Salt Lake City, Utah 84101, in lawful money of the United States, and in immediately available funds, the principal sum of THREE HUNDRED MILLION DOLLARS ($300,000,000) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Advances made by the Lender to the Borrower under the Loan Agreement), on the dates and in the principal amounts provided in the Loan Agreement, and to pay interest on the unpaid principal amount of each such Advance, at such office, in like money and funds, for the period commencing on the date of such Advance until such Advance shall be paid in full, at the rates per annum and on the dates provided in the Loan Agreement.

This Note is the Note referred to in that certain Amended and Restated Loan and Security Agreement, dated as of September 12, 2003 (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Loan Agreement”), by and between the Borrower and the Lender and evidences the Advances made by the Lender thereunder. Terms used but not defined in this Note have the respective meanings assigned to them in the Loan Agreement.

This Note amends and restates in its entirety that certain Promissory Note dated September 13, 2002, made by the Borrower in favor of the Lender in the original principal amount of Two Hundred Fifty Million Dollars ($250,000,000) (the “Original Note”); provided, that this Note is given solely in substitution of the Original Note and not in repayment or satisfaction thereof. The Borrower hereby acknowledges and agrees that simultaneously with the Borrower’s execution and delivery of this Note to the Lender, the Lender has agreed to deliver, and has in fact delivered, to the Borrower the Original Note, marked “cancelled”.

The date, Type, amount and length of Interest Period of each Advance made by the Lender to the Borrower (including, without limitation, each “Advance” outstanding under the Existing Loan Agreement on the Restatement Effective Date), each continuation thereof, each conversion of all or a portion thereof to another Type and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by the Lender on the schedules attached hereto and constituting a part hereof or any continuation thereof and any such recordation shall constitute Prima facie evidence of the accuracy of the information; provided, that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower to make a payment when due of any amount owing under the Loan Agreement or hereunder in respect of the Advances made by the Lender.

The Borrower agrees to pay all the Lender’s costs of collection and enforcement (including reasonable attorneys’ fees and disbursements of Lender’s counsel) in respect of this Note in accordance with the Loan Agreement, including, without limitation, reasonable attorneys’ fees through appellate proceedings.

Notwithstanding the pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees that the Borrower’s obligations under this Note are recourse obligations of the Borrower to which the Borrower pledges its full faith and credit.

The Borrower, and any indorsers or guarantors hereof, (a) severally waive diligence, presentment, protest and demand and also notice of protest, demand, dishonor and nonpayments of this Note, (b) expressly agree that this Note, or any payment hereunder, may be extended from time to time, and consent to the acceptance of further Collateral, the release of any Collateral for this Note, the release of any party primarily or secondarily liable hereon, and (c) expressly agree that it will not be necessary for the Lender, in order to enforce payment of this Note, to first institute or exhaust the Lender’s remedies against the Borrower or any other party liable hereon or against any Collateral for this Note. No extension of time for the payment of this Note, or any installment hereof, made by agreement by the Lender with any person now or hereafter liable for the payment of this Note, shall affect the liability under this Note of the Borrower, even

if the Borrower is not a party to such agreement; provided, however, that the Lender and the Borrower, by written agreement among them, may affect the liability of the Borrower.

Any reference herein to the Lender shall be deemed to include and apply to every subsequent holder of this Note. Reference is made to the Loan Agreement for provisions concerning optional and mandatory prepayments, Collateral, acceleration and other material terms affecting this Note.

This Note shall be governed by and construed under the laws of the State of New York whose laws the Borrower expressly elects to apply to this Note. The Borrower agrees that any action or proceeding brought to enforce or arising out of this Note may be commenced in the Supreme Court of the State of New York, Borough of Manhattan, or in the District Court of the United States for the Southern District of New York.

TAXI MEDALLION LOAN TRUST I
By:	/s/    Alvin Murstein
	Name: Alvin Murstein Title: Vice President

SCHEDULE A to

Promissory Note

Loans, Conversions and

Payments of Fixed rate Loans

Date Made Principal Amount of Fixed Rate Loan (and Continuations Thereof) Principal Amount of Eurodollar Loans Converted into Fixed Rate Loans Interest
Period and
Interest
Rate
Applicable
Thereto Principal
Amount of
Fixed Rate
Loans
Converted
into
Eurodollar
Loans Amount of
Principal
Repaid Unpaid
Principal
Amount of
Fixed Rate
Loans Notation
Made by

SCHEDULE B to

Promissory Note

Loans, Conversions and

Payments of Eurodollar Loans

Date Made Principal Amount of Eurodollar Loan (and Continuations Thereof) Principal Amount of Fixed Rate Loans Converted into Eurodollar Loans Interest
Period and
Interest
Rate
Applicable
Thereto Principal
Amount of
Eurodollar
Loans
Converted
into Fixed
Rate Loans Amount of
Principal
Repaid Unpaid
Principal
Amount of
Eurodollar
Loans Notation
Made by

EX-10.1

Exhibit 10.1

Execution Version

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

Dated as of September 12, 2003

TAXI MEDALLION LOAN TRUST I

as Borrower

and

MERRILL LYNCH COMMERCIAL FINANCE CORP.

as Lender

TABLE OF CONTENTS

			Page
ARTICLE I	DEFINITIONS AND ACCOUNTING MATTERS		1
Section 1.01		Certain Defined Terms.	1
Section 1.02		Accounting Terms and Determinations	22
ARTICLE II	ADVANCES, NOTE AND PREPAYMENTS		22
Section 2.01		Advances.	22
Section 2.02		Note.	23
Section 2.03		Procedure for Borrowing.	23
Section 2.04		Delivery of Medallion Loan Files.	24
Section 2.05		Repayment of Advances; Interest.	24
Section 2.06		Limitation on Advances; Illegality.	24
Section 2.07		Determination of Borrowing Base; Mandatory Prepayments or Pledge; Rapid Amortization Event.	25
Section 2.08		Optional Prepayments; Release of Medallion Loans upon Repayment.	26
Section 2.09		Requirements of Law.	26
Section 2.10		Purpose of Advances.	27
Section 2.11		Taxes.	28
Section 2.12		Interest Reserve Deposit Account	29
Section 2.13		Collection Account.	29
Section 2.14		Conversion and Continuation Options.	30
Section 2.15		Minimum Conversion Amounts	30
Section 2.16		Indemnity.	31
Section 2.17		Additional Specified Chicago Medallion Loans.	31
Section 2.18		Maximum Committed Credit	31
ARTICLE III	PAYMENTS; COMPUTATIONS; FEES		32
Section 3.01		Payments.	32
Section 3.02		Computations.	32
Section 3.03		Facility Fee	33
Section 3.04		Non-Usage Fee	33
ARTICLE IV	COLLATERAL SECURITY		33
Section 4.01		Collateral; Security Interest.	33
Section 4.02		Further Documentation.	34
Section 4.03		Changes in Locations, Name, etc.	35
Section 4.04		Lender’s Appointment as Attorney-in-Fact.	35
Section 4.05		Performance by Lender of Borrower’s Obligations	36
Section 4.06		Proceeds.	37
Section 4.07		Remedies	37
Section 4.08		Limitation on Duties Regarding Presentation of Collateral	38

-ii-

Section 4.09		Powers Coupled with an Interest	38
Section 4.10		Release of Security Interest	38
ARTICLE V	CONDITIONS PRECEDENT		39
Section 5.01		Initial Advance.	39
Section 5.02		Initial and Subsequent Advances	40
ARTICLE VI	REPRESENTATIONS AND WARRANTIES OF THE BORROWER		43
Section 6.01		Eligible Medallion Loans	43
Section 6.02		Existence; Qualification; No Change to Organizational Documents	43
Section 6.03		Authority and Authorization; Enforceability; Approvals; Absence of Adverse Notice	43
Section 6.04		No Breach	44
Section 6.05		Litigation	44
Section 6.06		No Adverse Selection	44
Section 6.07		Bulk Transfer	44
Section 6.08		Indebtedness	45
Section 6.09		Borrower’s Purpose	45
Section 6.10		Adverse Orders	45
Section 6.11		Taxes	45
Section 6.12		Chief Executive Office; Jurisdiction of Organization	45
Section 6.13		Legal Name	45
Section 6.14		Solvency	45
Section 6.15		Subsidiaries	45
Section 6.16		Consideration	45
Section 6.17		True and Complete Disclosure	46
Section 6.18		Proceeds Regulations	46
Section 6.19		Adverse Agreements.	46
Section 6.20		Investment Company.	46
Section 6.21		No Default	46
Section 6.22		Underwriting and Servicing	46
Section 6.23		ERISA	46
Section 6.24		Sharing of Payments	47
Section 6.25		Collateral Security; Acquisition	47
Section 6.26		Subsidiary	47
Section 6.27		Subsidiaries of the Parent	47
Section 6.28		Standard Form Medallion Loan Documentation	47
ARTICLE VII	COVENANTS OF THE BORROWER		48
Section 7.01		Existence; etc.	48
Section 7.02		Special Purpose Entity.	48
Section 7.03		Accuracy of Opinions	50
Section 7.04		Prohibition on Adverse Claims.	50
Section 7.05		Prohibition on Fundamental Change	50

-iii-

Section 7.06		Sale or Contribution Treatment	50
Section 7.07		Prohibition on Modifications	50
Section 7.08		Amendment to Organizational Documents.	50
Section 7.09		Remittance of Collections.	50
Section 7.10		Hedging Strategy	50
Section 7.11		Litigation	51
Section 7.12		Notices	51
Section 7.13		Additional Information	51
Section 7.14		Transaction with Affiliates	51
Section 7.15		Limitation on Liens.	52
Section 7.16		Advertising, Origination and Servicing Activities	52
Section 7.17		Required Filings.	52
Section 7.18		Financial Statements	52
Section 7.19		Maintenance of Insurance	53
Section 7.20		Right of First Refusal Replacement Financing	53
Section 7.21		Monthly Pricing Reports; Monthly Liquidation Reports	53
Section 7.22		Underwriting Guidelines	53
Section 7.23		Approved Purchase Agreement Sale or Contribution Treatment	53
ARTICLE VIII	EVENTS OF DEFAULT		54
ARTICLE IX	REMEDIES UPON DEFAULT		56
ARTICLE X	MISCELLANEOUS		56
Section 10.01		Waiver	56
Section 10.02		Notices	56
Section 10.03		Indemnification and Expenses.	57
Section 10.04		Amendments	58
Section 10.05		Successors and Assigns	58
Section 10.06		Survival	59
Section 10.07		Captions	59
Section 10.08		Counterparts	59
Section 10.09		GOVERNING LAW; ETC.	59
Section 10.10		SUBMISSION TO JURISDICTION; WAIVERS	59
Section 10.11		WAIVER OF JURY TRIAL	60
Section 10.12		Acknowledgments	60
Section 10.13		Hypothecation and Pledge of Collateral	60
Section 10.14		Assignments; Participations	60
Section 10.15		Alteration of Medallion Loan Documents	62
Section 10.16		Periodic Due Diligence Review	62
Section 10.17		Usury Savings Clause	63

-iv-

SCHEDULES
Schedule 1.01(a)	Credit and Collection Policy
Schedule 1.01(b)	Existing Permitted Joint Participants
Schedule 1.01(c)	Existing Permitted Junior Participants
Schedule 1.01(d)	Underwriting Guidelines
Schedule 1.01(e)	Category IV Medallion Loans
Schedule 1.01(f)	Category V Medallion Loans
Schedule 1.01(g)	Specified Chicago Medallion Loans
Schedule 1.01(h)	Junior Specified Chicago Medallion Loans
Schedule 1	Eligibility Criteria
Schedule 6.25	Filing Jurisdictions
Schedule 6.27	Parent Subsidiaries
Schedule 7.20	Right of First Refusal
Schedule 7.21	Monthly Pricing Reports
EXHIBITS
Exhibit A	Form of Note
Exhibit B	Form of Borrowing Base Certificate
Exhibit C	Form of Collection Account Control Agreement
Exhibit D	Form of Custodial Agreement
Exhibit E	[RESERVED]
Exhibit F-1	Form of Junior Participation Supplemental Agreement (E.J.T.)
Exhibit F-2	Form of Junior Participation Supplemental Agreement (Elk)
Exhibit F-3	Form of Junior Participation Supplemental Agreement (Susil Cab, Inc.)
Exhibit F-4	Form of Junior Participation Supplemental Agreement (The OSG Corporation)
Exhibit G	Form of Interest Reserve Deposit Account Control Agreement
Exhibit H	Form of Notice of Borrowing and Pledge
Exhibit I	Form of Tax Certificate
Exhibit J	Form of Assignment and Acceptance
Exhibit K	[RESERVED]
Exhibit L-1	Form of Approved Junior Participation Agreement (E.J.T.)
Exhibit L-2	Form of Approved Junior Participation Agreement (Elk)
Exhibit L-3	Form of Approved Junior Participation Agreement (Susil Cab, Inc.)
Exhibit L-4	Form of Approved Junior Participation Agreement (The OSG Corporation)
Exhibit M	Form of Continuation/Conversion Notice
Exhibit N	Form of Amendment to Servicing Agreement

-v-

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of September 12, 2003 (as amended, restated, supplemented or otherwise modified and in effect from time to time, this “Loan Agreement”), is made by and between TAXI MEDALLION LOAN TRUST I, a Delaware statutory trust (the “Borrower”), and MERRILL LYNCH COMMERCIAL FINANCE CORP., a Delaware corporation (the “Lender”).

RECITALS

WHEREAS, the Borrower and the Lender (as successor-in-interest to Merrill Lynch Bank USA pursuant to that certain Assignment and Acceptance, dated as of the date hereof) are parties to that certain Loan and Security Agreement, dated as of September 13, 2002 (the “Original Loan Agreement”, as amended, supplemented or otherwise modified prior to the date hereof, the “Existing Loan Agreement”);

WHEREAS, pursuant to the Existing Loan Agreement, the Lender has made revolving credit loans to the Borrower, the proceeds of which were used by the Borrower to finance the purchase of certain Medallion Loans or for other purposes permitted thereby;

WHEREAS, the Borrower has requested that the Lender amend and restate the Existing Loan Agreement to provide for an extension of the termination date, an increase in the maximum committed credit and for certain other amendments to the Existing Loan Agreement;

WHEREAS, the Lender is willing to amend and restate the Existing Loan Agreement, but only on the terms, and subject to the conditions, set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Existing Loan Agreement is amended and restated as set forth in the Recitals hereto and as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

Section 1.01 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Section 1.01 or in other provisions of this Loan Agreement in the singular to have the same meanings when used in the plural and vice versa):

“Accepted Servicing Practices” shall have the meaning assigned thereto in the Servicing Agreement.

“Additional Specified Chicago Medallion Loans” shall have the meaning assigned thereto in Section 2.17.

“Advance” shall have the meaning assigned to such term in Section 2.01(a).

“Advance Rate” shall mean:

(a) with respect to each Eligible Medallion Loan that is a Category I Medallion Loan, a Category IV Medallion Loan or a Category V Medallion Loan, the “Advance Rate” set forth in the chart below opposite the applicable Class of such Eligible Medallion Loan:

Class of Category I, Category IV or Category V Medallion Loans	Advance Rate
Class A Medallion Loans	90	%
Class B Medallion Loans	90	%
Class C Medallion Loans	85	%
Class D Medallion Loans	75	%
Class E Medallion Loans	50	%

(b) with respect to each Eligible Medallion Loan that is a Category II Medallion Loan or a Category III Medallion Loan, the “Advance Rate” set forth in the chart below opposite the applicable Class of such Eligible Medallion Loan:

Class of Category II or Category III Medallion Loans	Advance Rate
Class A Medallion Loans	100	%
Class B Medallion Loans	80	%
Class C Medallion Loans	75	%
Class D Medallion Loans	67	%
Class E Medallion Loans	45	%

provided, however, that:

(i) if the Delinquency Ratio shall exceed 25%, then the Advance Rate applicable to all Eligible Loans that are not Class A Medallion Loans may, in the sole and absolute discretion of the Lender, be reduced by an amount of up to 2.5 percentage points; or

(ii) if 5% or more of the Medallion Loans at any time held by the Borrower are Class D Medallion Loans and Class E Medallion Loans, then the Advance Rate applicable to all Eligible Loans that are Class D Medallion Loans and Class E Medallion Loans may, in the sole and absolute discretion of the Lender, be reduced by an amount of up to 2.5 percentage points; or

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(iii) the Cumulative Losses for Medallion Loans shall exceed $1,000,000; or

(iv) (A) the average cost of fully liquidating a Medallion, determined as of the last day of each month, based on the cost of liquidating Medallions during the preceding three months (or if fewer than ten Medallions were liquidated during such three-month period, based on the cost of liquidating the ten most recently liquidated Medallions), exceeds 5% of the original principal balance, or (B) the average time required to fully liquidate a Medallion in a jurisdiction, determined as of the last day of each month, based on the time of liquidating Medallions during the preceding three months (or if fewer than ten Medallions were liquidated during such three-month period, based on the time of liquidating the ten most recently liquidated Medallions), exceeds the number of days allotted per jurisdiction as set forth on Schedule 10 to the Borrowing Base Certificate under “Cannot exceed              days” due to a change in the procedure for liquidating Medallions estimated by the applicable Taxi Commission, in each case as determined by the Lender in its sole discretion exercised in good faith, in which case the Advance Rate may be reduced only with respect to Medallion Loans secured by Medallions in the jurisdiction in which such average time to liquidate Medallions exceeds the applicable allotted number of days.

“Adverse Claim” means a lien, security interest, charge, encumbrance or other right or claim of any Person other than, with respect to the Collateral, any lien, security interest, charge, encumbrance or other right or claim in favor of the Lender.

“Affiliate” means, with respect to any Person, any other Person which, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” (together with the correlative meanings of “controlled by” and “under common control with”) means possession, directly or indirectly, of the power (a) to vote 10% or more of the securities or interests (on a fully diluted basis) having ordinary voting power for the directors or managing partners (or their equivalent) of such Person, or (b) to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities or interests, by contract, or otherwise.

“Applicable Margin” shall mean (i) for each Advance secured by Eligible Medallion Loans other than Category III Medallion Loans, 1.25%, and (ii) for each Advance secured by Category III Medallion Loans, 1.75%.

“Approved Joint Participation Agreement” shall mean a participation agreement between Medallion Funding and a Permitted Joint Participant, in form and substance satisfactory to the Lender in its sole and absolute discretion.

“Approved Junior Participation Agreement” shall mean a participation agreement between Medallion Funding and a Permitted Junior Participant, substantially in the form of Exhibits L-1, L-2, L-3 and L-4 to the Original Loan Agreement, as amended, supplemented, restated or otherwise modified from time to time with the consent of the Lender in its sole and absolute discretion.

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“Approved Purchase Agreement” shall mean each purchase and sale agreement for Medallion Loans between the Borrower, as purchaser, and an Approved Seller, together with all instruments, documents and agreements executed in connection therewith, acceptable to the Lender in writing in the Lender’s sole and absolute discretion, as such Approved Purchase Agreement may from time to time be amended, supplemented, restated or otherwise modified in accordance with the terms hereof.

“Approved Seller” shall mean any Person, other than Medallion Funding, acceptable to the Lender in its sole and absolute discretion and approved in writing by the Lender, as seller of Medallion Loans to the Borrower pursuant to an Approved Purchase Agreement.

“Assignment and Acceptance” shall have the meaning set forth in Section 10.14 hereof.

“Atlantic Bank” shall mean Atlantic Bank, a bank chartered by the State of New York Banking Department.

“Backup Servicer” shall have the meaning assigned to such term in the Servicing Agreement.

“Backup Servicing Agreement” shall mean the Backup Servicing Agreement between the Backup Servicer, the Borrower and the Lender, as amended, supplemented, restated or otherwise modified from time to time.

“Bankruptcy Event” shall be deemed to have occurred with respect to a Person if either:

(a) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidation, assignee, sequestrator or the like for such Person or all or substantially all of its assets, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 30 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws or other similar laws now or hereafter in effect; or

(b) such Person shall commence a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) for such Person or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail to, or admit in writing its inability to, pay its debts generally as they become due, or, if a corporation or similar entity, its board of directors or members shall vote to implement any of the foregoing.

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“Borrower” shall have the meaning assigned to such term in the Preamble.

“Borrowing Base” shall mean at any time an amount equal to the aggregate Collateral Value of all Eligible Medallion Loans pledged to the Lender hereunder at such time.

“Borrowing Base Certificate” shall mean a certificate, substantially in the form of Exhibit B hereto, with appropriate insertions, showing the Borrowing Base as of the date set forth therein, and certified as complete and correct by a Responsible Officer of the Servicer.

“Borrowing Base Deficiency” shall have the meaning provided in Section 2.07(b) hereof.

“Borrowing Base Period” shall have the meaning assigned to such term in Section 2.01(a).

“Boston Medallion Loan” shall mean a Medallion Loan secured by Medallion Collateral that includes a Medallion issued by the Taxi Commission for the City of Boston, Massachusetts.

“Business Day” shall mean any day other than (i) a Saturday or Sunday or (ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of New York, the Lender or the Custodian (if other than the Borrower) is authorized or obligated by law or executive order to be closed and, if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, or an Interest Period for, a Eurodollar Loan or a notice by the Borrower with respect to any such borrowing, payment, prepayment or Interest Period, a day in which dealings in Dollar deposits are carried out in the London interbank market.

“Cambridge Medallion Loan” shall mean a Medallion Loan secured by Medallion Collateral that includes a Medallion issued by the Taxi Commission for the City of Cambridge, Massachusetts.

“Category I Medallion Loan” shall mean a Medallion Loan (other than a Category IV Medallion Loan or a Category V Medallion Loan) having an LTV at the time of origination or of acquisition by the Borrower of 80% or less.

“Category II Medallion Loan” shall mean a Specified Chicago Medallion Loan or any other Medallion Loan (other than a Category IV Medallion Loan or a Category V Medallion Loan) having a current LTV of 72% or less.

“Category III Medallion Loan” shall mean a Medallion Loan (other than a Category IV Medallion Loan or a Category V Medallion Loan) having an LTV at the time of origination or of acquisition by the Borrower greater than 80% but not more than 90%.

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“Category IV Medallion Loan” shall mean a Medallion Loan that was subject to a subordinated participation held by Freshstart but is no longer subject to a participation interest listed on Schedule 1.01(b) to the Original Loan Agreement.

“Category V Medallion Loan” shall mean a Medallion Loan listed on Schedule 1.01(e) to the Original Loan Agreement.

“Chicago Medallion Loan” shall mean a Medallion Loan secured by Medallion Collateral that includes a Medallion issued by the Taxi Commission for the City of Chicago, Illinois.

“Class” shall mean the status of a Medallion Loan at any time as a Class A Medallion Loan, Class B Medallion Loan, Class C Medallion Loan, Class D Medallion Loan or Class E Medallion Loan.

“Class A Medallion Loans” shall mean Eligible Medallion Loans in respect of which there is no delinquency in payment or there is a delinquency in the payment of principal and/or interest which continues for a period of up to 30 days (without regard to any applicable grace periods).

“Class B Medallion Loans” shall mean Eligible Medallion Loans in respect of which there is a delinquency in the payment of principal and/or interest which continues for a period greater than and including 31 days but not in excess of 60 days (without regard to any applicable grace periods).

“Class C Medallion Loans” shall mean Eligible Medallion Loans in respect of which there is a delinquency in the payment of principal and/or interest which continues for a period greater than and including 61 days but not in excess of 90 days (without regard to any applicable grace periods).

“Class D Medallion Loans” shall mean Eligible Medallion Loans in respect of which there is a delinquency in the payment of principal and/or interest which continues for a period greater than and including 91 days but not in excess of 180 days (without regard to any applicable grace periods).

“Class E Medallion Loans” shall mean Eligible Medallion Loans in respect of which there is a delinquency in the payment of principal and/or interest which continues for a period greater than and including 181 days but not in excess of 360 days (without regard to any applicable grace periods).

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” shall have the meaning provided in Section 4.01(b) hereof.

