8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 12, 2003

Encore Capital Group, Inc.
(Exact Name of Registrant as Specified in its Charter)

Delaware	000-26489	48-1090909
(State or other jurisdiction of	(Commission File Number)	(I.R.S Employer
incorporation or organization)		Identification No.)

5775 Roscoe Court
San Diego, California 92123
(Address of Principal Executive Offices) (Zip Code)

(877) 445-4581
(Registrant’s Telephone Number, Including Area Code)

Item 7. Financial Statements and Exhibits.

(c)      Exhibits:

3.1 Bylaws, as amended.

10.1 First Amendment, dated as of June 26, 2003, to the Credit Agreement by and between MRC Receivables Corporation, as borrower, and CFSC Capital Corp. VIII, as lender, dated as of December 20, 2000.

10.2 Loan and Security Agreement between Midland Funding NCC-1 Corporation and Patriot Capital Markets, LLC, dated as of July 25, 2003 (the “Secured Loan”).

10.3 Servicing Agreement relating to the Secured Loan, dated as of July 25, 2003.

SIGNATURES

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

		ENCORE CAPITAL GROUP, INC.
Date:	August 12, 2003	By    /s/ Barry R. Barkley
		Barry R. Barkley
		Executive Vice President,
		Chief Financial Officer and Treasurer

EXHIBIT INDEX

Exhibit        Description

3.1 Bylaws, as amended.

10.1 First Amendment, dated as of June 26, 2003, to the Credit Agreement by and between MRC Receivables Corporation, as borrower, and CFSC Capital Corp. VIII, as lender, dated as of December 20, 2000.

10.2 Loan and Security Agreement between Midland Funding NCC-1 Corporation and Patriot Capital Markets, LLC, dated as of July 25, 2003 (the “Secured Loan”).

10.3 Servicing Agreement relating to the Secured Loan, dated as of July 25, 2003.

EX-3

Exhibit 3.1

                                     BYLAWS
                                       OF
                           ENCORE CAPITAL GROUP, INC.
                       As amended through June 16, 2003

                 I. REFERENCES TO CERTAIN TERMS AND CONSTRUCTION

              1.01. Certain References. Any reference herein made to law will be
deemed to refer to the law of the State of Delaware, including any applicable
provision of Chapter 1 of Title 8 of the Delaware Code, or any successor
statutes, as from time to time amended and in effect (sometimes referred to
herein as the "Delaware General Corporation Law"). Any reference herein made to
the corporation's Certificate will be deemed to refer to its Certificate of
Incorporation and all amendments thereto as at any given time on file with the
Delaware Secretary of State (any reference herein to that office being intended
to include any successor to the incorporating and related functions being
performed by that office at the date of the initial adoption of these Bylaws).
Except as otherwise required by law, the term "stockholder" as used herein shall
mean one who is a holder of record of shares of the corporation.

              1.02. Seniority. The law and the Certificate (in that order of
precedence) will in all respects be considered senior and superior to these
Bylaws, with any inconsistency to be resolved in favor of the law and such
Certificate (in that order of precedence), and with these Bylaws to be deemed
automatically amended from time to time to eliminate any such inconsistency
which may then exist.

              1.03. Computation of Time. The time during which an act is
required to be done, including the time for the giving of any required notice
herein, shall be computed by excluding the first day or hour, as the case may
be, and including the last day or hour.

                                   II. OFFICES

              2.01. Principal Office. The principal office or place of business
of the corporation in the State of Delaware shall be the registered office of
the corporation in the State of Delaware. The corporation may change its
registered office from time to time in accordance with the relevant provisions
of the Delaware General Corporation Law. The corporation may have such other
offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the corporation may require from
time to time.

                                III. STOCKHOLDERS

              3.01. Annual Stockholder Meeting. The annual meeting of
stockholders shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall elect by a plurality vote
members of the Board of Directors and transact such other business as may
properly be brought before the meeting.

              3.02. Special Stockholder Meetings. Unless otherwise prescribed by
law or by the Certificate of Incorporation, special meetings of stockholders,
for any purpose or purposes, may be called by the Chairman of the Board or the
President, and shall be called by the President or the Secretary upon a written
request signed by at least three members of the Board of Directors, or of the
holders of at least a majority of the issued and outstanding shares of capital
stock entitled to vote thereat. Any such written request by stockholders shall
state the purpose or purposes of the proposed meeting, and business to be
transacted at any such meeting shall be confined to the purposes stated in the
notice thereof and to such additional matters as the chairman of the meeting may
rule to be germane to such purposes.


              3.03. Notice of Stockholders Meetings.

                           (a) Required Notice. Except as otherwise allowed or
required by law, written notice stating the place, day and hour of any annual or
special stockholders meeting shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder entitled to
vote at such meeting and to any other stockholder entitled to receive notice of
the meeting by law or the Certificate. Such notice may be given either
personally or by sending a copy thereof through the mail, by telegraph, by
private delivery service (including overnight courier), or by facsimile
transmission, charges prepaid, to each stockholder at his/her address as it
appears on the records of the corporation. If the notice is sent by mail, by
telegraph or by private delivery service, it shall be deemed to have been given
to the person entitled thereto when deposited in the United States mail or with
a telegraph office or private delivery service for transmission to such person.
If the notice is sent by facsimile transmission, it shall be deemed to have been
given upon transmission, if transmission occurs on a business day before 5:00
p.m. at the place of receipt, and upon the business day following transmission,
if transmission occurs after 5:00 p.m.

                           (b) Adjourned Meeting. If any stockholders meeting is
adjourned to a different date, time, or place, notice need not be given of the
new date, time, and place, if the new date, time, and place are announced at the
meeting at which the adjournment is taken. But if the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, then notice of the adjourned meeting shall be given
to each stockholder of record entitled to such notice pursuant to Section
3.03(a) above.

                           (c) Waiver of Notice. Any stockholder may waive
notice of a meeting (or any notice of any other action required to be given by
the Delaware General Corporation Law, the corporation's Certificate, or these
Bylaws), at any time before, during, or after the meeting or other action, by a
writing signed by the stockholder entitled to the notice. Each such waiver shall
be delivered to the corporation for inclusion in the minutes or filing with the
corporate
 records. Attendance of a stockholder at a meeting shall constitute a waiver of
notice of the meeting, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.

                           (d) Contents of Notice. The notice of each special
stockholders meeting shall include a description of the purpose or purposes for
which the meeting is called. Except as required by law or the corporation's
Certificate, the notice of an annual stockholders meeting need not include a
description of the purpose or purposes for which the meeting is called.

              3.04. Fixing of Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or in order to make a determination of stockholders for
any other proper purpose, the Board of Directors may fix a date as the record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors. In the case of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, such record date shall not be more than
sixty (60) days nor less than ten (10) days prior to the date of such meeting.
In the case of determining stockholders entitled to consent to corporate action
in writing without a meeting, the record date shall not be more than ten (10)
days after the date upon which the resolution fixing the record date is adopted
by the Board of Directors. In the case of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the record date shall be not more than sixty (60) days prior to such action. If
no record date is so fixed by the Board of Directors, the record date for the
determination of stockholders shall be as provided in the Delaware General
Corporation Law.

                  When a determination of stockholders entitled to notice of or
to vote at any meeting of stockholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date.

              3.05. Stockholder List. The officer who has charge of the stock
ledger of the corporation shall make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address and the
number of shares held by each. The stockholder list shall be available for
inspection by any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting at a place within the city where the meeting is to be held, which place
shall be specified in the meeting notice, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. Except as otherwise provided by
law, failure to comply with this section shall not affect the validity of any
action taken at the meeting.

                  3.06. Stockholder Quorum and Voting Requirements. Unless
otherwise provided in the Certificate or these Bylaws or required by law,

                           (a) a majority of the shares entitled to vote,
present in person or represented by proxy, shall constitute a quorum at a
meeting of stockholders;

                           (b) in all matters other than the election of
directors, the affirmative vote of the majority of shares voting for or against
the subject matter shall be the act of the stockholders;

                           (c) directors shall be elected by a plurality of the
votes cast at the meeting; and

                           (d) where a separate vote by a class or classes is
required, a majority of the outstanding shares of such class or classes, present
in person or represented by proxy, shall constitute a quorum entitled to take
action with respect to that vote on that matter and the affirmative vote of the
majority of shares of such class or classes present in person or represented by
proxy at the meeting shall be the act of such class.

                  Except as provided below, voting will be by ballot on any
question as to which a ballot vote is demanded prior to the time the voting
begins by any person entitled to vote on such question; otherwise, a voice vote
will suffice. Unless otherwise provided in the Certificate, all elections of
directors will be by written ballot. No ballot or change of vote will be
accepted after the polls have been declared closed following the ending of the
announced time for voting.

              3.07. Proxies. At all meetings of stockholders, a stockholder may
vote in person or by proxy duly executed in writing by the stockholder or the
stockholder's duly authorized attorney-in-fact. Such proxy shall comply with law
and shall be filed with the Secretary of the corporation or other person
authorized to tabulate votes before or at the time of the meeting. No proxy
shall be valid after three (3) years from the date of its execution unless
otherwise provided in the proxy. The burden of proving the validity of any
undated, irrevocable, or otherwise contested proxy at a meeting of the
stockholders will rest with the person seeking to exercise the same. A facsimile
appearing to have been transmitted by a stockholder or by such stockholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.

              3.08. Voting of Shares. Unless otherwise provided in the
Certificate or the Delaware General Corporation Law, each outstanding share
entitled to vote shall be entitled to one (1) vote upon each matter submitted to
a vote at a meeting of stockholders.

              3.09. Election Inspectors. The Board of Directors, in advance of
any meeting of the stockholders, may appoint an election inspector or inspectors
to act at such meeting (and at any adjournment thereof). If an election
inspector or inspectors are not so appointed, the chairman of the meeting may,
or upon request of any person entitled to vote at the meeting will, make such
appointment. If any person appointed as an inspector fails to appear or to act,
a substitute may be appointed by the chairman of the meeting. If appointed, the
election inspector or inspectors (acting through a majority of them if there be
more than one) will determine the number of shares outstanding, the
authenticity, validity, and effect of proxies, the credentials of persons
purporting to be stockholders or persons named or referred to in proxies, and
the number of shares represented at the meeting in person and by proxy; will
receive and count votes, ballots, and consents and announce the results thereof;
will hear and determine all challenges and questions pertaining to proxies and
voting; and, in general, will perform such acts as may be proper to conduct
elections and voting with complete fairness to all stockholders. No such
election inspector need be a stockholder of the corporation.

              3.10. Organization and Conduct of Meetings. Each meeting of the
stockholders will be called to order and thereafter chaired by the Chairman of
the Board of Directors if there is one, or, if not, or if the Chairman of the
Board is absent or so requests, then by the President, or if both the Chairman
of the Board and the President are unavailable, then by such other officer of
the corporation or such stockholder as may be appointed by the Board of
Directors. The corporation's Secretary or in his or her absence, an Assistant
Secretary will act as secretary of each meeting of the stockholders. If neither
the Secretary nor an Assistant Secretary is in attendance, the chairman of the
meeting may appoint any person (whether a stockholder or not) to act as
secretary for the meeting. After calling a meeting to order, the chairman
thereof may require the registration of all stockholders intending to vote in
person and the filing of all proxies with the election inspector or inspectors,
if one or more have been appointed (or, if not, with the secretary of the
meeting). After the announced time for such filing of proxies has ended, no
further proxies or changes, substitutions, or revocations of proxies will be
accepted. If directors are to be elected, a tabulation of the proxies so filed
will, if any person entitled to vote in such election so requests, be announced
at the meeting (or adjournment thereof) prior to the closing of the election
polls. Absent a showing of bad faith on his or her part, the chairman of a
meeting will, among other things, have absolute authority to fix the period of
time allowed for the registration of stockholders and the filing of proxies, to
determine the order of business to be conducted at such meeting, and to
establish reasonable rules for expediting the business of the meeting and
preserving the orderly conduct thereof (including any informal, or question and
answer portions thereof).

              3.11. Stockholder Approval or Ratification. The Board of Directors
may submit any contract or act for approval or ratification of the stockholders
at a duly constituted meeting of the stockholders. Except as otherwise required
by law, if any contract or act so submitted is approved or ratified by a
majority of the votes cast thereon at such meeting, the same will be valid and
as binding upon the corporation and all of its stockholders as it would be if it
were the act of its stockholders.

              3.12. Informalities and Irregularities. All informalities or
irregularities in any call or notice of a meeting of the stockholders or in the
areas of credentials, proxies, quorums, voting, and similar matters, will be
deemed waived if no objection is made at the meeting.

              3.13. Stockholder Action by Written Consent. Any action required
or permitted to be taken at a meeting of the stockholders may be taken without a
meeting if one (1) or more consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Each consent shall bear the date of signature of each stockholder who
signs the consent. The consents shall be delivered to the corporation in
accordance with law for inclusion in the minutes or filing with the corporate
record. Prompt notice of the taking of corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented to the action.

                  3.14. Nomination of Directors. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors of the corporation. Nominations of persons for election to the Board
of Directors may be made at any annual meeting of stockholders (a) by or at the
direction of the Board of Directors (or any duly authorized commit tee thereof)
or (b) by any stockholder of the corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this Section 3.14 and on
the record date for the determination of stockholders entitled to vote at such
annual meeting and (ii) who complies with the notice procedures set forth in
this Section 3.14.

         In addition to any other applicable requirements, for a nomination to
be made by a stock holder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the corporation, as
prescribed below.

         No person shall be elected to the Board of Directors of this
corporation at an annual meeting of the stockholders, or at a special meeting
called for that purpose, unless, with respect to a person nominated by a
stockholder of the corporation, a written notice of nomination of such person by
the stockholder shall have been received by the Secretary of the corporation not
earlier than one hundred and twenty (120) days and not later than ninety (90)
days prior to the anniversary date of the immediately preceding annual meeting
if an annual meeting, or seven (7) days after notice of the meeting is mailed to
stockholders if a special meeting. Each such notice shall set forth: (a) the
name and address of the stockholder who intends to make the nomination and of
the person or persons to be nominated; (b) a representation that the stockholder
is a holder of record of stock of the corporation entitled to vote at such
meeting (including the number of shares of stock of the corporation owned
beneficially or of record by such stockholder and the nominee or nominees) and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements or
understandings between the stockholders and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board of Directors; and (e) the consent of each nominee
to serve as a director of the corporation if so elected.

                  No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in this
Section 3.14. If the Chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the nomination was defective and such defective nomination
shall be disregarded.

                  Notwithstanding compliance with the foregoing provisions, the
Board of Directors shall not be obligated to include information as to any
stockholder nominee for director in any proxy statement or other communication
sent to stockholders.

                  3.15. Business at Annual Meetings. No business may be
transacted at an annual meeting of stockholders, other than business that is
either (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the annual meeting by
or at the direction of the Board of Directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the annual meeting by any
stockholder of the corporation (i) who is a stock holder of record on the date
of the giving of the notice provided for in this Section 3.15 and on the record
date for the determination of stockholders entitled to vote at such annual
meeting and (ii) who complies with the notice procedures set forth in this
Section 3.15.

                  In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the corporation.

                  To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company not earlier than one hundred and twenty (120) days and not later than
ninety (90) days prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the event that the
annual meeting is called for a date that is not within thirty (30) days before
or after such anniversary date, notice by the stockholder in order to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs.

                  To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the
corporation that are owned beneficially or of record by such stockholder, (iv) a
description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business

and (v) a representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.

                  No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 3.15, provided, however, that,
once business has been properly brought before the annual meeting in accordance
with such procedures, nothing in this Section 3.15 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an annual
meeting determines that business was not properly brought before the annual
meeting in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the business was not properly brought before the meeting and
such business shall not be transacted.

                             IV. BOARD OF DIRECTORS

              4.01. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the Board of Directors.

              4.02. Number, Tenure, and Qualification of Directors. Unless
otherwise provided in the Certificate, the authorized number of directors shall
be not less than one nor more than nine. The number of directors in office from
time to time shall be within the limits specified above, as prescribed initially
in the Certificate, or by the incorporator or incorporators of the corporation,
or by the initial director or directors of the corporation and thereafter as
prescribed from time to time by resolution adopted by either the stockholders or
by the Board of Directors upon the affirmative vote of a majority of the
directors then in office. The Board of Directors, upon the affirmative vote of a
majority of the directors then in office, shall have the power to increase or
decrease its size within the aforesaid limits and to fill any vacancies that may
occur in its membership, whether resulting from an increase in the size of the
Board or otherwise. Each director shall hold office until his or her successor
shall have been duly elected and qualified or until his or her earlier
resignation or removal. Unless required by the Certificate, directors do not
need to be residents of the State of Delaware or stockholders of the
corporation.

              4.03. Regular Meetings of the Board of Directors. A regular annual
meeting of the Board of Directors is to be held as soon as practicable after the
adjournment of each annual meeting of the stockholders, either at the place of
the stockholders meeting or at such other place as the directors elected at the
stockholders meeting may have been informed of at or prior to the time of their
election. Additional regular meetings may be held at regular intervals at such
places and at such times as the Board of Directors may determine.

              4.04. Special Meetings of the Board of Directors. Special meetings
of the Board of Directors may be held whenever and wherever called for by the
Chairman of the Board, the President, or the number of directors that would be
required to constitute a quorum.

              4.05. Notice of, and Waiver of Notice for, Directors Meetings. No
notice need be given of regular meetings of the Board of Directors. Notice of
the time and place (but not necessarily the purpose or all of the purposes) of
any special meeting will be given to each director in person or by telephone, or
via mail or facsimile transmission or electronic transmission (which shall
include electronic e-mail via the internet). Notice to any director of any such
special meeting will be deemed given sufficiently in advance when (i), if given
by mail, the same is deposited in the United States mail at least four (4) days
before the meeting date, with postage thereon prepaid, (ii), if given by
facsimile or electronic transmission, the same is transmitted at least 24 hours
prior to the convening of the meeting, or (iii), if personally delivered
(including by overnight courier) or given by telephone, the same is handed, or
the substance thereof is communicated over the telephone to the director or to
an adult member of his or her office staff or household, at least 24 hours prior
to the convening of the meeting. Any director may waive notice of any meeting
and any adjournment thereof at any time before, during, or after it is held, as
provided by law. Except as provided in the next sentence below, the waiver must
be (a) in writing, signed by the director entitled to the notice, and filed with
the minutes or corporate records, or (b) by electronic transmission identifying
the party waiving notice, and printed out in paper form and filed with the
minutes or corporate records. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.

              4.06. Director Quorum. A majority of the total number of directors
then in office shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, unless the Certificate requires a greater
number.

              4.07. Directors, Manner of Acting.

                           (a) The affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors unless the Certificate or these Bylaws require a greater
percentage and except as otherwise required by law.

                           (b) Unless the Certificate provides otherwise, any or
all directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, conference telephone or similar communications
equipment by means of which all persons participating in the meeting may hear
each other, in which case any required notice of such meeting may generally
describe the arrangements (rather than or in addition to the place) for the
holding thereof. A director participating in a meeting by this means is deemed
to be present in person at the meeting.

                           (c) A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless: (1) the
director objects at the beginning of the meeting (or promptly upon his/her
arrival) to holding it or transacting business at the meeting; or (2) his/her
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (3) he/she delivers written notice of his/her dissent or abstention
to the presiding officer of the meeting before its adjournment or to the
corporation before 5:00 p.m. on the next business day after the meeting. The
right of dissent or abstention is not available to a director who votes in favor
of the action taken.

              4.08. Director Action Without a Meeting. Unless the Certificate
provides otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if the action is taken by
unanimous written consent of the Board of Directors as evidenced by one (1) or
more written consents describing the action taken, signed by each director and
filed with the minutes or proceedings of the Board of Directors.

              4.09. Removal of Directors by Stockholders. Except as limited by
law, to the extent provided in the Certificate, any director or the entire Board
of Directors may be removed, with or without cause, by the holders of two-thirds
of the shares entitled to vote at an election of directors.

              4.10. Board of Director Vacancies. Unless the Certificates
provides otherwise and except as otherwise provided by law, any vacancy or newly
created directorship may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director.

              4.11. Director Compensation. Unless otherwise provided in the
Certificate, by resolution of the Board of Directors, each director may be paid
his/her expenses, if any, of attendance at each meeting of the Board of
Directors or any committee thereof, and may be paid a stated salary as director
or a fixed sum for attendance at each meeting of the Board of Directors or any
committee thereof, or both. No such payment shall preclude any director from
serving the corporation in any capacity and receiving compensation therefor.

              4.12. Director Committees.

                           (a) Creation of Committees. Unless the Certificate
provides otherwise, the Board of Directors may create one (1) or more committees
and appoint members of the Board of Directors to serve on them. Each committee
shall have one (1) or more members, who serve at the pleasure of the Board of
Directors.

                           (b) Selection of Members. The creation of a committee
and appointment of members to it shall be approved by the greater of (1)
two-thirds of all the directors in office when the action is taken or (2) the
number of directors required by the Certificate to take such action. The Board
of Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of any member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he/she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.

                           (c) Required Procedures. Sections 4.03 through 4.08
of this Article IV, which govern meetings, action without meetings, notice and
waiver of notice, and quorum and voting requirements of the Board of Directors,
apply to committees and their members.

                           (d) Authority. Unless limited by the Certificate and
except to the extent limited by law, each committee may exercise those aspects
of the authority of the Board of Directors which the Board of Directors confers
upon such committee in the resolution creating the committee.

              4.13. Director Resignations. Any director or committee member may
resign from his or her office at any time by written notice delivered to the
corporation as required by law. Any such resignation will be effective upon its
receipt unless some later time is therein fixed, and then from that time. The
acceptance of a resignation will not be required to make it effective.

              4.14. Interested Directors. No contract or transaction between the
corporation and one or more of its directors or officers, or between the
corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because such director's vote
is counted for such purpose if (i) the material facts as to such director's
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
such director's relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.

                                   V. OFFICERS

              5.01. Number of Officers. The officers of the corporation shall be
a President, a Secretary, and a Treasurer, each of whom shall be appointed by
the Board of Directors. Such other officers and assistant officers as may be
deemed necessary, including any Vice Presidents, may be appointed by the Board
of Directors. If specifically authorized by the Board of Directors, an officer
may appoint one (1) or more other officers or assistant officers. The same
individual may simultaneously hold more than one (1) office in the corporation.

              5.02. Appointment and Term of Office. The officers of the
corporation shall be appointed by the Board of Directors for a term as
determined by the Board of Directors. The designation of a specified term grants
to the officer no contract rights, and the Board of Directors can remove the
officer at any time prior to the termination of such term. If no term is
specified, an officer of the corporation shall hold office until he or she
resigns, dies, or until he or she is removed in the manner provided by law or in
Section 5.03 of this Article V. The regular election or appointment of officers
will take place at each annual meeting of the Board of Directors, but elections
of officers may be held at any other meeting of the Board.

              5.03. Resignation and Removal of Officers. An officer may resign
at any time by delivering written notice to the corporation. A resignation is
effective when the notice is delivered unless the notice specifies a later
effective date or event. Any officer may be removed by the Board of Directors at
any time, with or without cause. Such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Appointment of an officer
shall not of itself create contract rights.

              5.04. Duties of Officers. Officers of the corporation shall have
authority to perform such duties as may be prescribed from time to time by law,
in these Bylaws, or by the Board of Directors, the President, or the superior
officer of any such officer. Each officer of the corporation (in the order
designated herein or by the Board) will be vested with all of the powers and
charged with all of the duties of his or her superior officer in the event of
such superior officer's absence, death, or disability.

              5.05. Bonds and Other Requirements. The Board of Directors may
require any officer to give bond to the corporation (with sufficient surety and
conditioned for the faithful performance of the duties of his or her office) and
to comply with such other conditions as may from time to time be required of him
or her by the Board of Directors.

