Loan Agreement

AMERICAN BUSINESS CREDIT, INC.,
HOMEAMERICAN CREDIT, INC.
D/B/A UPLAND MORTGAGE,
AND
NEW JERSEY MORTGAGE & INVESTMENT CORP.
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$5,000,000


LOAN AGREEMENT


dated as of December 30, 1998
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CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, LENDER


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[GRAPHIC OMITTED] - --------------------------------------------------------------------------------


INDEX OF DEFINED TERMS


10/98 Credit Agreement.....................................................21 12/98 Security Agreement - Class R Certificate...........................1, 7 ABC.........................................................................1 Affiliate...................................................................1 Agreement...................................................................1 Annual Financial Statements ................................................1 Applicable LIBOR Margin ....................................................8 Bankruptcy Code ............................................................2 Borrowers...................................................................1 Borrowing Authorization ....................................................2 Business Day ...............................................................2 Ceiling Rate ...............................................................8 Chapter 1D..................................................................8 Claim......................................................................30 Class R Certificate ........................................................2 Class R Certificate's Value ................................................2 Code .......................................................................3 Collateral .................................................................3 Commitment .................................................................3 Compliance Certificate.....................................................17 Contribution Agreement......................................................3 Controlled Group ...........................................................3 Credit Papers ..............................................................3 Debt .......................................................................3 Default ....................................................................4 ERISA ......................................................................4 Facility Debt ..............................................................4 Financing Statements .......................................................4 GAAP .......................................................................4 Governmental Authority .....................................................4 Guarantor ..................................................................4 Guaranty ...................................................................4 HAC.........................................................................1 Hazardous Substance ........................................................5 Indemnified Parties........................................................27 Legal Requirement ..........................................................5 Lender......................................................................1 LIBOR ......................................................................8 Lien .......................................................................5 Loan Availability Period ...................................................5


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Maturity Date ..............................................................5 Maximum Loan Available Amount ..............................................5 Net Working Capital ........................................................5 NJMI........................................................................1 Note .......................................................................5 Organizational Documents ...................................................5 Participant................................................................11 Parties ....................................................................5 Past Due Rate ...........................................................6, 9 PBGC .......................................................................6 Perfection Certificate .....................................................6 Person .....................................................................6 Plan .......................................................................6 Pledgor.....................................................................6 Pooling and Servicing Agreement ............................................6 Prime Rate .................................................................9 Proper Form ................................................................6 Property ...................................................................6 PUHC Act...................................................................15 Quarterly Financial Statements .............................................6 Request for Credit .........................................................7 Requirements of Environmental Law ..........................................7 Reuters Screen LIBO ........................................................9 Security Agreements ........................................................7 Security Documents .........................................................7 Specified Courts...........................................................29 Stated Rate ................................................................9 Subsidiary .................................................................7 Termination Date ...........................................................7 Texas Finance Code..........................................................8 Unfunded Liabilities .......................................................8 weekly ceiling..............................................................8 "Applicable LIBOR Margin"...................................................8 "Chapter 1D"................................................................8 "indicated rate ceiling"....................................................8 "LIBOR".....................................................................8 "Past Due Rate".............................................................9 "Prime Rate"................................................................9 "Reuters Screen LIBO Page"..................................................9 "Stated Rate"...............................................................9 "weekly ceiling"............................................................8


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TABLE OF CONTENTS


1. Definitions..............................................................1
1.1 General Definitions............................................1
1.2 Definitions for Interest Calculations..........................8
1.3 Other Definitional Provisions..................................9 2. Loans...................................................................10
2.1 Agreement to Lend.............................................10
2.2 Mandatory Payment and Prepayments.............................10
2.3 Interest......................................................11
2.4 Rate of Return Maintenance Covenant...........................11 3. Conditions Precedent....................................................12
3.1 Conditions to Loans...........................................12
3.2 Additional Conditions.........................................12 4. Representations and Warranties..........................................13
4.1 Duly Organized................................................13
4.2 No Consents Required..........................................13
4.3 No Conflicts or Violations....................................13
4.4 Due Execution and Proper Form.................................13
4.5 Information Correct; No Material Adverse Change...............13
4.6 Tax Returns Filed and Taxes Paid..............................14
4.7 No Condemnation or Suit.......................................14
4.8 No Default....................................................14
4.9 No Material Adverse Agreements. ..............................14
4.10 Solvent, No Proceedings.......................................14
4.11 No Untrue or Misleading Representations.......................14
4.12 Not Purpose Credit............................................14
4.13 Permits, Etc..................................................15
4.14 Compliance with Legal Requirements and Good Practices.........15
4.15 ERISA.........................................................15
4.16 Investment Company Act of 1940................................15
4.17 PUHC Act......................................................15
4.18 Environmental Matters.........................................15
4.19 Chief Executive Office........................................16
4.20 Subsidiaries..................................................16
4.21 Joint and Several Representations.............................16
4.22 Year 2000.....................................................16


