12/00 Senior Secured Credit Agreement

12/00 SENIOR SECURED CREDIT AGREEMENT


Preamble


This 12/00 Senior Secured Credit Agreement (the "12/00 Credit Agreement" and as it may be supplemented, amended or restated from time to time, the "Current Credit Agreement" or, within itself, this "Agreement"), whose effective date (the "Effective Date") is December 22, 2000, among:


AMERICAN BUSINESS CREDIT, INC. ("ABC"), a Pennsylvania corporation,
HOMEAMERICAN CREDIT, INC. ("HAC"), a Pennsylvania corporation doing
business under the assumed or fictitious name Upland Mortgage, and NEW
JERSEY MORTGAGE AND INVESTMENT CORP., a New Jersey corporation whose
name will be changed in January 2001 to AMERICAN BUSINESS MORTGAGE
SERVICES and is referred to in this Agreement as "ABMS", each with its
principal office at BalaPointe Office Centre, 111 Presidential
Boulevard, Suite 215, Bala Cynwyd, Pennsylvania 19004 (ABC, HAC and
ABMS are herein collectively the "Companies" and are sometimes
individually referred to as a "Company");


AMERICAN BUSINESS FINANCIAL SERVICES, INC. (the "Parent"), a Delaware
corporation and owner of all of the capital stock of ABC, which owns
all of the capital stock of each of the other Companies;


THE CHASE MANHATTAN BANK ("Chase"), a New York banking corporation
(successor by merger to Chase Bank of Texas, National Association, a
national banking association formerly named Texas Commerce Bank
National Association), acting herein as a Lender and as agent and
representative of the Lenders and Eligible Assignees (in that capacity,
Chase is called the "Agent"); and


such other Lender(s) as may from time to time be party to this
Agreement;


recites and provides as follows:


Recitals


The Companies and the Parent have asked the Lenders and the Agent to establish a $50 million senior, secured, revolving line of credit with revolving sublines for (i) warehousing the Companies' prime (conforming and nonconforming) and subprime mortgage loans, including 1- to 4-family residential mortgage, home equity and second lien mortgage loans, and business purpose mortgage loans secured by residential mortgages, for which the Custodian has received documents until they are sold in the secondary market (i.e. financing the Companies' costs to fund or acquire them pending their subsequent sale in the secondary market) either as whole loans or after they have been securitized, with a wet warehousing sublimit, and (ii) working capital, and the Lenders and the Agent have agreed to do so on and subject to the terms and conditions of this Agreement.


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In addition, Chase has agreed to provide a separate revolving swing line of credit to initially and temporarily finance the Company's borrowings pending their funding by all of the Lenders pursuant to this Agreement (to be available from and after the time that one or more Lenders in addition to Chase become party to this Agreement.)


The Lenders' and Agent's agreement to establish and continue the credit line and its sublines is made upon and subject to the terms and conditions of this Agreement. If there is any conflict or inconsistency between any of the terms or provisions of this Agreement and any of the other Facilities Papers, this Agreement shall govern and control. If there is any conflict between any provision of this Agreement and any later supplement, amendment, restatement or replacement of it, then the latter shall govern and control.


Agreements


In consideration of the premises, the mutual agreements stated below and other good and valuable consideration paid by each party to each other party to this Agreement, the receipt and sufficiency of which each party hereby acknowledges, the parties hereby agree as follows.


1. DEFINITIONS


1.1. Defined Terms. Except where otherwise specifically stated, capitalized terms used in this Agreement and the other Facilities Papers have the meanings assigned to them below or elsewhere in this Agreement.


1.2. Definitions of General Application. The terms defined in this Section are generally applicable. For convenience of reference, defined terms relating only to the calculation and payment of interest are defined in Section 1.3.


"12/00 Credit Agreement" is defined in this Agreement's preamble.


"Acceleration Date" is defined in the definition of "Maturity Date".