              5.06. President. Unless otherwise specified by resolution of the
Board of Directors, the President shall be the principal executive officer of
the corporation and, subject to the control of the Board of Directors, shall
supervise and control all of the business and affairs of the corporation and the
performance by all of its other officers of their respective duties and in
general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
The President shall, when present, and in the absence of a Chairman of the
Board, preside at all meetings of the stockholders and of the Board of
Directors. The President will be a proper officer to sign on behalf of the
corporation any deed, bill of sale, assignment, option, mortgage, pledge, note,
bond, evidence of indebtedness, application, consent (to service of process or
otherwise), agreement, indenture, contract, or other instrument, except in each
such case where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these Bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or executed.
The President may represent the corporation at any meeting of the stockholders
or members of any other corporation, association, partnership, joint venture, or
other entity in which the corporation then holds shares of capital stock or has
an interest, and may vote such shares of capital stock or other interest in
person or by proxy appointed by him or her, provided that the Board of Directors
may from time to time confer the foregoing authority upon any other person or
persons.

              5.07. The Vice-President. If appointed, in the absence of the
President or in the event of his/her death or disability, the Vice-President (or
in the event there be more than one Vice-President, the Vice-Presidents in the
order designated at the time of their election, or in the absence of any such
designation, then in the order of their appointment) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. If there is no Vice-President or in
the event of the death or disability of all Vice-Presidents, then the Treasurer
shall perform such duties of the President in the event of his or her absence,
death, or disability. Each Vice-President will be a proper officer to sign on
behalf of the corporation any deed, bill of sale, assignment, option, mortgage,
pledge, note, bond, evidence of indebtedness, application, consent (to service
of process or otherwise), agreement, indenture, contract, or other instrument,
except in each such case where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed. Any Vice-President may represent the corporation at any
meeting of the stockholders or members of any other corporation, association,
partnership, joint venture, or other entity in which the corporation then holds
shares of capital stock or has an interest, and may vote such shares of capital
stock or other interest in person or by proxy appointed by him or her, provided
that the Board of Directors may from time to time confer the foregoing authority
upon any other person or persons. A Vice-President shall perform such other
duties as from time to time may be assigned to him/her by the President or by
the Board of Directors.

              5.08. The Secretary. The Secretary shall: (a) keep the minutes of
the proceedings of the stockholders and of the Board of Directors and any
committee of the Board of Directors and all unanimous written consents of the
stockholders, Board of Directors, and any committee of the Board of Directors in
one (1) or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (c) be custodian of the corporate records and of any seal of the
corporation; (d) when requested or required, authenticate any records of the
corporation; (e) keep a register of the address of each stockholder which shall
be furnished to the Secretary by such stockholder; and (f) in general perform
all duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him/her by the President or by the Board of
Directors. Except as may otherwise be specifically provided in a resolution of
the Board of Directors, the Secretary will be a proper officer to take charge of
the corporation's stock transfer books and to compile the voting record pursuant
to Section 3.05 above, and to impress the corporation's seal, if any, on any
instrument signed by the President, any Vice President, or any other duly
authorized person, and to attest to the same. In the absence of the Secretary, a
secretary pro tempore may be chosen by the directors or stockholders as
appropriate to perform the duties of the Secretary.

              5.09. The Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such bank, trust companies, or other depositories as shall be
selected by the Board of Directors or any proper officer; (c) keep full and
accurate accounts of receipts and disbursements in books and records of the
corporation; and (d) in general perform all of the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to
him/her by the President or by the Board of Directors. The Treasurer will render
to the President, the directors, and the stockholders at proper times an account
of all his or her transactions as Treasurer and of the financial condition of
the corporation. The Treasurer shall be responsible for preparing and filing
such financial reports, financial statements, and returns as may be required by
law.

              5.10. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries and the Assistant Treasurers, when authorized by the Board
of Directors, may sign with the President or a Vice-President certificates for
shares of the corporation, the issuance of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties as shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors.

     5.11. Chairman of the Board. The Board of Directors may appoint a Chairman,
who shall not be an executive  officer of the  corporation  unless  specifically
designated as the chief  executive  officer of the  corporation  by the Board of
Directors. If appointed,  the Chairman will preside at all meetings of the Board
of  Directors  and be vested  with such other  powers and duties as the Board of
Directors may from time to time delegate to him or her.

              5.12. Salaries. The salaries of the officers of the corporation
may be fixed from time to time by the Board of Directors or (except as to the
President's own) left to the discretion of the President. No officer will be
prevented from receiving a salary by reason of the fact that he or she is also a
director of the corporation.

              5.13. Additional Appointments. In addition to the officers
contemplated in this Article V, the Board of Directors may appoint other agents
of the corporation with such authority to perform such duties as may be
prescribed from time to time by the Board of Directors.

                 VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER

              6.01. Certificates for Shares.

                           (a) Content. Certificates representing shares of the
corporation shall, at a minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Delaware, the
name of the person to whom issued, and the number and class of shares and the
designation of the series, if any, the certificate represents. Such certificates
shall be signed (either manually or by facsimile to the extent allowable by law)
by any of the Chairman of the Board, the President, or any Vice-President and by
the Secretary or any assistant secretary or the Treasurer or any assistant
treasurer of the corporation, and may be sealed with a corporate seal or a
facsimile thereof. Each certificate for shares shall be consecutively numbered
or otherwise identified and will exhibit such information as may be required by
law. If a supply of unissued certificates bearing the facsimile signature of a
person remains when that person ceases to hold the office of the corporation
indicated on such certificates or ceases to be the transfer agent or registrar
of the corporation, they may still be issued by the corporation and
countersigned, registered, issued, and delivered by the corporation's transfer
agent and/or registrar thereafter, as though such person had continued to hold
the office indicated on such certificate.

                           (b) Legend as to Class or Series. If the corporation
is authorized to issue different classes of shares or different series within a
class, the powers, designations, preferences, and relative, participating,
optional, or other special rights applicable to each class or series and the
qualifications, limitations, or restrictions of such preference and/or rights
shall be set forth in full or summarized on the front or back of each
certificate as required by law. Alternatively, each certificate may state on its
front or back that the corporation will furnish a stockholder this information
on request and without charge.

                           (c) Stockholder List. The name and address of the
person to whom shares are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation.

                           (d) Lost Certificates. In the event of the loss,
theft, or destruction of any certificate representing shares of the corporation
or of any predecessor corporation, the corporation may issue (or, in the case of
any such shares as to which a transfer agent and/or registrar have been
appointed, may direct such transfer agent and/or registrar to countersign,
register, and issue) a new certificate, and cause the same to be delivered to
the registered owner of the shares represented thereby; provided that such owner
shall have submitted such evidence showing the circumstances of the alleged
loss, theft, or destruction, and his, her, or its ownership of the certificate,
as the corporation considers satisfactory, together with any other facts that
the corporation considers pertinent; and further provided that, if so required
by the corporation, the owner shall provide a bond or other indemnity in form
and amount satisfactory to the corporation (and to its transfer agent and/or
registrar, if applicable).

              6.02. Registration of the Transfer of Shares. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the owner, the corporation will be
entitled to treat the registered owner of any share of the capital stock of the
corporation as the absolute owner thereof and, accordingly, will not be bound to
recognize any beneficial, equitable, or other claim to, or interest in, such
share on the part of any other person, whether or not it has notice thereof,
except as may expressly be provided by applicable law, including as may be
contemplated by Title 6, Subtitle I, Article 8 of the Delaware code (or any
comparable successor statutes), as in effect from time to time.

              6.03. Shares Without Certificates. The Board of Directors may
authorize the issuance of uncertificated shares by the corporation and may
prescribe procedures for the issuance and registration of transfer thereof and
with respect to such other matters as the Board of Directors shall deem
necessary or appropriate.

                               VII. DISTRIBUTIONS

              7.01. Distributions. Subject to such restrictions or requirements
as may be imposed by applicable law or the corporation's Certificate or as may
otherwise be binding upon the corporation, the Board of Directors may from time
to time declare, and the corporation may pay or make, dividends or other
distributions to its stockholders.

                              VIII. CORPORATE SEAL

              8.01. Corporate Seal. The Board of Directors may provide for a
corporate seal of the corporation that will have inscribed thereon any
designation including the name of the corporation, Delaware as the state of
incorporation, the year of incorporation, and the words "Corporate Seal."

                                 IX. AMENDMENTS

              9.01. Amendments. If the Certificate so provides, the
corporation's Board of Directors may amend or repeal the corporation's Bylaws
unless the Certificate or the Delaware General Corporation Law reserve any
particular exercise of this power exclusively to the stockholders in whole or
part; provided, that any amendment of the corporation's Bylaws that revises the
requirement in Section 4.02 and/or Section 4.12 for an affirmative vote of at
least two-thirds of the corporation's directors then in office shall require the
affirmative vote of at least two-thirds of the corporation's directors then in
office. The corporation's stockholders may amend or repeal the corporation's
Bylaws by the affirmative vote of the holders of at least two-thirds of the
issued and outstanding capital stock of the corporation entitled to vote
thereon, even though the Bylaws may also be amended or repealed by its Board of
Directors.

EX-10

                                                                    Exhibit 10.1
                      FIRST AMENDMENT TO CREDIT AGREEMENT

     THIS FIRST  AMENDMENT TO CREDIT  AGREEMENT is made as of June 26, 2003,  by
and  between  MRC  RECEIVABLES   CORPORATION,   a  Delaware   corporation   (the
“Borrower”), and CFSC CAPITAL CORP. VIII, a Delaware corporation (the “Lender”).

                                    Recitals

     WHEREAS,  the Borrower and the Lender have entered into a Credit  Agreement
dated as of December  20, 2000 (the “Credit  Agreement”),  pursuant to which the
Lender agreed to consider making  financing  available to the Borrower from time
to time to finance the  Borrower’s  purchase of pools of charged off credit card
accounts and other delinquent or deficiency consumer obligations.

     WHEREAS,  the Borrower has requested  that the Lender enter into this First
Amendment to Credit Agreement (the“First Amendment”) to (i) permit the Borrower
to withhold from Asset Pool Proceeds (as defined in the Credit  Agreement) prior
to the deposit of Asset Pool Proceeds in the Collateral  Account all amounts due
and  payable  to it  pursuant  to  Sections  2.8(f),  (j) and (l) of the  Credit
Agreement,  and (ii) permit the Servicer (as defined in the Credit Agreement) to
withhold  its  Servicing  Fees (as  defined in the Credit  Agreement)  and Legal
Outsourcing  Management  Fees (as defined in that  certain  Second  Amendment to
Servicing Agreement among the Servicer,  the Borrower and the Lender dated as of
the date hereof (the “Servicing  Amendment”))  from Asset Pool Proceeds prior to
the deposit of Asset Pool Proceeds in the Collateral Account.

WHEREAS,  the Lender has agreed to permit such netting of amounts payable to the
Borrower and of Servicing Fees and Legal Outsourcing Management Fees pursuant to
the terms and subject to the  conditions  set forth in the Credit  Agreement and
this First Amendment and the Servicing Amendment.

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
and agreements  hereinafter set forth,  the Lender and the Borrower hereby agree
as follows:

     1.  Definitions.  The terms  defined in the preamble  hereto shall have the
meanings  therein  assigned to them,  and all other  defined  terms used in this
First  Amendment  shall  have  the  meanings  assigned  to  them  in the  Credit
Agreement,  unless  otherwise  specified  herein.  Section  1.1  of  the  Credit
Amendment shall be amended by adding the following defined term:
     “Borrower  Payments” shall mean all sums due and  payable to the  Borrower
pursuant to Section 2.8(f), (j) and (l).
     “Legal  Outsourcing  Management Fees” shall have the meaning  designated in
the Servicing Amendment.

    1        

     2. Netting of Servicing Fees and Legal Outsourcing Management Fees. So long
as no Default,  Event of Default,  Asset Pool Shortfall or Termination Event has
occurred,  until the Lender delivers to the Servicer written notice  withdrawing
the consent granted  pursuant to the Servicing  Amendment,  no Servicing Fees or
Legal  Outsourcing  Management Fees shall be payable to the Servicer pursuant to
Section 2.8 of the Credit Agreement but shall instead be payable to the Servicer
in accordance with the Servicing Amendment.

     3. Netting of Borrower Payments.  So long as no Default,  Event of Default,
Asset  Pool  Shortfall  or  Termination  Event has  occurred,  until the  Lender
delivers to the Borrower written notice  withdrawing the consent hereby granted,
the  Borrower  may,  with respect to a  particular  Asset Pool and  otherwise in
accordance  with the terms  and  provisions  of the  Credit  Agreement,  without
further  authorization  from the Lender  and prior to the  deposit of Asset Pool
Proceeds in the Collateral Account,  pay directly to itself (and the Servicer is
hereby  authorized to make such  disbursement)  from the  Servicer’s  Collection
Account all  Borrower  Payments  earned with respect to that Asset Pool that are
due and payable to the  Borrower;  provided,  however,  that Asset Pool Proceeds
collected  with  respect  to a  particular  Asset Pool shall be used only to pay
Borrower  Payments  earned with respect to that Asset Pool and shall not be used
to pay Borrower Payments earned with respect to any other Asset Pool.

     4. Accounting for Borrower Payments.  The Borrower shall cause the Servicer
to provide to the  Lender on each  Distribution  Date,  for each Asset  Pool,  a
separate detailed accounting of all Borrower Payments actually incurred and paid
to the  Borrower  for  the  immediately  preceding  Distribution  Period,  which
accounting  shall be certified by the signature of a duly authorized  officer of
each of the Borrower and the Servicer. In the event that the amounts paid exceed
or fall short of the Borrower  Payments actually due and payable pursuant to the
Credit  Agreement  for  such  preceding   Distribution  Period,  an  appropriate
adjustment  shall be made by  disbursements  approved  in  writing by the Lender
pursuant to Section 2.8 of the Credit Agreement.

     5.  Withdrawal  of Consent.  The Lender may  withdraw  its consent  granted
pursuant to this First  Amendment  for any reason or for no reason,  at its sole
discretion. Such consent shall be deemed withdrawn immediately upon the delivery
of written notice  thereof by telecopier as provided  pursuant to Section 7.2 of
the Servicing  Agreement or Section 9.4 of the Credit Agreement,  as applicable.
From and after delivery of such a withdrawal  notice,  the Servicing Fees, Legal
Outsourcing  Management Fees and Borrower Payments shall be due and payable only
pursuant to a  Distribution  Request duly  approved by the Lender in  accordance
with Section 2.8 of the Credit Agreement,  it being hereby agreed that all Legal
Outsourcing  Management  Fees shall then be paid  pursuant to Section 2.8 of the
Credit Agreement pari passu with all Servicing Fees.

    2       

     6.  Representations  and Warranties;  No Default;  Authority.  The Borrower
represents  and  warrants  to the  Lender  that all of the  representations  and
warranties  of the Borrower in the Credit  Agreement  are true as of the date of
this First  Amendment  and that no Default has  occurred  pursuant to the Credit
Agreement or any Loan  Document.  The Borrower has full  authority to enter into
this  First  Amendment.  This First  Amendment  will not  violate  the terms and
provisions of any other  contract to which the Borrower or any of its Affiliated
Parties is a party.

     7. No Waiver;  Effect of Amendment.  The terms and provisions of the Credit
Agreement,  as amended  hereby,  shall remain in full force and effect,  and the
parties hereto agree that this First  Amendment shall not be and is not intended
to  constitute  a  waiver  of any of the  terms  and  provisions  of the  Credit
Agreement.

     8. Governing Law. This First  Amendment  shall be governed by and construed
in accordance with the laws of the State of Minnesota.

     9.  Counterpart  Signatures.  This  First  Amendment  may  be  executed  in
counterpart  originals,  all of  which,  when  combined,  shall  constitute  one
document binding on all of the parties hereto.

     IN WITNESS  WHEREOF,  the parties hereto have executed this First Amendment
effective as of the date first above written.


MRC RECEIVABLES CORPORATION (Borrower)


By:          /s/ Carl C. Gregory, III
Name:     Carl C. Gregory, III
Title:       President & CEO



CFSC CAPITAL CORP. VIII  (Lender)


By:      /s/ Jeffrey Parker
Name: Jeffrey Parker
Title:  President




             [Signature Page to First Amendment to Credit Agreement]

    3        

EX-10

                                                                    Exhibit 10.2
                                                                  EXECUTION COPY


                           LOAN AND SECURITY AGREEMENT

     This LOAN AND SECURITY AGREEMENT (“this Agreement”) is made as of
July 25, 2003, by and between Patriot Capital  Markets,  LLC, a Delaware limited
liability company  (“Lender”),  with an address at 28 Thorndal Circle,
Darien, CT 06820, and Midland Funding NCC-1 Corporation,  a Delaware corporation
(the “Borrower”),  with an address at 5775 Roscoe Court, San Diego, CA
92123.  The Lender  and the  Borrower  (sometimes  singularly  referred  to as a
“Party”  and collectively referred to as “Parties”) agree as
follows:

                                    RECITALS

     A. The Borrower has entered into certain Purchase  Agreements listed on the
attached Exhibit B (collectively, the “Purchase Agreements”), pursuant
to which the  Borrower has  purchased  from the selling  financial  institutions
identified on Exhibit B  (collectively,  the  “Sellers”)  the pools of
Receivables listed on the attached Exhibit C (collectively,  the “Purchased
Receivables”).

     B. The Borrower desires to pledge the Purchased Receivables as security for
the Loan (the  “Loan”)  made by the  Lender of the Loan  Amount to the
Borrower,  subject to the terms and conditions  herein set forth, and the Lender
has agreed to loan the Loan Amount to the Borrower.

     NOW,  THEREFORE,  in  consideration  of the premises and agreements  herein
contained, the Lender and the Borrower hereby agree as follows:

                                   DEFINITIONS

     Certain  capitalized terms used in this Agreement shall have the respective
meanings  assigned to them in Appendix A attached hereto.  All references herein
to “the Agreement” or “this Agreement”  are to this Loan and
Security  Agreement  as it may be amended  and  supplemented  from time to time,
including the Exhibits hereto.

     SECTION 1. THE LOAN.

     1.1 The Loan Amount.  Subject to satisfaction  of the conditions  precedent
specified in Article 3 of this  Agreement,  on the Closing Date, the Lender will
loan $1,775,278.65 (the “Loan Amount”) to the Borrower.

     1.2 Disbursement Procedures. On the terms and subject to the conditions set
forth herein,  unless the parties agree otherwise in writing,  the Lender shall,
on the Closing  Date,  remit  $1,760,278.65,  which  amount is equal to the Loan
Amount less $15,000 in legal expenses  incurred by the Lender in connection with
the making of the Loan, by wire transfer of immediately  available federal funds
to the Borrower’s designated account.

    1        

     1.3 The  Note.  The  Loan to the  Borrower  in the  Loan  Amount  shall  be
evidenced by, and recorded on, a Note  substantially in the form attached hereto
as Exhibit A. The Lender is hereby authorized to make the appropriate  notations
on the schedule  annexed to the Note for  purposes of recording  the Loan to the
Borrower in the Loan Amount or repayment thereof; provided, however, the failure
of the  Lender to make,  or any error in  making,  any such  notation  shall not
limit, expand or otherwise affect the obligations of the Borrower hereunder.

     1.4 Interest.  The Note shall bear  interest on the Principal  Balance from
the Closing Date at the  Borrowing  Rate.  Interest  shall accrue and be payable
from and after the Closing  Date on the basis of actual days  elapsed and a year
of 365 or 366 days, as applicable and shall be paid as specified in Section 2.2.

     1.5 Principal Balance. The Principal Balance of the Note shall be repaid on
each  Remittance  Date as specified in Section 2.2.  Except as set forth in this
Section  1.5,  the Note may not be paid or prepaid  from any other  funds on any
date prior to the  Maturity  Date  without the consent of the Lender;  provided,
however,  that the Note may be paid or prepaid upon the  occurrence of either of
the following  events:  (i) the Principal Balance shall have been reduced to 10%
or less of the Loan Amount;  or (ii) the Lender  shall have  declared the unpaid
Principal  Balance and accrued  interest on the Note to be  immediately  due and
payable  following the  occurrence of an Event of Default as provided in Section
7.2 of this Agreement.

SECTION 2.        APPLICATION OF PROCEEDS.

     2.1 Servicer and Servicing Agreement.  Pursuant to the Servicing Agreement,
Midland Credit  Management,  Inc. has agreed to act as the Servicer with respect
to the Purchased Receivables. As a condition of this Agreement, the Borrower has
assigned for security all of its rights under the Servicing Agreement to Lender.
The  Servicer’s  rights  and  obligations  are set  forth in the  Servicing
Agreement.

     2.2 Application of Proceeds. On each Remittance Date until such time as all
Obligations have been satisfied, or until the Servicer and the Lender shall have
determined  (which  determination  shall  be made in a  commercially  reasonable
manner) that the Receivables  have been exhausted,  the Borrower shall cause the
Servicer to remit to the Lender from the Remittance  Account all  Collections in
respect of the related Remittance Period and all investment  earnings on amounts
on deposit in the  Remittance  Account.  On each Monthly Report Date, the Lender
shall apply all funds received by it in respect of the collection month to which
such Monthly  Report Date  relates,  as set forth on the Monthly  Reconciliation
Report  (“Available  Funds”),  in the  following  order,  priority and
amounts:

          first,  to the  Lender,  reimbursement  of  any  assessed  and  unpaid
     Obligations other than the Principal Balance and interest thereon;

          second,  to the  Lender,  from  Available  Funds  remaining  after the
     application  in  clause  first,  interest  at  the  Borrowing  Rate  on the
     Principal Balance from and including the preceding Monthly Report Date (or,
     in the case of the initial  Monthly  Report Date, the Closing Date) to, but
     not including, the subject Monthly Report Date;

    2        

          third,  to the  Lender,  from  Available  Funds  remaining  after  the
     applications  in clauses  first and second,  principal  in reduction of the
     Principal Balance, until the Principal Balance is reduced to zero; and

          fourth, any remaining Available Funds to the Borrower.

     SECTION 3. CONDITIONS PRECEDENT.

     3.1 The Loan.  The  funding by the Lender of the Loan Amount  hereunder  is
subject to the  satisfaction  of the following  conditions  precedent (or to the
waiver by the Lender of any of such conditions precedent):

          (a) The Financing Documents.  The Borrower shall have delivered to the
     Lender the duly executed  Financing  Documents  and any documents  required
     herein or  therein or  reasonably  requested  by the  Lender in  connection
     therewith.

          (b)  Collateral.  The Borrower  shall have filed,  or  authorized  the
     Lender  to file,  such  financing  statements  as the  Lender  requires  in
     connection  with the  creation  of a  perfected  security  interest  in the
     Collateral and to secure payment in full for all Obligations due hereunder.

          (c) Certified Resolutions and Corporate Documents.  The Borrower shall
     have  delivered to the Lender  certified  copies of (i)  resolutions of its
     board of  directors,  which  are  reasonably  satisfactory  to the  Lender,
     authorizing the execution,  delivery and performance of this Agreement, the
     Note, and all other  Financing  Documents and any documents and instruments
     delivered hereunder or thereunder and (ii) its Certificate of Incorporation
     and Bylaws.

          (d) Acquisition of Purchased Receivables by the Borrower. The Borrower
     shall have performed all of its obligations  required to be performed on or
     before the Closing Date under the Purchase Agreements.

          (e) Opinion. The Lender shall receive one or more Opinions of Counsel,
     satisfactory  in  form  and  substance  to  the  Lender  and  from  counsel
     satisfactory  to the Lender,  with  respect to such matters as Lender shall
     reasonably request.

          (f) Representations and Warranties. All representations and warranties
     in this Agreement and the Financing  Documents shall be true and correct on
     and as of the Closing Date.