iii 5. Affirmative Covenants.....................................................17
5.1 Pay Taxes, Preserve Existence, Comply
with Legal Requirements, Pay Debts..............................17
5.2 Furnish Financial Statements....................................17
5.3 Inspections.....................................................18
5.4 Further Assurances..............................................18
5.5 GAAP Books......................................................18
5.6 Insurance.......................................................18
5.7 Notice of Suits, Etc............................................18
5.8 PBGC Notices....................................................19
5.9 Use of Loan Proceeds............................................19 6. Negative Covenants........................................................20
6.1 Merger, Consolidation, Etc......................................20
6.2 Redemption and Dividends........................................20
6.3 No Change in Business...........................................20
6.4 Arm's-length Transactions.......................................20
6.5 No New Subsidiaries.............................................20 7. Default...................................................................21
7.1 Events of Default...............................................21
7.2 Remedies........................................................24 8. Lender's Right to Cure....................................................24 9. Miscellaneous.............................................................25
9.1 Usury Not Intended; Savings Provisions..........................25
9.2 Documentation Requirements......................................25
9.3 Credit Papers Cumulative........................................26
9.4 Satisfaction of Conditions......................................26
9.5 Survival........................................................26
9.6 Borrowers Agree to Pay or Reimburse Lender's Expenses...........26
9.7 Amendments in Writing...........................................27
9.8 Notices.........................................................28
9.9 Lender's Offset Rights..........................................29
9.10 Venue...........................................................29
9.11 Rights Cumulative; Delay Not Waiver.............................30
9.12 Severability....................................................30
9.13 Release of Claims...............................................30
9.14 Entire Agreement................................................31
9.15 Counterparts....................................................31
9.16 Sale and Assignment.............................................31
9.17 NOTICE PURSUANT TO TEX. BUS. & COMM. CODEss.26.02...............31


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LOAN AGREEMENT


This Loan Agreement is made as of December 30, 1998 by and among AMERICAN BUSINESS CREDIT, INC. ("ABC"), a Pennsylvania corporation, HOMEAMERICAN CREDIT, INC. ("HAC"), a Pennsylvania corporation doing business as Upland Mortgage, and NEW JERSEY MORTGAGE & INVESTMENT CORP., a New Jersey corporation ("NJMI" and collectively with ABC and HAC, the "Borrowers"), and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION ("Lender"), a national banking association. Borrowers have requested that Lender make loans to Borrowers in the following manner and subject to the following terms and conditions:


1. Definitions.


1.1 General Definitions. Unless a particular word or phrase is otherwise defined or the context otherwise requires, capitalized words and phrases used in this Agreement shall have the following meanings (all definitions that are defined in this Agreement in the singular to have the same meanings when used in the plural and vice versa):


10/98 Credit Agreement is defined in Section 7.1(d).


12/98 Security Agreement - Class R Certificate is defined in the definition of "Security Agreements".


Affiliate means any Person controlling, controlled by or under common control with any other Person. For purposes of this definition, "control" (including "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of any indicia of equity rights (whether issued and outstanding capital stock, partnership interests or otherwise) or by any other means.


Agreement means this Loan Agreement, as it may from time to time be supplemented, amended or restated.


Annual Financial Statements means the annual financial statements of a Person, including all notes thereto, which statements shall include a balance sheet as of the end of such fiscal year and an income statement, retained earnings statement and statement of cash flows -- cash flow statements for the Guarantor, Pledgor and the Borrowers on a consolidated basis -- for such fiscal year, all setting forth in comparative form the corresponding figures from the previous fiscal year, all prepared in conformity with GAAP, and without expressing any doubt as to such Person's ability to continue as a going concern, and accompanied by a report and opinion of independent certified public accountants of recognized national standing satisfactory to Lender, which shall state that such financial statements, in the opinion of such accountants, present fairly, in all material respects, the financial position of such Person as of the date thereof and the results of its operations for the period covered thereby in conformity with GAAP. Such statements shall be accompanied by a certificate of such accountants that in making the appropriate audit and/or investigation in connection with such report and opinion, such accountants did not become aware of any Default (as defined in this Agreement) or, if in the opinion of such accountant any such Default exists, a description of the nature and status thereof, certified as true and correct by an appropriate officer or other responsible party acceptable to Lender on behalf of such Person. The Annual Financial Statements for each Borrower and its Subsidiaries shall be prepared on both a consolidated and a consolidating basis (the parties recognizing that such consolidating statements will be prepared in accordance with GAAP only to the extent normal and customary).