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“Collateral Value” shall mean, with respect to any Eligible Medallion Loan on any date of determination, an amount equal to the product of (a) the Advance Rate applicable to such Eligible Medallion Loan and (b) the Net Principal Balance of such Eligible Medallion Loan; provided, that:

(a) the following additional limitations shall apply:

(i) the aggregate Collateral Value of all Eligible Medallion Loans which consist of New York City Medallion Loans shall be no less than 66.67% of the aggregate Collateral Value of all Eligible Medallion Loans at such time (or such other percentage as the Lender may consent to from time to time);

(ii) the aggregate Collateral Value of all Eligible Medallion Loans which consist of Chicago Medallion Loans, Boston Medallion Loans, Cambridge Medallion Loans, Newark Medallion Loans, Philadelphia Medallion Loans or Other Acceptable Medallion Loans shall not exceed 33.33% of the aggregate Collateral Value of all Eligible Medallion Loans at such time (or such other percentage as the Lender may consent to from time to time);

(iii) the aggregate Collateral Value of all Eligible Medallion Loans that are included in the Borrowing Base at any time and that are not Class A Medallion Loans shall not exceed 25% of the aggregate Collateral Value of all Eligible Medallion Loans at such time;

(iv) the aggregate Collateral Value of all Eligible Medallion Loans that are included in the Borrowing Base at any time and that are not Class A Medallion Loans or Class B Medallion Loans shall not exceed 7.5% of the aggregate Collateral Value of all Eligible Medallion Loans at such time;

(v) the aggregate Collateral Value of all Eligible Medallion Loans that are included in the Borrowing Base at any time and that are not Class A Medallion Loans, Class B Medallion Loans or Class C Medallion Loans shall not exceed 3.0% of the aggregate Collateral Value of all Eligible Medallion Loans at such time;

(vi) the aggregate Collateral Value of all Eligible Medallion Loans which consist of Category II Medallion Loans shall not exceed $40,000,000;

(vii) the aggregate Collateral Value of all Eligible Medallion Loans which consist of Category III Medallion Loans shall not exceed $40,000,000;

(viii) the aggregate Collateral Value of all Eligible Medallion Loans which consist of Category IV Medallion Loans shall not exceed $4,700,000; and

(ix) the aggregate Collateral Value of all Eligible Medallion Loans which consist of Category V Medallion Loans shall not exceed $6,900,000.

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(b) the Collateral Value shall be deemed to be zero with respect to each Medallion Loan:

(i) with respect to which the eligibility criteria set forth on Schedule 1 are not satisfied on such date;

(ii) made to any one Obligor (or guaranteed by any one guarantor) in an amount that exceeds $10,000,000, or such greater amount as the Lender may consent to from time to time, on a case-by-case basis, in writing, in the aggregate together with any other Medallion Loans to such Obligor;

(iii) in respect of which there is a delinquency in the payment of principal and/or interest which continues for a period greater than 360 days (without regard to any applicable grace periods);

(iv) for which the Medallion Loan File has been released from the possession of the Custodian under the Custodial Agreement to any Person other than the Lender or a Person acting as the consenting bailee for the Lender for a period of fifteen (15) or more consecutive days;

(v) which exceeds the limitations on Collateral Value set forth in paragraph (a) above;

(vi) for which the Custodian has not received the Medallion Loan File with respect to such Medallion Loan in the time and manner set forth in Section 2.04;

(vii) in respect of any Category IV Medallion Loan that is pledged to the Lender after the Effective Date; and

(viii) in respect of any Category V Medallion Loan that is pledged to the Lender after the Effective Date.

“Collection Account” shall mean a segregated bank account maintained by the Collection Account Bank, as depositary, pursuant to the Collection Account Control Agreement, in the name of the Borrower for the benefit of the Lender and subject to a security interest in favor of the Lender into which all Collections shall be deposited by the Servicer.

“Collection Account Bank” shall mean JPMorgan Chase Bank.

“Collection Account Control Agreement” shall mean that certain Collection Account Control Agreement, dated as of September 13, 2002, by and among the Borrower, the Servicer, the Lender, and the Collection Account Bank, as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time.

“Collections” shall mean, collectively, all collections, payments and recoveries on or in respect of the Medallion Loans, the Hedging Arrangements and the other Medallion Collateral (including without limitation insurance proceeds and proceeds of the disposition of the Medallion Loans or of assets securing or otherwise subject to the Medallion Loans), and all proceeds of the foregoing.

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“Combined Loan-To-Value Ratio” or “CLTV” shall have the meaning provided in Section 2.07(d) hereof.

“Commitment Letter” shall mean the commitment letter, dated as of June 21, 2002, between the Lender and Medallion Funding, as such letter may be amended from time to time.

“Continue”, “Continuation” and “Continued” shall mean the continuation of an Advance from one Interest Period to the next Interest Period.

“Convert”, Conversion” and “Converted” shall refer to a conversion of Fixed Rate Loans into Eurodollar Loans or of Eurodollar Loans into Fixed Rate Loans.

“Corporate Medallion” shall mean a Medallion that is not an Individual Medallion.

“Credit and Collection Policy” shall mean the credit and collection policy of Medallion Funding, as Servicer, for Medallion Loans, a copy of which is attached to the Original Loan Agreement as Schedule 1.01(a).

“Cumulative Losses” shall mean cumulative losses actually realized in any one calendar year with respect to Medallion Loans from and after the time such loans became Medallion Loans, but shall not include costs, expenses or losses resulting from Hedging Arrangements.

“Custodial Agreement” shall mean that certain Custodial Agreement, dated as of September 13, 2002, among the Borrower, the Custodian, the Servicer and the Lender, as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time.

“Custodian” shall mean Wells Fargo Bank Minnesota, National Association, as custodian under the Custodial Agreement, and its successors and permitted assigns thereunder.

“Default” shall mean an Event of Default or an event that with notice or lapse of time or both would become an Event of Default.

“Default Rate” shall mean, in respect of any principal of any Advance or, to the extent permitted by law, any other amount under this Loan Agreement, the Note or any other Loan Document that is not paid when due to the Lender (whether at stated maturity, by acceleration, by optional or mandatory prepayment or otherwise), a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to the Eurodollar Rate plus 4.00% per annum.

“Delinquency Ratio” means, as of the last day of each month, (x) the aggregate of the Net Principal Balance of all Medallion Loans for which the related Obligors have been delinquent for thirty-one (31) or more days, divided by (y) the aggregate of the Net Principal Balance of all Medallion Loans at such time.

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“Dollars” and “$” shall mean lawful money of the United States of America.

“Due Diligence Review” shall mean the performance by the Lender of any or all of the reviews permitted under Section 10.16 hereof with respect to any or all of the Medallion Loans, as desired by the Lender from time to time.

“Effective Date” shall mean the “Effective Date” as defined in the Original Loan Agreement, which date is September 13, 2002.

“Eligible Medallion Loan” shall mean a Medallion Loan purchased by the Borrower from a Seller (a) which satisfies the eligibility characteristics set forth on Schedule 1 hereto on and as of the applicable Funding Date and which continues to satisfy such eligibility characteristics at all times thereafter while such Medallion Loan is included in the Borrowing Base and (b) as to which the Lender has received evidence satisfactory to the Lender that such Medallion Loan was acquired by each of the Seller and the Borrower pursuant to a “true sale” transaction; provided, that in no event shall any Junior Specified Chicago Medallion Loan qualify as an Eligible Medallion Loan.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

“Eurocurrency Liabilities” shall have the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Eurodollar Base Rate” shall mean with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the corresponding rate appearing on page BBAM of Bloomberg L.P. as “LIBOR” for such Interest Period two (2) Business Days prior to the beginning of such Interest Period (and if such date is not a Business Day, the Eurodollar Rate in effect on the Business Day immediately preceding such date), and if such rate shall not be so quoted, the rate per annum at which the Lender is offered Dollar deposits at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period by prime banks in the interbank eurodollar market where the eurodollar and foreign currency exchange operations in respect of its Advances are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Advances to be outstanding during such Interest Period.

“Eurodollar Loan” shall mean an Advance the rate of interest applicable to which is based upon the Eurodollar Rate.

“Eurodollar Rate” shall mean with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

Eurodollar Base Rate

1.00 – Eurodollar Rate Reserve Percentage

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“Eurodollar Rate Reserve Percentage” shall mean, for any Interest Period for all of the Eurodollar Loans comprising part of the same borrowing, the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor thereto) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York, New York with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Loans is determined) having a term comparable to such Interest Period.

“Event of Default” or “Default” shall have the meaning provided in Article VIII hereof.

“Existing Loan Agreement” shall have the meaning provided in the Recitals.

“Facility Fee” shall have the meaning provided in Section 3.03 hereof.

“Federal Funds Rate” shall mean for any day, a fluctuating interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day for such transactions received by the Lender from three Federal funds brokers of recognized standing selected by the Lender.

“Financing Lease” shall mean any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee.

“Fixed Rate” shall mean the rate per annum equal to the rate of interest charged from time to time by Merrill Lynch Bank USA for a fixed rate loan with a term equal to the applicable Interest Period.

“Fixed Rate Loan” shall mean an Advance the rate of interest applicable to which is based upon the Fixed Rate.

“Freshstart” shall mean Freshstart Venture Capital Corp., a New York corporation.

“Funding Date” shall mean, (x) with respect to a Medallion Loan, the first date on which an Advance is made hereunder to fund the purchase of such Medallion Loan, and (y) with respect to an Advance, the date on which such Advance is made.

“Funding Date Documentation” shall have the meaning assigned to such term in the Custodial Agreement.

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“Funding Documentation Receipt Date” shall have the meaning assigned to such term in the Custodial Agreement.

“GAAP” shall mean generally accepted accounting principles as in effect from time to time in the United States of America.

“Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over the Borrower or any of its properties.

“Hedging Arrangement” shall mean, with respect to any or all of the Medallion Loans, any interest rate swap, cap or collar agreement, Eurodollar future contracts, repurchase agreement or other agreements or arrangements (including any arrangement providing for the short sale of U.S. Treasury securities), and any securities, securities accounts or securities contracts relating to the foregoing, in each case intended to provide protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by the Borrower or a designee of the Borrower and the hedging counterparty.

“Hedging Strategy” shall mean a commercially reasonable interest rate hedging strategy acceptable to the Lender that is designed to provide protection against fluctuations in interest rates, which strategy may from time to time include the purchase of fixed-for-floating interest rate swaps, long-dated LIBOR or interest rate caps.

“IDB” shall mean Israel Discount Bank of New York, a bank chartered by the State of New York Banking Department.

“Indebtedness” shall mean, of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of letters of credit, acceptances or similar instruments issued or created for the account of such Person and (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof.

“Indemnified Party” shall have the meaning provided in Section 10.03 hereof.

“Individual Medallion” shall mean a Medallion issued to an Obligor who is a natural person in circumstances where such natural person is the only party who may use such Medallion (commonly referred to as an “owner-driver medallion”).

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“Interest Period” shall mean with respect to any Advance:

(i) initially, (a) with respect to each Eurodollar Loan, the period commencing on the Funding Date with respect to such Eurodollar Loan and ending one, two, three, six or twelve months thereafter, as selected by the Borrower in its Notice of Borrowing and Pledge given with respect thereto and (b) with respect to each Fixed Rate Loan, the period commencing on the Funding Date with respect to such Fixed Rate Loan and ending eighteen months, two years, thirty months, three years or five years thereafter, as selected by the Borrower in its Notice of Borrowing and Pledge given with respect thereto; and

(ii) thereafter, (a) with respect to each Eurodollar Loan, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three, six or twelve months thereafter, as selected by the Borrower by irrevocable notice to the Lender not less than three Business Days prior to the last day of the then current Interest Period with respect thereto and (b) with respect to each Fixed Rate Loan, each period commencing on the last day of the next preceding Interest Period applicable to such Fixed Rate Loan and ending eighteen months, two years, thirty months, three years or five years thereafter, as selected by the Borrower by irrevocable notice to the Lender not less than five Business Days prior to the last day of the then current Interest Period with respect thereto (the parties acknowledge and agree that an Interest Period for a Fixed Rate Loan may extend beyond the Termination Date, which may result in the payment of amounts to the Lender pursuant to Section 2.16 in connection with the repayment in full of such Fixed Rate Loans on the Termination Date);

provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:

(1) if any Interest Period pertaining to an Advance would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;

(2) any Interest Period that would otherwise extend beyond the Termination Date shall end on the Termination Date;

(3) any Interest Period pertaining to an Advance that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and

(4) the Borrower shall select Interest Periods so as to minimize any amounts payable under Section 2.16 as a result of any payment or prepayment of any Advances which would be scheduled to be due during any such Interest Periods.

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“Interest Rate” shall mean (a) with respect to a Eurodollar Loan, the rate per annum equal to the sum of the applicable Eurodollar Rate plus the Applicable Margin and (b) with respect to a Fixed Rate Loan, the rate per annum equal to the sum of the applicable Fixed Rate plus the Applicable Margin.

“Interest Reserve Deposit Account” shall mean a segregated deposit account maintained at the Interest Reserve Deposit Account Bank in the name of the Borrower for the benefit of the Lender and subject to a security interest in favor of the Lender.

“Interest Reserve Deposit Account Bank” shall mean Merrill Lynch Bank USA or another bank or other financial institution acceptable to the Lender at which the Interest Reserve Deposit Account is maintained.

“Interest Reserve Deposit Account Control Agreement” shall mean that certain Interest Reserve Deposit Account Control Agreement, dated as of September 13, 2002, by and among the Borrower, the Lender, and the Interest Reserve Deposit Account Bank, as the same may be amended, supplemented, restated or otherwise modified and in effect from time to time.

“Investment Company Act” shall mean the Investment Company Act of 1940, as amended.

“Joint Participation Medallion Loan” shall mean a Medallion Loan that is subject to a Permitted Joint Participation Interest.

“Joint Participation Supplemental Agreement” shall mean each Joint Participation Supplemental Agreement among the Lender, the Borrower, Medallion Funding and a Permitted Joint Participant, in form and substance satisfactory to the Lender in its sole and absolute discretion, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time.

“Junior Participation Medallion Loan” shall mean a Medallion Loan that is subject to a Permitted Junior Participation Interest.

“Junior Participation Supplemental Agreement” shall mean each Junior Participation Supplemental Agreement among the Lender, the Borrower, Medallion Funding and a Permitted Junior Participant, substantially in the form of Exhibits F-1, F-2, F-3, and F-4 to the Original Loan Agreement, or any other Junior Participation Supplemental Agreement among the Lender, the Borrower, Medallion Funding and a Permitted Junior Participant approved by the Lender in its sole and absolute discretion, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time.

“Junior Specified Chicago Medallion Loan” shall mean a Chicago Medallion Loan specified on Schedule 1.01(h) hereto (as such Schedule 1.01(h) may from time to time be restated in accordance with Section 2.17), each originated by MF Chicago and each secured by a subordinate security interest in certain Medallion Collateral, which security interest is subordinate only to the security interest granted in respect of such Medallion Collateral in connection with the “Related Specified Chicago Medallion Loan” originated by IDB and/or Atlantic Bank and identified on Schedule 1.01(h) hereto.

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“Lender” shall have the meaning assigned to such term in the Preamble.

“Lien” shall mean any mortgage, lien, pledge, charge, security interest or similar encumbrance.

“Loan Agreement” shall have the meaning assigned to such term in the Preamble.

“Loan Documents” shall mean, collectively, this Loan Agreement, the Note, the Collection Account Control Agreement, the Interest Reserve Deposit Account Control Agreement, the Custodial Agreement, the Servicing Agreement, the Purchase Agreement, each Junior Participation Supplemental Agreement, each Joint Participation Supplement Agreement, each Approved Purchase Agreement, the Backup Servicing Agreement and the agreements relating to Hedging Arrangements.

“Loan-to-Value Ratio” or “LTV” shall mean, with respect to a Medallion Loan, as of any date of determination, the percentage equivalent of a fraction the numerator of which is the Net Principal Balance for such Medallion Loan and the denominator of which is the Medallion Valuation Amount for the related Medallion.

“Material Adverse Effect” shall mean a material adverse effect on (a) the contracts, property, business, condition (financial or otherwise) or prospects of the Borrower, (b) the ability of the Borrower to perform its obligations under any of the Loan Documents to which it is a party, (c) the validity or enforceability of any of the Loan Documents, (d) the rights and remedies of the Lender under any of the Loan Documents, (e) the timely payment of the principal of or interest on the Advances or other amounts payable in connection therewith or (f) the Collateral.

“Maximum Committed Credit” shall mean $250,000,000 or such other amount as may be in effect pursuant to Section 2.18 hereof.

“Medallion” shall mean a medallion or other license issued by a Taxi Commission which enables the holder thereof to operate a taxicab in New York City, Chicago, Boston, Cambridge, Newark, Philadelphia or another location in which the Lender in its sole discretion deems acceptable and approves in writing.

“Medallion Collateral” shall mean, in respect of a Medallion Loan, the related Medallion and any other interest in property securing such Medallion Loan.

“Medallion Funding” shall mean Medallion Funding Corp., a New York corporation, and its successors and permitted assigns.

“Medallion Loan” shall mean each of the loans secured by Medallion Collateral originated by any of (i) the Seller, (ii) an Affiliate of Medallion Funding or (iii) a third-party originator acceptable to the Lender in its sole and absolute discretion and approved by the Lender in writing, and purchased by the Borrower evidenced by, among other things, a Medallion Note and Medallion Security Agreement, that is included in any Medallion Loan Schedule, and all rights and obligations under such loan.

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“Medallion Loan Documents” shall mean, with respect to any Medallion Loan, each of the documents referred to in Section 2 of the Custodial Agreement (regardless of whether such document has been delivered to the Custodian under the Custodial Agreement).

“Medallion Loan File” shall mean, with respect to any Medallion Loan, all Medallion Loan Documents related to such Medallion Loan.

“Medallion Loan Schedule” shall have the meaning assigned to such term in the Custodial Agreement.

“Medallion Note” shall mean the original executed promissory note or other evidence of indebtedness of an Obligor with respect to a Medallion Loan.

“Medallion Security Agreement” shall mean a security agreement between a Seller and an Obligor under a Medallion Note pursuant to which the Obligor grants such Seller a security interest in the underlying Medallion and any other Medallion Collateral.

“Medallion Valuation Amount” shall mean, as of any date of determination:

(a) in the case of a Medallion issued by the Taxi Commission for New York City, the greater of (x) (i) for an Individual Medallion, the prior month’s average of monthly sales prices for sales of Individual Medallions, as reported by such Taxi Commission, and (ii) for a Corporate Medallion, the prior month’s average of monthly sales prices for sales of Corporate Medallions, as reported by such Taxi Commission and (y) the purchase price paid by the Obligor for such Medallion (excluding the amount of any transfer costs);

(b) in the case of a Medallion issued by any Taxi Commission other than the Taxi Commission for New York City, the greater of (x) the prior month’s average of monthly sales prices for sales of Medallions, as reported by the applicable Taxi Commission and (y) the purchase price paid by the Obligor for such Medallion (excluding the amount of any transfer costs);

provided that (x) in the event of a change in the manner in which a Taxi Commission reports average sales prices of Medallions as in effect on the Effective Date or (y) in the case of the determination of the Medallion Valuation Amount by an Other Acceptable Taxi Commission, the Medallion Valuation Amount shall be determined by the Lender pursuant to a methodology established by the Lender in its sole discretion exercised in good faith, notice of which methodology shall be given to the Borrower and the Servicer in writing.

“MF Chicago” shall mean Medallion Funding Chicago Corp., a Delaware corporation.

“Net Principal Balance” shall mean, with respect to a Medallion Loan, the unpaid principal balance of a Medallion Loan less the principal amount of any Permitted Junior Participation Interest in such Medallion Loan; provided, however, that if the Loan-to-Value Ratio of any Category IV Medallion Loan exceeds 90% at any time, the Net Principal Balance of such Category IV Medallion Loan for the purpose of determining the Collateral Value of such Category IV Medallion Loan shall equal 90% of the Medallion Valuation Amount for such Category IV Medallion Loan.

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“New York City Medallion Loan” shall mean a Medallion Loan secured by Medallion Collateral that includes a Medallion issued by the Taxi Commission for the City of New York, New York.

“Newark Medallion Loan” shall mean a Medallion Loan secured by Medallion Collateral that includes a Medallion issued by the Taxi Commission for the City of Newark, New Jersey.

“Non-Excluded Taxes” shall have the meaning provided in Section 2.11 hereof.

“Non-Usage Fee” shall have the meaning provided in Section 3.04 hereof.

“Note” shall have the meaning assigned to such term in Section 2.02 hereof.

“Notice of Borrowing and Pledge” shall have the meaning provided in Section 2.01(d) hereof.

“Obligor” shall mean the Person obligated to make payments under a Medallion Loan.

“Original Loan Agreement” shall have the meaning provided in the Recitals.

“Original Note” shall mean the “Note” as defined in the Existing Loan Agreement.

“Other Acceptable Medallion Loan” shall mean a Medallion Loan issued by an Other Acceptable Taxi Commission.

“Other Acceptable Taxi Commission” shall mean an agency, commission, regulatory body or other municipal instrumentality of a jurisdiction approved by the Lender in its sole and absolute discretion.

“Parent” shall mean Medallion Financial Corp., a Delaware corporation, a “regulated investment company” within the meaning of the Code and a closed-end management investment company registered under the Investment Company Act and its permitted successors hereunder.

“Partial Payment Date” shall have the meaning provided in Section 2.08(a) hereof.

“Payment Date” shall mean (i) each Regular Payment Date, (ii) any Business Day designated by the Borrower as a “Payment Date”, provided, that, in the case of this clause (ii) the Borrower shall have given the Lender and the Custodian one (1) Business Day’s prior written notice of such Payment Date, and the Servicer shall have delivered a current Servicing Report and Medallion Loan Schedule to the Lender and the Custodian in accordance with the Servicing

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Agreement, provided, further, that the Borrower shall designate a “Payment Date” pursuant to this clause (ii) only if the principal amount of the Advances to be paid on such day is at least $500,000, provided, further, that the Borrower shall not designate more than one “Payment Date” pursuant to this clause (ii) during any calendar week, (iii) each other Business Day on which a prepayment of the Advances is required under Section 2.07 and (iv) the Termination Date.

“Permitted Joint Participant” shall mean (a) a lender, financial institution or other Person listed on Schedule 1.01(c) to the Original Loan Agreement or another lender, financial institution or other Person acceptable to the Lender in its sole and absolute discretion, in each case that is not an Affiliate of the Borrower, that purchases participations in medallion loans; provided that in no event shall Permitted Joint Participant include individuals, and (b) an Affiliate of the Borrower that is a bankruptcy remote entity and is listed on Schedule 1.01(c) to the Original Loan Agreement (and whose bankruptcy remoteness has been established to the satisfaction of the Lender in its sole and absolute discretion, including, without limitation, by delivery of a legal opinion of counsel to the Borrower relating to the issues of substantive consolidation and true sale, in form and substance satisfactory to the Lender) or another Affiliate of the Borrower that is a bankruptcy remote entity that is acceptable to the Lender in its sole and absolute discretion hereto (and whose bankruptcy remoteness has been established to the satisfaction of the Lender in its sole and absolute discretion, including, without limitation, by delivery of a legal opinion of counsel to the Borrower relating to the issues of substantive consolidation and true sale, in form and substance satisfactory to the Lender).

“Permitted Joint Participation Interest” shall mean a participation interest in a Medallion Loan that (i) is pari passu in right of payment with the rights of the Borrower under such Medallion Loan and is evidenced by an Approved Joint Participation Agreement or another agreement in form and substance acceptable to the Lender in its sole and absolute discretion, (ii) is held by a Permitted Joint Participant, and (iii) is subject to a Joint Participation Supplemental Agreement.