          (g) No  Default.  As of the Closing  Date,  there shall exist or shall
     have occurred no default by the Borrower in the  performance  of any of its
     obligations under any of the Financing Documents.

     (h) Documentation and Proceedings.  All corporate and legal proceedings and
all  instruments  in  connection  with  the  transactions  contemplated  by this
Agreement  shall be reasonably  satisfactory in form and substance to the Lender
and  Lender’s  counsel,  and the Lender shall have received all information
and copies of all  documents,  including  records of corporate  proceedings  and
governmental  recording  and  filing  offices  as the  Lender  or  Lender’s
counsel,  shall  have  requested,  such  documents  to be  certified  by  proper
authorities where appropriate.

    3        

     SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.

     To induce  the  Lender to enter  into this  Agreement  and to make the Loan
provided for herein, the Borrower hereby makes the following representations and
warranties:

     4.1  Organization  and Standing.  The Borrower is, and will continue to be,
duly  organized and a validly  existing  corporation  in good standing under the
laws of the State of Delaware, with all requisite power and authority to own and
operate its  properties  and assets,  to conduct the  businesses  in which it is
engaged or proposes to engage and to consummate the Borrower’s  role in the
transactions contemplated in the Financing Documents, has been duly qualified as
a foreign  corporation in each jurisdiction where required by the conduct of its
business or its ownership of properties,  and has not adopted any resolutions or
taken any action leading to liquidation.

     4.2 Power and Authority. The Borrower has all requisite power and authority
to execute,  deliver,  and carry out the terms and  provisions  of the Financing
Documents  to which  the  Borrower  is a party,  and the  Borrower  has duly and
properly taken all necessary action to permit and authorize the  Borrower’s
execution,  delivery and  performance  of the  Obligations  under the  Financing
Documents,  and the consummation of the Borrower’s role in the transactions
contemplated herein and therein.

     4.3 Binding  Obligations.  The Financing Documents executed by the Borrower
have been duly  authorized,  executed  and  delivered  by the  Borrower and each
constitutes a legal, valid and binding  obligation of the Borrower,  enforceable
in  accordance  with its  terms  except  as  enforceability  may be  limited  by
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the
enforcement of  creditors’  rights  generally and by general  principles of
equity,  regardless of whether such enforceability is considered in a proceeding
in law or in equity.

     4.4 Compliance With Other Instruments. The Borrower is not in violation of,
or default under,  any  Requirement of Law, any agreement or instrument to which
it is a party or by which it is  bound  or to  which  any of its  properties  or
assets are subject,  which  violation or default  would have a material  adverse
effect on the Borrower or its ability to perform its duties under the  Financing
Documents  or  which  would  affect  the  legality  or  enforceability  of  this
Agreement.  The execution,  delivery and  performance on the Closing Date by the
Borrower of and in  accordance  with the Financing  Documents,  and any document
required to be  delivered  hereunder  or  thereunder,  the  consummation  of the
Borrower’s role in the transactions  contemplated herein or therein and the
compliance  with the terms and provisions  hereof or thereof will not contravene
any  Requirement  of Law to which the  Borrower  is subject  (including  without
limitation  any  applicable   consumer  credit  servicing  or  bankruptcy  laws,
statutes, rules or regulations) and will not, in any material respect,  violate,
conflict with or result in any breach of any of the terms, covenants, conditions
or provisions  of, or constitute a default  under,  or result in the creation or
imposition of any security  interest (other than the security  interest in favor
of the Lender) upon any of the  property or assets of the  Borrower  pursuant to
the  terms of,  any  indenture,  mortgage,  deed of  trust,  agreement  or other
instrument to which the Borrower is a party or by which its properties or assets
are bound or may be subject.

    4        

     4.5 Litigation.  There are no actions, suits, proceedings or investigations
pending or, to the  Borrower’s  knowledge,  threatened against or affecting
the  Borrower  or its  properties  or assets,  or to which the  Borrower  or its
properties or assets is subject, nor is there any outstanding  judgment,  order,
writ,  injunction,  decree or award  affecting the Borrower or its properties or
assets  before  any court or  before  any  federal,  state,  municipal  or other
governmental  department,  commission,  board,  bureau or agency,  which, either
individually  or in the  aggregate,  could  reasonably  be  expected  to  have a
material  adverse  effect  on its  business,  assets,  properties  or  financial
condition,  or which in any manner could  reasonably  be expected to  materially
impair the Purchased Receivables or which could reasonably be expected to affect
the legality or enforceability of this Agreement or the Financing Documents, and
the  Borrower  does not know of any  basis  for any such  suit,  proceeding,  or
investigation.

     4.6 No Material Adverse Laws, Contracts, Etc. The Borrower is not obligated
under any  contract or agreement  or under any law,  regulation  or decree which
materially and adversely  affects its ability to perform its  obligations  under
the Financing  Documents or which materially and adversely  affects the value of
the Purchased  Receivables or which would affect the legality or  enforceability
of the Financing Documents.

     4.7 Consents by Authority. Except for the filing of financing statements by
the Lender, all actions, approvals,  consents, waivers,  exemptions,  variances,
franchises, orders, permits, authorizations,  rights and licenses required to be
taken, given or obtained,  as the case may be, by or from any federal,  state or
other  governmental  authority or agency,  that are necessary in connection with
the execution, delivery and performance by the Borrower of its obligations which
it was required to perform as of such date under the Financing  Documents,  have
been duly taken,  given or  obtained,  as the case may be, are in full force and
effect on the date hereof, are not subject to any pending proceedings or appeals
(administrative,  judicial or  otherwise)  and either the time within  which any
appeal  therefrom may be taken or review  thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the  consummation by the Borrower of the  Borrower’s  role in the
transactions  contemplated by the Financing Documents and the performance by the
Borrower of its obligations hereunder and thereunder.

     4.8 No Finder’s or Broker’s  Fees. Other than  broker’s fees
incurred  in   connection   with  the  purchase  of  certain  of  the  Purchased
Receivables,  all  of  which  have  been  paid  by  the  Sellers,  there  are no
broker’s  or  finder’s  fees payable to any Person in connection  with
this Agreement or the transactions contemplated herein.

     4.9 Capabilities.  Assuming the Loan proceeds are advanced to the Borrower,
the Borrower has or is projected to have or will contract for adequate  capital,
assets,  liquidity,   personnel,   facilities,   equipment,   software,  systems
capability  and  competence to perform its  obligations  hereunder and under the
other Financing Documents.

          4.10  Securities  Laws. The Borrower is not required to register as an
     “investment company” under the Investment Company Act of 1940, as
     amended,  and the  execution  and  delivery  of the  Note  as  contemplated
     hereunder is exempt from the  registration  requirements  of the Securities
     Act of 1933, as amended, and applicable state securities laws.

    1        

     4.11 Disclosure. The representations and warranties and other statements of
fact made by the Borrower to the Lender in the  Financing  Documents  and in any
certificates,  exhibits and schedules  attached hereto or thereto (including any
such  documents  furnished by  electronic  medium) or furnished to the Lender or
their designee by the Borrower in connection with the Loan, taken as a whole, do
not on the date as of which  such  statements  were made  contain  any  material
misstatement of fact or omit to state a material fact necessary in order to make
the statements  contained herein or therein,  in the light of the  circumstances
under which they were made, not misleading in their presentation of the Borrower
and its  business.  The  information  provided  with  respect  to the  Purchased
Receivables and the Purchase  Agreements by or on behalf of the Borrower,  taken
as a whole,  is,  to the  Borrower’s  knowledge,  true and  correct  in all
material respects and, to the  Borrower’s  knowledge,  does not contain any
material   omissions  which  would  cause  such  information  to  be  materially
misleading with respect to the Purchased  Receivables taken as a whole. Borrower
makes no representation  or warranty  concerning the forecasts,  estimates,  pro
forma   information,   projections  and  statements  as  to  anticipated  future
performance or conditions,  and the assumptions on which they were based, except
that as of the date made (i) such forecasts,  estimates,  pro forma information,
projections  and  statements  were  based on the good faith  assumptions  of the
management  of the  Borrower  and (ii) such  assumptions  were  believed by such
management to be reasonable.  Such forecasts,  estimates, pro forma information,
projections and statements, and the assumptions on which they were based, may or
may not prove to be correct.  There is no fact or  condition  existing as of the
date hereof which materially and adversely  affects,  or to the  Borrower’s
knowledge,  in the future is reasonably  anticipated to materially and adversely
affect, the condition (financial or otherwise), or prospects, of the Borrower or
the Purchased Receivables taken as a whole.

     4.12  Foreign  Person.  The  Borrower is not a  “foreign  person”
within the meaning of Section 1445(f)(3) of the Code.

     4.13 ERISA. The Borrower has no Plans.

     4.14 Margin Stock. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying  “margin  stock”  (as
defined  in  Regulation  U of the  Board of  Governors  of the  Federal  Reserve
System),  and no  proceeds  of the Loan  will be used for the  purpose,  whether
immediate, incidental or ultimate, of purchasing or carrying any margin stock or
extending credit to others for such purpose.

     4.15 Liens and Encumbrances. The Receivables are owned by the Borrower free
and clear of any lien other than the  security  interest in favor of the Lender.
All actions  (including UCC filings)  necessary in any  jurisdiction to give the
Lender a first priority perfected lien under the UCC in each Receivable acquired
by the Borrower have been performed.

     4.16 Dealings with Obligor.  To the  Borrower’s  actual knowledge,  no
action or omission on the part of the Sellers would give rise to any right under
the FDCPA on the part of any  Obligor  to bring any  action or claim  that would
result in a material adverse effect on the Borrower or the Purchased Receivables
taken as a whole.  Neither the Borrower nor any of its  Affiliates has knowingly
advanced funds to, induced, or solicited any advance of funds from a party other
than the Obligor or any co-debtor or guarantor,  directly or indirectly, for the
payment of any amount required by any Account.

    6        

     4.17 Location of Place of Business.  The  Borrower’s  primary place of
business is located at 5775 Roscoe Court, San Diego, CA 92123.

     4.18 Lack of Reliance.  Independently and without reliance upon the Lender,
the Borrower, to the extent it deems appropriate, has made and shall continue to
make its own independent  investigation  of the merits and risks involved in its
role under this Agreement and the other transactions contemplated hereby and the
Lender  shall  not have any duty or  responsibility,  either  initially  or on a
continuing  basis, to provide the Borrower with any  information  concerning the
Servicer.

     SECTION 5. COVENANTS OF BORROWER.

     The  Borrower  hereby  covenants  and agrees  that from the date hereof and
until payment in full of the  principal of and interest on the Note,  unless the
Lender shall otherwise consent in writing, the Borrower will:

     5.1 Payments. Ensure that principal, interest and any other amounts payable
are duly and  punctually  paid in accordance  with the  priorities  set forth in
Section 2.2 and as otherwise provided herein.


     5.2 Business and  Existence.  Perform all things  necessary to preserve and
keep in full force and effect its existence and comply with each  Requirement of
Law, the  non-compliance  with which would  materially and adversely  affect its
business or its financial  condition.  The Borrower shall not engage in any line
of business other than pursuit,  negotiation,  acquisition  and ownership of the
Receivables  and related  assets.  The Borrower shall notify the Lender not less
than 30 days in  advance  of any change in  location  of its place of  business.
Without  prior  written  consent  of the  Lender,  which  consent  shall  not be
unreasonably withheld, delayed or conditioned,  the Borrower shall not amend its
Certificate of  Incorporation  except for the Restated  Certificate  pursuant to
which  Borrower  will  become a special  purpose  entity or Bylaws or change its
jurisdiction  of  incorporation.  The  Borrower  shall  comply  with  all of the
provisions of its Certificate of Incorporation and Bylaws.

     5.3  Indebtedness  and Expenses.  Not incur,  create or suffer to exist any
Indebtedness, other than Indebtedness in respect of this Agreement, the Note and
the  Financing  Documents,  and  pay  and  discharge  all of  its  indebtedness,
obligations  and expenses  promptly in  accordance  with this  Agreement and the
other Financing Documents and normal terms and practices of its business, before
the same  shall  become in  default,  as well as all  lawful  claims  for labor,
materials and supplies which otherwise,  if unpaid, might become a material lien
upon its properties or assets or any part thereof.

     5.4 Payment of Taxes and Assessments.  Pay when due all taxes,  assessments
and other  governmental  charges or levies  which  become due and payable by the
Borrower to any political  entity,  subdivision or department  thereof under any
law now or hereafter  in force or effect.  The  Borrower  however,  shall not be
required to pay any tax,  charge,  levy or  assessment  so long as the  Borrower
shall  contest,  in good faith and at its cost and expense,  in its own name and
behalf,  the  amount  or  validity  thereof,  in  an  appropriate  manner  or by
appropriate  proceedings  which shall  operate  during the  pendency  thereof to
prevent the collection of or other realization upon the tax, assessment, levy or
charge so  contested,  provided that no such contest shall subject the Lender to
the risk of any liability and that the Borrower shall take appropriate  reserves
or provide appropriate bond or collateral in respect thereof.  Each such contest
shall be promptly  prosecuted to final  conclusion  (subject to the right of the
Borrower to settle any such contest) and the Borrower will, and will require the
Servicer  to,  promptly  after  the  final  determination  of  such  contest  or
settlement thereof (including any appeals),  pay and discharge the amounts which
shall be  levied,  assessed  or  imposed or  determined  to be payable  therein,
together with all penalties,  fines,  interests,  costs and expenses  thereon or
incurred in connection therewith. The Borrower shall give, and shall require the
Servicer to give, the Lender prompt written notice of any such contest.

    7        

     5.5 Notice of Event of Default.  At the time of the  Borrower’s  first
actual  knowledge  (with  actual  knowledge  by the  Servicer  or any officer or
employee  of the  Servicer  being  deemed  knowledge  of the  Borrower  for this
purpose)  of an Event of Default or a Default,  furnish  the Lender  with prompt
written notice of the occurrence of any such event or condition.

     5.6 Additional Information; Further Assurances.

     (a) Furnish, and require the Servicer to furnish, as applicable, such other
information in the possession of or reasonably obtainable by the Borrower or the
Servicer regarding the operations,  business affairs and financial  condition of
Borrower  or the  Servicer  or their  properties  or assets  (including  but not
limited to the Receivables) as the Lender may reasonably request for the purpose
of  determining  compliance  with the  Financing  Documents or the status of the
Receivables,  including  but not limited to true and exact copies of their books
of  account  (related  to  this  Agreement,  the  Financing  Documents  and  the
Receivables)  and any  audit  reports  prepared  by any  governmental  agency or
authority related to the Borrower or this Agreement,  the Financing Documents or
the  Receivables  and all information  furnished to any  governmental  agency or
authority related to the Borrower or this Agreement,  the Financing Documents or
the Receivables;  provided, however, that any information provided to the Lender
pursuant to this Section 5.6 shall be held confidential by the Lender; and

     (b) Take such further actions as the Lender may reasonably  request for the
purpose of  obtaining  or  preserving  the full  benefits  to the Lender of this
Agreement and of the rights and powers herein  granted to the Lender,  including
the filing of any financing or continuation statements under the UCC.

          5.7 Right of Inspection/Right of Audit.

          (a) Permit,  and require the Servicer to permit,  at reasonable  times
     and  intervals  and  upon  reasonable  prior  notice,  any  person  who  is
     designated by the Lender to visit and inspect any of the properties, books,
     systems,  procedures,  financial  reports and  records of Borrower  and the
     Servicer  (related  to this  Agreement,  the  Financing  Documents  and the
     Receivables)  and to discuss  their  affairs,  finances and accounts as the
     Lender may  reasonably  request for the purpose of  determining  compliance
     with the Financing Documents or the status of the Receivables.  (b) Permit,
     and  require  the  Servicer  to permit,  the Lender to, on not less than 15
     days’  prior notice,  or, if an Event of Default has occurred,  on not
     less than one day’s prior notice,  conduct an audit of the properties,
     books, systems,  procedures,  financial reports and records of the business
     activities  and  operations  conducted  by the Borrower and the Servicer in
     connection  with  its  performance  under  this  Agreement  and  the  other
     Financing  Documents,  during regular  business  hours, at the location the
     records are then kept by the Borrower and the Servicer.

    8        

     5.8 Liens. Not contract,  create, incur or suffer to exist, and require the
Servicer  not to  contract,  create,  incur or  suffer to  exist,  any  security
interest in any of the Receivables acquired from the Sellers,  whether now owned
or hereafter acquired, except Permitted Liens.

     5.9 Notification of Litigation,  Liens,  Material Events.  Promptly notify,
and require the  Servicer to promptly  notify,  the Lender in writing of (i) any
litigation or dispute whether  pending or threatened,  of which the Borrower has
actual knowledge which could materially affect the Borrower, and if requested by
the Lender, deliver to the Lender copies of all pleadings, unprivileged relevant
correspondence  and  similar  documentation  relating  thereto,  (ii) any  lien,
security  interest or attachment  asserted  against any of the  Receivables  and
(iii)  the  occurrence  of any  other  event  or  the  discovery  of  any  other
information  known to  Borrower  which  could  reasonably  be expected to have a
material  adverse  effect  on  the  aggregate  market  value  of  the  Purchased
Receivables or on the security interests granted with respect thereto.

     5.10 Maintenance of First Priority.  Take all such action,  and require the
Servicer  to take all such  action,  as may from  time to time be  necessary  to
maintain the ownership  interest of the Borrower in the  Receivables  and of the
security  interests of the Lender,  in the  Receivables,  including all notices,
waivers and recording,  filing, rerecording and refiling of any documents as set
forth in the  Servicing  Agreement  to maintain  the  ownership  interest of the
Borrower or the security interests of the Lender and the perfection and priority
thereof.  In addition,  the Borrower  shall,  and shall require the Servicer to,
execute and deliver such further documents set forth in the Servicing  Agreement
and take such further  action as the Lender may  reasonably  request in order to
confirm the  ownership  interest of the  Borrower or security  interests  of the
Lender, and to preserve and protect the priority of such security interests, the
rights of the  Borrower  under the  Purchase  Agreements  and the  rights of the
Lender under this Agreement and any Financing Document.

     5.11 Consolidation,  Merger, Sale of Assets. Not (i) wind up, liquidate, or
dissolve its affairs,  enter into any  transaction  of merger or  consolidation,
convey or transfer its properties and assets substantially as an entirety,  (ii)
convey,  sell, lease or otherwise dispose of (a) all or substantially all of the
Receivables; or (b) any portion of the Receivables;  provided, however, that the
Borrower  may from time to time  convey,  sell,  lease or  otherwise  dispose of
Receivables  (y) which are  Bankrupt  Accounts  (as such term is  defined in the
Servicing  Agreement) to a third party who is not an  Affiliated  Party (as such
term is defined in the  Servicing  Agreement)  in an arm's  length  transaction;
provided that any such  transaction is in the normal course of business;  or (z)
pursuant to an agreement in which the purchase price percentage is not less than
the applicable  purchase price  percentage  paid by Borrower for the Receivables
being sold,  in each case as set forth in the  applicable  Purchase  Agreements,
(iii)  institute  any  bankruptcy  or  insolvency  proceeding  or consent to the
institution  of the same,  or (iv)  create  any  partnership,  joint  venture or
subsidiary,  in each case  without the prior  written  consent of Lender,  which
consent shall not be unreasonably withheld, delayed or conditioned.

    9        

     5.12 Other Agreements.

          (a) Not enter into any agreement  containing any provision which would
     cause an Event of Default  hereunder or which would be violated or breached
     by the  performance  of  Borrower’s  obligations  under the  Financing
     Documents or under any document or instrument  delivered or to be delivered
     by Borrower hereunder or thereunder.

          (b)  Enforce  the  material  obligations  of the  Servicer  under  the
     Servicing  Agreement  and  of  each  of  the  Sellers  under  the  Purchase
     Agreements,  as  applicable,  and each other party under any other material
     agreement to which Borrower is a party,  and not grant any material  waiver
     or release or permit any material  amendment of any such  document  without
     the written consent of the Lender,  which consent shall not be unreasonably
     withheld, delayed or conditioned.

     5.13  Capability.  Maintain,  or  contract  to  maintain,  and  require the
Servicer to  maintain,  or  contract  to  maintain,  adequate  capital,  assets,
liquidity,  personnel,  facilities,  equipment, software, systems capability and
competence  to  perform  its  obligations  hereunder  and  under  the  Financing
Documents.

     5.14  Approvals  and  Licenses.  Maintain,  and  require  the  Servicer  to
maintain, all consents,  approvals,  authorizations,  orders, rights,  licenses,
franchises, and permits, if any, required by or from any federal, state or other
governmental  authority  or  agency,  for the  conduct of its  business  and the
ownership of its properties, or otherwise obtain a waiver or variance thereof or
qualify for an exemption therefrom.

     5.15 Change in Accounting  Policies.  Not change its accounting policies or
reporting practices, except as allowable pursuant to GAAP, consistently applied.

     5.16 Financial Statements.  Cause the Servicer to deliver to the Lender the
financial  statements  specified  in  Sections  4.2(a) and (b) of the  Servicing
Agreement.

     5.17 Fraudulent Activities; Violations of Law. Not engage in, and no Person
under its direct control or direction  shall engage in, any fraudulent  activity
or other activity which would constitute a knowing violation of a Requirement of
Law.

          5.18 Lender’s Reliance.  Borrower acknowledges that the Lender is
     entering into the  transactions  contemplated by this Agreement in reliance
     upon  Borrower’s  identity as a legal entity that is separate from the
     Servicer  and that the Lender will be adversely  affected if Borrower  does
     not enforce its respective rights under the Servicing Agreement. Therefore,
     from and  after  the date of  execution  and  delivery  of this  Agreement,
     Borrower shall take all reasonable steps,  including,  without  limitation,
     all steps  that the  Lender may from time to time  reasonably  request,  to
     maintain Borrower’s identity as a separate legal entity and to make it
     manifest  to third  parties  that  Borrower  is an entity  with  assets and
     liabilities  distinct from those of the Servicer and any Affiliates thereof
     and not  just a  division  of  Servicer  or any  other  Affiliate.  Without
     limiting  the  generality  of the  foregoing  and in  addition to the other
     covenants
set forth herein, Borrower shall:

    10        

          (a) maintain its own separate books and records and bank accounts;

          (b) at all times  hold  itself  out to the  public  as a legal  entity
     separate from the its Affiliates and any other Person;

          (c)  file  its  own tax  returns,  if any,  as may be  required  under
     applicable  law, to the extent not part of a  consolidated  group  filing a
     consolidated  return or  returns,  and pay any taxes so required to be paid
     under applicable law;

          (d) not commingle  its assets with assets of any other Person  (except
     as contemplated by the Financing  Documents),  and maintain the assets in a
     manner that facilitates their  identification and segregation from those of
     its Affiliates and other Persons;

          (e) conduct its business in its own name;

          (f) maintain separate financial statements;

          (g) ensure that any financial  statements of any Affiliate of Borrower
     which are  consolidated  to include the  Borrower  contain  detailed  notes
     clearly stating that (a) all of the Borrower’s assets are owned by the
     Borrower,  and (b) the Borrower is a separate  entity with its own separate
     creditors that 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;

          (h) pay its own liabilities only out of its own funds;

          (i) not permit any  Affiliate  of  Borrower,  except an officer of the
     Borrower, to be, nor to hold itself out to be, responsible for the debts of
     the Borrower or the  decisions or actions in respect of the daily  business
     and affairs of the Borrower;

          (j) maintain an arm’s length relationship with its Affiliates;

          (k) pay the salaries of its own employees, if any;

          (l) require that any  full-time  employees  of the  Borrower  identify
     themselves  as such  and not as  employees  of any  Affiliate  of  Borrower
     (including without limitation,  by means of providing appropriate employees
     with business or  identification  cards  identifying  such employees as the
     Borrower’s employees);

          (m) not  hold  out its  credit  as  being  available  to  satisfy  the
     obligations of others;

          (n) allocate  fairly and  reasonably  with its Affiliates any overhead
     for shared office space;

          (o)  correct  any  known   misunderstanding   regarding  its  separate
     identity;

    11        

          (p) ensure that the  Borrower’s  operating  expenses  will not be
     borne by any Affiliate of Borrower;

          (q) use separate stationery, invoices and checks;

          (r) not pledge its assets for the benefit of any other Person;

          (s) maintain  adequate capital in light of its  contemplated  business
     purposes,  cash  flow  and  the  financing  contemplated  by the  Financing
     Documents;

          (t)  ensure  that  no  Affiliate  of  Borrower   shall,   directly  or
     indirectly,  name the  Borrower  or enter  into any  agreement  to name the
     Borrower  as a  direct  or  contingent  beneficiary  or loss  payee  of any
     insurance policy with respect to property of any Affiliate;

          (u) cause  the Board of  Directors  to meet at least  annually  or act
     pursuant to written  consent and keep minutes of such  meetings and actions
     and observe all other Delaware corporate law formalities; and

          (v) not acquire any obligations or securities of an Affiliate.