Bankruptcy Code means the United States Bankruptcy Code, as amended, and any successor statute.


Borrowing Authorization means (i) with respect to a corporation, a certificate, in Proper Form, of the Secretary or an Assistant Secretary of a corporation as to the resolutions of the Board of Directors of such corporation authorizing the execution, delivery and performance of the documents to be executed by such corporation; the incumbency and signature of the officer of such corporation executing such documents on behalf of such corporation, and the Organizational Documents of such corporation and (ii) with respect to a partnership, joint venture or other non-individual Person, such written instruments as shall be required by Lender, each in Proper Form, authorizing the execution, delivery and performance of the documents to be executed by such Person; the incumbency and signature of the representative of such Person executing such documents on behalf of such Person, and the Organizational Documents of such Person.


Business Day means any Monday, Tuesday, Wednesday, Thursday or Friday when both (1) Lender's main branch in Houston, Texas is open for regular commercial banking business and (2) federal funds wire transfers can be made.


Class R Certificate means the Class R Certificate dated June 18, 1998, Certificate No. R-1, issued by The Chase Manhattan Bank, Trustee of the ABFS Mortgage Loan Trust 1998-2, Series 1998-2, to ABFS 1998-2, representing 100% of the Class R percentage interest in certain first or second lien mortgage loans serviced by ABC, a copy of which certificate is attached as Exhibit A.


Class R Certificate's Value means the value as collateral of the Class R Certificate as determined by Lender from time to time using usual and customary market means, methods and sources for determining value of assets fairly comparable to the Class R Certificate, based on an assumed ramping twenty-four percent (24%) constant prepayment rate for home equity loans and nine and one-half percent (9 1/2%) for business loans and an eleven percent (11%) discount rate -- the Borrowers represent that their independent auditors have applied similar parameters to the residual strips of Borrowers as of June 30, 1998 and have accepted the resulting valuation as reasonable -- and the interest in mortgage loans which such certificate represents, including consulting with nationally-recognized mortgage-backed securities broker-dealers and nationally-recognized mortgage-backed securities appraisers or valuation consultants, whether or not they are Affiliates of Lender.


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Code means the Internal Revenue Code of 1986, as amended, as now or hereafter in effect, together with all regulations, rulings and interpretations thereof or thereunder by the Internal Revenue Service.


Collateral means all the collateral described in and covered by the Security Agreements.


Commitment means the obligation, if any, of Lender to make Loans in an aggregate principal amount at any one time outstanding up to (but not exceeding) Five Million Dollars ($5,000,000).


Compliance Certificate shall have the meaning given to it in Section 5.2.


Contribution Agreement means a written agreement in Proper Form among the Borrowers, the Pledgor and the Guarantor pursuant to which each signatory agrees to be liable as among the other parties thereto only for its agreed proportionate share of the indebtedness guaranteed or secured or otherwise assumed pursuant to the applicable Credit Paper and to make such contribution(s) to the other parties thereto as necessary to achieve that result.


Controlled Group means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the applicable Person, are treated as a single employer under Section 414 of the Code.


Credit Papers means any and all papers now or hereafter governing, evidencing, guaranteeing or securing or otherwise relating to all or any part of the Facility Debt, including the Note, this Agreement, the Guaranty, Borrowing Authorizations with respect to all such Persons as Lender may reasonably require, the Security Documents, the Perfection Certificates, all instruments, certificates and agreements now or hereafter executed or delivered to Lender pursuant to any of the foregoing or in connection with the Loans or any commitment regarding the Loans and all amendments, modifications, renewals, extensions, increases and rearrangements of, and substitutions for, any of the foregoing.