“Permitted Junior Participant” shall mean (a) a lender, financial institution or other Person listed on Schedule 1.01(d) hereto or another lender, financial institution or other Person acceptable to the Lender in its sole and absolute discretion, in each case that is not an Affiliate of the Borrower, that purchases participations in medallion loans; provided that in no event shall Permitted Junior Participant include individuals, (b) an Affiliate of the Borrower that is a bankruptcy remote entity and is listed on Schedule 1.01(d) hereto (and whose bankruptcy remoteness has been established to the satisfaction of the Lender in its sole and absolute discretion, including, without limitation, by delivery of a legal opinion of counsel to the Borrower relating to the issues of substantive consolidation and true sale, in form and substance satisfactory to the Lender) or another Affiliate of the Borrower that is a bankruptcy remote entity that is acceptable to the Lender in its sole and absolute discretion hereto (and whose bankruptcy remoteness has been established to the satisfaction of the Lender in its sole and absolute discretion, including, without limitation, by delivery of a legal opinion of counsel to the Borrower relating to the issues of substantive consolidation and true sale, in form and substance satisfactory to the Lender), and (c) Freshstart.

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“Permitted Junior Participation Interest” shall mean a participation interest in a Medallion Loan that (i) is subordinated in right of payment to the rights of the Borrower and is evidenced by an Approved Junior Participation Agreement or another agreement in form and substance acceptable to the Lender in its sole and absolute discretion, (ii) is subject to a Junior Participation Supplemental Agreement, and (iii) is held by a Permitted Junior Participant; provided, that Freshstart shall not have a participation interest of more than 10.0% in any Medallion Loan.

“Person” shall mean any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association, government (or any agency, instrumentality or political subdivision thereof) or any other entity of whatever nature.

“Philadelphia Medallion Loan” shall mean a Medallion Loan secured by Medallion Collateral that includes a Medallion issued by the Taxi Commission for the City of Philadelphia, Pennsylvania.

“Property” shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

“Purchase Agreement” means that certain Loan Sale and Contribution Agreement, dated as of September 13, 2002, between Medallion Funding, as Seller, and the Borrower, as purchaser, together with all instruments, documents and agreements executed in connection therewith, as such Purchase Agreement may from time to time be amended, supplemented, restated or otherwise modified in accordance with the terms hereof.

“Qualified Institutional Buyer” shall mean a “qualified institutional buyer” as defined in Rule 144A of the U.S. Securities Act of 1933, as amended.

“Rapid Amortization Event” shall have the meaning provided in Section 2.07(d) hereof.

“Reconciliation” shall have the meaning set forth in the Servicing Agreement.

“Regular Payment Date” shall mean the 16^th Business Day of each month.

“Related Parties” means the Borrower, Medallion Funding and Freshstart.

“Release Price” shall mean, with respect to a Medallion Loan, the Lender’s security interest in which is to be released in connection with the repayment of an Advance pursuant to Section 2.08(b), an amount equal to the Collateral Value of such Medallion Loan as of the date of such repayment plus all accrued but unpaid interest thereon.

“Requirement of Law” shall mean as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

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“Responsible Officer” shall mean, as to any Person, the chief executive officer, president, vice president, treasurer or secretary or, with respect to financial matters, the chief financial officer, chief accounting officer, president, vice president, treasurer or secretary of such Person; provided, that in the event any such officer is unavailable at any time he or she is required to take any action hereunder, Responsible Officer shall mean any officer authorized to act on such officer’s behalf as demonstrated to the Lender to its reasonable satisfaction.

“Restatement Effective Date” shall mean the date upon which the conditions precedent set forth in Section 5.01 shall have been satisfied.

“Secured Obligations” shall mean the unpaid principal amount of, and interest on the Advances, and all other obligations and liabilities of the Borrower to the Lender, any Affiliate of the Lender that is a hedging counterparty under a Hedging Arrangement or any Indemnified Party, (including, but not limited to, fees, expenses and indemnification payments owed to the Custodian under Sections 8 and 15 of the Custodial Agreement) whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of or in connection with this Loan Agreement, the Note, any other Loan Document and any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to the Lender or otherwise). For purposes hereof, “interest” shall include, without limitation, interest accruing after the maturity of the Advances and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding.

“Seller” shall mean (a) Medallion Funding, in its capacity as Seller under the Purchase Agreement, or (b) an Approved Seller.

“Servicer” shall mean Medallion Funding, in its capacity as servicer under the Servicing Agreement, or such other servicer as shall be acceptable to the Lender in its sole discretion.

“Servicer Default” shall have the meaning provided for in the Servicing Agreement.

“Servicing Agreement” shall mean that certain Servicing Agreement, dated as of September 13, 2002, between the Borrower, the Lender and the Servicer for the servicing of Medallion Loans, as the same may be amended, supplemented, restated or otherwise modified from time to time with the prior written consent of the Lender.

“Servicing Fee” shall have the meaning provided for in the Servicing Agreement.

“Servicing Records” means all servicing records relating to the Collateral, including but not limited to any and all servicing agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of Medallion Loans.

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“Servicing Report” shall have then meaning provided in the Servicing Agreement.

“Specified Chicago Medallion Loan” shall mean a Chicago Medallion Loan specified on Schedule 1.01(g) hereto (as such Schedule 1.01(g) may from time to time be restated in accordance with Section 2.17), each originated by IDB and/or Atlantic Bank and each secured by a perfected first priority security interest in the related Medallion Collateral.

“Standard Form Medallion Loan Documentation” means the forms of Medallion Loan Documents utilized by a Seller to originate Medallion Loans.

“Subsidiary” shall mean, with respect to any Person, any other Person of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership, trust or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership, trust or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.

“Taxi Commission” shall mean (i) in the case of the City of New York, New York, the New York City Taxicab and Limousine Commission, (ii) in the case of the City of Boston, Massachusetts, the Boston Police Department, (iii) in the case of the City of Chicago, Illinois, the Commissioner of the Department of Consumer Services, Public Vehicles Operations Division for Chicago, Illinois, (iv) in the case of the City of Cambridge, Massachusetts, the City of Cambridge, Hackney Carriage Division, (v) in the case of the City of Newark, New Jersey, the Division of Taxicabs, Newark Police Department, (vi) in the case of the City of Philadelphia, Pennsylvania, the Pennsylvania Public Utilities Commission, or (vii) any Other Acceptable Taxi Commission, and, in each case, any successor agency, commission, regulatory body or other municipal instrumentality charged with responsibility for licensing taxicabs in the applicable municipality.

“Termination Date” shall mean the earlier of: (i) September 12, 2005, and (ii) the date on which an Event of Default occurs, or, in either case, such earlier date on which this Loan Agreement shall terminate in accordance with the provisions hereof or by operation of law.

“Tranche” shall mean Advances the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Advances shall originally have been made on the same day).

“Type”: as to any Advance, its nature as a Fixed Rate Loan or a Eurodollar Loan.

“Underwriting Guidelines” shall mean (i) in the case of Medallion Loans sold by Medallion Funding, as Seller, to the Borrower, the underwriting guidelines of Medallion Funding for Medallion Loans, a copy of which is attached to the Original Loan Agreement as Schedule 1.01(f), or (ii) in the case of Medallion Loans sold by an Approved Seller to the Borrower, the underwriting guidelines of such Approved Seller for Medallion Loans delivered to the Lender and approved by the Lender in writing in the Lender’s sole and absolute discretion.

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“Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest or the renewal or enforcement thereof in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.

Section 1.02 Accounting Terms and Determinations. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lender hereunder shall be prepared, in accordance with GAAP.

ARTICLE II

ADVANCES, NOTE AND PREPAYMENTS

Section 2.01 Advances.

(a) Subject to the terms and conditions of this Loan Agreement, the Lender agrees to make loans (individually, an “Advance”; collectively, the “Advances”) to the Borrower, from time to time on any Business Day from and including the Restatement Effective Date to but excluding the Termination Date, in an aggregate principal amount at any one time outstanding up to but not exceeding the lesser of (i) the Maximum Committed Credit, and (ii) the Borrowing Base at such time; provided that during each period from the date on which a Borrowing Base Certificate is delivered until the earlier of (A) the date on which the next Borrowing Base Certificate is delivered and (B) the date on which the next Borrowing Base Certificate is required to be delivered (the “Borrowing Base Period”), the Borrower may borrow Advances up to and equal to the lesser of (I) the Maximum Committed Credit and (II) the sum of (x) the Borrowing Base as reported in the then current Borrowing Base Certificate (less the Collateral Value of any Medallion Loans released during such Borrowing Base Period pursuant to Section 2.08(b)) and (y) the amount of principal repayments on Medallion Loans received during such Borrowing Base Period as set forth on a Reconciliation timely delivered by the Servicer pursuant to Section 4.01(b) of the Servicing Agreement; provided further, that amounts borrowed on any date other than a Regular Payment Date may only be used by the Borrower to purchase additional Medallion Loans that are pledged to the Lender. On the Restatement Effective Date, all “Advances” outstanding under the Existing Loan Agreement shall become Advances under this Loan Agreement.

(b) Subject to the terms and conditions of this Loan Agreement, during the period from and including the Restatement Effective Date to but excluding the Termination Date the Borrower may borrow, repay and reborrow hereunder; provided, that not more than one Advance may be made in respect of any Category IV Medallion Loans or Category V Medallion Loans and any principal amounts repaid in respect of any such Advances may not be reborrowed.

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(c) In no event shall an Advance be made when any Default has occurred and is continuing or would occur as a result of such Advance.

(d) The Lender shall have no obligation to make new Advances with respect to any Medallion Loan at any time unless (x) an irrevocable written Notice of Borrowing and Pledge substantially in the form of Exhibit H hereto (a “Notice of Borrowing and Pledge”) relating to such Medallion Loans has been delivered to the Lender prior to the Funding Date for such Advance (as provided in Section 2.03(a)) including the certification with respect to the delivery of the Funding Date Documentation, and (y) the Custodian shall have received the Funding Date Documentation with respect to such Medallion Loan in accordance with the terms of the Custodial Agreement.

(e) The Advances may from time to time be (a) Eurodollar Loans, (b) Fixed Rate Loans or (c) a combination thereof, as determined by the Borrower and notified to the Lender in accordance with Sections 2.03 and 2.14.

Section 2.02 Note.

(a) The Advances made by the Lender shall be evidenced by a single promissory note of the Borrower substantially in the form of Exhibit A hereto (the “Note”), dated the date hereof, payable to the Lender in a maximum principal amount equal to $300,000,000 and otherwise duly completed. The Lender shall have the right to have its Note subdivided, by exchange for promissory notes of lesser denominations or otherwise. Simultaneously with the execution of the Note, the Lender shall return to the Borrower the Original Note, which shall have been marked “cancelled”.

(b) The date, amount, Type, Interest Period and interest rate of each Advance made by the Lender to the Borrower, each Conversion of all or a portion of the principal to another Type and each payment made on account of the principal and interest thereof, shall be recorded by the Lender on its books and records (including, without limitation, all such entries necessary to reflect all “Advances” outstanding under the Existing Loan Agreement on the Restatement Effective Date) and such entries made by the Lender on its books and records shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded (absent manifest error); provided, that any failure of the Lender to make any such entry on its on its books or records, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Advances made to the Borrower by the Lender in accordance with the terms of this Agreement.

Section 2.03 Procedure for Borrowing.

(a) The Borrower may request an Advance hereunder, on any Business Day during the period from and including the Restatement Effective Date to but excluding the Termination Date, by delivering to the Lender, with a copy to the Custodian, a Notice of Borrowing and Pledge, appropriately completed and executed by a Responsible Officer of the Borrower, which Notice of Borrowing and Pledge must be received by the Lender, with a copy to the Custodian, prior to 4 p.m., New York City time, one (1) Business Day prior to the

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requested Funding Date of any Advance requested to be made as a Eurodollar Loan and five (5) Business Days prior to the requested Funding Date of any Advance requested to be made as a Fixed Rate Loan; provided, that the Borrower shall not request more than one Advance per Business Day; provided, further, that the Borrower shall not request more than two Advances for any calendar week. Such Notice of Borrowing and Pledge shall (i) attach a schedule identifying the Eligible Medallion Loans for each Advance that the Borrower proposes to pledge to the Lender and to be included in the Borrowing Base in connection with such Advance, (ii) contain the amount of the Advance requested to be made on such Funding Date, (iii) specify the requested Funding Date, (iv) attach an officer’s certificate signed by a Responsible Officer of the Borrower as to the satisfaction of all of the matters referred to in Sections 5.02 (a), (b) and (c) hereof, (v) specify the requested Type of Advance, (vi) specify the length of the initial Interest Period, and (vii) contain (by attachment) such other information reasonably requested by the Lender from time to time.

(b) With respect to each Advance, upon satisfaction of all conditions precedent set forth in Sections 5.01 and 5.02 hereof and the satisfaction of all procedures set forth in this Section 2.03, the Lender shall transfer funds relating to such Advance to such account as the Lender and the Borrower may from time to time agree.

Section 2.04 Delivery of Medallion Loan Files. With respect to any Medallion Loan, the Borrower shall deliver to the Custodian the related Medallion Loan File in the manner set forth in Section 2 of the Custodial Agreement.

Section 2.05 Repayment of Advances; Interest.

(a) The Borrower hereby promises to repay in full on the Termination Date the aggregate outstanding principal amount of the Advances.

(b) The Borrower hereby promises to pay to the Lender interest on the unpaid principal amount of each Advance for the period from and including the Funding Date of such Advance to but excluding the date such Advance shall be paid in full, at a rate per annum for each day during each Interest Period equal to the Interest Rate applicable to such Advance; calculated such that interest shall accrue each day on the outstanding principal amount of all Advances as of 12:00 noon, New York City time, on such day. Notwithstanding the foregoing, the Borrower hereby promises to pay to the Lender interest at the Default Rate on any principal of any Advance and on any other amount payable by the Borrower hereunder or under the other Loan Documents that shall not be paid in full when due (whether at stated maturity, by acceleration or by mandatory prepayment or otherwise) for the period from and including the due date thereof to but excluding the date the same is paid in full. Accrued interest on each Advance shall be payable on each Payment Date. Notwithstanding the foregoing, interest accruing at the Default Rate shall be payable to the Lender on demand.

Section 2.06 Limitation on Advances; Illegality. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any Eurodollar Rate:

(a) the Lender determines, which determination shall be conclusive, that quotations of interest rates for the relevant deposits referred to in the definition of “Eurodollar Rate” in Section 1.01 hereof are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for Advances as provided herein; or

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(b) it becomes unlawful for the Lender to honor its obligation to make or maintain Advances hereunder using the Eurodollar Rate;

then the Lender shall give the Borrower prompt notice thereof and, so long as such condition remains in effect, the Lender shall be under no obligation to Continue any Eurodollar Loans or make any additional Advances as, or Convert any existing Fixed Rate Loans to, Eurodollar Loans and all outstanding Eurodollar Loans shall, at the Borrower’s option, either be prepaid, Converted to Fixed Rate Loans or shall accrue interest at a rate equal to the sum of (i) the Federal Funds Rate and (ii) the Applicable Margin.

Section 2.07 Determination of Borrowing Base; Mandatory Prepayments or Pledge; Rapid Amortization Event.

(a) The Borrower shall cause the Servicer to deliver to the Lender a Borrowing Base Certificate no later than the fifteenth (15th) Business Day after the last day of each month calculating the Borrowing Base as of the last day of such prior month, certified as complete and correct by a Responsible Officer of the Servicer.

(b) Subject to Section 2.16 hereto, if at any time the aggregate outstanding principal amount of Advances exceeds the Borrowing Base, including, without limitation, as the result of any Medallion Loan ceasing to be an Eligible Medallion Loan (a “Borrowing Base Deficiency”) the Borrower shall no later than 12:00 (noon) New York City time on the fifth (5th) Business Day immediately succeeding the discovery of such Borrowing Base Deficiency (i) prepay the outstanding principal amount of Advances in part or in whole, together with accrued and unpaid interest on, and other costs relating to such prepayment under this Loan Agreement payable by the Borrower with respect to, the principal amount prepaid, or (ii) pledge additional Eligible Medallion Loans to the Lender, such that after giving effect to such prepayment or pledge the aggregate outstanding principal amount of the Advances does not exceed the Borrowing Base.

(c) The Borrower shall prepay Advances as set forth in Section 4.01 of the Servicing Agreement.

(d) Subject to Section 2.16 hereto, if at any time, the Weighted Average Loan-To-Value Ratio (as defined below) of Eligible Medallion Loans exceeds 90%, and such Weighted Average Loan-To-Value Ratio multiplied by the then-applicable Advance Rate for Class B Medallion Loans (the “Combined Loan-To-Value Ratio”) exceeds 80% (a “Rapid Amortization Event”), the Servicer or the Borrower shall so notify the Lender immediately following the discovery of such Rapid Amortization Event. From and after the occurrence of a Rapid Amortization Event, the Lender may, by notice to the Borrower and the Servicer, direct that all Collections be applied to the payment of accrued but unpaid interest on the Advances and the repayment of principal of the Advances until, after giving effect to such repayments and any change in the Weighted Average Loan-to-Value Ratio (including as a result of the pledge of additional Eligible Medallion Loans to the Lender), the Combined Loan-to-Value Ratio is 72%

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or lower. The “Weighted Average Loan-To-Value Ratio” shall be computed as the decimal equivalent of a fraction by multiplying the Net Principal Balance and accrued interest of each Medallion Loan by the Loan-To-Value Ratio of such Medallion Loan, and dividing the sum of such numbers by the total outstanding principal and accrued interest on all Medallion Loans.

Section 2.08 Optional Prepayments; Release of Medallion Loans upon Repayment.

(a) Subject to Section 2.16 hereto, the Borrower may prepay, in whole or in part, Advances at any time without premium or penalty. Any amounts prepaid shall be applied to repay the outstanding principal amount of any Advances until paid in full and shall be accompanied by repayment of accrued and unpaid interest on the amount. Amounts repaid may be reborrowed in accordance with the terms of this Loan Agreement. If the Borrower intends to prepay an Advance in whole or in part from any source, the Borrower shall give one (1) Business Day’s prior written notice thereof to the Lender, specifying the date (such date, a “Partial Payment Date”) and amount of prepayment, together with any amounts payable pursuant to Section 2.16 hereunder. If such notice is given, the amount specified in such notice shall be due and payable on the date specified therein. Partial prepayments shall be in an aggregate principal amount of at least $500,000 or a whole multiple in excess thereof.

(b) With respect to any Advance, the Borrower may obtain the release of the Lender’s security interest in one or more Medallion Loans securing such Advance, pursuant to Section 4.10, by (i) transferring to the account referenced in Section 3.01(a) the Release Price therefor on the date of such repayment or (ii) pledging to the Lender additional Eligible Medallion Loans having a Collateral Value at least equal to the Collateral Value of the Medallion Loan(s) to be released; provided, however, that a release pursuant to this Section 2.08(b) shall be available only if, after giving effect thereto (including the application of the proceeds thereof or the grant of the security interest in the additional Eligible Medallion Loans), there shall not exist a Default or Rapid Amortization Event.

Section 2.09 Requirements of Law.

(a) If the introduction or adoption of or any change (other than any change by way of the imposition of or increase in reserve requirements included in the Eurodollar Rate Reserve Percentage) in any Requirement of Law (other than with respect to any amendment made to the Lender’s certificate of incorporation and by-laws or other organizational or governing documents) or any change in the interpretation or application thereof or compliance by the Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

(i) shall subject the Lender to any tax of any kind whatsoever with respect to this Loan Agreement, the Note or any Advance made by it (excluding net income taxes or franchise taxes) or change the basis of taxation of payments to the Lender in respect thereof;

(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory advance or similar requirement against receivables or other assets held by,

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deposits or other liabilities in or for the account of, advances or other extensions of credit by, or any other acquisition of funds by, any office of the Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or

(iii) shall impose on the Lender any other condition;

and the result of any of the foregoing is to increase the cost to the Lender, by an amount which the Lender deems to be material, of making, Converting into, Continuing, participating in or otherwise maintaining any Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay the Lender such additional amount or amounts as will compensate the Lender for such increased cost or reduced amount receivable.

(b) If the Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by the Lender or any corporation controlling the Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on the Lender’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which the Lender or such corporation (taking into consideration the Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by the Lender to be material, then from time to time, subject to clause (c) below, the Borrower shall promptly pay to the Lender such additional amount or amounts as will compensate the Lender for such reduction.

(c) If the Lender becomes entitled to claim any additional amounts pursuant to this Section 2.09, it shall notify the Borrower of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section 2.09 submitted by the Lender to the Borrower shall be conclusive in the absence of manifest error. It is understood and agreed that any additional amounts that the Lender is entitled to receive pursuant to this Section 2.09 shall only include amounts incurred on or after the ninetieth day immediately preceding the day on which the Lender shall have notified the Borrower pursuant to this clause (c) of the event by reason of which it became entitled to such additional amount.

(d) As promptly as practicable after the Lender becomes aware of the occurrence of an event described in Section 2.09(a) or (b), the Lender shall use reasonable efforts to make, fund or maintain its rights and obligations hereunder through another office of the Lender, if as a result thereof the grounds for payments under Section 2.09(a) or (b) would thereby cease to exist; provided, that the Lender shall not be obligated to select an alternative office if the Lender determines that (i) as a result of such selection the Lender would be in violation of any applicable law, regulation, treaty, or guideline, or would incur additional costs or expenses, or (ii) such selection would be inadvisable for regulatory reasons or inconsistent with the interests of the Lender.

Section 2.10 Purpose of Advances. Subject to the second proviso in Section 2.01(a), Advances may be used by the Borrower for any lawful purpose.

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Section 2.11 Taxes.

(a) All payments made by the Borrower under this Loan Agreement and the Note shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (collectively, “Taxes”), unless required by law. If the Borrower shall be required under any applicable Requirement of Law to deduct or withhold any Taxes from or in respect of any sum payable under or in respect of this Loan Agreement to the Lender, (i) the Borrower shall make all such deductions and withholdings in respect of Taxes, (ii) the Borrower shall pay the full amount deducted or withheld in respect of Taxes to the relevant taxation authority or other Governmental Authority in accordance with the applicable Requirement of Law, and (iii) the sum payable by the Borrower shall be increased as may be necessary so that after the Borrower has made all required deductions and withholdings such Lender receives an amount equal to the sum it would have received had no such deductions or withholdings been made in respect of Non-Excluded Taxes. For purposes of this Agreement “Non-Excluded Taxes” are Taxes other than, in the case of each Lender, Taxes that are measured by or imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which such Lender is organized or of its Applicable Lending Office, or any political subdivision thereof, unless such Taxes are imposed as a result of such Lender or such Agent having executed, delivered or performed its obligations or received payments under, or enforced, this Agreement or any of the other Loan Documents (in which case such Taxes will be treated as Non-Excluded Taxes).

(b) The Borrower shall not be required to increase any amounts payable under Section 2.11(a) to any Lender that is not organized under the laws of the United States of America or a state thereof if the Lender fails to comply with the requirements of clause (c) of this Section. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Lender the required receipts or other required documentary evidence, the Borrower shall indemnify the Lender for any incremental taxes, interest or penalties that may become payable by the Lender as a result of any such failure. The agreements in this Section shall survive the termination of this Loan Agreement and the payment of the Advances and all other amounts payable hereunder.

(c) If the Lender (or transferee that acquires a interest hereunder in accordance with Section 10.14 hereof) that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Code (a “US Person”)) for United States federal income tax purposes (a “Non-US Lender”), such Non-US Lender shall deliver or caused to be delivered to the Borrower and the Servicer the following properly completed and duly executed documents:

(1) two complete and executed (x) U.S. Internal Revenue Forms W-8BEN (or any successor form thereto) with respect to an income tax treaty providing for a zero rate of withholding tax on interest, or (y) U.S. Internal Revenue Service Forms W-8ECI (or any successor form thereto); or

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(2) two complete and executed U.S. Internal Revenue Service Forms W-8BEN (or any successor form thereto), including all appropriate attachments, documenting the status of the Lender (or transferee) as a Non-U.S. Lender and (y) a Certificate in the form of Exhibit I hereto.

Such documents shall be delivered by each Lender (or transferee) on or before the date it becomes a party to this Agreement (or, in the case of a transferee or assignee that is a participation holder, on or before the date such participation holder becomes a transferee hereunder) and on or before the date, if any, such Lender (or transferee) changes its applicable lending office by designating a different lending office. In addition, each Lender (or transferee) shall deliver or cause to be delivered such Forms and/or Certificates promptly upon or before the expiration, obsolescence or invalidity of any document previously delivered by such Lender (or transferee). Notwithstanding any other provision of this Section 2.11(c), a Lender (or transferee) shall not be required to deliver any document pursuant to this Section 2.11(c) that such Lender (or Transferee) is not legally able to deliver.