     SECTION 6. COLLATERAL.

     6.1 Security Interest in Collateral.  To secure the payment and performance
to the Lender of the  Obligations,  the Borrower  hereby  grants to the Lender a
continuing  security  interest of first priority in (subject to Permitted Liens)
and lien upon all the  following  Property  and  interests  in  Property  of the
Borrower,  whether  now owned or  existing  or  hereafter  created,  acquired or
arising and wheresoever located:

          (a) all Purchased Receivables;

          (b) all Related Property;

          (c) all property  constituting  (i)deposit  accounts or (ii)security
     interests in property  financed under Purchased  Receivables,  claims under
     guaranties  and other  property  or  security  held by or granted to secure
     payment of the Purchased Receivables by the Obligor obligated thereon;

          (d) all other  General  Intangibles,  whether  now owned or  hereafter
     created or acquired by the  Borrower  or in which the  Borrower  now has or
     hereafter  acquires any interest,  including all rights of Borrower against
     Sellers under the Purchase Agreements;

          (e) all monies and other  Property of any kind,  now or at any time or
     times hereafter, owned by the Borrower or a bailee of the Borrower;

          (f) all contracts,  contract  rights,  chattel paper,  instruments and
     documents of the Borrower;

          (g) all rights, claims or choses in action of the Borrower;

    12        

          (h) all of the Borrower’s interest in the Remittance Account;

          (i)  all  accessions  to,  substitutions  for  and  all  replacements,
     products and cash and non-cash  proceeds of (a),  (b),  (c), (d), (e), (f),
     (g) and (h) above, including proceeds of and unearned premiums with respect
     to insurance policies insuring any of the Collateral; and

          (j) all books and records  (including  customer  lists,  credit files,
     computer  print-outs,  and other  computer  materials  and  records) of the
     Borrower  pertaining  to any of (a),  (b), (c), (d), (e), (f), (g), (h) and
     (i) above.



     6.2 Location of Collateral.  All tangible  Collateral and Collateral in the
form of books and records will at all times be kept by the Borrower or Servicer,
as appropriate,  at the business  location set forth in  Section 4.17  and shall
not,  without the prior  written  approval of the  Lender,  be moved  therefrom,
except as necessary for the collection of an Account.

     6.3 Administration of Receivables.

          (a) Upon and after the  occurrence  of an Event of Default  (which has
     not been waived or cured if permitted  under  Section 7), the Lender or, if
     so directed by the Lender,  the Servicer shall have the exclusive  right to
     settle or adjust all disputes and claims  directly  with any Obligor and to
     compromise  the  amount or extend the time for  payment of the  Receivables
     upon such  terms and  conditions  as the Lender  may deem  advisable.  Upon
     notice by the Lender,  after the  occurrence of an Event of Default,  which
     notice may be given in the  Lender’s  sole  discretion,  the  Borrower
     shall   relieve  the   Servicer  of  any  further   authority   and  future
     administrative obligations with respect to the Receivables.

          (b) If any  Receivable  includes a charge  for any tax  payable to any
     governmental authority,  the Lender is authorized,  after the occurrence of
     an Event of Default,  to pay the amount thereof to the proper  governmental
     authority for the Receivable and charge the Borrower therefor. The Borrower
     shall notify the Lender if any  Receivable  includes any tax payable to any
     governmental authority and, in the absence of such a notice (i)with respect
     to  any   Receivable,   the  Borrower  shall  be  deemed  to  have  made  a
     representation  and  warranty to the Lender  that,  to the  Borrower’s
     knowledge,  no portion of such  Receivable  is payable to any  governmental
     authority  and (ii) the  Lender  shall  have the right to  retain  the full
     proceeds of the Receivable.  In no event shall the Lender be liable for any
     taxes to any  governmental  authority  that may be due by the  Borrower  by
     reason of the sale and delivery of any Receivable.

          (c) Upon and  following  the  occurrence  of a Default  or an Event of
     Default and while such  Default or Event of Default is  continuing,  any of
     the Lender’s officers, employees or agents shall have the right in the
     name of the Lender,  any designee of the Lender or the Borrower,  to verify
     the validity,  amount or any other matter  relating to any  Receivables  by
     mail, telephone, telegraph or otherwise. The Borrower shall cooperate fully
     with the Lender in an effort to facilitate  and promptly  conclude any such
     verification process.

    13        

          SECTION 7. DEFAULT

     7.1 Events of Default.  The occurrence and  continuation of any one or more
of the following events prior to the payment in full by the Borrower of the Note
shall constitute an “Event of Default” under this Agreement:

          (a) Payment Default.  The Borrower shall default in the payment of (i)
     any  principal  of or  interest  on the Loan  when due  (whether  at stated
     maturity,  upon  acceleration or at mandatory or optional  prepayment),  it
     being  understood  that no notice or cure period  will be required  for any
     such event to  constitute  an Event of  Default),  or (ii) any other amount
     payable by it hereunder or the Note and such default  shall have  continued
     unremedied for three (3) Business Days.

          (b)  Target  Principal  Balance.  On  any  Monthly  Report  Date,  the
     Principal  Balance  of the Note,  after  giving  effect to any  payment  in
     respect of principal on such Monthly Report Date, shall equal or exceed the
     Target Principal  Balance  corresponding to such Monthly Report Date as set
     forth on Exhibit D of this Agreement.

          (c)  Representations  and Warranties.  Any representation or warranty
     made by the Borrower  under the  Financing  Documents  or any  certificate,
     exhibit  or  other  document  required  thereunder  is  false,  misleading,
     incomplete or untrue in any material respect (an “Untrue Matter”)
     as of the date made and such Untrue Matter is not cured within fifteen days
     from the date that the Borrower knows of such Untrue Matter.

          (d)  Covenants.   (1)  Any  covenant,  term,  agreement  or  condition
     contained  in this  Agreement  is breached by the Borrower or (2) any other
     covenant, term, agreement or condition contained in the Financing Documents
     is  breached  by the  Borrower  or  Servicer,  and  such  breach  continues
     unremedied for a period of fifteen days after the date that the Borrower or
     the Servicer knows of such breach.

          (e)  Bankruptcy or  Insolvency.  The Borrower (i) is  dissolved,  (ii)
     fails or is  unable or admits in  writing  its  inability  to pay its debts
     generally  as  they  become  due,  (iii)  commences  a  voluntary  case  in
     bankruptcy or any other action or proceeding for any other relief under any
     law affecting  creditors’  rights that is similar to a bankruptcy law,
     (iv) consents by answer or otherwise to the  commencement  against it of an
     involuntary  case in bankruptcy or any other such action or proceeding,  or
     an involuntary case in bankruptcy or any other such action or proceeding in
     respect of the Borrower or any of its  properties  is commenced  and is not
     dismissed on or before the sixtieth day after the commencement thereof, (v)
     makes an assignment for the benefit of creditors,  (vi) files a petition or
     applies to any tribunal for the appointment of a custodian, receiver or any
     trustee for all or a  substantial  part of its assets,  (vii) by any act or
     omission  indicates  its  consent,  approval  of,  or  acquiescence  in the
     appointment  of a receiver,  custodian or trustee for all or a  substantial
     part of its  property,  (viii) is  adjudicated  a  bankrupt,  (ix)  becomes
     insolvent however otherwise evidenced, or (x) ceases to continue as a going
     concern.

          (f) Fraudulent Conveyances.  The Borrower conceals, removes or permits
     to be  concealed  or  removed,  any part of its  property,  with  intent to
     hinder,  delay or defraud its creditors or any of them, or makes or permits
     a transfer of any of its property  which  transfer is fraudulent  under any
     bankruptcy, fraudulent conveyance or similar law.

    14        

          (g) Judgments.  Any (i) uninsured judgment, (ii) judgment which is not
     fully insured or (iii) order for the payment of money,  that is equal to or
     greater than  $50,000  shall be rendered  against the Borrower  (unless the
     payment  of such  amount in excess of $50,000  is fully  insured)  and such
     judgment or order shall continue  unsatisfied  and unstayed for a period of
     60 days.

          (h) Breach of Agreement.  Any security  interest created  hereunder or
     pursuant to the Financing Documents shall cease to be a valid and perfected
     first  priority  security  interest in favor of the Lender in the Purchased
     Receivables.

          (i) Breach of the Purchase Agreements.  Any (i) breach or violation by
     Borrower of any provisions of a Purchase Agreement,  but only such breaches
     or violations which would give rise to a right to terminate Borrower’s
     rights under such agreement, and which continue after the expiration of any
     applicable  notice or cure periods  allowed  thereunder  or (ii) failure by
     Borrower  to  enforce  its  rights  under the  Purchase  Agreements,  which
     failure, in the Lender’s reasonable discretion,  shall have a material
     adverse effect on the Borrower’s ability to meet its obligations under
     this  Agreement  or any  other  Financing  Document  and which is not cured
     within fifteen days from the date that the Borrower receives notice of such
     breach from the Lender.

          (j) Servicer Termination.  The occurrence of a Termination Event under
     the Servicing Agreement.

     7.2 Effect of Event of Default.  If any Event of Default  shall  occur,  in
addition  to taking any action  pursuant to Section  6.5 and  Section  7.3,  the
Lender may, at its sole option,  by written  notice to the Borrower  declare the
entire  unpaid  Principal  Balance  of and  accrued  interest  on the Note to be
immediately due and payable,  without  presentment,  demand,  protest or further
notice  of any kind,  all of which are  expressly  waived by the  Borrower.  The
Lender may also  exercise  any or all of the rights and remedies (i) provided to
the Lender  pursuant to the Financing  Documents and (ii) available to a secured
creditor  under  the UCC of the  applicable  jurisdiction,  as the  same  may be
amended from time to time,  including without limiting the foregoing,  the right
to take possession of and sell the Collateral.  Except as set forth elsewhere in
this  Section  7, the  occurrence  of an Event of  Default  may only be cured by
written  waiver from the Lender (and not by the passage of time or  remedying of
the circumstances which led to such Event of Default).

     7.3 Power of Attorney. The Borrower hereby makes,  constitutes and appoints
the Lender its true and lawful attorney-in-fact, in its name place and stead, or
otherwise,  upon the  occurrence  of any Event of  Default  (which  has not been
waived or cured if permitted under Section 7):

          (a) To take  all  actions  and to  execute,  acknowledge,  obtain  and
     deliver any and all  writings  deemed  advisable  by the Lender in order to
     exercise any rights of the Borrower  with respect to the  Collateral  or to
     receive and enforce any payment or  performance  due to the  Borrower  with
     respect to the Collateral;

    15        

          (b) To give any notices,  instructions or other  communications to any
     person or entity in connection with the Collateral;

          (c) To demand and receive all performance due under or with respect to
     the  Collateral  and to take all lawful steps to enforce such  performances
     and  except  for any  claim or cause  of  action  against  the  Lender,  to
     compromise and settle any claim or cause of action of the Borrower  arising
     from  or  related  to  the  Collateral  and  give  acquittances  and  other
     discharges relating thereto; and

          (d) To file any claim or proceeding  or to take any other  action,  in
     the name of the Borrower,  Lender or otherwise, to enforce performances due
     under or related to the  Collateral  and to protect and preserve the right,
     title and interest of the Lender thereunder.

     The  foregoing  power of attorney is a power  coupled  with an interest and
shall be irrevocable  so long as any portion of the  obligations of the Borrower
hereunder remains contingent,  unmatured,  unliquidated,  unpaid or unperformed.
The Lender shall have no obligation to exercise any of the foregoing  rights and
powers in any event.

     SECTION 8. MISCELLANEOUS.

     8.1  Non-Recourse   Financing.   None  of  the   Borrower’s   lenders,
representatives or Affiliates will have any personal liability for the repayment
of any  portion  of the  Principal  Balance  or  the  fulfillment  of any of the
Borrower’s  obligations  under this  Agreement or any  Financing  Document.
Lender’s sole recourse will be to the assets and income of the Borrower.

     8.2 Indemnification.

          (a) The Borrower  agrees to indemnify  and hold the Lender  (including
     its Affiliates)  harmless from all liabilities,  damages,  claims,  losses,
     judgments,    reasonable   costs   and   expenses,   including   reasonable
     attorneys’  fees,  incurred by Lender arising out of or resulting from
     the  performance  or failure to perform by the Borrower of its  obligations
     and its failure to comply with any applicable Requirements of Law.

          (b) The Lender will  indemnify and hold harmless the Borrower from all
     liabilities,  damages,  claims,  losses,  judgments,  reasonable  costs and
     expenses,  including  reasonable  attorneys’  fees,  incurred  by  the
     Borrower  arising out of or resulting  from the  performance  or failure to
     perform the Lender’s  obligations,  and the  Lender’s  failure to
     comply with any applicable Requirements of Law.

          8.3  Set-off.  In  addition  to any rights and  remedies of the Lender
     provided by law or existing  under any  instrument,  document or  agreement
     relating to the Obligations,  if an Event of Default exists,  the Lender is
     authorized  at any time and from time to time,  without prior notice to the
     Borrower,  Servicer or any other  party,  any such notice  being  waived by
     Borrower,  the  Servicer  and any such other  party to the  fullest  extent
     permitted  by law,  to set off and apply any and all monies or  deposits at
     any time held by or for the benefit of, and other  indebtedness at any time
     owing by the  Lender to or for the credit or the  account  of the  Borrower
     against any and all Obligations, now or hereafter existing, irrespective of
     whether or not the Lender  shall have made demand  under this  Agreement or
     any Financing Document. The Lender agrees promptly to notify Borrower after
     any such set-off and  application  made by the Lender;  provided,  however,
     that, the failure to give such notice shall not affect the validity of such
     set-off and  application.  The rights of the Lender  under this Section 8.3
     are in addition to the other rights and remedies (including other rights of
     set-off) which the Lender may have.

    16        

          8.4 Notices. Any notice, demand, request,  approval,  consent or other
     communication (collectively  “Notice”)  concerning this Agreement
     or any  matter  arising  in  connection  with  this  Agreement  shall be in
     writing,  personally delivered,  or sent by telecopier,  data transmission,
     overnight  courier or mailed by certified mail,  return receipt  requested,
     and shall be deemed to have been duly given upon receipt:

If to the Lender to:                        PATRIOT CAPITAL MARKETS, LLC
                                            28 Thorndal Circle
                                            Darien, CT  06820
                                            ATTN: Chief Investment Officer


If to the Borrower to:                      MIDLAND FUNDING NCC-1 CORPORATION
                                            5775 Roscoe Court
                                            San Diego, CA  92123
                                            ATTN: Corporate Secretary


     8.5  Transactional  Expenses.  The  Borrower  shall  pay  all  Post-Closing
Transactional Expenses and all other Obligations (except principal and interest)
on or before the  thirtieth  (30th)  day  following  Borrower’s  receipt of
invoices for the same. All  Transactional  Expenses and other  Obligations which
are  not  so  paid  shall  be   capitalized   (“Capitalized   Transactional
Expenses”)   and  shall  become  part  of  the  Principal  Balance  on  the
immediately succeeding Monthly Report Date.

     8.6 Relationship  Between Parties.  The relationship between the Lender and
the Borrower shall be solely one of commercial lender and borrower,  and nothing
contained in this Agreement or in any Financing  Document  shall  constitute the
parties as partners or co-venturers with one another.

     8.7 Confidentiality.

          (a)  The  Borrower  and  the  Lender  agree  that  the  terms  of this
     Agreement,  all other Financing Documents,  and the Loan made or to be made
     hereunder  are  confidential  and shall not be disclosed by either party to
     any other  Person  without the other  party’s  prior  written  consent
     except  (a)  to  each  Party’s   counsel,  (b)  to  each  party’s
     Affiliates,  investors, prospective investors or lenders (c) as required by
     law or the rules and regulations of the Securities and Exchange Commission,
     any applicable  stock exchange or trading  market,  or (d) as  specifically
     contemplated  by this  Agreement or the other  Financing  Documents.  It is
     understood  that the parties hereto may make  customary  references to this
     transaction in their financial statements.

    17        

          (b) Notwithstanding anything herein to the contrary, each party hereto
     may disclose to any and all persons,  without  limitation of any kind,  the
     tax  treatment and tax structure of the  transaction  contemplated  by this
     Agreement  and all materials of any kind  (including  opinions or other tax
     analyses)  that are provided to such party or such person  relating to such
     tax  treatment and tax  structure.  This  authorization  is not intended to
     permit disclosure of any other  information  including terms or details not
     relevant to the tax treatment or the tax structure of this  transaction  or
     the transactions designated by the Financing Documents.

     8.8  Termination.  This  Agreement  shall continue in full force and effect
until all Obligations and  undertakings of the Borrower  hereunder and under any
other  Financing   Document  have  been  fully  discharged  or  performed.

     8.9 Amendments.  The provisions of this Agreement,  and any other Financing
Document, may from time to time be amended,  modified or waived with the consent
of the Borrower and the Lender if such  amendment,  modification or waiver is in
writing and signed by the Lender and the Borrower.

     8.10 Waivers.  No party shall be deemed to have waived any of its rights or
remedies  hereunder or under any other Financing  Document unless such waiver is
in writing  and  signed by such  party and then only to the extent  specifically
recited.  No failure to  exercise  and no delay or omission  in  exercising  any
right, remedy or recourse on the part of either party shall operate or be deemed
as a waiver of such  right,  remedy  or  recourse  hereunder  or  thereunder  or
preclude any other or further exercise  thereof.  A waiver or release on any one
occasion  shall not be construed as  continuing,  as a bar to, or as a waiver or
release of any subsequent right, remedy or recourse on any subsequent  occasion.
All rights and remedies of each party,  whether  pursuant to this Agreement,  or
any other  Financing  Document,  or any other  document or instrument  delivered
hereunder or thereunder, shall be cumulative and concurrent and may be exercised
singly,  successively  or  concurrently at the sole discretion of such party and
may be  exercised as often as occasion  therefor  may exist.  The rights of each
party  hereunder or any such document or instrument  shall be in addition to all
other rights and remedies provided at law or in equity.

     8.11 Transferability of Agreement. This Agreement shall be binding upon the
Borrower and the Lender and their respective successors and assigns, except that
the Borrower may not transfer or assign any or all of its rights or  obligations
hereunder  without  the prior  written  consent of the Lender and any  purported
assignment  without such written  consent shall be null and void. The Lender may
transfer and assign to any Person  (including  any  Affiliate) any or all of its
rights or obligations  hereunder and under the other Financing Documents without
the prior written consent of the Borrower.

     8.12 Replacement Note. Upon the loss,  theft,  destruction or mutilation of
the Note,  the Borrower  shall execute and deliver in lieu thereof a new Note in
the same  initial  principal  amount  and with such  notations  on the  schedule
attached  to such  Note as shall  evidence  all  payments  in  reduction  of the
Principal Balance prior to the date of delivery of such replacement Note.

    18        

     8.13  GOVERNING LAW. THIS  AGREEMENT  SHALL BE GOVERNED BY THE  SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK WITHOUT  APPLICATION OF CONFLICT OF LAW PRINCIPLES
(OTHER THAN SECTION  5-1401 OF THE GENERAL  OBLIGATIONS  LAW OF THE STATE OF NEW
YORK).

     8.14  Submission  to  Jurisdiction.  The  Borrower  hereby  consents to the
jurisdiction  of the federal  district  court  located  within the County of New
York, State of New York, with respect to all actions or proceedings  relating to
this  Agreement,  the Note,  the other  Financing  Documents  and the  Purchased
Receivables,  and the Borrower  waives any objection  which it may have based on
improper  venue or forum non  conveniens to the conduct of any proceeding in any
such  court and waives  personal  service  of any and all  process  upon it, and
consents  that all such  service of process be made by  registered  or certified
mail or by messenger  directed to it at the address of the Borrower set forth in
Section 7.3 and that service so made,  shall be deemed to be completed  upon the
earlier of actual  receipt and five Business Days after the same shall have been
posted to the Borrower’s  address in accordance herewith.  THE PARTIES EACH
WAIVE ANY RIGHT TO TRIAL BY JURY.  The Borrower  agrees that a final judgment in
any such action or proceeding  shall be conclusive  and may be enforced in other
jurisdictions  by suit on the judgment  (if such a procedure is available  under
applicable  law) or in any other manner  provided by law.  Nothing  contained in
this section  shall affect the right of the Lender to serve legal process in any
other manner permitted by law or to bring any action or proceeding in the courts
of any  jurisdiction  against the Borrower or to enforce a judgment  obtained in
the courts of any other jurisdiction.

     8.15 Enforceability of Agreement.  Should any one or more of the provisions
of this  Agreement  be  determined  to be  illegal or  unenforceable,  all other
provisions,  nevertheless,  shall  remain  effective  and binding on the parties
hereto  and such  provisions  shall be  deemed  revised  to the  minimum  extent
necessary to render it enforceable.

     8.16  Titles.  Titles of the  Sections  of this  Agreement  are  merely for
convenience  in reading  and shall be deemed not to be a part of this  Agreement
and shall be ignored in construing any provision hereof.

     8.17 Entire Agreement.  This Agreement (including all Exhibits hereto), the
Financing   Documents  and  the  Note  shall  constitute  the  full  and  entire
understanding  and  agreement of the parties  hereto and there are no further or
other agreements or undertakings, written or oral, in effect between the parties
relating to the subject  matter  hereof unless  expressly  referred to herein or
therein.  All  prior  negotiations,  agreements,  representations,   warranties,
statements  and  undertakings  concerning  the subject matter hereof between the
parties hereto are superseded by this Agreement.

     8.18  Execution  in  Counterparts.  This  Agreement  may be executed in any
number of  counterparts  and in  separate  counterparts,  each of which  when so
executed and delivered  shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.

                                                     * * * * *

    19        

     IN  WITNESS  WHEREOF,  the  Parties  have  signed  this  Loan and  Security
Agreement as of the date set forth in the first paragraph of this Agreement.

                                                    LENDER:

                                                    PATRIOT CAPITAL MARKETS, LLC

                                                 By:  /s/ Charles A. Forbes, Jr.
                                                        Charles A. Forbes, Jr.
                                                 Its:   Chief Investment Officer


                                                     BORROWER:


                                              MIDLAND FUNDING NCC-1 CORPORATION


                                                   By:  /s/ Carl C. Gregory, III
                                                          Carl C. Gregory, III
                                                   Its: President

                                                                      APPENDIX A

                                   DEFINITIONS

     “Account”  shall  mean each  relationship  comprising  a personal
loan, line of credit, lease or other credit transaction  established pursuant to
an Account  Agreement,  the Receivables from which are purchased by the Borrower
pursuant to a Purchase Agreement.