Debt means and includes (a) all items which in accordance with GAAP are to be included on the liability side of a balance sheet on the date as of which Debt is to be determined (excluding capital stock, surplus, surplus reserves and deferred credits); (b) all guaranties, letter of credit contingent reimbursement obligations, endorsements and other contingent obligations in respect of, or any obligations to purchase or otherwise acquire, Debt of others and (c) all Debt secured by any Lien existing on any interest of the Person with respect to which Debt is being determined in Property owned subject to such Lien whether or not the Debt secured thereby shall have been assumed; provided, that such term shall not mean or include any Debt in respect of which monies sufficient to pay and discharge the same in full (either on the expressed date of maturity thereof or on such earlier date as such Debt may be duly called for redemption and payment) shall be deposited with a depository, agency or trustee acceptable to Lender in trust for the payment thereof.


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Default means an event which with notice or lapse of time or both would, unless cured or waived, become an Event of Default.


ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules, regulations, rulings and interpretations adopted by the Internal Revenue Service or the U.S. Department of Labor thereunder.


Event of Default shall have the meaning assigned to it in Section 7.1.


Facility Debt means the Debt evidenced by the Note and other sums now or hereafter payable to Lender under any of the Credit Papers.


Financing Statements means all such Uniform Commercial Code financing statements as Lender shall reasonably require, in Proper Form, duly executed by Borrowers or others to give notice of and to perfect or continue perfection of Lender's Liens in all Collateral.


GAAP means, as to a particular Person, such accounting practice as, in the opinion of the independent certified public accountants of recognized national standing regularly retained by such Person and acceptable to Lender, conforms at the time to generally accepted accounting principles, consistently applied. GAAP means those principles and practices (a) which are recognized as such by the Financial Accounting Standards Board, (b) which are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the most recent audited financial statements of the relevant Person furnished to Lender, and (c) which are consistently applied for all periods after the date hereof so as to reflect properly the financial condition, and results of operations and changes in financial position, of such Person. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board in order for such principle or practice to continue as a generally accepted accounting principle or practice, all reports and financial statements required hereunder may be prepared in accordance with such change and written notice of such change shall be given to Lender when (or before) any report or financial statement affected thereby is delivered to Lender.


Governmental Authority means any governmental authority, the United States of America, any State of the United States and any political subdivision of any of the foregoing, and any central bank, agency, department, commission, board, bureau, court or other tribunal having jurisdiction over Lender, any Borrower or their respective Property.


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Guarantor means American Business Financial Services, Inc., a Delaware corporation.


Guaranty means Guarantor's written, absolute and irrevocable guaranty to Lender of payment of the Loans, in form and substance satisfactory to Guarantor and Lender, duly executed and delivered by Guarantor to Lender.


Hazardous Substance shall mean petroleum products and any hazardous or toxic waste or substance defined or regulated as a hazardous substance from time to time by any law, rule, regulation or order described in the definition of "Requirements of Environmental Law".


Legal Requirement means any law, statute, ordinance, decree, requirement, final order or judgment, rule, or regulation (or interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, whether presently existing or arising in the future. The term "Legal Requirement" includes Requirements of Environmental Law.


Lien means any mortgage, pledge, charge, encumbrance, security interest, collateral assignment or other lien or restriction of any kind, whether based on common law, constitutional provision, statute or contract, and shall include reservations, exceptions, covenants, conditions and restrictions.


Loan Availability Period means the period from and including the date hereof to (but not including) the Termination Date.


Loans means the loans described in and provided for by Section 2.


Maturity Date means the maturity of the Note, December 30, 1999, as such date may be accelerated pursuant to the provisions of any of the Credit Papers.


Maximum Loan Available Amount means, on any day, an amount equal to the lesser of (i) the Commitment for that day or (ii) twenty-five percent (25%) of the Class R Certificate's Value on that day.


Net Working Capital means the amount by which Current Assets exceed Current Liabilities.


Note means the promissory note dated concurrently herewith, executed by Borrowers, as co-makers, payable to the order of Lender, in the face principal amount of Five Million Dollars ($5,000,000), and any and all renewals, extensions, modifications, rearrangements and/or replacements thereof.


Organizational Documents means, with respect to a corporation, the certificate of incorporation, articles of incorporation and bylaws of such corporation; with respect to a partnership, the partnership agreement establishing such partnership; with respect to a joint venture, the joint venture agreement establishing such joint venture, and with respect to a trust, the instrument establishing such trust; in each case including any and all modifications thereof as of the date of the Credit Paper referring to such Organizational Document and any and all future modifications thereof.


5


Participant is defined in Section 2.4.


Parties means all Persons other than Lender executing any Credit Paper.


Past Due Rate means, on any day, a rate per annum equal to the Ceiling Rate for that day; or, only if applicable law imposes no maximum nonusurious rate of interest for tha ...