Section 2.12 Interest Reserve Deposit Account. (a) The Borrower established, on or prior to the Effective Date, the Interest Reserve Deposit Account in the name of the Borrower for the benefit of the Lender at the Interest Reserve Deposit Account Bank and subject to a security interest in favor of the Lender. The Borrower deposited $1,050,000 into the Interest Reserve Deposit Account on the Effective Date. The Lender shall release from the Interest Reserve Deposit Account and return to the Borrower (i) on [the Restatement Effective Date], an amount equal to $300,000, plus all current interest accrued upon the total $1,050,000 deposit and (ii) so long as no Default or Event of Default shall have occurred and be continuing, on the last Business Day of December, 2003, an amount equal to $250,000. Funds from time to time on deposit in the Interest Reserve Deposit Account shall be invested in interest bearing demand cash accounts with the Interest Reserve Deposit Bank.

(b) If an Event of Default has occurred and is continuing, the Lender may, in its sole discretion, give notice to the Interest Reserve Deposit Account Bank that the Lender is exercising its rights under the Interest Reserve Deposit Account Control Agreement, and the Lender may direct the Interest Reserve Deposit Bank that any and all amounts in the Interest Reserve Deposit Account shall be used to repay the principal, interest and other amounts due hereunder (such repayment to be applied in the order set forth in Section 4.01 of the Servicing Agreement).

(c) Upon termination of this Loan Agreement and repayment in full to the Lender of all Secured Obligations, the Lender shall cause to be paid to the Borrower all amounts held in the Interest Reserve Deposit Account.

Section 2.13 Collection Account.

(a) The Borrower established, on or prior to the Effective Date, the Collection Account in the name of the Borrower for the benefit of the Lender at the Collection Account Bank and subject to a security interest in favor of the Lender. Pursuant to, and in accordance with the Collection Account Control Agreement, funds on deposit in the Collection Account shall be invested by the Collection Account Bank in interest bearing demand cash accounts with the Collateral Account Bank, in the name of the Lender.

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(b) In accordance with the Collection Account Control Agreement, the Collection Account Bank shall not have any responsibility, or in any way be liable to any party hereto, for any loss in the value of any investment described in this Section 2.13 (including, without limitation, losses resulting from a fluctuation in interest rates, market values or otherwise).

(c) Each of the Borrower and the Lender hereby agree that upon the occurrence and during the continuation of a Default, the Lender may give notice (i) to the Collection Account Bank that it is exercising its rights under the Collection Account Control Agreement, and (ii) to the Obligors, directing them to make payments on the Medallion Loans to a Person other than the Servicer, including an account, other than the Collection Account, over which the Lender or its designee shall have exclusive dominion and control.

Section 2.14 Conversion and Continuation Options.

(a) The Borrower may elect from time to time to Convert an Advance of one Type into an Advance of another Type by giving the Lender at least two Business Days’ prior irrevocable notice of such election (in the form of Exhibit M hereto), such notice specifying the amount and the date such Conversion is to be made, provided that any such Conversion may only be made on the last day of the related Interest Period. Any such notice of Conversion shall specify the amount to be Converted, the date of such Conversion and the length of the initial Interest Period or Interest Periods therefor. All or any part of outstanding Advances may be Converted as provided herein, provided that (i) no Advance may be Converted when any Event of Default has occurred and is continuing and the Lender has determined that such a Continuation is not appropriate, (ii) any such Conversion may only be made if, after giving effect thereto, Section 2.16 shall not have been contravened, and (iii) no Advance may be Converted after the date that is one month prior to the Termination Date.

(b) The Interest Period selected for any Advance may be Continued upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Lender (in the form of Exhibit M hereto), in accordance with the applicable provisions of the term “Interest Period” set forth in Section 1.01, of the length of the next Interest Period to be applicable to such Advances, provided that no Advance may be Continued for an Interest Period longer than one-month (i) when any Event of Default has occurred and is continuing and the Lender has determined that such a Continuation is not appropriate, (ii) if, after giving effect thereto, Section 2.16 would be contravened, or (iii) after the date that is three (3) Business Days prior to the end of the then current Interest Period, and provided, further, that if the Borrower fails to give notice to the Lender of a Continuation, such Advances shall be automatically Continued as Eurodollar Loans having a one-month Interest Period on the last day of such Interest Period.

Section 2.15 Minimum Conversion Amounts. All Conversions and all selections of Interest Periods related thereto shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Advances Converted into any one Tranche shall not be less than $500,000.

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Section 2.16 Indemnity. The Borrower agrees to indemnify the Lender and to hold the Lender harmless from any loss or expense which the Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of Conversion into or Continuation of any Advances after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement, or (c) the making of a prepayment of any Advance on a day which is not the last day of the Interest Period applicable thereto (including, without limitation, the repayment of an Advances on the Termination Date, if the Interest Period applicable to such Advance extends beyond the Termination Date). Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, Converted or Continued, for the period from the date of such prepayment or of such failure to borrow, Convert or Continue to the last day of such Interest Period (or, in the case of a failure to borrow, Convert or Continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Advances provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by the Lender) which would have accrued to the Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Advances and all other amounts payable hereunder.

Section 2.17 Additional Specified Chicago Medallion Loans. The Borrower may from time to time request that the Lender include certain additional Chicago Medallion Loans (“Additional Specified Chicago Medallion Loans”) as Specified Chicago Medallion Loans by delivery to the Lender of a restated Schedule 1.01(g), which shall identify each existing Specified Chicago Medallion Loan and shall also identify each Additional Specified Chicago Medallion Loan requested for inclusion as a Specified Chicago Medallion Loan, and a restated Schedule 1.01(h), which shall identify each existing Junior Specified Chicago Medallion Loan and shall also identify the subordinate security interest related to each Additional Specified Chicago Medallion Loan requested for inclusion as Specified Chicago Medallion Loans; provided, that no such restated Schedule 1.01(g) or 1.01(h) shall be effective as a replacement for the existing schedules, and no additional Chicago Medallion Loans will be recognized as Specified Chicago Medallion Loans, except upon written confirmation by the Lender and provided that no Default or Event of Default has occurred and is then continuing.

Section 2.18 Maximum Committed Credit. (a) At any time, so long as no Default or Event of Default shall have occurred and then be continuing, the Borrower may reduce the amount of the Maximum Committed Credit by delivering to the Lender a notice of its election to reduce the amount of the Maximum Committed Credit executed by a duly authorized Responsible Officer of the Borrower, which notice must be received by the Lender at least thirty (30) days prior to the requested effective date of such reduction; provided, that any election by the Borrower to reduce the Maximum Committed Credit shall be subject, without limitation, to the right of first refusal given to the Lender pursuant to Section 7.20.

(b) So long as no Default or Event of Default shall have occurred and then be continuing, and provided that the Borrower shall not have previously elected to reduce the amount of the Maximum Committed Credit pursuant to the preceding subparagraph (a), on the one-year anniversary of the Restatement Effective Date, the amount of the Maximum Committed Credit shall be automatically increased from $250,000,000 to $300,000,000.

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(c) Except as provided in the preceding subparagraph (b), the amount of the Maximum Committed Credit shall not be increased, except with the prior written consent of the Lender.

ARTICLE III

PAYMENTS; COMPUTATIONS; FEES

Section 3.01 Payments.

(a) Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Borrower under this Loan Agreement and the other Loan Documents, shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the Lender at the following account maintained by the Lender:

Merrill Lynch Bank USA Operations

ABA# 124-084-669

A/C 62030

Credit Globus Account 0200001133

Ref: Merrill Lynch Commercial Finance Corp. - Taxi Medallion

Attn: Scott Croland (Phone: 609-282-3038; Fax: 609-282-1269)

not later than 3:00 p.m., New York City time, on the date on which such payment shall become due (and each such payment made after such time on such due date shall be deemed to have been made on the next succeeding Business Day). The Borrower acknowledges that it has no rights of withdrawal from the foregoing account.

(b) Except to the extent otherwise expressly provided herein, if the due date of any payment under this Loan Agreement or the other Loan Documents would otherwise fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day, and interest shall be payable for any principal so extended for the period of such extension.

Section 3.02 Computations. (a) Interest on the Advances shall be computed on the basis of a 360-day year for the actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable. The Lender shall as soon as practicable notify the Borrower of each determination of a Eurodollar Rate. Any change in the interest rate on an Advance resulting from a change in the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Lender shall as soon as practicable notify the Borrower of the effective date and the amount of each such change in interest rate.

(b) Each determination of an interest rate by the Lender pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower in the absence of manifest error. The Lender shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Lender in determining any interest rate pursuant to Section 3.02.

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Section 3.03 Facility Fee. The Borrower agrees to pay to the Lender the following amounts (collectively, the “Facility Fee”):

(a) on the Restatement Effective Date, the Borrower shall pay the Lender an amount equal to $375,000, and

(b) on the one-year anniversary of the Restatement Effective Date, the Borrower shall pay to the Lender an amount equal to $900,000;

in each case, such payment to be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the Lender at the account set forth in Section 3.01(a) hereof. The Facility Fee shall be deemed fully earned as of the Restatement Effective Date and shall not be subject to rebate or set-off for any reason whatsoever, including, without limitation, early occurrence of the Termination Date.

Section 3.04 Non-Usage Fee. The Borrower agrees to pay to the Lender a Non-Usage fee (the “Non-Usage Fee”) from and including the Restatement Effective Date to the Termination Date, computed at the rate of 12.5 basis points (0.125%) per annum on the average daily amount of the unutilized portion of the Maximum Committed Credit during the period for which payment is made, in each case payable monthly in arrears on the first Business Day of the following month and on the Termination Date, commencing on October 1, 2003, such payment to be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the Lender at the account set forth in Section 3.01(a) hereof.

ARTICLE IV

COLLATERAL SECURITY

Section 4.01 Collateral; Security Interest.

(a) The Custodian shall hold the Medallion Loan Documents as exclusive bailee and agent for the Lender pursuant to terms of the Custodial Agreement.

(b) All of the Borrower’s right, title and interest in, to and under each of the following items of property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, is hereinafter referred to as the “Collateral”:

(i) all Medallion Loans identified on a Notice of Borrowing and Pledge delivered by the Borrower to the Lender and the Custodian from time to time, including, without limitation all liquidation proceeds and recoveries with respect thereto, and the Medallion Collateral securing same, and any security interest in such Medallion Loans in favor of the applicable Seller;

(ii) all Medallion Loan Documents;

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(iii) the Purchase Agreement (including, without limitation all rights of the Borrower to amounts due, and all rights of indemnity arising, under or in connection with the Purchase Agreement);

(iv) all Approved Purchase Agreements (including, without limitation all rights of the Borrower to amounts due, and all rights of indemnity arising, under or in connection with any Approved Purchase Agreement);

(v) all Hedging Arrangements;

(vi) all insurance policies and any proceeds from such insurance policies relating to the Medallion Loans, the Obligors or the related Medallion Collateral;

(vii) all Collections and all rights with respect thereto;

(viii) the Collection Account, the Interest Reserve Deposit Account and the balances, investments and other items of value attributable or credited to the Collection Account or the Interest Reserve Deposit Account, and all rights with respect thereto;

(ix) all “chattel paper” and “documents” (as defined in the Uniform Commercial Code) evidencing or relating to the Medallion Loans;

(x) the Servicing Agreement and all Servicing Records;

(xi) all Permitted Joint Participation Interests and Permitted Junior Participation Interests, and all agreements with respect thereto;

(xii) all “equipment”, “general intangibles” and “instruments” as defined in the Uniform Commercial Code relating to or constituting any and all of the foregoing; and

(xiii) any and all replacements, substitutions, distributions on, or proceeds of any and all of the foregoing.

(c) The Borrower hereby pledges to the Lender, and grants a security interest in favor of the Lender in, all of the Borrower’s right, title and interest in, to and under the Collateral including without limitation the repayment of principal of and interest on all Advances and all other amounts owing to the Lender hereunder, under the Note and under the other Loan Documents and all other amounts owing by such Borrower to the Lender, whether now owned or hereafter acquired, now existing or hereafter created, to secure the Secured Obligations. Each of the Borrower and the Servicer agrees to mark its master computer databases and computer files (by way of the creation of a special “field” or otherwise), in a manner acceptable to the Lender, to evidence the interests granted to the Lender hereunder.

Section 4.02 Further Documentation. At any time and from time to time, and at the sole expense of the Borrower, the Borrower will promptly and duly execute and deliver, or will promptly cause to be executed and delivered, such further instruments and documents and take such further actions as are necessary (or as are reasonably requested by the Lender) for the purpose of obtaining or preserving the full benefits of this Loan Agreement and of the rights and

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powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Liens created hereby or the taking of any other action necessary to preserve the status of the Lender’s Liens on the Collateral as first priority perfected liens. The Borrower also hereby authorizes the Lender to file any such financing or continuation statement without the signature of the Borrower to the extent permitted by applicable law. A photographic or other reproduction of this Loan Agreement shall be sufficient as a financing statement for filing in any jurisdiction.

Section 4.03 Changes in Locations, Name, etc. The Borrower shall not (i) change the location of its chief executive office/chief place of business from that specified in Section 6.12 hereof, (ii) change its name, identity or corporate structure (or the equivalent) or change the location where it maintains its records with respect to the Collateral or (iii) reincorporate or reorganize under the laws of another jurisdiction, in each case unless it shall have given the Lender at least 30 days prior written notice thereof and shall have delivered to the Lender all Uniform Commercial Code financing statements and amendments thereto as the Lender shall reasonably request and taken all other actions deemed reasonably necessary by the Lender to continue its perfected status in the Collateral with the same or better priority. The Borrower’s organizational identification number is 3542576 and the Borrower’s federal tax identification number is 51-6527213 . The Borrower shall promptly notify the Lender of any change in such organizational identification number. In the event of a disaster at the location of the Borrower’s chief executive office or at the location of the Borrower’s records regarding the Medallion Loans, the Borrower shall maintain its backup office and records at 11-49 44^th Drive, Long Island City, New York 11101.

Section 4.04 Lender’s Appointment as Attorney-in-Fact.

(a) The Borrower hereby irrevocably constitutes and appoints the Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Borrower and in the name of the Borrower or in its own name, from time to time in the Lender’s discretion, for the purpose of carrying out the terms of this Loan Agreement, to take any and all appropriate action and to execute any and all documents and instruments related to the Collateral which may be necessary or desirable to accomplish the purposes of this Loan Agreement, and, without limiting the generality of the foregoing, the Borrower hereby gives the Lender the power and right, on behalf of the Borrower, without assent by the Borrower, if an Event of Default shall have occurred and be continuing, to do the following:

(i) in the name of the Borrower or its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any insurance policy or with respect to any other Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Lender for the purpose of collecting any and all such moneys due under any such insurance policy or with respect to any other Collateral whenever payable;

(ii) to pay or discharge taxes and Liens levied or placed on or threatened against the Collateral; and

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(iii) (A) to direct any party liable for any payment under any Collateral to make payment of any and all moneys due or to become due thereunder directly to the Lender or as the Lender shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any of the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any thereof and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Borrower with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as the Lender may deem appropriate; (G) to make any filing or other submission to any Taxi Commission on behalf of the Borrower; and (H) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Lender were the absolute owner thereof for all purposes, and to do, at the Lender’s option and the Borrower’s expense, at any time, and from time to time, all acts and things which the Lender deems necessary to protect, preserve or realize upon the Collateral and the Lender’s Liens thereon and to effect the intent of this Loan Agreement, all as fully and effectively as the Borrower might do.

The Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.

(b) The Borrower also authorizes the Lender, at any time and from time to time, to execute, in connection with any sale provided for in Section 4.07 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral and to file any initial financing statements amendments thereto and continuation statements with or without the signature of any Borrower as authorized by applicable law, as applicable to all or any part of the Collateral and to file any initial financing statements, amendments thereto and continuation statements with or without the signature of any Borrower as authorized by applicable law, as applicable to all or any part of the Collateral.

(c) The powers conferred on the Lender are solely to protect the Lender’s interests in the Collateral and shall not impose any duty upon the Lender to exercise any such powers. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and, without limiting Section 4.08, neither the Lender nor any of its officers, directors, or employees shall be responsible to the Borrower for any act or failure to act under this Section 4.04, except for its own gross negligence or willful misconduct.

Section 4.05 Performance by Lender of Borrower’s Obligations. If the Borrower fails to perform or comply with any of its agreements contained in the Loan Documents and the Lender may itself perform or comply, or otherwise cause performance or compliance, with such agreement, the out-of-pocket costs and expenses of the Lender incurred in connection with such performance or compliance, together with interest thereon at a rate per annum equal to the Default Rate, shall be payable by the Borrower to the Lender on demand and shall constitute Secured Obligations.

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Section 4.06 Proceeds. If an Event of Default shall occur and be continuing, (a) all proceeds of Collateral received by the Borrower consisting of cash, checks and other cash equivalents shall be held by the Borrower in trust for the Lender, segregated from other funds of the Borrower, and shall forthwith upon receipt by the Borrower be turned over to the Lender in the exact form received by the Borrower (duly endorsed by the Borrower to the Lender, if required) and (b) any and all such proceeds received by the Lender (whether from the Borrower or otherwise) may, in the sole discretion of the Lender, be held by the Lender as collateral security for, and/or then or at any time thereafter may be applied by the Lender against, the Secured Obligations (whether matured or unmatured), such application to be in such order as the Lender shall elect. Any balance of such proceeds remaining after the Secured Obligations shall have been paid in full and this Loan Agreement shall have been terminated shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive the same. For purposes hereof, proceeds shall include, but not be limited to, all principal and interest payments, all prepayments and payoffs, insurance claims, recoveries against Obligors, sale and foreclosure proceeds, and any other income and all other amounts received with respect to the Collateral.

Section 4.07 Remedies. If an Event of Default shall occur and be continuing, the Lender may exercise, in addition to all other rights and remedies granted to it in this Loan Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under the Uniform Commercial Code. Without limiting the generality of the foregoing, the Lender without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Borrower or any other Person (each and all of which demands, presentments, protests, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell (on a servicing released basis, at the Lender’s option), lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels or as an entirety at public or private sale or sales, at any exchange, broker’s board or office of the Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Borrower, which right or equity is hereby waived or released. In the event that the Lender elects to take any action described in this Section 4.07, the Borrower further agrees, at the Lender’s request, to assemble the Collateral and make it available to the Lender at places which the Lender shall reasonably select, whether at the Borrower’s premises or elsewhere. The Lender shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Lender hereunder, including without limitation reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Secured Obligations, in such order as the Lender may elect, and only after such application and after the payment by the Lender of any

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other amount required or permitted by any provision of law, including without limitation Sections 9-610 and 9-615 of the Uniform Commercial Code, need the Lender account for the surplus, if any, to the Borrower. To the extent permitted by applicable law, the Borrower waives all claims, damages and demands it may acquire against the Lender arising out of the exercise by the Lender of any of its rights hereunder, other than those claims, damages and demands arising from the gross negligence or willful misconduct of the Lender. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. The Borrower shall remain liable for any deficiency (plus accrued interest thereon as contemplated pursuant to Section 2.05(b) hereof) if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Secured Obligations, including the fees and disbursements of any attorneys employed by the Lender to collect such deficiency.

Section 4.08 Limitation on Duties Regarding Presentation of Collateral. The Lender’s duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Uniform Commercial Code or otherwise, shall be to deal with it in the same manner as the Lender deals with similar property for its own account. Neither the Lender nor any of its directors, officers or employees shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Borrower or otherwise.

Section 4.09 Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest.

Section 4.10 Release of Security Interest. Upon (x) termination of this Loan Agreement, repayment to the Lender of all Secured Obligations and the performance of all other obligations under the Loan Documents, the Lender shall release its security interest in any remaining Collateral, (y) repayment of a Medallion Loan in full by the related Obligor or sale of a Medallion Loan by the Borrower to the extent permitted by this Loan Agreement, the Lender shall release its security interest in any Collateral securing such Medallion Loan, in the case of this clause (y), upon receipt by the Lender of the amount of such repayment or sales proceeds (unless otherwise agreed by the Lender in its sole discretion), or (z) deposit of the Release Price or pledge to the Lender of additional Eligible Medallion Loans as contemplated by Section 2.08(b), provided that no Event of Default or Rapid Amortization Event has occurred and is continuing, the Lender shall release its security interest in any Collateral securing such Medallion Loan; provided that if any payment, or any part thereof, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or a trustee or similar officer for, the Borrower or any substantial part of its Property, or otherwise, this Loan Agreement, all rights hereunder and the Liens created hereby (other than Liens referred to in clause (y) above) shall continue to be effective, or be reinstated, as though such payments had not been made.

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ARTICLE V

CONDITIONS PRECEDENT

Section 5.01 Initial Advance. The agreement of the Lender to make additional Advances requested to be made by it hereunder is subject to the satisfaction, immediately prior to or concurrently with the making of the initial additional Advance requested to be made under this Loan Agreement, of the following conditions precedent:

(a) Loan Agreement. The Lender shall have received this Loan Agreement, executed and delivered by a duly authorized officer of the Borrower and the Lender.

(b) Note. The Lender shall have received the Note, conforming to the requirements hereof and executed by a duly authorized officer of the Borrower.

(c) Amendment to Servicing Agreement. The Lender shall have received an amendment to the Servicing Agreement, substantially in the form of Exhibit N hereto, executed and delivered by a duly authorized officer of the Borrower, the Lender and the Servicer.

(d) Filings, Registrations, Recordings. All documents (including, without limitation, financing statements) required to be filed, registered or recorded in order to create, in favor of the Lender, a perfected, first-priority security interest in the Collateral, subject to no Liens other than those created hereunder and those in favor of the applicable Seller or the Borrower and pledged hereunder, shall have been properly prepared and executed for filing (including the applicable county(ies) if the Lender determines such filings are necessary in its reasonable discretion), registration or recording in each office in each jurisdiction in which such filings, registrations and recordations are required to perfect such first-priority security interest; and lien search results in such jurisdictions of the Borrower, the Servicer and the Parent are in form and substance satisfactory to the Lender.

(e) Closing Certificates. The Lender shall have received a certificate of the Secretary or Assistant Secretary of the Borrower, dated as of the date hereof, and certifying (A) that attached thereto is a true, complete and correct copy of the resolutions duly adopted by such Related Party (or its general partner) authorizing the execution, delivery and performance of this Loan Agreement, the Note and the other Loan Documents to which it is a party, and the borrowings contemplated hereunder, and that such resolutions have not been amended, modified, revoked or rescinded, and (B) as to the incumbency and specimen signature of each officer executing any Loan Documents on behalf of such Related Party and, in the case of the Borrower, authorized to execute any Notice of Borrowing and Pledge, and such certificate and the resolutions attached thereto shall be in form and substance satisfactory to the Lender.

(f) Good Standing Certificates. The Lender shall have received copies of certificates evidencing the good standing of the Borrower, Medallion Funding and the Parent, dated as of a recent date, from the Secretary of State (or other appropriate authority) of the jurisdiction under which such party is organized.

(g) Legal Opinions. The Lender shall have received the executed legal opinions of Michael C. Carroll, Esq., vice president and general counsel to the Parent, dated the

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Restatement Effective Date and in form and substance acceptable to the Lender and covering such other matters incident to the transactions contemplated by the Loan Documents as the Lender shall request.

(h) Fees and Expenses. The Borrower shall have paid $77,443.54, the reasonable fees and disbursements incurred by the Lender in connection with the negotiation, preparation and execution of this Loan Agreement, including, without limitation, the reasonable fees and disbursements of Cadwalader, Wickersham & Taft LLP, counsel to the Lender.

(i) Due Diligence Review. The Lender shall have successfully completed its due diligence review of the Medallion Loans and the Related Parties (including, without limitation, a comprehensive valuation and appraisal of the Medallion Loans and an assessment of the management of the Related Parties) and be satisfied with the operations, financial condition of the Related Parties, and with the Medallion Loan Files, in each case in its sole discretion.