     “Account  Agreement”  shall  mean the  retail  installment  sales
contract,  lease,  credit agreement or other agreement or agreements pursuant to
which a Person is obligated to pay for borrowed money or leased property under a
credit plan.

     “Account  Control  Agreement”  shall  mean that  account  control
agreement  with respect to the Remittance  Account by and among the Lender,  the
Borrower, the Servicer and the bank named therein, which is in substantially the
form attached hereto as Exhibit E.

     “Affiliate”  means, with respect to any Person,  any other Person
directly or indirectly  controlling (including but not limited to all directors,
managers  and  officers  of such  Person),  controlled  by,  or under  direct or
indirect  common  control with such Person.  A Person shall be deemed to control
another Person if such Person  possesses,  directly or indirectly,  the power to
direct or cause the direction of the management or policies of the other Person,
whether through ownership of voting securities, by contract or otherwise.

     “Authorized  Officer,”  with respect to the  Borrower,  means the
Person or other  signatory  authorized  by or  pursuant  to the  Borrower’s
Bylaws.
     “Available  Funds”  shall have the meaning  specified  in Section
2.2.

     “Borrower”  shall have the meaning  specified  in the preamble to
this Agreement.

     “Borrowing Rate” shall mean, as to any Monthly Report Date, a per
annum rate equal to 15.00%.

     “Business Day”  shall mean any day other than a Saturday,  Sunday
or any other day on which banks are required or  authorized  to be closed in New
York, New York.

     “Capitalized  Transactional  Expenses”  shall  have  the  meaning
specified in Section 8.5 of this Agreement.

     “Code”  shall mean the Internal  Revenue Code of 1986, as amended
from time to time, or any successor statute, and the regulations promulgated and
the rulings issued thereunder.


     “Collateral”  shall mean all of the  Property  and  interests  in
Property described in Section 6.1 of this Agreement,  and all other Property and
interests in Property that now or hereafter  secure the payment and  performance
of any of the Obligations.

     “Collections”  shall have the meaning  specified  in Article I of
the Servicing Agreement.

     “Default”  shall  mean an  event  or  condition  which,  with the
passage of time or the giving of notice or both,  would  constitute  an Event of
Default.

     “ERISA” shall mean the Employee Retirement Income Security Act of
1974,  as  amended  from  time  to  time,  or any  successor  statute,  and  the
regulations promulgated and the rulings issued thereunder.

     “ERISA  Affiliate”  shall mean any trade or business  (whether or
not  incorporated)  which,  together with the  Borrower,  is treated as a single
employer under Title IV of ERISA or Section 414 of the Code.

     “Event of  Default” shall  have the meaning  specified in Section
7.1 of the Agreement.

     “FDCPA”  shall  mean the Fair Debt  Collection  Practices  Act of
1977, as amended.

     “Financing   Documents”   means  the  Agreement,   the  Servicing
Agreement,  the Account Control  Agreement and any related agreement or document
contemplated thereunder.

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

     “General  Intangibles”  shall have the  meaning it is given under
the UCC as in effect in the State of New York.

     “Indebtedness” shall mean, with respect to any Person, any amount
payable by such Person  pursuant to an  agreement  or  instrument  involving  or
evidencing money borrowed or received, the advance of credit, a conditional sale
or a transfer with  recourse or with an  obligation  to  repurchase  (other than
customary  “putback”  rights  given  in  connection  with  a  sale  of
Accounts), or pursuant to a lease with substantially the same economic effect as
any such  agreement  or  instrument,  to which such Person is a party as debtor,
borrower or guarantor, all obligations of such Person to purchase securities (or
other property) which arise out of or in connection with the sale of the same or
substantially similar securities or property and all non-contingent  obligations
of such Person to reimburse  any bank or other Person in respect of amounts paid
under a letter of credit or similar instrument.

     “Initial  Transactional  Expenses”  shall mean all  out-of-pocket
costs and expenses  incurred by the Lender (including  attorneys’  fees and
expenses) in connection with the consummation of the  transactions  contemplated
by the Financing Documents.

     “Lender”  shall mean  Patriot  Capital  Markets,  LLC, a Delaware
limited liability company.

     “Loan”  shall have the meaning  specified in the Recitals to this
Agreement.

     “Loan Amount”  shall have the meaning specified in Section 1.1 of
the Agreement.

     “Maturity  Date”  shall mean the Monthly Report Date occurring in
October, 2005.

     “Monthly Reconciliation Report”  shall have the meaning specified
in Article I of the Servicing Agreement.

     “Monthly Report Date” shall have the meaning specified in Article
I of the Servicing Agreement.

     “Multiemployer  Plan” shall mean a “multiemployer plan”
as defined in Section 4001(a) (3) of ERISA.

     “Note”  shall mean the secured  promissory  note  executed by the
Borrower  evidencing the Principal Balance, in substantially the form of Exhibit
A to the Agreement.

     “Obligations”   means  all   present   and  future   liabilities,
obligations  and  indebtedness  of the Borrower  owing to the Lender under or in
connection  with  this  Agreement,  including  amounts  owed in  respect  of the
Principal Balance, Unpaid Interest, Transactional Expenses, and indemnities.

     “Obligor”  shall mean the customer,  obligor,  maker, borrower or
other party primarily obligated to pay an Account.

     “Opinion of Counsel”  shall mean a written opinion of counsel and
who,  in the case of  opinions  delivered  to the  Lender,  shall be  reasonably
satisfactory to the Lender.

     “Permitted  Liens”  shall  mean,  with  respect to the  Purchased
Receivables,  (i) inchoate  liens in respect of taxes not due and  payable,  and
(iii) security interests created pursuant to the Financing Documents.

     “Person”  shall mean any legal person,  including any individual,
corporation,  partnership,  joint  venture,  association,  joint-stock  company,
trust,  unincorporated  organization,  governmental  entity  or other  entity of
similar nature.

     “Plan”  shall  mean  any  employee  benefit  plan,  other  than a
Multiemployer  Plan,  which is  subject  to Title IV of ERISA or  subject to the
minimum funding standards under Section 412 of the Code or Section 302 of ERISA,
and  either  (i) is  maintained  for  employees  of the  Borrower  or any  ERISA
Affiliate or in which any such employees  participate or to which  contributions
are made by the Borrower or any ERISA Affiliate,  or (ii) has at any time within
the preceding  five years been  maintained  for employees of the Borrower or any
ERISA  Affiliate or any Person  which was at such time an ERISA  Affiliate or in
which any such  employees  participated  at such time,  or (iii) with respect to
which the Borrower or any ERISA  Affiliate  could be subjected to any  liability
under Title IV of ERISA (including  without limitation Section 4069 of ERISA) in
the event that such plan has been or were to be terminated.

     “Post-Closing    Transactional    Expenses”    shall   mean   all
out-of-pocket  costs and expenses  incurred by the Lender in connection with the
interpretation,  enforcement,  exercise  of rights or  amendment  (in each case,
whether or not definitive action is taken) of the Financing Documents.

     “Principal  Balance”  shall mean, on any Business Day (i) the sum
of (a) the Loan  Amount as of the  Closing  Date,  (b) the  aggregate  amount of
Unpaid Interest on all previous  Monthly Report Dates,  and (c) all Post-Closing
Transactional  Expenses which have become Capitalized  Transactional Expenses on
any Monthly  Report Date on or before such Business Day, minus (ii) amounts paid
to the Lender in reduction of the Principal Balance pursuant to clause fourth of
Section 2.2 of the Agreement.

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

     “Purchase  Agreements”  shall have the meaning  specified  in the
Recitals to this Agreement.

     “Purchased  Receivables”  shall have the meaning specified in the
Recitals to this Agreement.

     “Receivable”  shall  mean  any  outstanding  indebtedness  of  an
Obligor under an Account  Agreement  (including any unpaid  finance  charges and
other  charges  relating  thereto)  arising from a loan for borrowed  money or a
lease for leased property,  including any deficiency balance remaining after the
application of sale proceeds from any property securing such property.


     “Related  Property”  shall mean all rights, title and interest of
the Borrower under and in the Servicing  Agreement and the Purchase  Agreements,
including  the  ownership  interests of the  Borrower in  Purchased  Receivables
acquired thereunder.

     “Remittance  Account”  shall mean the account  established by the
Servicer in accordance with Section 2.9 of the Servicing Agreement.

     “Remittance  Date”  shall have the meaning specified in Article I
of the Servicing Agreement.

     “Remittance Period” shall have the meaning specified in Article I
of the Servicing Agreement.

     “Requirement  of  Law”  shall mean,  as to any  Person,  any law,
treaty, rule or regulation,  determination or order of any arbitrator or a court
or other governmental authority,  judgment,  decree, franchise or permit 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.

     “Sellers”  shall have the meaning  specified  in the  Recitals to
this Agreement.

     “Servicer”  shall mean Midland Credit Management,  Inc., a Kansas
corporation.

     “Servicing  Agreement”  shall mean the Servicing  Agreement among
the Borrower,  the Servicer and the Lender,  dated as of July 25, 2003, relating
to the servicing of the Purchased Receivables.

     “Servicing  Fee”  shall mean the  Servicing  Fee  received by the
Servicer in accordance with Section 3.1 of the Servicing Agreement.

     “Target  Principal  Balance”  shall  mean,  with  respect  to any
Monthly Report Date, the dollar amount corresponding to such Monthly Report Date
as set forth on Exhibit D of this Agreement.

     “Termination  Event”  shall have the meaning specified in Section
1.1 of the Servicing Agreement.

     “Transactional  Expenses”  shall mean the  Initial  Transactional
Expenses and the Post-Closing Transactional Expenses.

     “UCC”  shall mean the Uniform  Commercial  Code as in effect in a
jurisdiction at any time.

     “Unpaid  Interest”  shall mean,  on a Monthly  Report  Date,  the
amount,  if any, by which the amount owing  pursuant to clause second of Section
2.2 of the  Agreement  exceeds the amount of Available  Funds in respect of such
Monthly Report Date applied in payment of such owing amounts.

EX-10

                                                                                                       Exhibit 10.3
                                                                            [***] TEXT OMITTED AND FILED SEPARATELY
                                                                                   CONFIDENTIAL TREATMENT REQUESTED


                                                                                                   [EXECUTION COPY]

                                                SERVICING AGREEMENT

                                                   by and among

                                        MIDLAND FUNDING NCC-1 CORPORATION,

                                                   as Borrower,

                                         MIDLAND CREDIT MANAGEMENT, INC.,

                                                   as Servicer,

                                                        and

                                           PATRIOT CAPITAL MARKETS, LLC

                                                     as Lender

                                             Dated as of July 25, 2003

CONFIDENTIAL

[***]  Omitted pursuant to a request for confidential treatment. The omitted material has been filed separately
with the Securities and Exchange Commission.

                                                 TABLE OF CONTENTS

                                                                                                               Page


ARTICLE I DEFINITIONS.............................................................................................3
         Section 1.1       Defined Terms..........................................................................3

ARTICLE II SERVICING..............................................................................................8
         Section 2.1       Appointment of the Servicer as Servicer................................................8
         Section 2.2       Documents Evidencing Assets............................................................9
         Section 2.3       Duties of Servicer.....................................................................9
         Section 2.4       Servicing Standards; Subservicing.....................................................10
         Section 2.5       Power and Authority...................................................................10
         Section 2.6       Settlement Authority and Re-Write Notes...............................................10
         Section 2.7       Account Sales.........................................................................11
         Section 2.8       Legal Compliance......................................................................11
         Section 2.9       Remittance Account....................................................................12
         Section 2.10      Distributions from the Remittance Account.............................................13
         Section 2.11      Accounting for Fees...................................................................13
         Section 2.12      Insurance.............................................................................13

ARTICLE III SERVICING AND OTHER FEES; REIMBURSEMENT OF EXPENSES..................................................13
         Section 3.1       Servicing Fees; Legal Outsourcing Management Fees.....................................13
         Section 3.2       Nonreimbursable Expenses of the Servicer..............................................14

ARTICLE IV ACCOUNTING, STATEMENTS AND REPORTS....................................................................14
         Section 4.1       Books and Records.....................................................................14
         Section 4.2       Periodic Reporting....................................................................15
         Section 4.3       Inspection Rights.....................................................................17

ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................................17
         Section 5.1       Representations and Warranties of the Servicer........................................17
         Section 5.2       Covenants of the Servicer.............................................................20

ARTICLE VI TERMINATION; TRANSFER OF SERVICING; INDEMNITY.........................................................21
         Section 6.1       Termination Events....................................................................21
         Section 6.2       Termination; Removal of the Servicer..................................................24
         Section 6.3       Effect of Termination.................................................................24
         Section 6.4       Indemnity by the Servicer.............................................................25

ARTICLE VII MISCELLANEOUS........................................................................................25
         Section 7.1       Severability Clause...................................................................25
         Section 7.2       Notices...............................................................................25
         Section 7.3       Costs and Expenses....................................................................26
         Section 7.4       Assignment............................................................................27
         Section 7.5       Counterparts..........................................................................27
         Section 7.6       Governing Law; Jurisdiction; Waiver of Jury Trial.....................................27
         Section 7.7       Amendments............................................................................27
         Section 7.8       Integration...........................................................................27
         Section 7.9       Agreement Effectiveness...............................................................27
         Section 7.10      Headings Descriptive..................................................................28
         Section 7.11      Advice from Independent Counsel.......................................................28
         Section 7.12      Judicial Interpretation...............................................................28
         Section 7.13      Term................................................................................. 28
         Section 7.14      Confidentiality.......................................................................28

i

                                                SERVICING AGREEMENT


         This SERVICING  AGREEMENT  (this  “Agreement”)  is made as of July 25, 2003, by and among MIDLAND  FUNDING
NCC-1 CORPORATION, a Delaware corporation (the “Borrower”),  MIDLAND CREDIT MANAGEMENT,  INC., a Kansas corporation
(the “Servicer”) and PATRIOT CAPITAL MARKETS, LLC, a Delaware limited liability company (the “Lender”).

         WHEREAS,  the  Borrower  has  purchased  a pool or  pools  (each,  a  “Portfolio”)  which  assets  include
delinquent or deficiency consumer obligations other than charged off credit card accounts.

         WHEREAS,  the Borrower and the Lender are parties to a Loan and Security  Agreement of even date herewith,
as the same may be amended or supplemented  from time to time (the “Loan  Agreement”)  pursuant to which the Lender
has made a Loan secured by such Portfolios.

         WHEREAS,  the  Servicer  and the Lender  desire that the Servicer  manage and service  collection  of such
assets so  purchased  by the  Borrower  and  financed by the Lender,  the  Borrower and the Servicer is desirous of
providing such services.

         NOW THEREFORE,  in consideration  of the premises and the mutual covenants and agreements  hereinafter set
forth, the Lender, the Borrower and the Servicer  (sometimes  singularly  referred to as a “Party” and collectively
referred to as the “Parties”) hereby agree as follows:




                                                ARTICLE I
                                               DEFINITIONS



Section 1.1       Defined Terms.  For all purposes of this  Agreement,  except as otherwise  expressly  provided or
unless the context otherwise requires:

(a)      the terms defined in the preamble hereto have the meanings therein assigned to them;

(b)      the terms  defined in this  Article have the meanings  assigned to them in this  Article,  and include the
plural as well as the singular;

(c)      all accounting  terms not otherwise  defined herein have the meanings  assigned to them in accordance with
GAAP;

(d)      all  accounting  terms,  unless  otherwise  specified,  shall be  deemed  to refer to  Persons  and  their
subsidiaries on a consolidated basis in accordance with GAAP;

(e)      “including”  shall mean including but not limited to; “from”,  when used with respect to a period of time,
shall mean from and including;  and “to”, when used with respect to a period of time,  shall mean to and including;
and

3

(f)      if any action or event is to occur on a day that is not a Business  Day,  then such  action or event shall
occur on the first Business Day occurring thereafter.

         “ACCOUNT”  means an  obligation  of an  Obligor  to pay  money,  whether  under an open  account  balance,
consumer loan, installment sales or payment agreement,  deficiency balance,  deferred payment contract or any other
arrangement  whatsoever,  as set forth and described in a Purchase Agreement,  and all unpaid balances due from the
Obligors with respect to such  obligations,  together with all documents  evidencing  such  Obligors'  agreement to
make payment of such unpaid balances,  including  without  limitation each loan application or agreement,  and each
promissory  note, loan  agreement,  receivable,  chattel paper,  payment  agreement,  contract,  installment  sales
agreement  or other  obligation  or promise to pay of an Obligor,  all as  described  and referred to in a Purchase
Agreement.

         “AFFILIATED  PARTY” means a Person which is related to,  affiliated with or controlled by, or under common
control with, or common ownership of, the Borrower, the Servicer or Encore Capital Group.

         “ASSET”  means each Account and any property or other right  obtained by the Borrower in  connection  with
collection of any such Account or in substitution  therefor,  all of which  constitute a part of the Portfolio into
which such Account was initially delivered.

         “ASSET DOCUMENTS” has the meaning set forth in Section 2.2.

         “BANKRUPT  ACCOUNT”  means any Account  the Obligor of which is subject to (i) a petition  filed under the
United  States  Bankruptcy  Code by or against  such  Obligor,  (ii) a decree or order for relief in a  bankruptcy,
insolvency,  readjustment  of debt or  similar  proceeding  enforced  by a court of  supervising  authority  having
jurisdiction  in respect of such Obligor,  or (iii) the  appointment  of a trustee in  bankruptcy,  conservator  or
receiver for such Obligor in any bankruptcy, insolvency, readjustment of debt or similar proceeding.

         “BULK TRANSFER” has the meaning set forth in Section 2.7.

         “BUSINESS  DAY”  means  any day  other  than (a) a  Saturday  or  Sunday  and (b) a day on  which  banking
institutions  in the states of  California  or New York are  authorized  or  obligated by law,  executive  order or
governmental decree to be closed.

         “CLOSING DATE” means July 25, 2003.

         “COLLATERAL” has the meaning specified in the Loan Agreement.

         “COLLECTIONS” means any and all monies,  payments,  revenues,  income, receipts,  collections,  recoveries
and other proceeds or assets,  representing  collected  available  funds,  net of checks returned for  insufficient
funds,  received or  otherwise  recovered  on or with  respect to Assets (net of  Permitted  Third-Party  Costs and
Permitted  Third-Party  Fees retained by Permitted  Third  Parties out of  collections  received by such  Permitted
Third Parties)  including (a) payments of principal,  interest,  fees,  late charges,  insufficient  funds charges,
guaranty  payments and any interest  thereon,  credit insurance  payments and other cash receipts on account of any
Asset,  (b)  interest  on the  Remittance  Account  or any  other  account  created  in  connection  herewith,  (c)
court-awarded  legal fees and expenses,  court-awarded  reimbursement of fees, costs and expenses,  (d) legal fees,
credit  insurance  costs,  guaranty  fees and other  amounts  recovered on account of any Asset,  to the extent the
obligation  giving  rise  thereto  has  previously  been paid or is  otherwise  not due and  payable  with any such
receipts,  (e) settlements,  compromises,  liquidations,  foreclosure proceeds,  dispositions,  sales, transfers or
other  proceeds,  whether cash or otherwise,  received as a result of or in any way in connection  with  collection
activities  related  to any Asset or in  connection  with the sale,  transfer  or  disposition  of any  Asset,  (f)
payments,  fees,  rebates,  refunds,  commissions,  kickbacks,  rakeoffs,  discounts,  deductions,  whether cash or
otherwise,  received  by  Borrower,  or any  Affiliated  Party,  as a result  of or in any way in  connection  with
collection  activities  related to any Asset or in connection with the sale,  disposition or transfer of any Asset,
and (g) proceeds from the sale of Accounts pursuant to Section 2.7.

4

         “DEFAULT”  means an event  that,  with  giving of notice or passage of the grace  period (if any) or both,
would constitute an Event of Default.

         “ELIGIBLE  ACCOUNT” means a segregated  account,  which may be an account (i) maintained with a depository
institution  or trust  company whose long term  unsecured  debt  obligations  are rated at least BBB+ by Standard &
Poor’s Ratings Services and Baal by Moody’s Investors Service,  Inc.;  provided that if only one such rating agency
rates such  institution,  such single  rating  shall  suffice),  or (ii) a  segregated  account  maintained  with a
federally or state chartered  depository  institution  subject to regulations  regarding fiduciary funds on deposit
substantially similar to 12 C.F.R. § 9.10(b).

         “ENCORE  CAPITAL  GROUP” means Encore  Capital Group,  Inc., a Delaware  corporation,  which is the parent
corporation of the Borrower and the Servicer and which is a publicly traded company.

         “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

         “EVENT OF DEFAULT” has the meaning specified in Section 7.1 of the Loan Agreement.

         “GAAP” means accounting principles generally accepted in the United States of America.

         “INITIAL TRANSACTIONAL EXPENSES” has the meaning specified in Appendix A of the Loan Agreement.

         “LEGAL OUTSOURCING MANAGEMENT FEE” has the meaning specified in Section 3.1.

         “LOAN” means the loan made by the Lender to the Borrower pursuant to the Loan Agreement.

         “LOAN DOCUMENTS” means this Agreement,  the Loan Agreement,  the Account Control Agreement and any related
agreement or document contemplated thereunder.

5

         “MIDLAND CREDIT” means Midland Credit Management, Inc., a Kansas corporation.

         “MONTHLY  RECONCILIATION  REPORT” means,  as to any Monthly Report Date, a report  delivered to the Lender
on such date  substantially in the form of Exhibit C hereto,  setting forth as of the end of immediately  preceding
month all Collections  received,  all Servicing Fees,  Legal  Outsourcing  Management Fees,  Permitted  Third-Party
Costs and Permitted Third-Party Fees netted from Collections,  interest and principal  calculations with respect to
the Loan, and other relevant information to determine the use and application of Collections during such month.

         “MONTHLY  REPORT  DATE”  means the date on which the  Monthly  Reconciliation  Report  is  required  to be
delivered by the Servicer to the Lender,  which date shall be the fifteenth  (15th) day of each month,  or, if such
fifteenth (15th) day is not a Business Day, the next succeeding Business Day.

         “NAN” or “National  Attorney Network” means the National  Attorney Network,  a division of TSYS Total Debt
Management, Inc.

         “NET NEGATIVE PERMITTED  THIRD-PARTY COSTS” means the amount of Permitted  Third-Party Costs expended with
respect to the Assets which have been paid from sources other than collections arising from the Assets.

         “NOTE” means the promissory  note,  dated as of the Closing Date,  substantially  in the form of Exhibit A
to the Loan Agreement, issued by the Borrower to the order of the Lender.

         “OBLIGOR”  means the  customer,  obligor,  maker,  borrower or other party  primarily  obligated to pay an
Account.

         “PERMITTED  THIRD  PARTY”  means  (i)  any  member  of  the  National  Attorney  Network,  (ii)  Automated
Collections Control,  Inc. d/b/a  YouveGotClaims.com  and each collections attorney or agency engaged in connection
with the use thereof,  (iii) [***] with respect to its balance  transfer  program,  and (iv) any other Person
reasonably acceptable to the Lender selected by Servicer to assist in the collection process.

         “PERMITTED  THIRD-PARTY  COSTS” means all  out-of-pocket  costs and expenses incurred by a Permitted Third
Party retained or otherwise  engaged by the Servicer in connection with collection  actions or proceedings  related
to the  enforcement or collection of any Account,  which may be retained by such  Permitted  Third Party solely out
of collections collected by such Permitted Third Party.

         “PERMITTED  THIRD-PARTY  FEES”  means the amount of any fees or  compensation  paid or owed to a Permitted
Third  Party  retained  or  otherwise  engaged by the  Servicer  under fee or  compensation  arrangements  that are
contingent  upon,  and  determined  by  reference  to, the amounts  (net of related  Permitted  Third-Party  Costs)
recovered by such Permitted Third Party in respect of the related Accounts.