"Adjusted Tangible Net Worth" means, with respect to any Person at the end of any fiscal quarter:


(a) the excess of that Person's total assets over total liabilities on that day, each being determined in accordance with GAAP consistent with the accounting principles applied in the preparation of the Financial Statements referred to in Section 9.4 (herein called "GAAP Net Worth");


minus (b) advances to shareholders, officers or Affiliates, aggregate investments in Subsidiaries and Affiliates included in the Financial Statements referred to in Section 9.4,


minus (c) goodwill and all other assets not supported by or representative of a tangible asset other than mortgage loan servicing rights and capitalized excess mortgage loan servicing fees (the values of which rights and fees shall not be subtracted from GAAP Net Worth to determine Adjusted Tangible Net Worth), which intangible assets would be deemed by HUD to be unacceptable for the


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purpose of calculating adjusted net worth in accordance with its requirements in effect as of such day, as such requirements appear in the "Audit Guide for Audit of Approved Non-supervised Mortgagees";


plus (d) loan loss reserves and that portion of Subordinated Debt that is not due within one (1) year of that day;


plus (e) net unrealized holding losses, if any, (and minus net unrealized holding gains, if any) for available-for-sale debt securities and equity securities owned (including those classified as current assets) that are required by FASB 115 to be reported as a net amount in a separate component of shareholders' equity until realized.


"Advance" means a disbursement by the Lenders under the Loan in accordance with the terms of this Agreement -- including initial disbursements, readvances of funds previously advanced to the Companies and repaid to the Lenders and protective advances made without any requirement for any Request for Advance -- and is a correlative of "Borrowing": a Borrowing from the Lenders' and the Agent's point of view. Where the name of a Subline prefaces "Advance", then it means an Advance under that Subline. Where the term "Swing Line" prefaces "Advance", then it means an Advance by Chase under the Swing Line.


"Advance Rate" is defined in the definition of "Collateral Value".


"Affiliate" means and includes, with respect to a specified Person, any other Person:


(a) that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with the specified Person (in this definition only, the term "Control" means having the power to set or direct management policies, directly or indirectly);


(b) that is a director, trustee, partner, member or officer of the specified Person or serves in a similar capacity in respect of the specified Person;


(c) of which the specified Person is a director, trustee, partner, member or officer or with respect to which the specified Person serves in a similar capacity and over whom the specified Person, either alone or together with one or more other Persons similarly situated, has Control;


(d) that, directly or indirectly through one or more intermediaries, is the beneficial owner of five percent (5%) or more of any class of equity securities -- which does not include any Structured Securities -- of the specified Person; or


(e) of which the specified Person is directly or indirectly the owner of five percent (5%) or more of any class of equity securities of the specified Person.


"Aged Loan" is defined in the definition of "Long Warehoused (Aged) Loan".


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"Agent" is defined in this Agreement's preamble.


"Administrative Fee" is defined in Section 6.7.


"Aggregate Committed Sum" means, on any day, the lesser of (a) Fifty Million Dollars ($50,000,000) and (b) the aggregate of the Lenders' individual Committed Sums for that day as stated in the definition of "Committed Sum".


"Agreement" is defined in this Agreement's preamble.


"Approved Investor" means GNMA, FNMA, FHLMC and any of the Persons listed on Schedule AI, as it may be supplemented or amended from time to time by agreement of the Companies and the Agent; provided that if the Agent shall give at least ten (10) Business Days' written notice to the Companies of the Agent's reasonable disapproval of any Approved Investor(s) named in the notice, the investor(s) named shall no longer be Approved Investor(s) from and after the time the effective date of that notice.


"Authorized Company Representative" means a representative of the Company duly authorized by its Board of Directors (or by an officer to whom such authority has been delegated by its Board of Directors) to execute any certificate, schedule or other document contemplated or required by this Agreement or the Custody Agreement on behalf of the Company and as its act and deed. A list of Authorized Company Representatives current as of the Effective Date is attached as Schedule AR. The Company will use its best efforts to provide an updating list of Authorized Company Representatives to the Agent promptly following each addition to or subtraction from such list, and the Agent and the Lenders shall be entitled to rely on each such list until such an updating list is received by the Agent.


"Basic Papers" means all of the Loan Papers that must be delivered to the Custodian -- in the case of Wet Loans, on or before the fifth (5th) Business Day after the related Advance -- in order for any particular item of Collateral to be Eligible Collateral and have Collateral Value. The Custody Agreement lists the Basic Papers for each such category of Collateral, and reference is here made to the Custody Agreement for those listings.