(j) Facility Fee. The Related Parties shall have paid in full the Facility Fee required to be paid to the Lender pursuant to Section 3.03(a).

(k) Evidence of Insurance. The Lender shall have received evidence satisfactory to it that (i) the requirements of Section 7.19 hereof, relating to insurance coverage of the Borrower, and (ii) the requirements of Section 6.18 of the Servicing Agreement, relating to insurance coverage of the Servicer, have been satisfied.

(l) Borrowing Base Certificate. The Lender shall have received a Borrowing Base Certificate showing the Borrowing Base as of the Restatement Effective Date, with appropriate insertions and dated the Restatement Effective Date, satisfactory in form and substance to the Lender, executed by the President, Vice President, Treasurer or Secretary of the Borrower.

(m) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Loan Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to the Lender, and the Lender shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request.

(n) Other Conditions. The Related Parties shall have satisfied all other conditions that the Lender may reasonably request.

Section 5.02 Initial and Subsequent Advances. The making of each Advance to the Borrower (including the initial Advance) on any Business Day is subject to the satisfaction of the following further conditions precedent, both immediately prior to the making of such Advance and also after giving effect thereto and to the intended use thereof:

(a) No Default. No Default or Event of Default shall have occurred and be continuing.

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(b) Representations and Warranties. Each representation and warranty made by a Related Party in the Loan Documents, shall be true and correct in all material respects on and as of the date of the making of such Advance with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). Each Related Party shall also be in compliance in all material respects with all governmental licenses and authorizations, statutory and regulatory requirements.

(c) Outstanding Advances. The aggregate outstanding principal amount of the Advances shall not exceed the amount permitted to be outstanding as described in Section 2.01(a) hereof.

(d) Notice of Borrowing and Pledge. The Lender shall have received a completed Notice of Borrowing and Pledge and Medallion Loan Schedule in accordance with Section 2.03 hereof.

(e) Medallion Loan Files. The Custodian shall have received a complete Medallion Loan File with respect to each pledged Medallion Loan to be funded on the Funding Date and which was required to have been received by the Custodian (i) in the case of the initial Advance, at least three (3) Business Days prior to the funding of such Advance, and (ii) at least one (1) Business Day prior to the funding of such Advance.

(f) Additional Documents. The Lender shall have received with regard to all Medallion Loans, such information, documents, agreement, opinions or instruments (including, without limitation, good standing certificates of each Obligor under each Medallion Loan pledged hereunder) as the Lender reasonably requires with respect to Medallion Loans to be pledged hereunder on such Business Day, each in form and substance satisfactory to the Lender.

(g) No Material Adverse Effect. There shall not have occurred one or more events that, in the judgement of Lender exercised in good faith, constitutes, or could reasonably be expected to constitute, a Material Adverse Effect.

(h) Due Diligence Review. Without limitation the Lender’s right to perform one or more Due Diligence Reviews pursuant to Section 10.16 hereof, the Lender shall have completed (i) any due diligence review of the Medallion Loan Documents relating to such Advance and such other documents, records, agreements, instruments, collateral or information relating to such Advances as the Lender in its reasonable discretion deems appropriate to review and such review shall be satisfactory to the Lender in its reasonable discretion, and (ii) in the case of an Approved Seller, any due diligence review of the applicable Approved Purchase Agreement and any due diligence review of such Approved Seller (including, without limitation, a review of its Underwriting Guidelines, credit and collection policy and creditworthiness) as the Lender in its sole and absolute discretion deems appropriate and such review shall be satisfactory to the Lender in its sole and absolute discretion, and the Borrower shall have reimbursed the Lender for all reasonable out-of-pocket costs and expenses incurred by the Lender in connection with such review pursuant to Section 10.16(b) hereof.

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(i) Junior Participation Medallion Loan. In the case of each Junior Participation Medallion Loan, the Lender shall have determined in its sole and absolute discretion that the subordinated participation is a Permitted Junior Participation Interest and the Lender shall have so notified the Borrower.

(j) Joint Participation Medallion Loan. In the case of each Joint Participation Medallion Loan, the Lender shall have determined in its sole and absolute discretion that the pari passu joint participation is a Permitted Joint Participation Interest and the Lender shall have so notified the Borrower.

(k) Evidence of Notification to the Taxi Commission of Chicago. The Lender shall have received evidence that in connection with the financing of any Chicago Medallion Loans to the Borrower, an appropriate UCC-3 Financing Statements was filed with the Illinois Secretary of State assigning the Borrower’s security interest in such Chicago Medallion Loans to the Lender, and within five days after receipt of notice that such UCC-3 Financing Statement was properly filed, the Taxi Commission for Chicago, Illinois shall have received a copy of such completed filing and all relevant documents pertaining to such assignment of security interest to the Lender.

(l) Participation Agreements. The Lender shall have received copies of any and all participation agreements executed by Medallion Funding in connection with any Medallion Loan to be pledged under this Loan Agreement in connection with such Advance, together with a certificate of a Responsible Officer that such participation agreement does not vary in any material respect from the form of participation agreement with the applicable Permitted Joint Participant or Permitted Junior Participant previously provided to, and approved by, the Lender.

(m) Bankruptcy Remoteness. In the case of an initial Advance where the Collateral securing such initial Advance is held by either a Permitted Joint Participant or a Permitted Junior Participant that is an Affiliate of the Borrower, the bankruptcy remoteness of such Permitted Joint Participant or Permitted Junior Participant shall be established to the satisfaction of the Lender in its sole and absolute discretion prior to such initial Advance.

(n) Other Actions. Any other actions required or advisable to be taken by the Borrower in connection with the purchase and pledging of any Medallion Loans to be included in the Borrowing Base (including, without limitation, the giving of notice of the purchase of such Medallion Loans and the giving of any notice required to be given with respect to the pledge of such Medallion Loans to the Lender hereunder) shall have been taken.

(o) Additional Specified Chicago Medallion Loans. In the case of each Additional Specified Chicago Medallion Loan accepted by the Lender for inclusion as a Specified Chicago Medallion Loan, each of the following conditions precedent shall have been satisfied:

(i) The Lender shall have received a copy of the underwriting guidelines applicable to the Additional Specified Chicago Medallion Loans and the related Junior Specified Chicago Medallion Loans, which underwriting guidelines shall be accepted and approved in writing by the Lender as “Underwriting Guidelines”;

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(ii) The Lender shall have received evidence satisfactory to it that each Additional Specified Chicago Medallion Loan and each related Junior Specified Chicago Medallion Loan was originated pursuant to and in accordance with the applicable Underwriting Guidelines;

(iii) The Lender shall have received evidence satisfactory to it that each Junior Specified Chicago Medallion Loan related to an Additional Specified Chicago Medallion Loan was acquired by dividend from MF Chicago to Medallion Funding and that the Borrower has acquired, by contribution from Medallion Funding for no additional consideration, all right, title and interest in and to each such Junior Specified Chicago Medallion Loan, including, without limitation, the right to receive all payments of interest and principal made in respect thereof; and

(iv) The Lender shall have received evidence satisfactory to it that the originator(s) of each Additional Specified Chicago Medallion Loan has received payment of the purchase price applicable to each such Additional Specified Chicago Medallion Loan and that the Borrower has acquired all right, title and interest in and to each such Additional Specified Chicago Medallion Loan, including, without limitation, the right to receive all payments of interest and principal made in respect thereof.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

As of the Restatement Effective Date and each Funding Documentation Receipt Date, the Borrower represents and warrants to the Lender that:

Section 6.01 Eligible Medallion Loans. (a) As of the date on which a Medallion Loan is initially pledged hereunder, such Medallion Loan was an Eligible Medallion Loan and (b) to the best of the Borrower’s knowledge, each Medallion Loan included as an Eligible Medallion Loan in any Medallion Loan Schedule, or any calculation of the Borrowing Base made by the Borrower is (or was) as of the date of such schedule, tape, report, other information or calculation, an Eligible Medallion Loan.

Section 6.02 Existence; Qualification; No Change to Organizational Documents. The Borrower is a Delaware business trust duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has the power and all licenses and permits necessary to own its assets and to transact the business in which it is presently engaged, and is duly qualified and in good standing under the laws of each jurisdiction where the conduct of its business requires such qualification. True, correct and complete copies of the organizational documents of all of the Related Parties were delivered to the Lender in connection with the closing of the Original Loan Agreement and no action has been taken to amend, modify or repeal any such organizational document, each of which remains in full force and effect in the form so-delivered as of the date hereof.

Section 6.03 Authority and Authorization; Enforceability; Approvals; Absence of Adverse Notice. The Borrower has the power, authority and legal right to make, deliver and

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perform this Loan Agreement and each of the Loan Documents to which it is a party and all of the transactions contemplated hereby and thereby, and has taken all necessary action to authorize the execution, delivery and performance of this Loan Agreement and each of the Loan Documents to which it is a party, and to grant to the Lender a first priority perfected security interest in the Collateral on the terms and conditions of this Loan Agreement. This Loan Agreement and each of the Loan Documents to which the Borrower is a party constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with their respective terms except as the enforceability hereof and thereof may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws of general application affecting creditors’ rights generally and by general principles of equity (whether such enforceability is considered in a proceeding in equity or at law). No consent of any other party and no consent, license, approval or authorization of, or registration or declaration with, any governmental authority, bureau or agency (including, without limitation, any Taxi Commission) is required in connection with the execution, delivery or performance by the Borrower of this Loan Agreement or any Loan Document to which it is a party, or the validity or enforceability of this Loan Agreement or any such Loan Document or the Medallion Loans, other than such as have been met or obtained. The Borrower has not received any notice, nor does the Borrower have any knowledge or reason to believe, that any Taxi Commission or other Governmental Authority intends to seek the cancellation, termination or modification of any of its licenses or permits, or that valid grounds for such cancellation, termination or modification exist.

Section 6.04 No Breach. The execution, delivery and performance of this Loan Agreement and all other agreements and instruments executed and delivered or to be executed and delivered pursuant hereto or thereto in connection with the pledge of the Collateral will not (i) create any Adverse Claim on the Collateral other than as contemplated herein or (ii) violate any provision of any existing law or regulation or any order or decree of any court, regulatory body or administrative agency or the certificate of formation or by-laws of the Borrower or any mortgage, indenture, contract or other agreement to which the Borrower is a party or by which the Borrower or any property or assets of the Borrower may be bound.

Section 6.05 Litigation. No litigation or administrative proceeding of or before any court, tribunal or governmental body is presently pending or, to the knowledge of the Borrower, threatened against the Borrower or any properties of the Borrower or with respect to this Loan Agreement which, if adversely determined, could have a material effect on the business, assets or financial condition of the Borrower or which would draw into question the validity of this Loan Agreement, any Loan Document to which the Borrower is a party, or any of the other applicable documents forming part of the Collateral.

Section 6.06 No Adverse Selection. In selecting the Medallion Loans to be pledged pursuant to this Loan Agreement, no selection procedures were employed which are intended to be, of had the effect of being, adverse to the interests of the Lender.

Section 6.07 Bulk Transfer. The grant of the security interest in the Collateral by the Borrower to the Lender pursuant to this Loan Agreement is in the ordinary course of business for the Borrower and is not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction.

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Section 6.08 Indebtedness. The Borrower has no Indebtedness or obligation, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than Indebtedness incurred under (or contemplated by) the terms of this Loan Agreement.

Section 6.09 Borrower’s Purpose. The Borrower has been formed solely for the purpose of engaging in transactions of the types contemplated by this Loan Agreement.

Section 6.10 Adverse Orders. No injunction, writ, restraining order or other order of any nature adversely affects the Borrower’s performance of its obligations under this Loan Agreement or any Loan Document to which the Borrower is a party.

Section 6.11 Taxes. The Parent has elected to be treated as and qualifies as a “regulated investment company” within the meaning of the Code. The Borrower has filed (on a consolidated basis or otherwise) on a timely basis all tax returns (including, without limitation, all foreign, federal, state, local and other tax returns) required to be filed, is not liable for taxes payable by any other Person and has paid or made adequate provisions for the payment of all taxes, assessments and other governmental charges due from the Borrower. No tax lien or similar adverse claim has been filed, and no claim is being asserted, with respect to any such tax, assessment or other governmental charge. Any taxes, fees and other governmental charges payable by the Borrower in connection with the execution and delivery of this Loan Agreement and the other Loan Documents and the transactions contemplated hereby or thereby have been paid or shall have been paid if and when due.

Section 6.12 Chief Executive Office; Jurisdiction of Organization. On the Restatement Effective Date, the Borrower’s chief executive office is (and the location of the Borrower’s records regarding the Medallion Loans), and during the four months immediately preceding July 1, 2001 such office has been, located at 437 Madison Avenue, New York, New York 10022. On the Restatement Effective Date, the Borrower’s jurisdiction of organization is the State of Delaware.

Section 6.13 Legal Name. The Borrower’s legal name is as set forth in this Loan Agreement; the Borrower has not changed its name since its formation; the Borrower does not have trade names, fictitious names, assumed names or “doing business as” names.

Section 6.14 Solvency. The Borrower is solvent and will not become insolvent after giving effect to the transactions contemplated hereby; the Borrower is paying its debts as they become due; and the Borrower, after giving effect to the transactions contemplated hereby, will have adequate capital to conduct its business.

Section 6.15 Subsidiaries. The Borrower has no subsidiaries.

Section 6.16 Consideration. Taking into account the capital contribution in the Purchase Agreement, the Borrower has given fair consideration and reasonably equivalent value in exchange for the sale of the Medallion Loans by Medallion Funding, as Seller, under the Purchase Agreement.

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Section 6.17 True and Complete Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of the Related Parties to the Lender or the Custodian in connection with the negotiation, preparation or delivery of this Loan Agreement and the other Loan Documents or included herein or therein or delivered pursuant hereto or thereto are true and correct in every material respect, or (in the case of projections) are based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to a Responsible Officer of the Borrower that, after due inquiry, should reasonably be expected to have a Material Adverse Effect that has not been disclosed herein, in the other Loan Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to the Lender for use in connection with the transactions contemplated hereby or thereby.

Section 6.18 Proceeds Regulations. No proceeds of any Advances will be used by the Borrower (i) to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended or (ii) for the purpose of purchasing or carrying any “margin stock” as such term is defined in Regulation U of the Federal Reserve Board.

Section 6.19 Adverse Agreements. There are no agreements in effect adversely affecting the rights of the Borrower to make, or cause to be made, the grant of the security interest in the Collateral contemplated by Section 4.01.

Section 6.20 Investment Company. The Parent is a closed-end management investment company registered under the Investment Company Act and has elected to be treated as a “business development company” under and as defined in the Investment Company Act. The Parent is an “investment company”, as such term is defined in the Investment Company Act. The Borrower is Subsidiary of an “investment company”, as such term is defined in the Investment Company Act. The acquisition of the Note by the Lender, the making of Advances hereunder, the application of the proceeds and repayment of Advances by the Borrower and the performance of the transactions contemplated by this Agreement and the other Loan Documents will not violate any provision of said Act, or any rule, regulation or order issued by the Securities Exchange Commission thereunder.

Section 6.21 No Default. No Default or Event of Default has occurred and is continuing.

Section 6.22 Underwriting and Servicing. Each of the Medallion Loans was underwritten in accordance with the Underwriting Guidelines and is being serviced in conformance with the applicable Seller’s standard underwriting, credit, collection, operating and reporting procedures and systems and otherwise in accordance with Accepted Servicing Practices and the Credit and Collection Policy.

Section 6.23 ERISA. The Borrower is in compliance with ERISA and has not incurred and does not expect to incur any liabilities (except for premium payments arising in the ordinary course of business) to the Pension Benefit Guaranty Corporation (or any successor thereto) under ERISA.

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Section 6.24 Sharing of Payments. There is not now, nor will there be at any time in the future, any agreement or understanding between Medallion Funding and the Borrower (other than as expressly set forth in the Loan Documents) providing for the allocation or sharing of obligations to make payments or otherwise in respect of any taxes, fees, assessments or other governmental charges.

Section 6.25 Collateral Security; Acquisition. (a) The Borrower has not assigned, pledged, or otherwise conveyed or encumbered any Medallion Loan or other Collateral to any other Person, and immediately prior to the pledge of such Medallion Loan or any other Collateral to the Lender, the Borrower was the sole owner of such Medallion Loan or such other Collateral and had good and marketable title thereto, free and clear of all Liens other than those created hereunder and those in favor of the applicable Seller or the Borrower and pledged hereunder, in each case except for Permitted Participation Interests and Liens to be released simultaneously with the Liens granted in favor of the Lender hereunder. Each Medallion Loan was acquired by the Borrower from a Seller.

(b) The provisions of this Loan Agreement are effective to create in favor of the Lender a valid security interest in all right, title and interest of the Borrower in, to and under the Collateral.

(c) Upon delivery to the Custodian of a complete Medallion Loan File, the Lender shall have a fully perfected first priority security interest therein, in each Medallion Loan pledged hereunder and in the Borrower’s interest in the related Medallion Collateral.

(d) Upon the filing of financing statements on Form UCC-1 naming the Lender as “secured party” and the Borrower as “debtor”, and describing the Collateral, in the jurisdictions and recording offices listed on Schedule 6.25 attached hereto, the security interests granted hereunder in the Collateral will constitute fully perfected first priority security interests under the Uniform Commercial Code in all right, title and interest of the Borrower in, to and under such Collateral which can be perfected by filing under the Uniform Commercial Code.

Section 6.26 Subsidiary. The Borrower is a wholly-owned subsidiary of Medallion Funding.

Section 6.27 Subsidiaries of the Parent. Schedule 6.27 sets forth, as of the Restatement Effective Date, the name of each direct or indirect subsidiary of the Parent, its form of organization and its jurisdiction of organization.

Section 6.28 Standard Form Medallion Loan Documentation. The Borrower has previously delivered to the Lender correct and complete copies of all Standard Form Medallion Loan Documentation, none of which has been amended or otherwise modified and all of which represent the forms currently used by the Sellers to originate Medallion Loans.

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ARTICLE VII

COVENANTS OF THE BORROWER

The Borrower covenants and agrees with the Lender that, so long as any Advance is outstanding and until the later to occur of the payment in full of all Secured Obligations and the termination of this Loan Agreement:

Section 7.01 Existence; etc.

(a) The Borrower is a Delaware business trust and will observe all procedures required by its trust agreement (or equivalent document) and the laws of its jurisdiction of formation. The Borrower will maintain its existence in good standing under the laws of its jurisdiction of formation and will promptly obtain and thereafter maintain qualifications to do business as a foreign business trust in any other state in which it does business and in which it is required to so qualify.

(b) The Borrower will comply with the requirements of all applicable laws, rules, regulations and orders of Governmental Authorities (including, without limitation, all environmental laws, all laws with respect to unfair and deceptive lending practices and predatory lending practices), if failure to comply with such requirements would be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect.

(c) The Borrower will not move its chief executive office from the address referred to in Section 6.12 or change its jurisdiction of organization from the jurisdiction referred to in Section 6.02 unless it shall have provided the Lender 30 days’ prior written notice of such change.

(d) The Borrower will pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.

(e) The Borrower will permit representatives of the Lender, during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by the Lender.

Section 7.02 Special Purpose Entity.

(a) The Borrower will at all times ensure that (i) its directors and managers act independently and in its interests, (ii) it shall at all times maintain at least two independent directors each of (x) whom is not currently and has not been during the five years preceding the date of this Loan Agreement an officer, director, manager or employee of the Borrower or an Affiliate thereof (other than a limited purpose corporation, business trust, partnership or other entity organized for the purpose of acquiring, financing or otherwise investing, directly or indirectly, in assets or receivables originated, owned or serviced by Medallion Funding or an

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Affiliate thereof), (y) whom is not a current or former officer or employee of the Borrower and (z) whom is not a manager of the Borrower or an Affiliate thereof, (iii) its assets are not commingled with those of Medallion Funding or any other Affiliate of the Borrower, (iv) its board of managers duly authorizes all of its corporate actions, (v) it maintains separate and accurate records and books of account and such books and records are kept separate from those of Medallion Funding and any other Affiliate of the Borrower, and (vi) it maintains minutes of the meetings and other proceedings of the members and the board of managers. Where necessary, the Borrower will obtain proper authorization from its managers for business trust action.

(b) The Borrower will pay its operating expenses and liabilities (including, as applicable, shared personnel and overhead expenses) from its own assets; provided, however, that the Borrower’s organizational expenses and the expenses incurred in connection with the negotiation and execution of this Loan Agreement and the other Loan Documents may be paid by Medallion Funding;

(c) The Borrower will not have any of its indebtedness guaranteed by Medallion Funding or any Affiliate of Medallion Funding. Furthermore, the Borrower will not hold itself out, or permit itself to be held out, as having agreed to pay or as being liable for the debts of any Person and the Borrower will not engage in business transactions with any Affiliate of the Borrower, except on an arm’s-length basis. The Borrower will not hold Medallion Funding or any Affiliate of the Borrower out to third parties as other than an entity with assets and liabilities distinct from the Borrower. The Borrower will cause any financial statements consolidated with those of Medallion Funding or any Affiliate of the Borrower to state that the Borrower is a separate corporate entity with its own separate creditors who, in any liquidation of the Borrower, will be entitled to be satisfied out of the Borrower’s assets prior to any value in the Borrower becoming available to the Borrower’s equity holders. The Borrower will not act in any other matter that could foreseeably mislead others with respect to the Borrower’s separate identity.

(d) The Borrower shall own no assets, and will not engage in any business, other than the assets and transactions specifically contemplated by this Loan Agreement and the Loan Documents.

(e) The Borrower shall be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), shall correct any known misunderstanding regarding the Borrower’s status as a separate entity, shall conduct business in the Borrower’s own name, shall not identify itself or any of its Affiliates as a division or part of the other and shall maintain and utilize a separate telephone number and separate stationery, invoices and checks.

(f) The Borrower shall maintain the Borrower’s assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify the Borrower’s individual assets from those of any Affiliate or any other Person.

(g) The Borrower shall, at all times, be a wholly-owned subsidiary of Medallion Funding.

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Section 7.03 Accuracy of Opinions. The Borrower shall take all other actions necessary to maintain the accuracy of the factual assumptions set forth in the legal opinion of Willkie Farr & Gallagher, counsel to Medallion Funding and the Borrower, issued in connection with the Purchase Agreement and relating to the issues of substantive consolidation and true sale of the Medallion Loans.

Section 7.04 Prohibition on Adverse Claims. Except as otherwise provided herein or in any other Loan Document, the Borrower shall not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any Medallion Loan, any Collections related thereto or any other Collateral related thereto, or upon or with respect to any account to which any Collections of any Medallion Loan are sent, or assign any right to receive income in respect thereof or (ii) create or suffer to exist any Adverse Claim upon or with respect to any of the Borrower’s assets.

Section 7.05 Prohibition on Fundamental Change. The Borrower will not engage in, or suffer any, change of ownership, dissolution, winding up, liquidation, merger or consolidation with, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions), all or substantially all of its assets (whether now owned or hereafter acquired), or acquire all or substantially all of the assets or capital stock or other ownership interest of, any Person.

Section 7.06 Sale or Contribution Treatment. The Borrower will not account for or treat (whether in financial statements or otherwise) the transactions contemplated by the Purchase Agreement in any manner other than the sale or contribution of Medallion Loans and other Collateral by Medallion Funding to the Borrower.

Section 7.07 Prohibition on Modifications. The Borrower will not amend, modify, waive or terminate any terms or conditions of the Purchase Agreement, any Approved Purchase Agreement, the Servicing Agreement or, in any material respect, the Standard Form Medallion Loan Documentation without the written consent of the Lender (which consent shall not be unreasonably withheld in the case of an amendment curing an ambiguity or correcting any inconsistent provisions of the Purchase Agreement or any Approved Purchase Agreement), and shall perform its obligations thereunder.

Section 7.08 Amendment to Organizational Documents. The Borrower will not amend, modify or otherwise make any change (other than an inconsequential change) to its organizational documents without the consent of the Lender.