[***]  Omitted pursuant to a request for confidential
treatment. The omitted material has been filed
separately with the Securities and Exchange
Commission.

6

         “PERSON”  means any  individual,  corporation,  partnership,  limited  liability  company,  joint venture,
association,  joint-stock  company,  trust,  unincorporated  organization  or government or any agency or political
subdivision thereof.

         “PLAN” means an employee  benefit plan or other plan  maintained  for employees and covered by Title IV of
ERISA.

         “PORTFOLIO”  means all Accounts and other Assets  purchased  from a Portfolio  Seller,  together  with (a)
each and every  Asset  obtained  in  replacement  or  satisfaction  of or  substitution  for,  any such  Account so
purchased,  (b) each and every item of property  obtained by the Borrower as a result of its collection  activities
with respect to any such  Account,  including  Re-Write  Notes,  (c) each and every item of collateral or security,
including all security interests,  liens,  guarantees and other interests securing payment of any Account,  and all
other rights and  interests of the Borrower with respect to each Account,  (d) each  judgment  rendered  against an
Obligor in respect of an Account,  together with all lien rights related thereto,  (e) Collections  derived from or
paid or payable with respect  thereto,  together  with any and all earnings  thereon,  and (f) each and every other
right, claim and interest associated therewith.

         “PORTFOLIO  SELLER” means the party that sold or has agreed to sell a specified  Portfolio to the Borrower
pursuant to the terms and conditions of a Purchase Agreement.

         “POST-CLOSING  TRANSACTIONAL  EXPENSES”  shall  mean  all  reasonable  out-of-pocket  costs  and  expenses
incurred by the Lender in  connection  with the  interpretation,  enforcement,  exercise of rights or amendment (in
each case, whether or not definitive action is taken) of the Loan Documents.

         “PURCHASE  AGREEMENT”  means the asset or account  purchase and sale agreement by and between the Borrower
and a Portfolio  Seller  pursuant to which such  Portfolio  Seller agrees to sell (i) a specified  Portfolio to the
Borrower for a specified  purchase  price,  or (ii) a number of  Portfolios  to the Borrower  pursuant to a Forward
Flow Purchase Agreement.

         “REMITTANCE ACCOUNT” has the meaning set forth in Section 2.9.

         “REMITTANCE  DATE” means each Friday  commencing on August 1, 2003 until all amounts due and payable under
the Loan Agreement have been satisfied.

         “REMITTANCE  PERIOD” means,  with respect to each Remittance  Date, the period of time commencing with the
Friday  occurring two (2) weeks prior to the applicable  Remittance Date and ending on the Thursday first occurring
after such Friday;  provided,  however, that the initial Remittance Period shall mean the period of time commencing
with July 1, 2003 and ending on July 24, 2003.

         “REMITTANCE  REPORT” means,  with respect to a Remittance  Period,  a report  substantially in the form of
Exhibit B hereto,  setting forth the Collections,  Servicing Fees, Legal Outsourcing  Management Fees,  outstanding
balance of the Loan,  Permitted  Third-Party  Costs and  Permitted  Third-Party  Fees  netted from  Collections  by
Permitted Third Parties,  Net Negative  Permitted  Third-Party  Costs, and other relevant  information to determine
the use and application of Collections during such Remittance Period.

7

        “REMITTANCE  REPORT DATE” means,  with respect to a Remittance  Date, the second  Business Day immediately
preceding such Remittance Date.

         “REPORTABLE EVENT” has the meaning assigned to that term in Title IV of ERISA.

         “RE-WRITE  NOTE” means a promissory  note issued by an Obligor in favor of the Borrower in  replacement or
settlement of the Account of such Obligor.

         “SERVICER”  initially means Midland Credit, and, if thereafter  replaced,  means any replacement  servicer
or any permitted successor or assign thereof.

         “SERVICER'S  COLLECTION  ACCOUNT” means account  [***] maintained by the Servicer with Wells Fargo
Bank,  National  Association,  or such other collection  account as may be approved in writing from time to time by
the Lender, which account the Servicer shall use solely for receipt of collections.

         “SERVICING  FEE”  means  the fee  payable  to the  Servicer  for  services  rendered  during  the  related
Collection Period,  computed in accordance with Exhibit A hereto;  provided,  however, that the Servicing Fee shall
not be payable with respect to any  Collections  to the extent that they are a result of  repurchase of Assets by a
Portfolio Seller.

         “SUBSIDIARY”  means,  with  respect  to any  Person,  (i) any  corporation  of which  more than 50% of the
outstanding  shares of capital stock having general voting power under ordinary  circumstances  to elect a majority
of the board of  directors  of such  corporation,  irrespective  of  whether  or not at the time stock of any other
class or classes has or might have  voting  power by reason of the  happening  of any  contingency,  is at the time
directly or indirectly owned by such Person, by such Person and one or more other  Subsidiaries,  or by one or more
other  Subsidiaries,  (ii) any partnership of which 50% or more of the partnership  interests  therein are directly
or  indirectly  owned by such Person,  by such Person and one or more other  Subsidiaries,  or by one or more other
Subsidiaries,  and (iii) any  limited  liability  company  or other form of  business  organization  the  effective
control of which is held by such Person,  such Person and one or more other  Subsidiaries,  or by one or more other
Subsidiaries.

         “TERMINATION EVENT” has the meaning set forth in Section 6.1.

         “UCC” means the Uniform  Commercial  Code as in effect from time to time in New York or in any state whose
laws are held to govern the creation,  perfection or foreclosure of any security  interest  granted pursuant to the
Loan Agreement.

         “YGC” means Automated  Collections Control,  Inc. d/b/a  YouveGotClaims.com  and collections attorneys and
agencies engaged in connection with the use thereof.



                                                ARTICLE II
                                                SERVICING



Section 2.1       Appointment  of the Servicer as Servicer.  The Servicer  shall  collect,  administer  and service
all Accounts and other Assets from time to time  constituting a part of any Portfolio  financed in whole or in part
by the  Lender in  accordance  with this  Agreement  and shall  have full  power and  authority,  to the extent not
limited hereunder,  to do or cause to be done any and all things in connection with such servicing,  administration
and  collection.  In the  performance of its duties and  responsibilities  under this  Agreement,  the Servicer may
engage Permitted Third Parties to commence collection actions,  foreclosure  proceedings and/or the like; provided,
however,  that  each  Permitted  Third  Party  shall be  engaged  on a  contingency  fee  basis  and all  Permitted
Third-Party  Costs and Permitted  Third-Party  Fees shall be payable only by such Permitted  Third Party  retaining
such  Permitted  Third-Party  Costs and Permitted  Third-Party  Fees from  collections  collected by such Permitted
Third  Party.  The  Servicer  acknowledges  that the  Borrower  has  assigned to the Lender for security all of the
Borrower’s rights under this Agreement.



[***]  Omitted pursuant to a request for confidential
treatment. The omitted material has been filed
separately with the Securities and Exchange
Commission.

8

Section 2.2       Documents  Evidencing  Assets.  To the extent  delivered to the  Borrower by a Portfolio  Seller,
the Borrower will deposit with the Servicer  copies of each document  evidencing or relating to an Account or other
Asset to be  serviced  by the  Servicer,  together  with such other  documents  available  to the  Borrower  as the
Servicer may  reasonably  require in order to perform its duties under this  Agreement.  In addition,  the Servicer
shall (i)  maintain  and  retain  physical  possession  of good and  legible  copies of all  other  instruments  or
documents,  including original Re-Write Notes to the extent permitted under this Agreement,  executed by an Obligor
and/or the  Servicer to modify,  supplement,  compromise,  settle,  restructure  or  otherwise  modify the terms or
conditions  of any Account  during the term that the  Servicer is servicing  the  Accounts,  and (ii)  maintain and
retain  originals or copies,  as  appropriate,  of all  instruments  and documents  generated by or coming into the
possession  of the  Servicer  (including  current and  historical  computerized  data files,  whether  developed or
originated by the Servicer or others) that are reasonably  required to evidence,  document,  collect or service any
Asset. All documents  described in this Section 2.2 are referred to collectively  herein as the “Asset  Documents”.
All Asset  Documents  shall remain the property of the  Borrower,  subject to the security  interest of the Lender,
and shall be kept by the  Servicer  at the  address  set forth in  Section  7.2 and shall  not,  without  the prior
written consent of the Lender, be moved therefrom.

Section 2.3       Duties of  Servicer.  Without  limiting  the  generality  of  Section  2.1,  the  Servicer  shall
undertake  commercially  reasonable  efforts to collect or otherwise realize upon each Asset comprising a part of a
Portfolio  being serviced  hereunder,  including,  without  limitation,  commencing (i)  collection  actions,  (ii)
foreclosure  proceedings  and  repossession  activities,  if  applicable,  and  (iii)  other  customary  collection
practices.  In that  connection,  the Servicer shall be solely  responsible  for the retention and  compensation of
attorneys  (other than Permitted  Third Parties)  engaged for purposes of pursuing  collection  litigation  against
Obligors,  collection and posting of all payments,  responding to inquiries of Obligors of Accounts,  investigating
delinquencies,  sending statements to Obligors,  reporting any required tax information to Obligors,  reporting any
required credit information on Obligors to the credit bureaus,  accounting for Collections  collected on account of
any Asset,  monitoring the status of any  guaranties or insurance  policies  relating to any Asset,  commencing and
pursuing  collection  actions,  entering into agreements for the  settlement,  compromise or satisfaction of Assets
and such other practices and procedures as are generally employed in collecting  similar accounts,  loan portfolios
and other  receivables.  To the extent that the Servicer,  in the  performance  of its duties and  responsibilities
under this  Agreement,  engages  Permitted  Third Parties or other  attorneys  for purposes of pursuing  collection
litigation or other purposes,  the Servicer shall also have sole  responsibility  for monitoring the activities and
actions of such Permitted  Third Parties and such other attorneys and shall use reasonable  efforts to require,  by
enforcement  of the  applicable  contract of  placement  or  engagement,  that such  activities  and actions are in
compliance with provisions of this Agreement.

9

Section 2.4       Servicing Standards; Subservicing.

(a)      The  Servicer  agrees  that it shall  service,  administer,  collect,  market  and sell  the  Assets  in a
commercially reasonable manner.

(b)      In addition to  Permitted  Third  Parties,  the  Servicer,  with the prior  approval of the Lender,  which
approval shall not be  unreasonably  withheld,  delayed or  conditioned,  may appoint one or more  subservicers  to
perform the  Servicer's  duties  hereunder.  No  appointment  of any  subservicer or engagement of any attorney for
collection  litigation  or other  purposes  by the  Servicer  shall  relieve  the  Servicer of any of its duties or
responsibilities under this Agreement,  including without limitation,  its servicing responsibilities hereunder and
its reporting  responsibilities  hereunder.  The Servicer  shall not be entitled to payment of any Servicing Fee on
account of the Assets subject to a subservicing  agreement,  but the amount of such subservicing fees payable under
such  subservicing  agreement shall be payable from  Collections  from such Assets serviced by such  subservicer in
lieu of the Servicing Fee which would otherwise be payable to the Servicer with respect to such Assets.

Section 2.5       Power and  Authority.  The  Servicer is hereby  granted the full power and  authority  to conduct
its  servicing,  administration  and  collection  activities  for and on behalf of the  Borrower  and the Lender as
contemplated  herein and,  without  limiting the  generality of the  foregoing,  is authorized and empowered to (a)
make all  communications  with  Obligors  under  Accounts in the  Borrower's  name and (b) execute and deliver,  on
behalf of the Borrower,  any and all  instruments of amendment,  modification,  satisfaction,  cancellation,  sale,
transfer,  release,  discharge  and all other  comparable  instruments  with  respect to any such Asset;  provided,
however,  that the authority  granted above shall not be exercised by the Servicer unless  consistent with Section
2.6 and Section 2.7 hereof.  To the extent  permitted  by  applicable  law, the  Servicer is hereby  authorized  to
commence,  in the name of the Borrower,  legal  proceedings  to collect  Accounts and to commence or participate in
any other legal  proceeding  otherwise  relating to or  involving  an Account or any other  Asset.  If the Servicer
commences or  participates in any such legal  proceedings,  the Servicer is authorized and empowered to execute and
deliver,  in the  Borrower's  name,  any notices,  demands,  claims,  complaints,  responses,  affidavits  or other
documents or  instruments  in connection  with any such  proceeding.  Upon request,  the Borrower shall furnish the
Servicer with any powers of attorney or other  documents  which the Servicer may  reasonably  request and which the
Borrower  may  reasonably  approve in order to take such steps as the  Servicer  deems  necessary,  appropriate  or
expedient to carry out its servicing, administration and collection activities under this agreement.

Section 2.6       Settlement  Authority  and Re-Write  Notes.  The  Servicer  shall have  authority to  compromise,
settle or cooperate  with the  Borrower in selling any Account or other Asset.  In  furtherance  of the  Servicer's
collection  of Accounts,  the Servicer may accept,  on behalf of the Borrower and subject to the Lender's  security
interest,  a  promissory  note issued by an Obligor in favor of the Borrower in  replacement  or  settlement  of an
Account (a  “Re-Write  Note”).  Each  Re-Write  Note shall be in  compliance  with all  applicable  laws and,  upon
execution and delivery of such Re-Write  Note by the Obligor to the  Servicer,  the Servicer  shall affix thereto a
legend clearly stating that all right,  title and interest thereto shall be the exclusive  property of the Borrower
subject to the lien and  security  interest of the Lender.  So long as no Default or Event of Default  exists under
the Loan Agreement and no Termination Event exists under this Agreement,  the Lender shall permit the Servicer,  as
agent for the Lender (for the sole purpose of  perfecting  the  Lender's  security  interest in Re-Write  Notes) to
retain  possession of Re-Write Notes. The Servicer hereby  acknowledges and agrees that it shall retain  possession
(in the same manner as, and  consistent  with,  Section 2.2 hereof) of the  Re-Write  Notes as agent for the Lender
for the purpose of  perfecting  the Lender's  security  interest in the Re-Write  Notes.  Upon the  occurrence of a
Default or an Event of Default  under the Loan  Agreement  or upon the  occurrence  of a  Termination  Event,  upon
written request of the Lender,  the Servicer shall  immediately  deliver all Re-Write Notes to the Lender. If after
delivery of the Re-Write  Notes to the Lender (at a time when the Servicer has not been  terminated as servicer for
the  Assets),  the  Servicer  needs  possession  of a Re-Write  Note for  amendment,  enforcement  or return to the
applicable  Obligor upon final payment of such Re-Write  Note, the Servicer shall provide the Lender with a written
request for the  applicable  Re-Write  Note.  Upon receipt of such written  request from the  Servicer,  the Lender
shall promptly  provide to the Servicer the requested  Re-Write Note.  Unless such Re-Write Note is paid in full or
a lesser amount is accepted by the Servicer in its  reasonable  judgment in full  satisfaction  of the amount owing
under such Re-Write Note,  the Servicer  shall  promptly  return such Re-Write Note to the Lender when the Servicer
no longer needs possession of such Re-Write Note for amendment or enforcement.

10

Section 2.7       Account Sales.  The Servicer may, and the Borrower may,  without the consent of the Lender,  sell
Bankrupt  Accounts to a third party who is not an  Affiliated  Party in an arm's length  transaction.  The Servicer
may also,  without the consent of the Lender,  sell,  assign or otherwise  transfer Accounts from more than one (1)
Obligor  (a “Bulk  Transfer”)  to a third  party who is not an  Affiliated  Party in an arm's  length  transaction;
provided,  that the purchase price  percentage is not less than the applicable  purchase price  percentage  paid by
Borrower for the receivables being sold, in each case as set forth in the applicable  Purchase  Agreements.  Except
as permitted  herein,  the Servicer may not,  without the consent of the Lender,  convey,  sell, lease or otherwise
dispose of the  Receivables,  or any  portion of the  Receivables.  Any Bulk  Transfer of Accounts or any sale of a
Bankrupt Account pursuant to this paragraph is sometimes  referred to as a “Permitted  Sale”. Upon deposit into the
Remittance  Account of the  Collections  generated  from a Permitted  Sale,  such  Permitted Sale shall be free and
clear of any lien or security interest of the Lender, and the Lender,  upon request of the Borrower,  shall execute
and deliver to the Servicer UCC releases  prepared by the Servicer,  in form and content  acceptable to the Lender,
with respect to the Accounts sold or  transferred  pursuant to such Permitted  Sale.  Upon request of the Borrower,
the  Lender  shall  provide  prior to the  closing of a  Permitted  Sale a  “payment  letter”  in form and  content
acceptable to the Lender which will provide  that,  among other things,  upon deposit into the  Remittance  Account
of immediately  available funds by the date and in the amount specified in such “payment letter”,  the Lender shall
execute and deliver UCC releases  prepared by the  Servicer,  in form and content  acceptable  to the Lender,  with
respect to the Accounts sold or transferred pursuant to such Permitted Sale.

Section 2.8       Legal  Compliance.  The Servicer  shall perform all of its  obligations  under this  Agreement in
full compliance with all applicable laws, rules and  regulations,  including laws, rules and regulations  governing
debt  collection  practices and  procedures.  To the extent that the Servicer places Assets for collection with any
subservicer  or  engages  any  Permitted  Third  Party  or any  other  attorney  to  commence  collection  actions,
foreclosure  proceedings  and/or  the like  with  respect  to the  Assets,  the  Servicer  shall  advise  each such
subservicer,  Permitted  Third Party or other attorney of provisions in this Agreement and the Loan Agreement which
are  relevant  to such  placement  or  engagement.  The  Servicer  shall use  reasonable  efforts  to  require,  by
enforcement  of the  applicable  contract of such  placement or  engagement,  each such  subservicer  and each such
Permitted  Third  Party or other  attorney  to perform all of its  obligations  with  respect to the Assets in full
compliance  with  the  provisions  of this  Agreement  and the  Loan  Agreement  and in full  compliance  with  all
applicable laws, rules and regulations,  including laws, rules and regulations  governing debt collection practices
and  procedures.  The  Servicer  specifically  represents  and  warrants  to the  Borrower  and the Lender that the
Servicer is  knowledgeable  and  experienced in complying with such laws,  rules and regulations as they pertain to
debt collection practices and procedures.

11

Section 2.9       Remittance Account.

(a)      The  Servicer  shall cause to be  established  and, in  accordance  with the  Account  Control  Agreement,
maintained  at all  times an  Eligible  Account  (the  “Remittance  Account”)  on  behalf of and in the name of the
Borrower.  The Borrower  shall  possess all right,  title and interest in all funds on deposit from time to time in
the  Remittance  Account  subject to the security  interest of the Lender and shall hold all funds therein in trust
on behalf of and as fiduciary for the Lender.  The Borrower  shall have no right of withdrawal  from the Remittance
Account.

(b)      The Servicer shall deposit into the Remittance  Account on a daily basis, all Collections  posted by it on
the prior  Business Day, net of (i) all Servicing  Fees (or fees payable in lieu thereof to a subservicer  pursuant
to Section 2.4) and Legal  Outsourcing  Management  Fees earned that are due and payable to the Servicer,  and (ii)
all Net Negative  Permitted Third Party Costs. The Servicer shall use reasonable  efforts to require by enforcement
of the applicable  contract of placement or  engagement,  all  Collections  whether  received by a  subservicer,  a
Permitted Third Party or any other attorney engaged to commence collection actions,  foreclosure  procedures and/or
the like, to be paid to the Servicer for deposit into the Remittance  Account  pursuant to the applicable  contract
of placement or engagement.  To the extent that Collections are received (whether by wire transfer,  money order or
otherwise) in the Servicer's  Collection  Account and posted,  the Servicer shall transfer all Collections  (net of
the amounts set forth in clauses (i) and (ii)  above) on a daily basis from the  Servicer's  Collection  Account to
the Remittance  Account.  Except for the temporary deposit of Collections in the Servicer's  Collection  Account as
provided in the preceding  sentence,  the Servicer  shall not commingle any  Collections  collected with respect to
the Assets with any moneys or other funds which are not Collections.  Pending  distribution  pursuant thereto,  all
Collections  at any time held by the Servicer,  any  subservicer,  any Permitted  Third Party or any other attorney
shall be held in trust for the benefit of the Lender.  The  Servicer  acknowledges  that the Borrower has granted a
security  interest to the Lender in all of the  Borrower's  right,  title and  interest in and to all  Collections,
including  those from time to time on deposit in the Servicer's  Collection  Account and those from time to time on
deposit in the Remittance Account.  The Servicer has not granted,  and will not grant, to any Person (i) a security
interest in the Servicer's Collection Account or in the Collections at any

12

(c)      time on deposit in the  Servicer's  Collection  Account.  or (ii) the right to control in any  respect the
Servicer's Collection Account or any Collections at any time on deposit therein.

Section 2.10      Distributions  from the Remittance  Account.  All Collections from time to time on deposit in the
Remittance  Account in accordance  with Section 2.9(b) shall be held therein until  distribution on the appropriate
Remittance  Date.  Not later than 3:00 p.m.  Eastern time on the  applicable  Remittance  Report Date, the Servicer
shall  deliver to the Lender the  Remittance  Report for the related  Remittance  Period.  Not later than 3:00 p.m.
Eastern  time on the  applicable  Remittance  Date,  the  Servicer  shall  wire all  amounts  with  respect  to the
corresponding  Remittance  Period on deposit in the Remittance  Account to a bank account  designated by Lender for
application  on the  applicable  Monthly Report Date in accordance  with Section 2.2 of the Loan  Agreement,  until
such time as all amounts due and payable under the Loan Agreement have been satisfied.

Section 2.11      Accounting for Fees. The Servicer  shall provide to the Lender on each  Remittance  Report Date a
detailed  accounting of all Servicing Fees and Legal Outsourcing  Management Fees actually incurred and paid to the
Servicer for the immediately  preceding  Remittance Period. In the event that the amounts paid exceed or fall short
of the  Servicing  Fees and Legal  Outsourcing  Management  Fees  actually  due and  payable  pursuant  to the Loan
Agreement and/or the Servicing Agreement for such preceding  Remittance Period, an appropriate  adjustment shall be
made in the disbursement from the Remittance Account.

Section 2.12      Insurance.  The  Servicer  shall  maintain  at all  times  during  the  term  of  this  Agreement
insurance  coverage  substantially  similar  (including  amounts of monetary coverage) to the policies set forth in
Schedule 5.1(l).



                                                 ARTICLE III
                                SERVICING AND OTHER FEES; REIMBURSEMENT OF EXPENSES




Section 3.1       Servicing Fees; Legal Outsourcing Management Fees.

(a)      Except to the  extent  that the  provisions  of this  Agreement  or the Loan  Agreement  provide  that the
Servicer is not  entitled to a Servicing  Fee, the  Servicer  shall be entitled to a Servicing  Fee with respect to
Collections,  computed in accordance  with Exhibit A. Any Servicing  Fee shall be payable  solely from  Collections
and shall be without recourse to the Lender.

(b)      As compensation for its services in managing the legal placement of accounts  through YGC,  Servicer shall
receive a Legal  Outsourcing  Management Fee equal to [ *** ] percent ( *** %) of gross  collections  received  through
the use of YGC,  out of which fee  Servicer  shall be  responsible  for  paying  all fees owing to YGC (but not the
Permitted  Third-Party Costs incurred by, or the Permitted  Third-Party Fees payable to, the collections  attorneys
engaged in connection with the use of YGC).



[***]  Omitted pursuant to a request for confidential
treatment. The omitted material has been filed
separately with the Securities and Exchange
Commission.