"Book Collateral Value" means the value of collateral determined by reference to an intrinsic characteristic such as its cost, its principal balance or the amount that a third party is contractually obligated to pay to acquire, settle or discharge it.


"Borrowing" is a correlative of "Advance": an Advance from the Companies' point of view. Where the name of a Subline prefaces "Borrowing", then it means a Borrowing under that Subline. Where the term "Swing Line" prefaces "Borrowing", then it means a Borrowing from Chase under the Swing Line.


"Borrowing Base" means, on any day, the sum of the Collateral Values of all Eligible Collateral then Pledged to the Agent. The Borrowing Base is comprised of the "Single-family Warehouse Borrowing Base" for the Single-family Warehouse Subline and the "Working Capital Borrowing Base" for the Working Capital Subline, and those terms mean, respectively and on any day, the


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respective sums of the Collateral Values of all Eligible Single-family Collateral and Eligible Working Capital Collateral then Pledged to the Agent.


"Business Day" means any day that is not a Saturday, a Sunday or a weekday when either of Chase's main branches in Houston, Texas or New York, New York, or any other Lender's main branch or office, is not open for regular commercial lending business.


"Business Purpose Mortgage Loan" means a Single-family Mortgage Loan (which may be additionally secured by commercial or mixed-use property) that is exempt from the federal Truth-in-Lending Act and the federal Real Estate Settlement Procedures Act because its proceeds are used primarily for business purposes and not primarily for personal, family, household or agricultural purposes.


"Cash Equivalents" means (i) U.S. Treasury securities none of which has a final maturity date later than one (1) year later than the Termination Date, (ii) certificates of deposit or investor certificates issued by the Agent and (iii) commercial paper issued by a corporation organized under the laws of any state of the United States of America or of the District of Columbia and rated A-2 or better by Standard and Poor's Ratings Services and P-2 or better by Moody's Investors Service, Inc.


"Central Elements" means and includes the value of all or any substantial portion of the Collateral; the prospects for repayment of each portion of the Loan, both principal and interest, when due; the validity or enforceability of this Agreement, any Senior Credit Note or other Facilities Papers and, as to any Person referred to in any reference to the Central Elements, such Person's property, business operations, financial condition and ability to fulfill its obligations under this Agreement or any other Facilities Papers, each taken as a whole, and such Person's prospects of continuing in business as a going concern.


"Change of Control" in respect of a Company or the Parent means and includes:


o a sale of substantially all of such Company's or the Parent's assets to any Person or related group of Persons.


o without the Agent's prior written consent, any merger or consolidation of such Company or the Parent with or into another Person with the effect that the Persons who have been represented to the Lenders as owning all of such Company's or the Parent's equity interests on the Effective Date (the "Current Company Equity Holders") or their Affiliates hold less than fifty-one percent (51%) of the total voting power entitled to vote in the election of directors, managers or trustees of the survivor of such merger or consolidation.


o the occurrence of any other event after which the Parent no longer owns one hundred percent (100%) of the total voting power entitled to vote in the election of any Company's directors, or the Current Company Equity Holders or their Affiliates no longer own at least fifty-one percent (51%) of the total voting power entitled to vote in the election of such Company's directors.


o any Company's or the Parent's own liquidation or dissolution.


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"Change of Executive Management" means that any of Anthony J. Santilli, President and Chief Executive Officer of the Parent, Beverly Santilli, Executive Vice President of the Parent, Jeffrey M. Ruben, Executive Vice President of the Parent, or Albert W. Mandia, Chief Financial Officer of the Parent, has been removed from, or has ceased for any reason, voluntarily or involuntarily, to occupy, any such office or to be responsible for and carry out its principal duties, and has not been replaced or his or her absence accommodated for within (i) one hundred twenty (120) days thereafter in the event of his or her death or disability or ninety (90) days thereafter in any other event thereafter by another Person or Persons and in a manner reasonably acceptable to and approved by the Agent, such approval not to be unreasonably withheld, conditioned or delayed.


"Chase" is defined in this Agreement's preamble.


"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 one hundred percent (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 I.