Section 7.09 Remittance of Collections. If the Borrower receives any Collections, the Borrower will remit such Collections to the Collection Account within one (1) Business Days of the Borrower’s receipt thereof.

Section 7.10 Hedging Strategy. Commencing not later than December 1, 2003, the Borrower shall implement a commercially reasonable Hedging Strategy satisfactory to the Lender and the Borrower shall at all times thereafter maintain a commercially reasonable Hedging Strategy acceptable to the Lender.

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Section 7.11 Litigation. The Borrower will promptly, and in any event within 10 days after service of process on any of the following, give to the Lender notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or threatened) or other legal or arbitrable proceedings affecting the Borrower or any of its Subsidiaries or affecting any of the Property of any of them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Loan Documents or any action to be taken in connection with the transactions contemplated hereby, (ii) which, individually or in the aggregate, if adversely determined, could be reasonably likely to have a Material Adverse Effect, or (iii) requires filing with the Securities and Exchange Commission in accordance with the Securities and Exchange Act of 1934 and any rules thereunder.

Section 7.12 Notices. The Borrower shall give notice to the Lender:

(a) promptly upon receipt of notice or knowledge of the occurrence of any Default or Event of Default or a Rapid Amortization Event;

(b) promptly upon receipt of notice or knowledge of (i) any default related to any Collateral, (ii) any Lien or security interest (other than security interests created hereby or by the other Loan Documents) on, or claim asserted against, any of the Collateral or (iii) any event or change in circumstances which could reasonably be expected to have a Material Adverse Effect;

(c) promptly upon any material change in the Medallion Value of any Medallion Collateral;

(d) promptly upon receipt of notice or knowledge of any issuance, or possible issuance, of additional Medallions by New York City, Chicago, Boston, Cambridge, Newark, Philadelphia or any other jurisdiction for which the Lender has financed the purchase of Medallion Loans by the Borrower; and

(e) promptly upon receipt of notice or knowledge that a Medallion Loan is no longer an Eligible Medallion Loan.

Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken or proposes to take with respect thereto.

Section 7.13 Additional Information. The Borrower shall, from time to time, provide to the Lender such other information, reports, financial statements and documents as the Lender may reasonably request.

Section 7.14 Transaction with Affiliates. The Borrower will not enter into any transaction, including without limitation any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under this Loan Agreement, (b) in the ordinary course of the Borrower’s business and (c) upon fair and reasonable terms no less favorable to the Borrower than it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate, or make a payment that is not otherwise permitted by this Section 7.14 to any Affiliate.

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Section 7.15 Limitation on Liens. The Borrower will defend the Collateral against, and will take such other action as is necessary to remove, any Lien, security interest or claim on or to the Collateral, other than the security interests created under this Loan Agreement or Permitted Participation Interests, and the Borrower will defend the right, title and interest of the Lenders in and to any of the Collateral against the claims and demands of all persons whomsoever.

Section 7.16 Advertising, Origination and Servicing Activities. All advertising, origination and servicing activities, procedures and materials used with regard to any Medallion Loan made or accounts acquired, collected or serviced by the Borrower comply with all applicable Federal, state and local laws, ordinances, rules and regulations, including but not limited to those related to usury, truth in lending, real estate settlement procedures, consumer protection, equal credit opportunity, fair debt collection, rescission rights and disclosures, except where failure to comply would not have a Material Adverse Effect.

Section 7.17 Required Filings. The Borrower shall promptly provide the Lender with copies of all documents which the Parent or any Affiliate of the Parent is required to file with the Securities and Exchange Commission in accordance with the Securities and Exchange Act of 1934 or any rules thereunder.

Section 7.18 Financial Statements. (a) The Borrower shall deliver to the Lender within 30 days after the last day of each calendar month, (i) unaudited balance sheets and statements of income and cash flows for the Borrower for such month (including, if such calendar month is the last month of a calendar quarter, consolidated statements of cash flows for such calendar quarter) and (ii) a certificate of an officer of the Borrower, whose position is vice president or higher, stating that such financial statements are presented fairly in all material respects and in accordance with GAAP, subject to year-end audit adjustments.

(b) The Borrower shall deliver to the Lender within 90 days after the end of each fiscal year, the consolidated balance sheets of the Borrower as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for the Borrower for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall not be qualified as to scope of audit or going concern and shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower as at the end of, and for, such fiscal year in accordance with GAAP, and a certificate of such accountants stating that, in making the examination necessary for their opinion, they obtained no knowledge, except as specifically stated, of any Default or Event of Default.

The Borrower will furnish to the Lender, at the time it furnishes each set of financial statements pursuant to paragraphs (a) and (b) above, a certificate of a Responsible Officer of the Borrower stating that, to the best of such Responsible Officer’s knowledge, the Borrower during such fiscal period or year has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Loan Agreement and the other Loan Documents to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such

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certificate (and, if any Default or Event of Default has occurred and is continuing, describing the same in reasonable detail and describing the action the Borrower has taken or proposes to take with respect thereto).

Section 7.19 Maintenance of Insurance. The Borrower will maintain at all times in full force and effect with financially sound and reputable insurance companies insurance covering such risks and liabilities and with such deductibles or self-insured retentions as are in accordance with normal industry practices for policies of insurance.

Section 7.20 Right of First Refusal Replacement Financing. The Borrower shall give the Lender the right of first refusal with respect to any replacement financing in connection with any Eligible Medallion Loans, as set forth on Schedule 7.20 hereto, provided, however, that the Lender offers to provide such replacement financing on terms comparable to but no less favorable to the Borrower and its Affiliates than the terms for such replacement financing offered in good faith by any other potential lender.

Section 7.21 Monthly Pricing Reports; Monthly Liquidation Reports. The Borrower shall deliver to the Lender within 30 days after the last day of each calendar month (i) a monthly report summarizing the pricing and sales of taxi medallions in New York City, Boston, Chicago, Cambridge, Newark, Philadelphia and any other location of an Other Acceptable Taxi Commission, meeting the requirements set forth on Schedule 7.21 hereto, in form acceptable to the Lender in its sole and absolute discretion, and (ii) a monthly report in each jurisdiction of the cost of fully liquidating Medallions during the preceding three months, and the average cost for such liquidations (or if fewer than ten Medallions were liquidated during such three-month period, the cost of liquidating the ten most recently liquidated Medallions, and the average cost for such liquidations), in form and substance acceptable to the Lender in its sole and absolute discretion.

Section 7.22 Underwriting Guidelines. The Borrower shall promptly notify the Lender (i) if Medallion Funding amends, modifies or revises its Underwriting Guidelines or (ii) if the Borrower has knowledge that any Approved Seller has amended, modified or revised its Underwriting Guidelines (and the Borrower shall require any Approved Seller to notify the Borrower of any such amendment, modification or revision). If the Lender determines, in its sole discretion, that a proposed change to Underwriting Guidelines is material, the Lender will have no obligation to finance any Medallion Loans that are originated pursuant to such new Underwriting Guidelines.

Section 7.23 Approved Purchase Agreement Sale or Contribution Treatment. The Borrower will not account for or treat (whether in financial statements or otherwise) the transactions contemplated by any Approved Purchase Agreement in any manner other than the sale of Medallion Loans and other Collateral by the applicable Approved Seller to the Borrower.

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ARTICLE VIII

EVENTS OF DEFAULT

Each of the following events shall constitute an event of default (an “Event of Default”) hereunder:

(a) the Borrower shall default in the payment of any principal of or interest on any Advance when due (whether at stated maturity, upon acceleration or at mandatory or optional prepayment); or

(b) the Borrower shall default in the payment of any other amount payable by it hereunder or under any other Loan Document after notification by the Lender of such default, and such default shall have continued unremedied for five (5) consecutive Business Days; or

(c) the Borrower shall fail to comply with Section 7.10; or

(d) the Borrower shall fail to comply with Section 2.07(a), and such failure shall have continued unremedied for two (2) Business Days; or

(e) the Borrower shall fail to perform or observe any term, covenant or agreement hereunder or under any other Loan Document in any material respect which failure is (i) not curable or (ii) curable and continues unremedied for a period of ten (10) consecutive Business Days (and written assurances of such cure shall have been given within one Business Day of default); or

(f) the occurrence of any Bankruptcy Event with respect to the Borrower; or

(g) any representation or warranty made or deemed to be made by the Borrower (or any of its respective officers) under or in connection with this Loan Agreement, any remittance report or other information or report delivered pursuant hereto or any other Loan Document shall prove to have been false or incorrect in any material respect when made (other than the representations and warranties made in a Borrowing Base Certificate with respect to the inclusion of Medallion Loans in the Borrowing Base as Eligible Medallion Loans, which shall be considered solely for the purpose of determining the Collateral Value of the Mortgage Loans, unless (i) the Borrower shall have included a Medallion Loan in the Borrowing Base with knowledge that such Medallion Loan was not an Eligible Medallion Loan or (ii) the Lender shall determine in its sole discretion exercised in good faith that the Borrower shall have included Medallion Loans in the Borrowing Base with that were not an Eligible Medallion Loans on a regular basis); or

(h) (i) the Lender shall at any time fail to have a valid, perfected, first priority security interest in a material portion of the Collateral (as determined by the Lender in its sole discretion, exercised in good faith), free of adverse claims, or (ii) the purchase by the Borrower of Medallion Loans under the Purchase Agreement or any Approved Purchase Agreement with respect to a material portion of the Collateral (as determined by the Lender in its sole discretion, exercised in good faith) shall, for any reason, cease to create in favor of the Borrower a perfected ownership interest in such Medallion Loans and the other Medallion Collateral related thereto, free of adverse claims; or

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(i) the Borrower shall have suffered any material adverse change, as determined by the Lender in its sole discretion, to its financial condition or operations which could reasonably be expected to affect the collectability of the Medallion Loans or the Borrower’s ability to conduct its business or perform its obligations under the Loan Documents; or

(j) the Borrower’s activities are terminated in whole or in part for any reason, including any termination thereof by a Taxi Commission or other regulatory, tax or accounting body; or

(k) the Purchase Agreement, any Approved Purchase Agreement, the Custodial Agreement, the Servicing Agreement or any other Loan Documents shall cease to be in full force and effect or the enforceability thereof shall be contested by a party thereto; or

(l) the failure of the Borrower to cure a Borrowing Base Deficiency in the manner, and within the time period, set forth in Section 2.07; or

(m) a final judgment or judgments for the payment of money in excess of $500,000 in the aggregate shall be rendered against the Borrower by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within five (5) Business Days from the date of entry thereof, and the Borrower or any such Affiliate shall not, within said period of five (5) Business Days, or such longer period during which execution of the same shall have been stayed or bonded, appeal therefrom and cause the execution thereof to be stayed during such appeal; or

(n) the Borrower shall be in default under any note, indenture, loan agreement, guaranty, swap agreement or any other contract to which it is a party, which default (i) involves the failure to pay a matured obligation, or (ii) permits the acceleration of the maturity of obligations by any other party to or beneficiary of such note, indenture, loan agreement, guaranty, swap agreement or other contract; or

(o) the Board of Managers of the Borrower (which shall consist of a total of five managers, including two independent managers) shall not include at least three of the following persons for a period of five (5) Business Days: Alvin Murstein, Andrew Murstein, Michael Carroll, Brian O’Leary, Larry Hall and Michael Kowalsky; or

(p) both Alvin Murstein and Andrew Murstein shall fail to be on the Board of Managers of the Borrower.

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ARTICLE IX

REMEDIES UPON DEFAULT

(a) Upon the occurrence of one or more Events of Default hereunder, the Lender’s obligation to make additional Advances to the Borrower shall automatically terminate without further action by any Person. Upon the occurrence and continuation of one or more Events of Default other than those referred to in Article VIII, paragraph (e) hereof, and in addition to the remedies provided in Section 4.07 hereof and otherwise provided in this Loan Agreement, the Lender may immediately declare the principal amount of the Advances then outstanding under the Note to be immediately due and payable, together with all interest thereon and fees and expenses accruing under this Loan Agreement. Upon the occurrence of an Event of Default referred to in Article VIII, paragraph (e), and in addition to the remedies provided in Section 4.07 hereof and otherwise provided in this Loan Agreement, such amounts referred to in the preceding sentence shall immediately and automatically become due and payable without any further action by any Person. Upon such declaration or such automatic acceleration, the balance then outstanding on the Note shall become immediately due and payable, without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Borrower.

(b) The powers conferred on the Lender hereunder are solely to protect the Lender’s interests in the Collateral and shall not impose any duty upon it to exercise any such powers. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Related Parties for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.

ARTICLE X

MISCELLANEOUS

Section 10.01 Waiver. No failure on the part of the Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any Loan Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

Section 10.02 Notices. Except as otherwise expressly permitted by this Loan Agreement, all notices, requests and other communications provided for under the Loan Documents (including without limitation any modifications of, or waivers, requests or consents under, this Loan Agreement) shall be given or made in writing (including without limitation by telecopy) delivered to the intended recipient at the address specified for each party hereto below; or, as to any party, at such other address as shall be designated by such party in a written notice to each other party:

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The Borrower:

Taxi Medallion Loan Trust I

c/o Medallion Financial Corp.

437 Madison Avenue

New York, New York 10022

Attention: President

Telecopier No.: 212-328-3654

Telephone No.: 212-328-3654

The Lender:

Merrill Lynch Commercial Finance Corp.

c/o Merrill Lynch Bank USA

15 W. South Temple, Suite 300

Salt Lake City, Utah 84101

Attention: Louise Alder

Telecopier No.: 801-531-7470

Telephone No.: 801-526-8324

With a copy to:

Merrill Lynch Global Asset Based Finance,

Securitization and Principal Transactions

4 World Financial Center

New York, New York 10080

Attention: Joshua Green

Telecopier No.: 212-449-6673

Telephone No.: 212-449-7330

Except as otherwise provided in this Loan Agreement and except for notices given under Section 2 (which shall be effective only on receipt), all such communications shall be deemed to have been duly given when transmitted by telecopy or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

Section 10.03 Indemnification and Expenses.

(a) The Borrower agrees to hold the Lender, the Custodian, the Backup Servicer and each of their officers, directors, agents and employees (each, an “Indemnified Party”) harmless from and indemnify each Indemnified Party against all liabilities, losses, damages, judgments, costs and expenses of any kind which may be imposed on, incurred by or asserted against such Indemnified Party in any suit, action, claim or proceeding relating to or arising out of this Loan Agreement, the Note, any other Loan Document, any Collateral or any transaction contemplated hereby or thereby, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Loan Agreement, the Note, any other Loan Document, any Collateral or any transaction contemplated hereby or thereby, including, without limitation, (i) any Medallion Loan pledged hereunder not constituting an Eligible Medallion

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Loan, (ii) the offering or effectuation of any securitization, or (iii) the commingling of the proceeds of the Collateral at any time with other funds, except, in each case, to the extent arising from such Indemnified Party’s gross negligence or willful misconduct. In any suit, proceeding or action brought by the Lender in connection with any Collateral for any sum owing thereunder, or to enforce any provisions of such Collateral, the Borrower will save, indemnify and hold the Lender harmless from and against all expense, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by the Borrower of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from the Borrower. The Borrower also agrees to reimburse the Lender as and when billed by the Lender for all the Lender’s reasonable costs and expenses incurred in connection with the enforcement or the preservation of the Lender’s rights under this Loan Agreement, the Note, any other Loan Document, any Collateral or any transaction contemplated hereby or thereby, including without limitation the reasonable fees and disbursements of its counsel (including reasonable fees and disbursements incurred in any action or proceeding between the Borrower and an Indemnified Party or between an Indemnified Party and any third party relating hereto). The Borrower hereby acknowledges that, notwithstanding the fact that the Secured Obligations are secured by the Collateral, each Secured Obligation is a recourse obligation of the Borrower.

(b) The Borrower agrees to pay as and when billed by the Lender all reasonable costs and expenses incurred by the Lender in connection with the development, preparation and execution of, this Loan Agreement, the Note, any other Loan Document, any Collateral or any other documents prepared in connection herewith or therewith, and any amendment, supplement or modification thereto, and the consummation and administration of the transactions contemplated hereby and thereby, including without limitation (i) all the reasonable fees, disbursements and expenses of counsel to the Lender, and (ii) all the reasonable due diligence, inspection, testing and review costs and expenses incurred by the Lender with respect to Collateral under this Loan Agreement.

Section 10.04 Amendments. Any provision of a Loan Document may be modified or supplemented only by an instrument in writing signed by the Borrower, the Lender and (to the extent any such modification or supplement would have a material adverse effect on the interest of the Custodian) the Custodian, and any provision of a Loan Document may be waived only by the written agreement of the Lender. Any consent by the Lender to any amendment, modification or supplement to the trust agreement of the Borrower or the Purchase Agreement may be conditioned upon confirmation from Willkie Farr & Gallagher, counsel to the Borrower, that the analysis and conclusions expressed in the legal opinion delivered by them dated the Restatement Effective Date and addressing issues of true sale and nonconsolidation remain unchanged.

Section 10.05 Successors and Assigns. This Loan Agreement shall be binding upon and inure to the benefit of (i) the parties hereto and their respective successors and permitted assigns and (ii) to the Custodian (and its successors and assigns), to the extent of provisions herein that pertain to the Custodian.

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Section 10.06 Survival. The obligations of the Borrower under Sections 2.09, 2.11 and 10.03 and 10.16 hereof shall survive the repayment of the Advances and the termination of this Loan Agreement. In addition, each representation and warranty made or deemed to be made by a request for a borrowing herein or pursuant hereto shall survive the making of such representation and warranty, and the Lender shall not be deemed to have waived, by reason of making any Advance, any Default that may arise because any such representation or warranty shall have proved to be false or misleading, notwithstanding that the Lender may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time such Advance was made.

Section 10.07 Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Loan Agreement.

Section 10.08 Counterparts. This Loan Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Loan Agreement by signing any such counterpart.

Section 10.09 GOVERNING LAW; ETC. THIS LOAN AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE (BUT WITH REFERENCE TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, WHICH BY ITS TERMS APPLIES TO THIS LOAN AGREEMENT), AND SHALL CONSTITUTE A SECURITY AGREEMENT WITHIN THE MEANING OF THE UNIFORM COMMERCIAL CODE.

Section 10.10 SUBMISSION TO JURISDICTION; WAIVERS. EACH OF THE BORROWER AND THE LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY:

(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

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(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN NOTIFIED; AND

(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.

(E) AGREES THAT THE LENDER SHALL HAVE NO LIABILITY FOR ANY PUNITIVE DAMAGES IN ANY SUCH ACTION OR PROCEEDING.

Section 10.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 10.12 Acknowledgments. The Borrower hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Loan Agreement, the Note and the other Loan Documents;

(b) the Lender has no fiduciary relationship to the Borrower, and the relationship between the Borrower and the Lender is solely that of debtor and creditor; and

(c) no joint venture exists between the Lender and the Borrower.

Section 10.13 Hypothecation and Pledge of Collateral. The Lender shall have free and unrestricted use of all Collateral and nothing in this Loan Agreement shall preclude the Lender from engaging in repurchase transactions with the Collateral or otherwise pledging, repledging, transferring, hypothecating, or rehypothecating the Collateral. Nothing contained in this Loan Agreement shall obligate the Lender to segregate any Collateral delivered to the Lender by the Borrower.

Section 10.14 Assignments; Participations. (a) The Lender may assign to one or more Qualified Institutional Buyers (or, if an Event of Default has occurred and is continuing, to any Person who is not a Qualified Institutional Buyer, provided that prior to such assignment the Lender delivers to the Borrower an opinion of experienced securities law counsel to the Lender to the effect that such assignment will not cause the Borrower to be required to register as an investment company under the Investment Company Act) all or a portion of its rights and obligations under this Loan Agreement; provided, that if no Event of Default has occurred and is continuing, the Lender may not assign to a Person that competes with Medallion Funding in the origination and servicing of Medallion Loans; provided, however, that the parties to each such

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assignment shall execute and deliver an Assignment and Acceptance substantially in the form of Exhibit J hereto, with appropriate completions (an “Assignment and Acceptance”), along with replacement Notes executed and delivered by the Borrower.

(b) Upon such execution and delivery, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of the Lender hereunder, and (ii) the Lender assignor thereunder shall, to the extent that any rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Loan Agreement.

(c) The Lender may sell participations to one or more Qualified Institutional Buyers (or, if an Event of Default has occurred and is continuing, to any Person who is not a Qualified Institutional Buyer, provided that prior to such assignment the Lender delivers to the Borrower an opinion of experienced securities law counsel to the Lender to the effect that such assignment will not cause the Borrower to be required to register as an investment company under the Investment Company Act) all or a portion of its rights and obligations under this Loan Agreement; provided, however, that (i) the Lender’s obligations under this Loan Agreement shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Lender shall remain the holder of any such Note for all purposes of this Loan Agreement, and (iv) the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender’s rights and obligations under and in respect of this Loan Agreement and the other Loan Documents. Notwithstanding the terms of Section 2.09, each participant of the Lender shall be entitled to the additional compensation and other rights and protections afforded the Lender under Sections 2.09 or 2.16 to the same extent as the Lender would have been entitled to receive them with respect to the participation sold to such participant but not in excess of amounts to which the Lender would have been entitled hereunder.

(d) The Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 12.14, disclose to the assignee or participant or proposed assignee or participant, as the case may be, any information relating to the Borrower or any of its Subsidiaries or to any aspect of the Loans that has been furnished to the Lender by or on behalf of the Borrower or any of its Subsidiaries.

(e) The Lender may at any time create a security interest in all or any portion of its rights under this Loan Agreement (including, without limitation, the Loans owing to it and the Note held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder.

(f) Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default, Lender may assign all or any portion of its rights and obligations hereunder to any Person, provided that upon the effective date of such assignment such Person shall become a party hereto and a Lender hereunder and shall be (A) entitled to all

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the rights, benefits and privileges accorded Lender under the Loan Documents, and (B) subject to all the duties and obligations of Lender under the Loan Documents.

(g) The Borrower agrees to cooperate with the Lender in connection with any such assignment or transfer, to execute and deliver such replacement notes, and to enter into such restatements of, and amendments, supplements and other modifications to, this Loan Agreement and the other Loan Documents in order to give effect to such assignment or transfer.

(h) The Borrower may not assign any of its rights or obligations hereunder or under any Loan Document without the prior written consent of the Lender.

Section 10.15 Alteration of Medallion Loan Documents. After the Funding Documentation Receipt Date, until the pledge of any Medallion Loan is relinquished by the Lender, the Borrower will have no right to modify or alter the terms of the related Medallion Loan Documents except in accordance with the applicable Seller’s written Underwriting Guidelines and the Credit and Collection Policy.

Section 10.16 Periodic Due Diligence Review. (a) The Borrower acknowledges that the Lender has the right to perform continuing due diligence reviews with respect to the Medallion Loans, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and the Borrower agrees that upon reasonable (but no less than one (1) Business Day’s) prior notice to the Borrower (which prior notice shall not be required after the occurrence and during the continuation of a Default), the Lender or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Medallion Loan Files and any and all documents, records, agreements, instruments or information relating to such Medallion Loans in the possession or under the control of the Borrower and/or the Custodian. The Borrower also shall make available to the Lender a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Medallion Loan Files, the Medallion Loans, the Borrowing Base or other related matters. Without limiting the generality of the foregoing, the Borrower acknowledges that the Lender may make Advances to the Borrower based solely upon the information provided by the Borrower to the Lender and the representations, warranties and covenants contained herein, and that the Lender, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Medallion Loans securing such Advance, including without limitation ordering new credit reports and otherwise re-generating the information used to originate such Medallion Loans. The Lender may underwrite such Medallion Loans itself or engage a mutually agreed upon third party underwriter to perform such underwriting, provided that such third party underwriter shall agree in writing with the Borrower to maintain the confidentiality of the information reviewed and only to use such information in connection with its engagement by the Lender in connection with this Loan Agreement. The Borrower agrees to cooperate with the Lender and any third party underwriter in connection with such underwriting, including, but not limited to, providing the Lender and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Medallion Loans in the possession, or under the control, of the Borrower. The Borrower shall reimburse the Lender for all reasonable out-of-pocket costs and expenses incurred by the Lender in connection with the Lender’s activities pursuant to this Section 10.16 and Section 9.09 of the Servicing Agreement; provided, however that, except if a

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Servicer Default or Event of Default has occurred and is continuing, the Borrower shall not be required to reimburse the Lender for ongoing due diligence and monitoring costs and expenses in excess of $20,000 for any calendar year.