13

Section 3.2       Nonreimbursable  Expenses of the Servicer.  Except for Permitted  Third Party Costs and Permitted
Third Party Fees retained by Permitted  Third Parties from  collections  received by such  Permitted  Third Parties
and except with respect to a subservicer  to the extent  contemplated  by Section 2.4, the Servicer shall be solely
responsible  for payment of all costs and expenses  incurred in connection  with the servicing,  administration  or
collection of Assets.  Without  limiting the  generality of the  foregoing,  and with the exception of Net Negative
Permitted  Third Party Costs,  it is  understood  and agreed that the Servicer  shall not be entitled to payment or
reimbursement  for any costs of  collecting  or realizing  upon any Account  (including,  without  limitation,  any
filing  fees,  court  costs,  legal fees or other costs or expenses  incurred by the  Servicer) or for any overhead
expenses of the Servicer,  salaries,  wages or other  compensation of employees of the Servicer or travel and other
expenses  incurred by any  employees of the  Servicer.  In addition,  except for  Permitted  Third-Party  Costs and
Permitted  Third-Party Fees retained by Permitted Third Parties from  collections  received by such Permitted Third
Parties and except with  respect to a  subservicer  to the extent  contemplated  by Section  2.4, to the extent the
Servicer  engages  any other  party to  perform  any  aspects of its duties  under this  Agreement,  any such fees,
charges, costs or expenses therefor shall be paid by the Servicer and shall not be reimbursable from Collections.




                                                ARTICLE IV
                                        ACCOUNTING, STATEMENTS AND REPORTS




Section 4.1       Books and Records.

(a)      The Servicer shall keep accurate books and records  pertaining to the  operations,  business and financial
condition  of the Servicer and to such other  matters as the Lender may from time to time  reasonably  request with
respect to the Servicer.

(b)      The Servicer shall (i) maintain and retain  detailed  records with respect to each Asset setting forth the
status of such  Asset,  the amount and  application  of any funds  received  on  account  of such  Asset,  or other
realization  upon,  such Asset,  and (ii) maintain and retain notes related to the  servicing,  administration  and
collection  efforts and  activities  with respect to each Asset as are reasonably  necessary to continue  servicing
the Asset.  The Servicer  shall also make periodic  reports in accordance  with Section 4.2. To the extent that the
Servicer  has placed any of the Assets  with a  subservicer  or has  engaged a  Permitted  Third Party or any other
attorney  to  commence  collection  actions,  foreclosure  proceedings  and/or  the like,  the  Servicer  shall use
reasonable  efforts to require,  by enforcement of the  applicable  contract of placement or engagement,  each such
subservicer  and each such Permitted Third Party and each such other attorney to keep detailed  records  pertaining
to such  Assets.  Such  records may not be  destroyed  or  otherwise  disposed of except as  provided  herein.  All
records and all Asset  Documents,  whether or not developed or originated by the Servicer,  any such subservicer or
any such  attorney,  shall remain at all times the property of the Borrower,  subject to the security  interests of
the Lender therein.  None of the Servicer,  any such subservicer,  any such Permitted Third Party or any such other
attorney shall acquire any property rights with respect to any such books or records or Asset  Documents,  and none
of the Servicer,  any such  subservicer,  any such Permitted  Third Party or any such other attorney shall have any
right to possession of any of them except  pursuant to this  Agreement.  Upon  termination of this  Agreement,  the
Servicer shall immediately  deliver,  and the Servicer shall use reasonable  efforts to require,  by enforcement of
the applicable  contract of placement or engagement,  each such  subservicer,  each such Permitted  Third Party and
each such other  attorney  to  immediately  deliver,  all such  records  and Asset  Documents  to the Lender or its
designee.  The Servicer  shall bear the entire cost of  restoration in the event any such books or records or Asset
Documents shall become damaged,  lost or destroyed while in the possession of the Servicer,  any such  subservicer,
any such Permitted Third Party or any such other attorney.

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Section 4.2       Periodic  Reporting.  Until such time as all  amounts due and  payable  under the Loan  Agreement
have been satisfied,  the Servicer shall provide to the Borrower and the Lender the following periodic reports,  in
form and content acceptable to the Borrower and the Lender:

(a)      As soon as available,  and in any event within one hundred  twenty (120) days after the end of each fiscal
year of Encore  Capital  Group,  a copy of the annual audit report of Encore  Capital  Group and its  Subsidiaries,
including the Borrower and the Servicer,  with the opinion of their respective  certified public accountants (which
opinion  shall not contain any “going  concern”  qualifications  to Encore  Capital Group or the Servicer and which
shall not  contain  any other  qualification  as to the  Collateral  or as to the  ability of the  Borrower  or the
Servicer to perform any of its respective  obligations  under any Loan Documents to which it is a party),  together
with the audited  financial  statements of Encore  Capital Group and its  Subsidiaries,  including the Borrower and
the Servicer,  which  financial  statements  shall include the  consolidated  balance  sheets and the  consolidated
statements  of  operations,  shareholder's  equity  and cash  flows as of and for such  fiscal  year end for Encore
Capital Group and its  Subsidiaries,  all in reasonable  detail and stating in comparative form the figures for the
previous fiscal year, all prepared in accordance with GAAP,  applied on a consistent  basis;  provided that so long
as Encore  Capital  Group is a  reporting  company,  delivery of the Form 10-K filed by Encore  Capital  Group with
respect to a fiscal year shall  satisfy the  requirement  for the annual  audit report and  consolidated  financial
statements under this section).

(b)      As soon as  available  and in any event  within  sixty (60) days after the end of each of the first  three
quarters of each fiscal year of Encore  Capital  Group,  a copy of the interim  unaudited  financial  statements of
Encore Capital Group and its  Subsidiaries,  including the Borrower and the Servicer,  which  financial  statements
shall include the consolidated balance sheets and the consolidated  statements of operations,  shareholder's equity
and cash  flows as of and for the end of such  quarter  for  Encore  Capital  Group  and its  Subsidiaries,  all in
reasonable  detail  and  stating in  comparative  form the  figures  for the  corresponding  date and period in the
previous  fiscal year, all prepared in accordance with GAAP,  applied on a consistent  basis (provided that so long
as Encore  Capital  Group is a  reporting  company,  delivery of the Form 10-Q filed by Encore  Capital  Group with
respect to a fiscal quarter shall satisfy the requirement for quarterly  consolidated  financial  statements  under
this section).

(c)      As soon as available and in any event within  thirty (30) days after the end of each month,  (i) a copy of
the monthly unaudited  financial  statements of Encore Capital Group and its  Subsidiaries,  including the Borrower
and the Servicer,  which financial  statements shall include the  consolidated  balance sheets and the consolidated
statements  of  operations,  shareholder's  equity and cash  flows as at the end of such  month for Encore  Capital
Group and its  Subsidiaries,  all in  reasonable  detail  and  stating  in  comparative  form the  figures  for the
corresponding  date and period in the previous  fiscal year, all (except for the statement of cash flows)  prepared
in accordance with GAAP,  applied on a consistent  basis, and (ii) a copy of the monthly unaudited balance sheet of
the Borrower at the end of such month, certified by a responsible officer of the Servicer.

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(d)      On each Monthly Report Date, beginning August 15, 2003, a Monthly Reconciliation Report.

(e)      Not later than 3:00 p.m.,  Eastern  time,  two (2) Business Days  immediately  preceding  each  Remittance
Date, (i) a Remittance  Report for the applicable  Remittance  Period,  (ii) a cash receipts  report by Asset,  and
(iii) such other reports as the Lender shall reasonably require regarding the Portfolios or the Collections.

(f)      As promptly as  practicable  (but in any event not later than five (5)  Business  Days) after the Servicer
obtains  knowledge of the occurrence of any default by the Servicer in the  performance  of any of its  obligations
under  this  Agreement  or under  any  other  Loan  Document  to which  the  Servicer  is a party,  notice  of such
occurrence,  together  with a detailed  statement  by the Servicer of the steps being taken by the Servicer to cure
the effect of such event.

(g)      As promptly as  practicable  (but in any event not later than five (5)  Business  Days) after the Servicer
obtains knowledge thereof,  notice of any pending or overtly threatened  litigation against Encore Capital Group or
any of its  Subsidiaries  (i) which must be reported in a Form 8-K filed by Encore Capital Group or (ii) which,  if
successful,  would likely result in a judgment of  $1,000,000  or more or (iii) which  involves the Borrower or any
of the Assets (other than routine litigation customary in the collection industry).

(h)      Such  other  information  respecting  any  Portfolio,   the  Servicer,  any  Permitted  Third  Party,  any
subservicer or any attorney engaged by the Servicer as the Lender may from time to time reasonably request.

         The Lender  acknowledges that certain  information  provided to it pursuant to this Agreement,  including,
pursuant to this Section 4.2, may consist of material  nonpublic  information  regarding  Encore  Capital Group and
its  Subsidiaries,  and  Lender  acknowledges  and  agrees  that it is aware  (and that any Person to whom any such
information may be disclosed as permitted by this Agreement has been, or upon receiving such  information  will be,
advised)  of the  restrictions  imposed  by  federal  and state  securities  laws on a Person  possessing  material
nonpublic  information  regarding an issuer of securities.  In the event the Servicer is required to provide to the
Lender  material  nonpublic  information  regarding  Encore  Capital  Group and its  Subsidiaries  pursuant to this
Agreement,  including, without limitation,  pursuant to this Section 4.2, and to the extent that applicable federal
securities laws, rules and regulations  require that the Lender execute and deliver a confidentiality  agreement in
connection with its receipt of such material nonpublic  information,  upon request of the Servicer, the Lender will
execute and deliver a  confidentiality  agreement  reasonably  acceptable  to Lender which has been prepared by the
Servicer and which is consistent with the minimum  requirements  for  confidentiality  agreements set forth in such
federal  securities  laws,  rules and  regulations.  Notwithstanding  any other provision in this  Agreement,  this
paragraph  shall  survive and continue to be binding  against  Lender  after any sale,  conveyance,  assignment  or
transfer by any such Person of the Note.

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Section 4.3       Inspection  Rights.  At any  time  and from  time to time  during  regular  business  hours,  the
Servicer shall permit,  and shall use reasonable efforts to require,  by enforcement of the applicable  contract of
placement or  engagement,  each  subservicer  which is servicing  any of the Assets to permit,  the  Borrower,  the
Lender or their respective agents,  representatives  or designees,  at the sole cost and expense of such requesting
party,  (a) to examine or make copies of  abstracts  from all books,  records  and  documents  (including,  without
limitation)  computer  tapes and disks and  constituting  Asset  Documents  or otherwise in any way relating to any
Asset or the Servicer's or any subservicer’s  collection  activities with respect thereto, (b) to visit the offices
and  properties of the Servicer or any  subservicer  for purposes of examining  such materials or the Servicer's or
any  subservicer’s  procedures,  processes and activities  relating to the exercise of its duties hereunder and (c)
to discuss  matters  relating to Assets or the servicing,  collection or liquidation  thereof or the performance by
the Servicer or any subservicer  with respect thereto with any officers or employees  having  knowledge of any such
matters.  Without  limiting the foregoing,  at any time and from time to time during regular  business  hours,  the
Servicer shall permit, and the Servicer shall use reasonable  efforts to require,  by enforcement of the applicable
contract of placement or engagement,  each subservicer to permit,  certified  public  accountants or other auditors
designated  by the  Borrower  or the  Lender to  conduct a review of the  Servicer's  or any  subservicer's  books,
records and  procedures  with  respect to the  servicing,  administration,  collection  and/or  disposition  of the
Assets.  In connection with the Lender's  exercise of the inspection  rights granted to the Lender pursuant to this
Section 4.3, the Lender will use reasonable  efforts not to interfere with the  preparation by employees and agents
of Encore  Capital Group and its  Subsidiaries  of financial  statements  or other  reports or filings  required by
applicable federal securities laws, rules and regulations.




                                                 ARTICLE V
                                     REPRESENTATIONS, WARRANTIES AND COVENANTS




Section 5.1       Representations  and Warranties of the Servicer.  The Servicer hereby  represents and warrants to
the Lender and the Borrower as follows:

(a)      The Servicer is a corporation  duly  organized,  validly  existing and in good standing  under the laws of
the jurisdiction of its incorporation,  and is duly qualified and licensed to conduct collection  activities and is
in good  standing in each  jurisdiction  in which such  qualification  or  licensing is necessary as a condition to
conducting  collection  activities with respect to Assets being serviced  hereunder and where the failure to obtain
such  licensing or  qualification  would have a material  adverse  effect on the Servicer or its ability to perform
its  obligations  hereunder.  The Servicer has all requisite power and authority to own and operate its properties,
carry out its business as presently  conducted  and as proposed to be conducted and to enter into and discharge its
obligations  under this  Agreement  and the other Loan  Documents to which it is a party.  Within the last five (5)
years,  the Servicer has done  business  only under its current name as specified  herein.  As of the Closing Date,
the chief  executive  office and principal place of business of the Servicer is located at the address set forth in
Section  7.2,  and  all of the  Servicer's  records  relating  to its  businesses  are  kept  at one or more of the
following  locations:  (i) the location set forth in Section 7.2, (ii) 4302 East Broadway  Road,  Phoenix,  Arizona
85040 or (iii) 12375 Kerran  Street,  Poway,  California  92064.  The Servicer will not change its chief  executive
office or principal place of business without sixty (60) days prior written notice to the Lender.

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(b)      The execution and delivery by the Servicer of this  Agreement and the other Loan  Documents to which it is
a party and  performance  and  compliance  by the  Servicer  with the terms of this  Agreement  and the other  Loan
Documents  to which it is a party have been duly  authorized  by all  necessary  action on the part of the Servicer
and will not violate the  Servicer's  organizational  documents or constitute a default under any indenture or loan
or credit  agreement or any other  material  agreement,  lease or instrument to which the Servicer is a party or by
which it or its properties may be bound or affected.

(c)      This  Agreement  and the other Loan  Documents  to which it is a party  constitute  the  valid,  legal and
binding  obligations of the Servicer,  enforceable  against it in accordance with their respective terms, except as
enforcement may be limited by applicable bankruptcy, insolvency,  reorganization,  moratorium or other similar laws
affecting  creditors' rights generally and by general  principles of equity (whether  considered in a proceeding or
action in equity or at law).

(d)      As of the Closing Date, no litigation is pending or, to the best of the Servicer's  knowledge,  threatened
against the Servicer,  the  consequences  of which would  prohibit its entering  into this  Agreement or that would
materially  and  adversely  affect the  condition  (financial  or  otherwise)  or operations of the Servicer or its
properties or the consequences of which would materially and adversely affect its performance hereunder.

(e)      The Servicer has heretofore  furnished to the Borrower and the Lender  consolidated  financial  statements
of Encore  Capital  Group and its  Subsidiaries,  including the Servicer,  as of May 31, 2003.  Those  consolidated
financial  statements  fairly  present  the  consolidated  financial  condition  of  Encore  Capital  Group and its
Subsidiaries,  including the Servicer,  on the date thereof and the results of their respective  operations for the
period ending on May 31, 2003, and, except for the consolidated  statement of cash flows,  which is presented in an
internal  company format,  were prepared in accordance with GAAP. From May 31, 2003 through the Closing Date, there
has been no material  adverse  change in the business,  properties or condition  (financial or otherwise) of Encore
Capital Group and its Subsidiaries, including the Servicer.

(f)      All  actions,  approvals,   consents,  waivers,  exemptions,   variances,   franchises,  orders,  permits,
authorizations,  rights and licenses  required to be taken,  given or obtained,  as the case may be, by or from any
federal,  state or other governmental  authority or agency,  that are necessary or advisable in connection with the
execution and delivery by the Servicer of this  Agreement and the other Loan  Documents to which it is a party have
been duly taken,  given or obtained,  as the case may be, are in full force and effect on the date hereof,  are not
subject to any pending  proceedings or appeals  (administrative,  judicial or otherwise) and either the time within
which any appeal  therefrom may be taken or review  thereof may be obtained has expired or no review thereof may be
obtained or appeal  therefrom  taken,  and are adequate to authorize this Agreement and the other Loan Documents to
which it is a party and, as of the Closing Date,  the  performance  by the Servicer of its  obligations  under this
Agreement and the other Loan Documents to which it is a party.

(g)      The  Servicer  has paid or caused to be paid to the proper  authorities  when due all  federal,  state and
local taxes  required to be  withheld  by it (other than any taxes which are being  contested  in good faith and by
proper  proceedings and for which the Servicer shall have set aside on its books adequate  reserves).  The Servicer
has filed all federal,  state and local tax returns  which to the  knowledge of the officers of the  Servicer,  are
required to be filed,  and the  Servicer has paid or caused to be paid to the  respective  taxing  authorities  all
taxes as shown on said  returns  or on any  assessment  received  by it to the extent  such  taxes have  become due
(other  than any taxes  which are  being  contested  in good  faith  and by  proper  proceedings  and for which the
Servicer shall have set aside on its books adequate reserves).

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(h)      The  Servicer  has no  ownership  interest in the Assets or the Asset  Proceeds  and the  Servicer has not
granted,  or attempted to grant, to any other Person any security  interest in the Assets or the  Collections,  and
no financing  statement  naming the Servicer as debtor and covering the Assets or the Collections is on file in any
office.

(i)      As of the Closing Date,  the Servicer does not maintain and has not in the past  maintained  any Plan. The
Servicer  has not received any notice or has any  knowledge  to the effect that it is not in full  compliance  with
any of the  requirements  of ERISA.  No Reportable  Event or other fact or  circumstance  which may have an adverse
effect on the Plan's tax qualified status exists in connection with any Plan. The Servicer does not have:

i)       any accumulated funding deficiency within the meaning of ERISA; or

ii)      any  liability or know of any fact or  circumstances  which could  result in any  liability to the Pension
         Benefit Guaranty  Corporation,  the Internal  Revenue Service,  the Department of Labor or any participant
         in  connection  with any Plan  (other  than  accrued  benefits  which are or which may  become  payable to
         participants or beneficiaries of any such Plan).

(j)      As of  the  Closing  Date,  the  Servicer  is  in  compliance  with  all  provisions  of  all  agreements,
instruments,  decrees and orders to which it is a party or by which it or its  property is bound or  affected,  the
breach or default  of which  could  have a  material  adverse  effect on the  financial  condition,  properties  or
operations of the Servicer.

(k)      All financial and other  information  regarding the Servicer or Encore Capital Group and its  Subsidiaries
provided to the  Borrower  and/or the Lender by or on behalf of the  Servicer  in  connection  with the  Borrower's
request for the Loan is true and correct in all material  respects and, as to  projections,  valuations or proforma
financial  statements for the Servicer or Encore Capital Group,  or any Portfolio,  present a good faith opinion as
to such  projections,  valuations  and proforma  condition  and results.  The foregoing  information  regarding the
Servicer or Encore Capital Group and its  Subsidiaries  provided to the Borrower  and/or the Lender by or on behalf
of the  Servicer  contains no  omissions  which would cause such  information  to be  misleading.  All  information
provided to the  Borrower  and/or the Lender with  respect to the  Assets,  the  Portfolios,  the  Collections  and
related  matters by or on behalf of the Servicer  is, to the  knowledge  of the  Servicer,  true and correct in all
material  respects  and, to the knowledge of the  Servicer,  does not contain any omissions  which would cause such
information to be  misleading.

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(l)      The attached  Schedule5.1(l)  lists and briefly  describes  each  insurance  policy  maintained for or on
behalf of the Servicer with respect to its properties,  assets and business.  All of such insurance policies are in
full force and effect,  and no default  exists  with  respect to the  obligations  of the  Servicer  under any such
insurance  policies and the Servicer has not received any  notification  of  cancellation  of any of such insurance
policies.  Except as set forth on  Schedule 5.1(l),  the Servicer does not have any  self-insurance or co-insurance
programs.

Section 5.2       Covenants of the Servicer.  The Servicer will comply with the following covenants:

(a)      The Servicer will pay or discharge,  when due, (i) all taxes,  assessments and governmental charges levied
or imposed upon it or upon its income or profits,  upon any  properties  belonging to it prior to the date on which
penalties  attach  thereto,  (ii) all federal,  state and local taxes  required to be withheld by it, and (iii) all
lawful claims for labor,  materials and supplies  which,  if unpaid,  would by law become a lien or charge upon any
properties  of the Servicer;  provided,  that the Servicer  shall not be required to pay any such tax,  assessment,
charge  or  claim  whose  amount,  applicability  or  validity  is being  contested  in good  faith by  appropriate
proceedings.

(b)      The  Servicer  will keep and maintain  all of its  properties  necessary or useful in its business in good
condition,  repair and working  order  (normal wear and tear  excepted);  provided,  however,  that nothing in this
Section  5.2(b)  shall  prevent the  Servicer  from  discontinuing  the  operation  and  maintenance  of any of its
properties if such discontinuance is, in the reasonable  judgment of the Servicer,  desirable in the conduct of the
Servicer's business and not disadvantageous in any material respect to the Borrower or the Lender.

(c)      The  Servicer  will  preserve  and  maintain its legal  existence  and all of its rights,  privileges  and
franchises  necessary  or desirable  in the normal  conduct of its  business  and shall  conduct its business in an
orderly, efficient and regular manner.

(d)      The Servicer will conduct all collection  activities and all sales,  transfers and  dispositions  relating
to the Assets on an arms-length  basis and so as to cause all collections and all  consideration  received upon the
sale,  transfer or  disposition of an Asset to (i) become and  constitute  Collections,  and (ii) be distributed as
Collections in accordance with Section 2.10.

(e)      The Servicer will not create, or attempt to create, any pledge,  lien,  security  interest,  assignment or
transfer upon or in any of the Assets or the Collections,  or assign or otherwise  convey,  or attempt to assign or
otherwise  convey,  any right to receive  collections or other income with respect thereto,  except as contemplated
by the Loan Documents.

(f)      The Servicer will not sell, lease,  assign,  transfer or otherwise dispose of all or a substantial part of
its assets (whether in one transaction or in a series of transactions)  which materially and adversely  affects the
Assets or the ability of the Servicer to perform its obligations under the Loan Documents to which it is a party.

(g)      Except for the right of the  Servicer to remit  Collections  net of certain  amounts  pursuant to Section
2.9, the Servicer shall not assert any claims or set-off rights against the Collections.

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(h)      In the  fulfillment  of Servicer’s  obligations  under this  Agreement,  Servicer shall not, and no person
under its direct  control or direction  shall,  (i) engage in any fraudulent  activity or (ii) knowingly  engage in
any other activity which would constitute a violation of law or other governmental requirement.

(i)      Servicer will use reasonable  efforts to maintain  systems,  personnel and facilities,  including  back-up
and disaster recovery capability, that will enable it to perform fully its obligations under this Agreement.

(j)      Unless Lender otherwise consents in writing:

i)       Servicer  shall not  resign  from the  obligations  and  duties  imposed  on it by this  Agreement  as the
         Servicer.

ii)      Servicer shall not assign this Agreement or any of its rights,  powers,  duties or obligations  hereunder,
         except as authorized pursuant to this Agreement.

iii)     The duties and  obligations of Servicer under this Agreement  shall continue until this Agreement  expires
         or shall have been  terminated  and shall survive the exercise by the Parties of any right or remedy under
         this Agreement, or the enforcement by the Parties of any provision of this Agreement.

(k)      The Servicer  shall not  liquidate,  dissolve,  terminate or suspend its business  operations or otherwise
fail to operate its business in the ordinary course.

(l)      The  Servicer  will not  consolidate  with or merge into any Person,  or permit any other  Person to merge
into it, or  acquire  (in a  transaction  analogous  in  purpose or effect to a  consolidation  or  merger)  all or
substantially all the assets of any other Person.

(m)      The  Servicer  will not accept or receive or agree to accept or receive  any rebate,  refund,  commission,
fee (other than the Servicing Fee and the Legal Outsourcing  Management Fee), kickback or rakeoff,  whether cash or
otherwise and whether paid by or originating  with an Obligor,  any  subservicer or any other party  (including but
not limited to brokers and agents),  as a result of or in any way in connection with collection  activities related
to any Asset or in connection with the sale, disposition, transfer or servicing of any Asset.