(b) The Borrower shall reimburse the Lender for all reasonable out-of-pocket costs and expenses incurred by the Lender in connection with any due diligence review of a proposed Approved Seller or a proposed Approved Purchase Agreement. Amounts reimbursed pursuant to this Section 10.16(b) shall not be subject to or applied toward the reimbursement cap set forth in Section 10.16(a) hereof.

Section 10.17 Usury Savings Clause. Anything in this Loan Agreement or the Note to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the extent that a Lender’s receipt thereof would not be permissible under the law or laws applicable to it limiting rates of interest which may be charged or collected by it. Any such amount of interest which is not paid as a result of the limitation referred to in the preceding sentence shall be carried forward and paid by the Borrower to the Lender on the earliest date or dates on which any interest is payable under this Loan Agreement and on which the receipt thereof is permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such payment shall be made as additional interest for the month preceding such interest payment date. Such deferred payments shall not bear interest.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed and delivered as of the day and year first above written.

BORROWER:
TAXI MEDALLION LOAN TRUST I
By:	/s/ Alvin Murstein
	Name: Alvin Murstein Title: Vice President
LENDER:
MERRILL LYNCH COMMERCIAL FINANCE CORP.
By:	/s/ Joshua A. Green
	Name: Joshua A. Green Title: Director

Schedule 1.01(a)

CREDIT AND COLLECTION POLICY

(See Schedule 1.01(a) to the Original Loan Agreement)

Schedule 1.01(b)

EXISTING PERMITTED JOINT PARTICIPANTS

(See Schedule 1.01(b) to the Original Loan Agreement)

Schedule 1.01(c)

EXISTING PERMITTED JOINT PARTICIPANTS

1. Atlantic Bank of New York

2. The Merchants Bank of New York

3. North Fork Bank

Schedule 1.01(d)

EXISTING PERMITTED JUNIOR PARTICIPANTS

1. E.J.T. Management, Inc.

2. Elk Associates Funding Corporation

3. Susil Cab, Inc.

4. The OSG Corporation

Schedule 1.01(e)

CATEGORY V MEDALLION LOANS

(See Schedule 1.01(e) to the Original Loan Agreement)

Schedule 1.01(f)

UNDERWRITING GUIDELINES

(See Schedule 1.01(f) to the Original Loan Agreement)

Schedule 1.01(g)

SPECIFIED CHICAGO MEDALLION LOANS

Schedule 1.01(h)

JUNIOR SPECIFIED CHICAGO MEDALLION LOANS

Schedule 1

ELIGIBILITY CRITERIA

To be an Eligible Medallion Loan, a Medallion Loan (and the related Medallion) must satisfy, and maintain at all times, the following eligibility characteristics, subject to any exceptions thereto approved in writing by the Lender in its sole discretion:

(a) In the case of each Category I Medallion Loan, the LTV of such Category I Medallion Loan at the time of origination or of acquisition by the Borrower was less than or equal to 80% (for purposes of calculating the LTV, the maximum Medallion Valuation Amount attributed to any Medallion Loan shall not exceed $375,000).

(b) In the case of each Category II Medallion Loan, after giving effect to all Advances made or requested to be made in respect thereof, the CLTV is not more than 72% (for purposes of calculating the CLTV, the maximum Medallion Valuation Amount attributed to any Medallion Loan shall not exceed $375,000).

(c) In the case of the Specified Chicago Medallion Loans originated by IDB and/or Atlantic Bank: (i) each Specified Chicago Medallion Loan was acquired by the Borrower pursuant to a “true sale” transaction, and (ii) at the time of acquisition by the Borrower, each Specified Chicago Medallion Loan had a maximum aggregate LTV less than or equal to 70% (for purposes of calculating the CLTV, the maximum Medallion Valuation Amount attributed to any Medallion Loan shall not exceed $375,000).

(d) In the case of each Category III Medallion Loan, the LTV of such Category III Medallion Loan at the time of origination or of acquisition by the Borrower was (i) less than or equal to 90% but greater than 80% (for purposes of calculating the LTV, the maximum Medallion Valuation Amount attributed to any Medallion Loan shall not exceed $375,000), and (ii) Freshstart was not granted a participation interest of more than 10.0% in such Medallion Loan.

(e) In the case of each Category IV Medallion Loan, the LTV of such Category IV Medallion Loan at the time of origination or of acquisition by the Borrower was less than or equal to 90% (for purposes of calculating the LTV, the maximum Medallion Valuation Amount attributed to any Medallion Loan shall not exceed $375,000).

(f) In the case of each Category V Medallion Loan, the LTV of such Category V Medallion Loan at the time of origination or of acquisition by the Borrower was less than or equal to 90% but greater than 80% (for purposes of calculating the LTV, the maximum Medallion Valuation Amount attributed to any Medallion Loan shall not exceed $375,000).

(g) The Medallion Loan provides for not less frequently than monthly payments of interest.

(h) The Medallion Loan and other Medallion Loan Documents have not been extended, waived, amended or modified except in accordance with the Credit and Collection

Schedule 1-1

Policy. The Lender shall be notified of any material change to the Credit and Collection Policy and shall have the right to declare ineligible any Medallion Loans originated or modified under such revised Credit and Collection Policy.

(i) The Medallion Loan does not contravene any Requirements of Law applicable thereto.

(j) All required consents, approvals and authorizations in connection with the Medallion Loan have been obtained.

(k) The Medallion Loan is in full force and effect, no provision of which has been modified, waived or amended (in the case of a Medallion Loan acquired from an Approved Seller, since the date of acquisition of such Medallion Loan), except in accordance with the Credit and Collection Policy, and constitutes the legal, valid and binding obligation of the Obligor in accordance with its terms.

(l) The Medallion Loan is (i) payable in Dollars, (ii) denominated in Dollars and (iii) originated in the United States.

(m) Immediately prior to the sale, assignment and transfer thereof, the Medallion Loan is secured by a valid first perfected security interest in the related Medallion Collateral in favor of the Seller or the Borrower, as secured party.

(n) No right of rescission, setoff, counterclaim or defense has been asserted in connection with the Medallion Loan.

(o) The related Obligor is an individual, corporation or partnership.

(p) If the Obligor is an individual, such individual is either a United States citizen or a resident alien with a “Green Card”, has a social security number, a drivers license, and does not have a criminal record or otherwise complies with all requirements of the applicable Taxi Commission.

(q) The Seller originated the Medallion Loan for the purpose of financing an Obligor’s Medallion, and the Medallion Loan was made in the ordinary course of such Seller’s business in accordance in all material respects with the Underwriting Guidelines.

(r) The Medallion Loan Documents were fully and properly executed by the parties thereto.

(s) The Medallion Loan is not more than 360 days delinquent (without regard to any applicable grace periods).

(t) The Medallion Loan (i) has been sold by Medallion Funding, as Seller, to the Borrower pursuant to the Purchase Agreement, or (ii) has been sold by an Approved Seller to the Borrower pursuant to an Approved Purchase Agreement.

Schedule 1-2

(u) The related Obligor (i) is not currently the subject of a judgment in favor of the Borrower, or the applicable Seller and (ii) did not have its related Medallion foreclosed (or subject to foreclosure).

(v) There exists a Medallion Loan File with respect to the Medallion Loan that has been delivered to the Custodian in accordance with the Loan Documents. The related Medallion Loan File for the Medallion Loan contains the documents and instruments specified to be included therein in the form specified in the definition of “Medallion Loan File.”

(w) The information with respect to the Medallion Loan and the related Medallion Loan Documents and Medallion Collateral set forth in the Medallion Loan Schedule is true, correct and complete in all material respects.

(x) No adverse selection procedures have been utilized in selecting the Medallion Loan as one meeting the selection criteria contained in the Loan Agreement.

(y) The origination and servicing of the Medallion Loan, and the sale of the Medallion Loan did not contravene in any material respect any requirements of applicable federal, state and local laws, and regulations thereunder including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board’s Regulations B and Z, the Soldiers’ and Sailors’ Civil Relief Act of 1940, each applicable state Motor Vehicle Retail Installment Sales Act, and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code, and other consumer credit laws and equal credit opportunity and disclosure laws.

(z) The Medallion Loan is not due from the United States of America or any state or from any other Governmental Authority.

(aa) The Medallion Loan has created a valid, subsisting and enforceable first priority perfected security interest in the related Medallion Collateral in favor of the applicable Seller as secured party, and such security interest is prior to all other liens (other than liens described in the next sentence, as to which the Borrower has no knowledge) upon and security interests in such Medallion Collateral that now exist or may hereafter arise or be created. To the best of the Borrower’s knowledge, there are no Liens or claims existing or that have been filed for work, labor, storage or materials relating to the related Medallion that are prior to the security interest in the related Medallion granted by such Medallion Loan. At the time of origination, there is no Lien against the Medallion related to such Medallion Loan for delinquent taxes, except where an adequate escrow for such taxes has been established and funded.

(bb) The Medallion Loan is the legal, valid and binding obligation of the Obligor thereunder and is enforceable in accordance with its terms, except only as such enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally; all parties to the Medallion Loan had full legal capacity to execute and deliver such Medallion Loan and all other documents related thereto and to grant the security interest purported to be granted thereby. The Medallion Loan has not been satisfied, subordinated or rescinded, nor has any Medallion been released from the lien granted by such Medallion Loan in whole or in part.

Schedule 1-3

(cc) The Medallion Loan has not been modified as a result of application of the Soldiers’ and Sailors’ Civil Relief Act of 1940, as amended.

(dd) No right of rescission, setoff, counterclaim, or defense exists with respect to the Medallion Loan. The operation of the terms of the Medallion Loan or the exercise of any right thereunder will not render such Medallion Loan unenforceable in whole or in part or subject to any such right of rescission, setoff, counterclaim or defense.

(ee) As of the Funding Documentation Receipt Date for the Medallion Loan, except for Permitted Delinquencies, no default, breach, violation or event permitting acceleration under the terms of the Medallion Loan has occurred; no continuing condition that with notice or the lapse of time would constitute a default, breach, violation, or event permitting acceleration under the terms of such Medallion Loan has arisen; the applicable Seller has not waived any of the foregoing; and the Medallion related to the Medallion Loan has not been repossessed under the Medallion Loan. To the best of the Borrower’s knowledge, the related Obligor is not in default on any other debt obligation owed or owing to the Borrower or any Affiliate of the Borrower. “Permitted Delinquency” means a delinquency of no more than 360 days.

(ff) The Medallion Loan has not been sold, transferred, assigned or pledged by the applicable Seller to any Person other than the Borrower, and immediately prior to the sale of the Medallion Loan to the Lender, such Seller had good and marketable title to the Medallion Loan, and was sole owner thereof, free and clear of all Liens, except for Permitted Participation Interests. Such Seller has not taken any action to convey any right to any Person that would result in such Person having a right to payments received under the related insurance policies, except in connection with Permitted Junior Participation Interests or Permitted Joint Participation Interests.

(gg) On the Restatement Effective Date and each Funding Documentation Receipt Date, the Borrower and the Servicer will have each caused the portions of its master computer records relating to the Medallion Loan to be clearly and unambiguously marked to show that the Medallion Loans has been pledged to the Lender in accordance with the terms of this Loan Agreement.

(hh) Each Medallion Loan Schedule made available by the Borrower to the Lender was complete and accurate in all material respects as of the Restatement Effective Date (in the case of the first such tape) and the Funding Documentation Receipt Date with respect to which such tape was delivered.

(ii) The Medallion Loan was not originated in, and is not subject to the laws of, any jurisdiction under which the pledge, sale, contribution, transfer and assignment of such Medallion Loan shall be unlawful, void or voidable, except as set forth in the opinions of local counsel delivered pursuant to Section 5.01(j)(ii) of the Loan Agreement. The applicable Seller has not entered into any agreement with any Obligor or other Person that prohibits, restricts or conditions the pledge, sale, contribution, transfer or assignment of any portion of such Medallion Loan or the related Collateral or that is otherwise inconsistent with the terms of such Medallion Loan or this Loan Agreement.

Schedule 1-4

(jj) The Lender has a first priority perfected Lien in the Medallion Loan and the Medallion Collateral related thereto. All filings (including, without limitation, Uniform Commercial Code filings) necessary in any jurisdiction to give the Lender a first priority perfected Lien in the Medallion Loan and the other Medallion Collateral have been made.

(kk) There is only one original executed copy of the Medallion Note for the Medallion Loan, including any assumptions, amendments or modifications thereto.

(ll) No further action is required under the Uniform Commercial Code or any titling statute or act to continue the perfected status of the first priority security interest of the Borrower in the Medallion against creditors of and transferees of the Obligor, except for the filing of continuation statements.

(mm) The Medallion Loan constitutes “chattel paper”, an “instrument” or a “general intangible” under the Uniform Commercial Code.

(nn) Each related Medallion Loan Document contains customary and enforceable provisions so as to render the rights and remedies of the holder thereof adequate for the practical realization of the benefits of the security interests intended to be provided thereby, subject to the limitations described in the next succeeding sentence. There is no exemption under existing law available to the related Obligor which would interfere with secured party’s right to foreclose or to realize upon the related Medallion Loan Document, other than that which may be available under the insolvency laws, other laws of general application relating to or affecting the enforcement of creditors’ rights generally, applicable debt relief or homestead statutes or general principles of equity. No representations have been made to the related Obligor by the applicable Seller or the Borrower that are inconsistent with the Medallion Loan Documents. The Medallion Loan contains an enforceable provision for the acceleration of the payment of the principal balance of the Medallion Loan in the event that the Medallion is sold or transferred without the prior written consent of the Borrower.

(oo) Any applicable intangible taxes and documentary stamp taxes were paid as to the Medallion Loan and each related Medallion Loan Document.

(pp) The Medallion Loan Documents for the Medallion Loan are in substantially the form of the Standard Form Medallion Loan Documentation with the exceptions, if any, listed on the Notice of Borrowing and Pledge and approved in writing by the Lender.

(qq) The Borrower has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than an Obligor on such Medallion Loan, directly or indirectly, for the payment of any amount required by such Medallion Loan.

(rr) The proceeds of such Medallion Loan have been fully disbursed, there is no obligation or requirement for future advances thereunder, and all costs, fees and expenses incurred in making or closing the Medallion Loan have been paid. The Borrower has duly fulfilled in all material respects all obligations on its part to be fulfilled under or in connection

Schedule 1-5

with the related Medallion Loan Documents and has done nothing to impair the rights of the applicable Seller, the Borrower or the Lender in such Medallion Loan Documents or payments with respect thereto.

(ss) As of the applicable date of transfer thereunder, no Obligor on the Medallion Loan is bankrupt, is the debtor in a voluntary or involuntary bankruptcy proceeding, or is the subject of a comparable receivership or insolvency proceeding, other than Obligors under the protection of a bankruptcy court or receivership which has approved payment by any such Obligor of the Medallion Loan.

(tt) To the best of the Borrower’s knowledge, there are no proceedings or investigations pending or, threatened, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (a) asserting the invalidity of the related Medallion Loan Documents, (b) seeking to prevent payment and performance of such Medallion Loan Documents, or (c) seeking any determination or ruling that might materially and adversely affect the validity, enforceability or collectability of the Medallion Loan or the related Medallion Loan Documents.

(uu) The Borrower has no knowledge of any circumstance or condition with respect to the Medallion Loan, the Medallion Collateral with respect thereto or the related Obligors’ credit standing that could reasonably be expected to cause the Lender to regard the Medallion Loan as unacceptable security, cause the Medallion Loan to become delinquent or adversely affect the value or marketability of such Medallion Loan.

(vv) The Medallion Loan is a Boston Medallion Loan, Chicago Medallion Loan, New York City Medallion Loan, Cambridge Medallion Loan, Newark Medallion Loan, Philadelphia Medallion Loan or Other Permitted Medallion Loan. The Medallion securing such Medallion is valid and subsisting and in full force and effect.

(ww) The applicable Seller and related Obligor shall have complied in all material respects with all the requirements of the applicable Taxi Commission.

(xx) In the case of a New York Medallion Loan, the underlying Medallion is either an Individual Medallion or a Corporate Medallion.

(yy) The Medallion Loan and other Medallion Loan Documents have not been extended, waived, amended or modified except in accordance with the applicable Seller’s written Underwriting Guidelines and the Credit and Collection Policy.

(zz) The Medallion Loans shall have been originated in a manner which is consistent with the applicable Seller’s Underwriting Guidelines, and in compliance with applicable federal and state consumer protection laws, including, without limitation, all laws with respect to unfair or deceptive practices and all laws relating to predatory lending practices.

(aaa) In the case of a Medallion Loan that is subject to a Joint Participation Interest or a Junior Participation Interest, the applicable participation agreement is an Approved Joint Participation Agreement or an Approved Junior Participation Agreement, as applicable, and constitutes the legal, valid and binding obligation of the applicable Permitted Joint Participant or

Schedule 1-6

Permitted Junior Participant and is enforceable against such Permitted Joint Participant or Permitted Junior Participant in accordance with the respective terms and conditions of such participation agreement.

(bbb) In the case of a Category IV Medallion Loan, the participation formerly held by Freshstart was sold to Medallion Funding in a “true sale” transaction.

(ccc) In the case of a Newark Medallion Loan, the Lender shall have received evidence, in form and substance satisfactory to the Lender in the Lender’s sole and absolute discretion, that the Newark Taxi Commission has approved the Borrower’s grant of security interest to the Lender in the Newark Medallion Loans pursuant to this Loan Agreement.

Schedule 1-7

Schedule 6.25

FILING JURISDICTIONS

Taxi Medallion Loan Trust I

Delaware Secretary of State

Medallion Funding Corp.

New York Secretary of State

Medallion Financial Corp.

Delaware Secretary of State

Schedule 6.27

PARENT SUBSIDIARIES

Subsidiary	Form of Organization	Jurisdiction of Organization
Medallion Funding Corp.	Corporation	New York
Business Lenders, LLC	Limited Liability Corporation	Delaware
Medallion Taxi Media, Inc.	Corporation	New York
Medallion Capital Corp.	Corporation	New York
Medallion Business Credit, LLC	Limited Liability Corporation	Delaware
Freshstart Venture Capital Corp.	Corporation	New York
Medallion Funding Chicago Corp.	Corporation	Delaware
Medallion Bank (in-formation)	Corporation	Utah

Schedule 7.20

RIGHT OF FIRST REFUSAL

From the date hereof until and including the later of (i) the Termination Date and (ii) the date of repayment to the Lender of all Secured Obligations and the performance of all other obligations under the Loan Documents, the Lender shall have a right of first refusal with respect to each financing of Eligible Medallion Loans and the Borrower shall not, and shall not permit any of its Affiliates to, effect any financing of Eligible Medallion Loans with any Person who is not an Affiliate of the Borrower, except with respect to loan participations sold in the ordinary course of business and except pursuant to the procedures set forth below.

1. If a party other than the Lender or an Affiliate of the Borrower (a “Third Party”) has provided a good faith proposal, terms sheet, indication or commitment to provide financing of Eligible Medallion Loans (a “Third Party Proposal”), the Borrower shall provide written notice (a “Match Notice”) thereof to the Lender together with a copy of the Third Party Proposal.

2. At the request of the Lender, the Borrower shall cooperate fully with the Lender in good faith for a period of twenty Business Days, to negotiate the details of the terms of the proposed financing and to reach agreement with the Lender to obtain from the Lender or one of its Affiliates, financing on terms substantially as beneficial to the Borrower as that contained in the Third Party Proposal; provided, however, in any event, upon notice to the Borrower, the Lender or one of its Affiliates shall have the right to provide the financing pursuant to the terms of the Third Party Proposal.

3. The Lender or one of its Affiliates may elect to provide the proposed financing by delivering to the Borrower on or before the date which is twenty Business Days after the Match Notice has been received by the Lender, or, if the Borrower and Lender agree in good faith to extend negotiations referred to in paragraph 2, such later date as the negotiations are finalized or terminated, a terms sheet setting forth the terms and conditions of the its proposal, such terms and conditions to be either (i) as agreed by the parties pursuant to paragraph 2 above, or (ii) on the same terms and conditions as those contained in the Third Party Proposal. In such event, the Borrower shall not proceed with the Third Party Proposal.

4. If (i) the Lender or one of its Affiliates gives notice to the Borrower that it elects not to provide the financing set forth in the Third Party Proposal or to negotiate with the Borrower pursuant to paragraph 2, or (ii) Lender or one of its Affiliates does not, within the time period specified above, provide the term sheet referred to in paragraph 2, the Borrower may close the financing on the terms specified in the Third Party Proposal.

5. If the Borrower proposes to close a transaction on terms more favorable to the Third Party or any of the Third Party’s Affiliates than those included in the Third Party Proposal accompanying the most recent Match Notice delivered to the Lender, than such financing shall be deemed a new Third Party Proposal and the Borrower shall provide a new Match Notice to the Lender and comply with the provisions of this Schedule 7.20 with respect to such financing terms.

6. If the financing is being provided by a Third Party, then (i) one Business Day after receipt thereof, the Borrower shall provide to the Lender an initial draft of the credit agreement or similar document and all material related documentation with the Third Party (collectively, the “Third Party Credit Documents”), the terms of which must be consistent with the applicable Third Party Proposal accompanying a Match Notice; and (ii) three Business Days prior to the execution of any Third Party Credit Documents, the Borrower shall provide to the Lender the then current drafts of the Third Party Credit Documents, which shall be substantially in the form to be executed by the parties thereto. Within one Business Day following execution thereof, the Borrower shall provide to the Lender copies of the final Third Party Credit Documents.

7. Section 7.20 to the Loan Agreement and this Schedule 7.20 are not intended to be and do not constitute a commitment or obligation by the Lender or any of its Affiliates to provide or arrange for any financing by the Borrower or any of its Affiliates, and no liability or obligation on the part of the Lender or any of its Affiliates to proceed with or participate in any financing by the Borrower or any of its Affiliates shall be created or exist unless or until the Lender, or such Affiliate, as the case may be, has executed and delivered definitive documentation containing such obligation.

Schedule 7.21

MONTHLY PRICING REPORTS

JURISDICTION	DESCRIPTION OF REPORT
Boston, Massachusetts	Pricing and sales report from the Boston Police Department setting forth, among other things, the medallion numbers, sellers, buyers, sales price, transaction dates, and purchase dates (or such other information as shall then be included in such report), or if for any month such pricing and sales report is not available after reasonable attempts to obtain the same, a letter from Robert Kline, Esq. or another attorney acceptable to the Lender in its sole discretion, (i) setting forth, that based upon the sales of taxi medallions during the applicable month in which such counsel participated in or of which such counsel is otherwise aware, the average price at which taxi medallions were sold during the applicable month, and (ii) attaching to such letter a schedule of the sales of taxi medallions during such applicable month which such counsel participated in or of which such counsel is otherwise aware.
Cambridge, Massachusetts	Pricing and sales report from the City of Cambridge, Hackney Carriage Division setting forth, among other things, the medallion numbers, dates of transfer and sales price (or such other information as shall then be included in such report), or if for any month such pricing and sales report is not available after reasonable attempts to obtain the same, a letter from Robert Kline, Esq. or another attorney acceptable to the Lender in its sole discretion, (i) setting forth, that based upon the sales of taxi medallions during the applicable month in which such counsel participated in or of which such counsel is otherwise aware, the average price at which taxi medallions were sold during the applicable month, and (ii) attaching to such letter a schedule of the sales of taxi medallions during such applicable month which such counsel participated in or of which such counsel is otherwise aware.

Chicago, Illinois	Pricing and sales report from the Commissioner of the Department of Consumer Services setting forth, among other things, the medallion numbers, transaction dates and sales price (or such other information as shall then be included in such report), or if for any month such pricing and sales report is not available after reasonable attempts to obtain the same, a letter from Bernie Block, Esq. or another attorney acceptable to the Lender in its sole discretion, (i) setting forth, that based upon the sales of taxi medallions during the applicable month in which such counsel participated in or of which such counsel is otherwise aware, the average price at which taxi medallions were sold during the applicable month, and (ii) attaching to such letter a schedule of the sales of taxi medallions during such applicable month which such counsel participated in or of which such counsel is otherwise aware.
Newark, New Jersey	A pricing and sales report from the Division of Taxicabs, Newark Police Department (or such other information as shall then be included in such report), or if for any month such pricing and sales report is not available after reasonable attempts to obtain the same, a letter from Alan Decker, Esq. or another attorney acceptable to the Lender in its sole discretion, (i) setting forth, that based upon the sales of taxi medallions during the applicable month in which such counsel participated in or of which such counsel is otherwise aware, the average price at which taxi medallions were sold during the applicable month, and (ii) attaching to such letter a schedule of the sales of taxi medallions during such applicable month which such counsel participated in or of which such counsel is otherwise aware.
New York, New York	Pricing and sales report from the New York City Taxi & Limousine Commission setting forth, among other things, the average price

and number of medallion loan transfers for the six prior months (or such other information as shall then be included in such report), or if for any month such pricing and sales report is not available after reasonable attempts to obtain the same, a letter from Lance Kuba, Esq., Roger Davis, Esq. or another attorney acceptable to the Lender in its sole discretion, (i) setting forth, that based upon the sales of taxi medallions during the applicable month in which such counsel participated in or of which such counsel is otherwise aware, the average price at which taxi medallions were sold during the applicable month, and (ii) attaching to such letter a schedule of the sales of taxi medallions during such applicable month which such counsel participated in or of which such counsel is otherwise aware.

Philadelphia, Pennsylvania

A pricing and sales report from the Pennsylvania Public Utilities Commission, or if for any month such pricing and sales report is not available after reasonable attempts to obtain the same, a letter from John Gallagher, Esq. or another attorney acceptable to the Lender in its sole discretion, (i) setting forth, that based upon the sales of taxi medallions during the applicable month in which such counsel participated in or of which such counsel is otherwise aware, the average price at which taxi medallions were sold during the applicable month, and (ii) attaching to such letter a schedule of the sales of taxi medallions during such applicable month which such counsel participated in or of which such counsel is otherwise aware.

Exhibit A

FORM OF AMENDED AND RESTATED PROMISSORY NOTE

$300,000,000	September     , 2003
	New York, New York

FOR VALUE RECEIVED, TAXI MEDALLION LOAN TRUST I, a Delaware business trust (the “Borrower”), hereby promises to pay to the order of MERRILL LYNCH COMMERCIAL FINANCE CORP. (the “Lender”), at the principal office of the Lender at [15 W. South Temple, Suite 300, Salt Lake City, Utah 84101], in lawful money of the United States, and in immediately available funds, the principal sum of THREE HUNDRED MILLION DOLLARS ($300,000,000) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Advances made by the Lender to the Borrower under the Loan Agreement), on the dates and in the principal amounts provided in the Loan Agreement, and to pay interest on the unpaid principal amount of each such Advance, at such office, in like money and funds, for the period commencing on the date of such Advance until such Advance shall be paid in full, at the rates per annum and on the dates provided in the Loan Agreement.

This Note is the Note referred to in that certain Amended and Restated Loan and Security Agreement, dated as of September     , 2003 (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Loan Agreement”), by and between the Borrower and the Lender and evidences the Advances made by the Lender thereunder. Terms used but not defined in this Note have the respective meanings assigned to them in the Loan Agreement.

This Note amends and restates in its entirety that certain Promissory Note dated September 13, 2002, made by the Borrower in favor of the Lender in the original principal amount of Two Hundred Fifty Million Dollars ($250,000,000) (the “Original Note”); provided, that this Note is given solely in substitution of the Original Note and not in repayment or satisfaction thereof. The Borrower hereby acknowledges and agrees that simultaneously with the Borrower’s execution and delivery of this Note to the Lender, the Lender has agreed to deliver, and has in fact delivered, to the Borrower the Original Note, marked “cancelled”.

The date, Type, amount and length of Interest Period of each Advance made by the Lender to the Borrower (including, without limitation, each “Advance” outstanding under the Existing Loan Agreement on the Restatement Effective Date), each continuation thereof, each conversion of all or a portion thereof to another Type and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by the Lender on the schedules attached hereto and constituting a part hereof or any continuation thereof and any such recordation shall constitute Prima facie evidence of the accuracy of the information; provided, that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower to make a payment when due of any amount owing under the Loan Agreement or hereunder in respect of the Advances made by the Lender.

The Borrower agrees to pay all the Lender’s costs of collection and enforcement (including reasonable attorneys’ fees and disbursements of Lender’s counsel) in respect of this Note in accordance with the Loan Agreement, including, without limitation, reasonable attorneys’ fees through appellate proceedings.

Notwithstanding the pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees that the Borrower’s obligations under this Note are recourse obligations of the Borrower to which the Borrower pledges its full faith and credit.

The Borrower, and any indorsers or guarantors hereof, (a) severally waive diligence, presentment, protest and demand and also notice of protest, demand, dishonor and nonpayments of this Note, (b) expressly agree that this Note, or any payment hereunder, may be extended from time to time, and consent to the acceptance of further Collateral, the release of any Collateral for this Note, the release of any party primarily or secondarily liable hereon, and (c) expressly agree that it will not be necessary for the Lender, in order to enforce payment of this Note, to first institute or exhaust the Lender’s remedies against the Borrower or any other party liable hereon or against any Collateral for this Note. No extension of time for the payment of this Note, or any installment hereof, made by agreement by the Lender with any person now or hereafter liable for the payment of this Note, shall affect the liability under this Note of the Borrower, even if the Borrower is not a party to such agreement; provided, however, that the Lender and the Borrower, by written agreement among them, may affect the liability of the Borrower.

Any reference herein to the Lender shall be deemed to include and apply to every subsequent holder of this Note. Reference is made to the Loan Agreement for provisions concerning optional and mandatory prepayments, Collateral, acceleration and other material terms affecting this Note.

This Note shall be governed by and construed under the laws of the State of New York whose laws the Borrower expressly elects to apply to this Note. The Borrower agrees that any action or proceeding brought to enforce or arising out of this Note may be commenced in the Supreme Court of the State of New York, Borough of Manhattan, or in the District Court of the United States for the Southern District of New York.

TAXI MEDALLION LOAN TRUST I
By:
	Name:
	Title:

SCHEDULE A to

Promissory Note

LOANS, CONVERSIONS AND

PAYMENTS OF FIXED RATE LOANS

Date
Made Principal
Amount
of Fixed
Rate Loan
(and
Continuations
Thereof) Principal
Amount of
Eurodollar
Loans
Converted
into Fixed
Rate Loans Interest
Period and
Interest Rate
Applicable
Thereto
Principal
Amount of
Fixed Rate
Loans
Converted
into
Eurodollar
Loans
Amount
of Principal
Repaid
Unpaid
Principal
Amount of
Fixed Rate
Loans
Notation
Made by

SCHEDULE B to

Promissory Note

LOANS, CONVERSIONS AND

PAYMENTS OF EURODOLLAR LOANS

Date
Made Principal
Amount
of
Eurodollar
Loan (and
Continuations
Thereof) Principal
Amount of
Fixed Rate
Loans
Converted
into
Eurodollar
Loans Interest
Period and
Interest Rate
Applicable
Thereto
Principal
Amount of
Eurodollar
Loans
Converted
into Fixed
Rate Loans
Amount
of Principal
Repaid
Unpaid
Principal
Amount of
Eurodollar
Loans
Notation
Made by

Exhibit B

FORM OF BORROWING BASE CERTIFICATE

[To Be Added]

Exhibit C

FORM OF COLLECTION ACCOUNT CONTROL AGREEMENT

(See Exhibit C to the Original Loan Agreement)

Exhibit D

FORM OF CUSTODIAL AGREEMENT

(See Exhibit D to the Original Loan Agreement)

Exhibit E

[RESERVED]

Exhibits F-1 through F-4

(SEE ORIGINAL LOAN AGREEMENT)

Exhibit F-1	Form of Junior Participation Supplemental Agreement (E.J.T.)
Exhibit F-2	Form of Junior Participation Supplemental Agreement (Elk)
Exhibit F-3	Form of Junior Participation Supplemental Agreement (Susil Cab, Inc.)
Exhibit F-4	Form of Junior Participation Supplemental Agreement (The OSG Corporation)

Exhibit G

FORM OF INTEREST RESERVE DEPOSIT ACCOUNT CONTROL AGREEMENT

(See Exhibit G to the Original Loan Agreement)

Exhibit H

FORM OF NOTICE OF BORROWING AND PLEDGE

Lender:	MERRILL LYNCH COMMERCIAL FINANCE CORP.
Borrower:	TAXI MEDALLION LOAN TRUST I
Requested Funding Date:
Medallion Loans to be Pledged:	See attached Schedule A
Requested Advance:	$
Type of Advance:	[Eurodollar Loan] [Fixed Rate Loan]
Requested Interest Period:	Eurodollar Loans: [one][two][three][six] month(s)
	Fixed Rate Loans: [eighteen months][two years]
	[thirty months][three years][five years]

In connection with the Advance requested to be made on                     , 20     under the Amended and Restated Loan and Security Agreement, dated as of September 12, 2003 (as amended, supplemented, restated or otherwise modified and in effect from time to time, the “Loan Agreement”; capitalized terms not otherwise defined herein have the meaning set forth in the Loan Agreement), between Taxi Medallion Loan Trust I (the “Borrower”) and Merrill Lynch Commercial Finance Corp. (the “Lender”), the undersigned Responsible Officer of the Borrower hereby certifies to the Lender as follows:

1. The undersigned is a Responsible Officer of the Borrower and is authorized to execute and deliver this Notice of Borrowing and Pledge on behalf of the Borrower pursuant to the Loan Agreement.

2. No Default or Event of Default exists (both before and after giving effect to the requested Advance).

3. Each of the representations and warranties made by a Related Party in the Loan Documents is true and correct in all material respects on and as of the date of the making of the requested Advance with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). Each Related Party is in compliance in all material respects with all governmental licenses and authorizations, statutory and regulatory requirements.

4. After giving effect to the requested Advance, the aggregate outstanding principal amount of the Advances does not exceed the amount permitted to be outstanding as described in Section 2.01(a) of the Loan Agreement.

[Name of Responsible Officer]

[Title of Responsible Officer]

[Name of Responsible Officer]

[Title of Responsible Officer]

Date:                         

Schedule A

LIST OF MEDALLION LOANS TO BE PLEDGED

[To be Added]

Exhibit I

FORM OF TAX CERTIFICATE

Reference is hereby made to the Amended and Restated Loan and Security Agreement dated as of September 12, 2003 (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Loan Agreement”), among Taxi Medallion Loan Trust I (the “Borrower”) and Merrill Lynch Commercial Finance Corp. (the “Lender”). All capitalized terms used but not defined herein have the meanings ascribed to them in the Loan Agreement. Pursuant to the provisions of Section 2.11(c) of the Loan Agreement, the undersigned Lender hereby certifies that:

1. It is a          natural individual person,          treated as a corporation for U.S. federal income tax purposes,          disregarded for federal income tax purposes (in which case a copy of this Certificate is attached in respect of its sole beneficial owner), or          treated as a partnership for U.S. federal income tax purposes. [One must be checked.]

2. It is the beneficial owner of the Note, except to the extent of a transferee or assignee that has satisfied the requirements of Section 2.11(c) of the Loan Agreement.

3. It is not a bank, as such term is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “Code”), or the Loan Agreement is not, with respect to the undersigned, a loan agreement entered into in the ordinary course of its trade or business, within the meaning of such section.

4. It is not a 10-percent shareholder of the Borrower within the meaning of Section 871(h)(3) or 881(c)(3)(B) of the Code.

5. It is not a controlled foreign corporation that is related to the Borrower within the meaning of Section 881(c)(3)(C) of the Code.

6. Amounts received by it pursuant to the Loan Agreement and under the Note are not effectively connected with its conduct of a trade or business in the United States.

[NAME OF LENDER]
By:
	Name:
	Title:

Date:                  , 20    

Exhibit J

FORM OF ASSIGNMENT AND ACCEPTANCE

Reference is made to the Amended and Restated Loan and Security Agreement, dated as of September 12, 2003 (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Loan Agreement”) among TAXI MEDALLION LOAN TRUST I, a Delaware business trust (the “Borrower”), and MERRILL LYNCH COMMERCIAL FINANCE CORP. (the “Lender”). Terms defined in the Loan Agreement and not otherwise defined herein are used herein with the meanings so defined.

                     (the “Assignor”) and                      (the “Assignee”) agree as follows:

1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), all of the Assignor’s interest (the “Assigned Interest”) in and to the Assignor’s rights and obligations under the Loan Agreement as are set forth on SCHEDULE 1 (individually, an “Assigned Facility”; collectively, the “Assigned Facilities”), in a principal amount for each Assigned Facility as set forth on SCHEDULE 1.

2. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement, any other Loan Documents or any other instrument or document furnished pursuant thereto, other than that it has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any Subsidiary or any other obligor or the performance or observance by the Borrower or any Subsidiary or any obligor of any of their respective obligations under the Loan Agreement or any other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (c) attaches the Note(s) held by it evidencing the Assigned Facilities and requests that the Lender exchange such Note(s) for a new Note or Notes payable to the Assignee (and, if the Assignor is retaining any portion of its rights and obligations under the Loan Documents, to the Assignor) in the amounts which reflect the assignment being made hereby.

3. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the Loan Agreement, together with copies of the financial statements delivered pursuant thereto and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Agreement, the other Loan

Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Lender to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Lender by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Loan Agreement and will perform in accordance with its terms all the obligations which by the terms of the Loan Agreement are required to be performed by it as a Lender.

4. The effective date of this Assignment and Acceptance shall be                  , 200     (the “Effective Date”). Following the execution of this Assignment and Acceptance, it will be delivered to the Lender, as syndicate manager (in such capacity, the “Syndicate Manager”), for acceptance by it and recorded by the Lender pursuant to the terms of the Loan Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Syndicate Manager, be earlier than five Business Days after the date of such acceptance and recording by the Lender).

5. Upon such acceptance and recording, from and after the Effective Date, the Borrower shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Syndicate Manager on behalf of the Assignee whether such amounts have accrued prior to the Effective Date or accrue subsequent to the Effective Date. The Syndicate Manager shall make all appropriate adjustments in payments by the Borrower for periods prior to the Effective Date or with respect to the making of this assignment.

6. From and after the Effective Date, (a) the Assignee shall be a party to the Loan Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in the Loan Agreement, relinquish its rights and be released from its obligations under the Loan Agreement.

7. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto.

SCHEDULE 1

TO ASSIGNMENT AND ACCEPTANCE

RELATING TO THE AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT,

DATED AS OF SEPTEMBER 12, 2003

AMONG

TAXI MEDALLION LOAN TRUST I

AND

MERRILL LYNCH COMMERCIAL FINANCE CORP.

Name of Assignor:

Name of Assignee:

Effective Date of Assignment:

Credit Facility Assigned	Principal Amount Assigned	Commitment Percentage Assigned
	$	____%

[Name of Assignee]	[Name of Assignor]
By	By
Name:	Name:
Title:	Title:

Exhibit K

[RESERVED]

Exhibits L-1 through L-4

(SEE ORIGINAL LOAN AGREEMENT)

Exhibit L-1	Form of Approved Junior Participation Agreement (E.J.T.)
Exhibit L-2	Form of Approved Junior Participation Agreement (Elk)
Exhibit L-3	Form of Approved Junior Participation Agreement (Susil Cab, Inc.)
Exhibit L-4	Form of Approved Junior Participation Agreement (The OSG Corporation)

Exhibit M

FORM OF NOTICE OF CONVERSION OR CONTINUATION

[Date]

Merrill Lynch Commercial Finance Corp.

[Address]

Attention:                                 

Re: Taxi Medallion Loan Trust I

Ladies and Gentlemen:

This Notice of Conversion or Continuation is delivered to you pursuant to Section 2.14 of the Loan and Security Agreement, dated as of September 12, 2003 (as amended, supplemented, restated, or otherwise modified from time to time, the “Loan Agreement”) between Taxi Medallion Loan Trust I, as borrower (the “Borrower”), and Merrill Lynch Commercial Finance Corp. (the “Lender”). Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Loan Agreement.

[The Borrower hereby requests that on [            ] (the “Conversion/Continuation Date”),

1. $[            ] of the presently outstanding principal amount of the Advances originally made on [            ],

2. and all Advances presently being maintained as [Eurodollar Rate Loans] [Fixed Rate Loans],

3. be [converted into] [continued as],

4. [Eurodollar Rate Loans having an Interest Period of [one/two/three/six/twelve months] [Fixed Rate Loans having an Interest Period of [eighteen months/two years/thirty months/three years/five years].

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the proposed Conversion/Continuation Date, both before and after giving effect thereto and to the application of the proceeds therefrom:

(a) the foregoing [conversion] [continuation] complies with the terms and conditions of the Credit Agreement (including, without limitation, Section 2.14 of the Loan Agreement);

(b) no Default or Event of Default has occurred and is continuing, or would result from such proposed [conversion] [continuation].]

The Borrower has caused this Notice of Conversion or Continuation to be executed and delivered, and the certification and warranties contained herein to be made, by its duly authorized officer this     th day of             , 20    .]

TAXI MEDALLION LOAN TRUST I
By:
	Name:
	Title:

Exhibit N

FORM OF AMENDMENT TO SERVICING AGREEMENT

AMENDMENT TO SERVICING AGREEMENT, dated as of September 12, 2003 (this “Amendment”), to the Servicing Agreement, dated as of September 13, 2002 (as amended, supplemented or otherwise modified prior to the date hereof, the “Existing Servcing Agreement”; as amended hereby and as further amended, restated, supplemented or otherwise modified and in effect from time to time, the “Servicing Agreement”), by and among TAXI MEDALLION LOAN TRUST I (the “Borrower”), MEDALLION FUNDING CORP. (the “Servicer”), and MERRILL LYNCH COMMERCIAL FINANCE CORP. (successor-in-interest to Merrill Lunch Bank USA, the “Lender”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Servicing Agreement.

RECITALS

The Borrower, the Servicer and the Lender are parties to the Existing Servicing Agreement.

The Borrower, the Servicer and the Lender have agreed, subject to the terms and conditions of this Amendment, that the Existing Servicing Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Servicing Agreement.

Accordingly, the Borrower, the Servicer and the Lender hereby agree, in consideration of the mutual premises and mutual obligations set forth herein, that the Existing Servicing Agreement is hereby amended as follows:

SECTION 1. Amendments.

Article VI of the Existing Servicing Agreement is hereby amended by deleting Section 6.08 in its entirety and substituting the following new Section 6.08:

“Section 6.08 Maintenance of Tangible Net Worth. The Servicer shall maintain Tangible Net Worth at all times of not less than $50,000,000.”

Article VI of the Existing Servicing Agreement is hereby amended by deleting Section 6.09 in its entirety and substituting the following new Section 6.09:

“Section 6.09 Maintenance of Ratio of Total Liabilities to Tangible Net Worth. The ratio of Total Liabilities to Tangible Net Worth shall not be greater than 6 to 1 at any time.”

SECTION 2. Conditions Precedent. This Amendment shall become effective on the first date (the “Amendment Effective Date”) on which all of the following conditions precedent shall have been satisfied:

The Lender shall have received counterparts of this Amendment executed by a duly authorized officer of each of the Borrower and the Servicer;

The Lender shall have received payment for all of the out-of-pocket costs and expenses incurred by the Lender in connection with the preparation, execution and delivery of this Amendment, including, without limitation, the reasonable fees and disbursements of Cadwalader, Wickersham & Taft LLP, counsel to the Lender;

The Lender shall have received a certificate of the Secretary or Assistant Secretary of the Servicer substantially in the form of Exhibit A hereto, dated as of the date hereof, and certifying (i) that since September 13, 2002 there have been no changes to any of the organizational documents of the Servicer and (ii) as to the incumbency and specimen signature of each officer executing this Amendment; and

(i) The Servicer shall be in compliance with all of the terms and provisions set forth in the Existing Servicing Agreement and the other Loan Documents on its part to be observed or performed, (ii) the representations and warranties made and restated by the Servicer pursuant to Section 3 of this Amendment shall be true and complete in all material respects on and as of such date with the same force and effect as if made on and as of such date, and (iii) no Default or Event of Default shall have occurred and be continuing on such date.

SECTION 3. Representations and Warranties. The Servicer hereby (i) represents and warrants to the Lender that it is in compliance with all of the terms and provisions set forth in the Existing Servicing Agreement and the other Loan Documents on its part to be observed or performed, (ii) represents and warrants to the Lender that no Default or Event of Default has occurred and is continuing, and (iii) confirms and reaffirms to the Lender each of the representations and warranties contained in Article V of the Servicing Agreement.

SECTION 4. Limited Effect. Except as expressly amended or otherwise modified hereby, the Existing Servicing Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms, without any amendment, waiver or modification of any provision thereof.

SECTION 6. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof.

SECTION 7. Governing Law. This Amendment shall be governed and construed in accordance with the laws of the State of New York.

[SIGNATURES FOLLOW]

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

BORROWER:
TAXI MEDALLION LOAN TRUST I
By:
	Name:
	Title:
LENDER:
MERRILL LYNCH COMMERCIAL FINANCE CORP.
By:
	Name:
	Title:
SERVICER:
MEDALLION FUNDING CORP.
By:
	Name:
	Title:

Exhibit A

FORM OF SECRETARY’S CERTIFICATE

Pursuant to Section 2(c) of the Amendment, dated as of September 12, 2003 (the “Amendment”), to the Servicing Agreement, dated as of September 13, 2002 (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Servicing Agreement”; capitalized terms used but not otherwise defined herein shall have the meanings assigned thereto by the Servicing Agreement), by and between TAXI MEDALLION LOAN TRUST I (the “Borrower”), MEDALLION FUNDING CORP.(the “Servicer”), and MERRILL LYNCH COMMERCIAL FINANCE CORP. (successor-in-interest to Merrill Lynch Bank USA, the “Lender”), the undersigned hereby certifies on behalf of the Servicer as follows:

Since September 13, 2002 there have been no changes to any of the organizational documents of the Servicer and each such document remains in full force and effect as of the date hereof; and

The following named individuals are duly elected, qualified and acting officers of the Servicer, each such individual holding the office(s) set forth opposite his respective name as of the date hereof, and the signatures set forth beside the respective name and title of said officers and authorized signatories are true, authentic signatures:

Name Title Signature

IN WITNESS WHEREOF, the undersigned has hereunto executed this Secretary’s Certificate as of this      day of September, 2003.

By:
	Name:
	Title:

The undersigned,             , does hereby certify that he is the duly elected and presently incumbent              of the Servicer and in such capacity does hereby certify to the Lender that              is the duly elected and presently incumbent Secretary of the Servicer.

By:
	Name:
	Title:

EX-31.1

Exhibit 31.1

CERTIFICATIONS

Certification of Alvin Murstein

I, Alvin Murstein, Chairman and Chief Executive Officer of Medallion Financial Corp. certify that:

1. I have reviewed this quarterly report on Form 10-Q of Medallion Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2003

By: /s/ Alvin Murstein

Alvin Murstein

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Larry D. Hall

I, Larry D. Hall, Acting Chief Financial Officer of Medallion Financial Corp., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Medallion Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2003

By: /s/ Larry D. Hall

Larry D. Hall

Acting Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, (the Report) of Medallion Financial Corp. (the Company), as filed with the Securities and Exchange Commission on the date hereof; I, Alvin Murstein, the Chairman and Chief Executive Officer of the Company, certify, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

By: /s/ Alvin Murstein

Chairman and Chief Executive Officer

Date: November 13, 2003

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, (the Report) of Medallion Financial Corp. (the Company), as filed with the Securities and Exchange Commission on the date hereof; I, Larry D. Hall, the Acting Chief Financial Officer of the Company, certify, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

By: /s/ Larry D. Hall

Acting Chief Financial Officer

Date: November 13, 2003