(n)      Upon  termination of this Agreement for any reason,  the Servicer shall, in addition to the obligations of
the  Servicer  set forth in Section 6.3 hereof,  provide its  reasonable  cooperation  to Lender,  Borrower and any
successor servicer in the transfer of management responsibilities contemplated by this Agreement.




                                               ARTICLE VI
                                   TERMINATION; TRANSFER OF SERVICING; INDEMNITY



Section 6.1       Termination  Events.  Any of the following  acts or  occurrences  shall  constitute a Termination
Event under this Agreement (each, a “Termination Event”):

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(a)      The Servicer shall fail to deposit to the Remittance  Account any Collections  received by the Servicer as
and when required in accordance  with this  Agreement,  or the Servicer shall fail to pay to the Lender any payment
in the amount and on the date required to be made in  accordance  with this  Agreement,  and any such failure shall
continue for more than two (2) Business Days;

(b)      The  Servicer  shall fail to observe or perform in any respect any  covenant or  agreement  required to be
performed  thereby under this Agreement or under any other Loan Document to which the Servicer is a party,  and the
continuance  of such  default or breach for a period of fifteen  (15)  calendar  days after there has been given to
the Servicer a written notice specifying the default or breach and requiring it to be remedied;

(c)      Any  representation,  warranty or  statement of the Servicer  made in this  Agreement  shall prove to have
been  incorrect  in any  material  respect,  or any  representation,  warranty or  statement of the Servicer in any
certificate,  report or other statement, in writing or orally,  delivered to any party hereto shall not satisfy the
standard applicable to such representation or warranty as set forth in Section 5.1(k) of this Agreement;

(d)      The Servicer or Encore  Capital Group shall be or become  insolvent,  or admit in writing its inability to
pay its debts as they  mature,  or make a general  assignment  for the  benefit of  creditors;  or the  Servicer or
Encore Capital Group shall apply for or consent to the  appointment of any receiver,  trustee,  or similar  officer
for it or for all or any substantial  part of its property;  or such receiver,  trustee or similar officer shall be
appointed  without the  application  or consent of the Servicer or Encore Capital Group and shall not be discharged
within sixty (60) days of  appointment;  or the Servicer or Encore  Capital  Group shall  institute  (by  petition,
application,  answer,  consent or otherwise) any  insolvency,  reorganization,  arrangement,  readjustment of debt,
dissolution,  liquidation  or similar  proceeding  relating to it under the laws of any  jurisdiction;  or any such
proceeding  shall be instituted  (by petition,  application  or otherwise)  against the Servicer or Encore  Capital
Group;  or any judgment,  writ,  warrant of  attachment  or execution or similar  process shall be issued or levied
against a substantial  part of the property of the Servicer or Encore Capital Group and such shall remain  unstayed
or undismissed for sixty (60) days;
(e)      A voluntary  petition  naming the Servicer or Encore Capital Group,  as debtor,  is filed under the United
States  Bankruptcy  Code, or an involuntary  petition  naming the Servicer or Encore Capital Group,  as debtor,  is
filed under the United States  Bankruptcy  Code and such  involuntary  petition shall remain  undismissed for sixty
(60) days;

(f)      An Event of Default as specified  in the Loan  Agreement  shall exist and shall not have been  remedied to
the written satisfaction of the Lender or waived in writing by the Lender;

(g)      A material  adverse  change  shall  occur in the  financial,  business  or  operational  condition  of the
Servicer or Encore  Capital Group as compared to the status of the Servicer or Encore  Capital Group as of the date
of this  Agreement,  which material  adverse change  materially  impacts the ability of the Servicer to perform its
obligations under any Loan Document to which it is a party;

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(h)      Any  Reportable  Event,  which the  Lender  determines  in good faith  might  constitute  grounds  for the
termination of any Plan or for the  appointment  by the  appropriate  United States  District Court of a trustee to
administer  any Plan,  shall have occurred and be continuing  thirty (30) days after written  notice to such effect
shall  have  been  given to the  Servicer  or Encore  Capital  Group by the  Lender;  or any Plan  shall  have been
terminated,  or a trustee shall have been  appointed by an appropriate  United States  District Court to administer
any Plan, or the Pension Benefit Guaranty  Corporation  shall have instituted  proceedings to terminate any Plan or
to appoint a trustee to administer any Plan;

(i)      The  Servicer or Encore  Capital  Group  shall  liquidate,  dissolve,  terminate  or suspend its  business
operations or otherwise fail to operate its business in the ordinary course;

(j)      The Servicer or Encore Capital Group shall sell,  lease,  assign,  transfer or otherwise dispose of all or
a substantial part of its assets (whether in one transaction or in a series of  transactions)  which materially and
adversely  affects  the  Collateral  or the  ability of the  Servicer  to perform  its  obligations  under the Loan
Documents to which it is a party;

(k)      The  Servicer  or Encore  Capital  Group  shall  fail to pay,  withhold,  collect  or remit any tax or tax
deficiency  when assessed or due (other than any tax or tax deficiency  which is being  contested in good faith and
by proper  proceedings and for which it shall have set aside on its books adequate reserves  therefor) or notice of
any state or federal tax liens shall be filed or issued  (other than with respect to any taxes or tax  deficiencies
which are being  contested  in good  faith and by proper  proceedings  and for which it shall have set aside on its
books adequate reserves therefor);

(l)      A continuing  default in the payment of $100,000 or more under any note,  agreement  or other  evidence of
indebtedness  or similar  obligation  of the  Servicer  (other than a default  whose  breach is  elsewhere  in this
Section 6.1  specifically  dealt with) or under any instrument under which such evidence of indebtedness or similar
obligation  has been issued or by which it is governed and the  expiration of the  applicable  period of grace,  if
any, specified in such evidence of indebtedness or other instrument;

(m)      The rendering  against the Servicer or Encore Capital Group of a final  judgment,  decree or order for the
payment of money in excess of  $1,000,000  (unless the payment of such  judgment in excess of  $1,000,000  is fully
waived) which  materially and adversely  affects the ability of the Servicer or Encore Capital Group to perform its
obligations  under  the  Loan  Documents  to  which  it is a party  and such  judgment,  decree  or  order  remains
unsatisfied and unstayed for more than sixty (60) days; or

(n)      Any of the  following  shall  occur:  (i) entry of a court order which  enjoins,  restrains  or in any way
prevents the Servicer or Encore Capital Group from  conducting all or any material part of its business  affairs in
the ordinary course of business,  or (ii)  withdrawal or suspension of any license  required for the conduct of any
material  part of the  business of the  Servicer or Encore  Capital  Group,  or (iii) any assets of the Servicer or
Encore  Capital  Group having a fair market value of $1,000,000 or more in the aggregate are subject to an order or
writ granting a motion or action to replevy, sequester, garnish, attach or levy against such assets.

23

Section 6.2       Termination;  Removal of the Servicer.  Immediately  upon the occurrence of a Termination  Event,
the Lender,  upon written  notice to the Servicer and the Borrower,  may terminate  this  Agreement with respect to
any or all of the Assets or  Portfolios,  whereupon the Servicer  shall be removed from its duties and  obligations
as Servicer  under this  Agreement  with respect to such Assets and  Portfolios and the Lender shall have the right
to appoint one or more  replacement  servicers to service and collect all such Assets and Portfolios.  Selection of
one or more  replacement  servicers and execution of one or more replacement  servicing  agreements shall be in the
sole  discretion  of the Lender and shall be subject to such terms and  conditions,  including as to the  servicing
fee which  shall be payable to such one or more  replacement  servicers,  as the Lender  shall  require in its sole
discretion.  Each such replacement  servicing agreement shall contain a confidentiality  provision in substantially
the form of Section 7.14 of this Agreement.  In addition,  upon the occurrence of a Termination  Event,  the Lender
may pursue the  Servicer  for  damages  and  exercise  any other  right or remedy  against  the  Servicer as may be
available  under  applicable law as a result of the Servicer's  acts or omissions,  whether  arising under contract
law, tort law or otherwise.  Without the prior written consent of the Lender,  the Servicer may not resign from its
obligations  under this  Agreement,  unless it is determined by the Lender and the Servicer that the performance by
the Servicer of its obligations under this Agreement is prohibited by applicable law.

Section 6.3       Effect of  Termination.  Upon  termination of this Agreement  pursuant to Section 6.2, except for
any accrued and unpaid  Servicing Fee or Legal  Outsourcing  Management Fee owing to the Servicer with respect to a
Remittance  Period ended before the termination of this Agreement or with respect to any  Collections  collected by
Permitted  Third Parties who have authority to continue  collection  services  after  termination of this Agreement
pursuant to the terms of this Section 6.3, the Servicer shall not be entitled to any  compensation  with respect to
any Assets which are no longer being serviced by Servicer after the date of such  termination.  Upon termination of
this Agreement,  the Servicer shall promptly deliver,  and use reasonable efforts, by enforcement of the applicable
contract of placement or engagement,  to require each Permitted  Third Party and other  subservicer to deliver,  to
the  replacement  servicer all books and records that the Servicer  and/or any  Permitted  Third Party or any other
subservicer  has maintained  with respect to such Assets,  including all Asset  Documents then in the possession of
the Servicer or any Permitted Third Party or any other subservicer.  Any Collections  received by the Servicer with
respect to an Asset no longer serviced by the Servicer  hereunder after removal of such servicing  responsibilities
shall be  remitted by the  Servicer  directly  and  immediately  to the  Remittance  Account.  The  Servicer  shall
promptly  transfer  all right,  title and interest in the  Remittance  Account to Lender.  The  Servicer  agrees to
cooperate and agrees to use reasonable efforts to require,  by enforcement of the applicable  contract of placement
or  engagement,  each  Permitted  Third Party and any other  subservicer  to cooperate,  with any such  replacement
servicer in effecting the  termination of any of the Servicer's  servicing  responsibilities  and rights under this
Agreement  and shall  promptly  provide  such  replacement  servicer  with all  documents  and  records  reasonably
requested  by it to  enable it to  assume  the  functions  of the  Servicer  and  shall  promptly  transfer  to the
Remittance Account any Collections then on deposit with the Servicer.  Notwithstanding the foregoing,  in the event
of a termination of this Agreement  pursuant to Section 6.2, so long as such  termination  was not as a result of a
Termination  Event under Section 6.1(d) or Section 6.1(e) or as a result of any  Termination  Event arising from an
act of fraud or  misappropriation  of funds on the part of the  Servicer,  the Lender shall allow  Permitted  Third
Parties to continue to perform  collection  actions,  foreclosure  proceedings,  repossession  activities and other
related  collection  activities with respect to Accounts which were being collected by such Permitted Third Parties
at the time of termination of this  Agreement  (and such Permitted  Third Parties may continue to retain  Permitted
Third-Party  Fees and  Permitted  Third-Party  Costs with  respect  to such  Accounts)  so long as all  Collections
generated from such  collection  activities of such Permitted  Third Parties  continue to be timely  deposited into
the  Remittance  Account as required by the terms of Section 2.9.  Upon any removal of the  Servicer,  the Servicer
shall join in, and the  Servicer  shall use  reasonable  efforts  to  require,  by  enforcement  of the  applicable
contract of placement or engagement,  each  subservicer to join in, any written notice to affected  Obligors of the
transfer of the servicing to such replacement servicer.

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Section 6.4       Indemnity  by the  Servicer.  The  Servicer  agrees to  indemnify,  defend and hold  harmless the
Borrower and the Lender (each an “Indemnitee”) from and against any and all claims, losses,  liabilities,  damages,
penalties,  fines,  forfeitures,  legal and accounting  fees and all other fees or costs of any kind,  judgments or
expenses resulting from or arising out of any claims,  actions or proceedings  brought against an Indemnitee by any
third  party as a  result  of or based  upon  actions  or  inactions  by the  Servicer  in the  performance  of its
obligations  under this  Agreement  (unless  such  action or inaction is not  required  by this  Agreement  and was
undertaken  at the express  written  direction of such  Indemnitee),  including  any failure by the  Servicer,  any
subservicer  or any of their agents,  representatives  or employees to comply with all applicable  debt  collection
laws,  rules and  regulations  and any other  action  taken in  collection  of the  Assets.  If any  investigative,
judicial or  administrative  proceeding  arising from any of the  foregoing is brought  against the Borrower or the
Lender,  upon  request  of such  party,  the  Servicer,  or  counsel  designated  by the  Servicer  and  reasonably
satisfactory  to the  Indemnitee,  will resist and defend such action,  suit or  proceeding  to the extent and in a
manner  reasonably  directed by the Indemnitee,  at the Servicer's sole cost and expense.  Each Indemnitee will use
its best efforts to cooperate in the defense of any such action, suit or proceeding.



                                                    ARTICLE VII
                                                   MISCELLANEOUS



Section 7.1       Severability  Clause.  Any part,  provision,  representation  or warranty of this Agreement which
is prohibited or which is held to be void or  unenforceable  shall be ineffective to the extent of such prohibition
or unenforceability  without invalidating the remaining provisions hereof. Any part,  provision,  representation or
warranty of this  Agreement  which is prohibited or  unenforceable  or is held to be void or  unenforceable  in any
jurisdiction  shall, as to such jurisdiction,  be ineffective to the extent of such prohibition or unenforceability
without  invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or  unenforceability  in any
jurisdiction shall not invalidate or render  unenforceable such provision in any other jurisdiction.  To the extent
permitted by  applicable  law, the parties  hereto  waive any  provision of law which  prohibits or renders void or
unenforceable any provision hereof.  If the invalidity of any part,  provision,  representation or warranty of this
Agreement shall deprive any party of the economic benefit  intended to be conferred by this Agreement,  the parties
shall  negotiate  in good faith to develop a structure  the  economic  effect of which is as nearly as possible the
same as the economic effect of this Agreement without regard to such invalidity.

Section 7.2       Notices.  Any notices,  consents,  directions,  demands or other  communications given under this
Agreement  (unless  otherwise  specified  herein)  shall be in writing  and shall be deemed to have been duly given
when  delivered  in person or by overnight  delivery at, or  telecopied  to, the  respective  addresses or telecopy
numbers,  as the case may be, set forth below (or to such other  address or telecopy  numbers as either party shall
give notice to the other party  pursuant to this  Section  7.2);  provided,  however,  any notice of a  Termination
Event given by Lender to Servicer shall be delivered either in person or by overnight mail:

25

         If to the Borrower:

         Midland Funding NCC-1 Corporation
         5775 Roscoe Court
         San Diego, California 92123
         Attention: General Counsel
         Telephone: (858) 309-6964
         Telecopy: (858) 309-6977

         If to the Servicer:

         Midland Credit Management, Inc.
         5775 Roscoe Court
         San Diego, California 92123
         Attention: General Counsel
         Telephone: (858) 309-6964
         Telecopy: (858) 309-6977

         If to the Lender:

         Patriot Capital Markets, LLC
         28 Thorndal Circle
         Darien, CT  06820
         Attention: Charles A. Forbes, Jr.
         Telephone: (203) 656-3470
         Telecopy: (203) 829-4992

Any such demand,  notice or  communication  hereunder  shall be deemed to have been duly given when received by the
other party or parties at the  addresses  described  above,  or such other address as may hereafter be furnished to
the other party or parties by like notice and shall be deemed to have been  received  on the date  delivered  to or
received at the premises of the addresses.

Section 7.3       Costs and  Expenses.  The  Servicer  agrees that  neither the  Borrower  nor the Lender  shall be
liable for any costs,  expenses or disbursements  which may be incurred or made in connection with servicing of any
Portfolios,  or any action  which may be taken by the Servicer to collect  such costs,  expenses or  disbursements.
All legal costs and expenses  incurred by the Lender in connection with the preparation,  execution and delivery of
this Agreement and the other documents to be delivered  hereunder,  shall be Initial  Transactional  Expenses.  The
Servicer shall pay all  Post-Closing  Transactional  Expenses within thirty (30) days following the presentation of
invoices for the same.

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Section 7.4       Assignment.  The obligations of the Servicer under this Agreement  shall not be assigned  without
the prior written consent of the Lender.

Section 7.5       Counterparts.  For the purpose of  facilitating  the  execution of this  Agreement  and for other
purposes,  this  Agreement may be executed  simultaneously  in any number of  counterparts,  each of which shall be
deemed to be an original, and together shall constitute and be one and the same instrument.

Section 7.6       Governing Law; Jurisdiction; Waiver of Jury Trial.

(a)      Governing  Law. This  Agreement  shall be governed by, and construed in accordance  with,  the laws of the
State of New York.

(b)      Jurisdiction.  The Servicer and the Borrower hereby irrevocably  submit to the non-exclusive  jurisdiction
of any federal court sitting in New York,  New York in any action or proceeding  arising out of or relating to this
Agreement,  and the Servicer and the Borrower  hereby  irrevocably  agree that all claims in respect of such action
or proceeding may be heard and determined in such federal court.  The Servicer and the Borrower hereby  irrevocably
waive, to the fullest extent they may  effectively do so, the defense of an  inconvenient  forum to the maintenance
of such action or  proceeding  and  irrevocably  consent to the service of any summons and  complaint and any other
process by the mailing of copies of such process to them at the  addresses  specified in Section 7.2. To the extent
permitted by applicable law, and without  limiting any right to appeal,  the Servicer and the Borrower hereby agree
that a final  judgment  in any  such  action  or  proceeding  shall  be  conclusive  and may be  enforced  in other
jurisdictions  by suit on the  judgment or in any other manner  provided by law.  Nothing in this Section 7.6 shall
affect the right of any party to serve legal process in any other manner (or in any other  jurisdiction)  permitted
by law or affect the right of any party to bring any action or  proceeding  under this  Agreement  in the courts of
other jurisdictions.

(c)      WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY  IRREVOCABLY  WAIVES ALL RIGHT TO A TRIAL BY JURY
IN ANY ACTION,  PROCEEDING  OR  COUNTERCLAIM  ARISING OUT OF OR RELATING TO THIS  AGREEMENT OR ANY AGREEMENT OR ANY
INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER.

Section 7.7       Amendments.  This  Agreement may be amended from time to time by a written  instrument  signed by
the  Servicer,  the  Borrower  and the  Lender  and no  waiver of any of the  terms  hereof  by any party  shall be
effective unless it is in writing and signed by the other parties.

Section 7.8       Integration.  The Servicing  Agreement  and the Loan  Agreement  together  comprise the final and
complete  integration of all prior  expressions by the parties hereto with respect to the subject matter hereof and
shall  constitute the entire  agreement among the parties hereto with respect to such subject  matter,  superseding
all prior oral or written understandings.

Section 7.9       Agreement  Effectiveness.  This Agreement shall become  effective upon delivery of fully executed
counterparts hereof to each of the parties hereto.

27

Section 7.10      Headings  Descriptive.  The  headings of the  sections  and  subsections  of this  Agreement  are
inserted  for  convenience  only and shall not in any way affect the meaning or  construction  of any  provision of
this Agreement.

Section 7.11      Advice  from  Independent  Counsel.  The  parties  hereto  understand  that this  Agreement  is a
legally binding  agreement that may affect such party's rights.  Each party hereto  represents to the other that it
has  received  legal  advice  from  counsel of its choice  regarding  the meaning  and legal  significance  of this
Agreement and that it is satisfied with its legal counsel and the advice received from it.

Section 7.12      Judicial   Interpretation.   Should   any   provision   of  this   Agreement   require   judicial
interpretation,  it is agreed that a court  interpreting or construing the same shall not apply a presumption  that
the terms hereof shall be more strictly  construed  against any person by reason of the rule of construction that a
document is to be construed  more  strictly  against the person who itself or through its agent  prepared the same,
it being agreed that all parties hereto have participated in the preparation of this Agreement.

Section 7.13      Term.  This  Agreement  shall  terminate  upon the  satisfaction  of all  amounts due and payable
under the Loan Agreement, unless earlier terminated pursuant to Article VI.

Section 7.14      Confidentiality.

(a)      The  Borrower,  the  Servicer  and the Lender  agree that the terms of the  transaction  set forth in this
Agreement and the Loan Documents,  along with all information  regarding the Portfolios in connection with the loan
approval process and all confidential,  proprietary and non-public  information regarding Encore Capital Group, the
Servicer,  the  Borrower  and  their  respective   subsidiaries  and  affiliates  and  their  business  operations,
procedures,  methods and plans  (together  with all notes,  analysis,  compilations,  studies and other  documents,
whether  prepared  by  the  Borrower,  the  Lender,  Encore  Capital  Group,  the  Servicer  and  their  respective
subsidiaries and affiliates,  or others,  which contain or otherwise  reflect such information  (collectively,  the
“Confidential Information”) shall be considered confidential.  Therefore, the Borrower, the Servicer and the Lender
agree not to disclose any  Confidential  Information  to any Person,  except for  affiliates of the Borrower or the
Lender,  as the case may be, nor provide copies of the Loan  Documents,  or earlier drafts of such Loan  Documents,
to any person,  except for  affiliates of the Borrower or the Lender,  provided,  however,  that the Borrower,  the
Servicer  and the Lender may disclose  any such  Confidential  Information  (i) to any party  contemplated  in this
Agreement for purposes  contemplated  hereunder  (including to any permitted  assignee of any such parties' rights)
provided that such party shall be informed of the  confidential  nature of the  Confidential  Information and shall
agree to maintain its  confidentiality  in accordance  with this Section 7.14;  (ii) to the  directors,  employees,
auditors,  current or  prospective  investors,  counsel or affiliates of the Lender,  the Servicer or the Borrower,
each of whom  shall be  informed  of the  confidential  nature  of the  Confidential  Information;  (iii) as may be
required by any municipal,  state,  federal or other regulatory body having or claiming to have  jurisdiction  over
such party;  (iv) in order to comply with any law, order,  regulation,  regulatory  request or ruling applicable to
such party; or (v) in the event any such party is legally compelled (by  interrogatories,  requests for information
or  copies,   subpoena,  civil  investigative  demand  or  similar  process)  to  disclose  any  such  Confidential
Information.  This Section 7.14 shall be  inoperative as to those portions of the  Confidential  Information  which
are or become generally  available to the public or to the Lender on a  non-confidential  basis from a source other
than the Borrower or the Servicer or were known to the Lender on a  non-confidential  basis prior to its disclosure
by the Borrower or the Servicer.  The foregoing  restrictions  shall not prohibit the use of template  documents in
the form of the Loan Documents provided that all financial or economic terms, exhibits,  appendices,  schedules and
identifying information with respect to the Parties have been redacted therefrom.

28

(b)      Notwithstanding  anything  herein to the contrary,  each party hereto may disclose to any and all persons,
without  limitation  of any kind,  the tax  treatment and tax  structure of the  transaction  contemplated  by this
Agreement  and all  materials  of any kind  (including  opinions or other tax  analyses)  that are provided to such
party or such person  relating to such tax  treatment  and tax  structure.  This  authorization  is not intended to
permit  disclosure  of any other  information  including  terms or details not relevant to the tax treatment or the
tax structure of this transaction or the transactions designated by the Loan Documents.

                                             [Signature page follows]

29

         IN WITNESS  WHEREOF,  the  undersigned  have caused  this  Agreement  to be  executed by their  respective
authorized officers as of the day and year first above written.

                                                     PATRIOT CAPITAL MARKETS, LLC


                                                     By:      /s/ Charles A. Forbes, Jr.
                                                     Its:     Chief Investment Officer



                                                     MIDLAND FUNDING NCC-1 CORPORATION


                                                     By:      /s/ Carl C. Gregory, III
                                                     Its:     President


                                                     MIDLAND CREDIT MANAGEMENT, INC.


                                                     By:      /s/ Carl C. Gregory, III
                                                     Its:     President & CEO