"Class R Certificate's Value" means the value as collateral of the Class R Certificate as determined by the Agent from time to time based on valuation advice furnished from time to time (at least quarterly) by the Companies, which advice shall be in writing and shall include a summary of the valuation methodology and assumptions used, including the assumed ramping constant prepayment rates for the various categories of Mortgage Loans comprising the backing and base for the Class R Certificate and a representation by the Parent and the Companies that they and their independent auditors have applied similar parameters to the residual strips of the Companies as of a specified date and have accepted the resulting valuation as reasonable); provided that the Agent may elect (but shall have no obligation) to determine such value from time to time (whether or not such valuation advice is timely furnished and updated by the Companies from time to time) by using the Agent's usual and customary market means, methods and sources for determining the value of assets fairly comparable to the Class R Certificate 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.


"Class R Certificate's Pledgor" means ABFS 1998-2, a Delaware corporation and a Subsidiary of the Parent.


"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.


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"Collateral" is any or all collateral (as the context requires) for the Obligations, consisting of:


o the "Single-family Collateral" which means the Pledged Loans, their security, their related Loan Papers and the right to recover under the related Hazard Insurance Policies; and


o the "Working Capital Collateral" which means the Class R Certificate.


"Collateral Categories" is defined in the definition of "Eligible Collateral".


"Collateral Value" means the value of Eligible Collateral for purposes of this Agreement. Collateral (i) that is not duly Pledged to the Agent, (ii) in which the Agent does not have a first and prior perfected Lien (except that in the case of Wet Loans Pledged to the Agent for five (5) or less Business Days, the fact that the Agent does not have possession, directly or through the Custodian, of the Basic Papers therefor shall not affect such Wet Loans' Collateral Value) or (iii) that is not Eligible Collateral because it does not satisfy in all material respects one or more of the conditions to eligibility stated for it in this Agreement, shall have zero Collateral Value, and Collateral that at one time satisfied all conditions for eligibility but for which a Disqualifier has occurred shall have zero Collateral Value from the date of that Disqualifier unless and until the Companies have cured all applicable Disqualifiers or the Agent has waived them in writing. Collateral Values of Eligible Collateral duly Pledged to the Agent with the Agent having Lien priority and perfection as aforesaid and as to which no such Disqualifier has occurred and is uncured without such a waiver by the Agent shall be determined as follows:


o The Collateral Value on any day of any Mortgage Loan (whether or not a Wet Loan) that is not a Late Pledged Loan shall be its Book Collateral Value, which is the least of:


(i) ninety-eight percent (98%) of its Principal Balance on such Mortgage Loan's Original Pledge Date;


(ii) ninety-eight percent (98%) of (x) for a Company-originated Pledged Loan, the loan amount at origination less discount points received by the originating Company, as stated on such Pledged Loan's HUD-1 Settlement Statement, or (y) for a Company-purchased Pledged Loan, the net purchase price actually paid for it by the Company purchasing it directly from a Person that is not an Affiliate of such Company (determined for Mortgage Loan pools or other groupings purchased by prorating the total purchase price paid for the entire pool or grouping according to the original principal amounts of all Mortgage Loans in such pool or grouping); or


(iii) (only for Pledged Loans as to which failure to be covered by a Purchase Commitment is a Disqualifier, as stated in Schedule DQ), ninety-eight percent (98%) of the purchase price provided to be paid by an Approved Investor as provided in the relevant Purchase Commitment;


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provided that if the Agent shall elect to mark it to market, such Pledged Loan's Collateral Value for that day shall be the lesser of (i) its Book Collateral Value or (ii) ninety-seven percent (97%) of its Market Value on that day.


o The Collateral Value on any day of any Late Pledged Loan shall be its Book Collateral Value, which is the least of:


(i) ninety percent (90%) of its Principal Balance on such Mortgage Loan's Original Pledge Date;


(ii) ninety percent (90%) of (x) for a Company-originated Pledged Loan, the loan amount at origination less discount points received by the originating Company, as stated on such Pledged Loan's HUD-1 Settlement Statement, or (y) for a Company-purchased Pledged Loan, the net purchase price actually paid for it by the Company purchasing it directly from a Person that is not an Affiliate of such Company (determined for Mortgage Loan pools or other groupings purchased by prorating the total purchase price paid for the entire pool or grouping according to the original principal amounts of all Mortgage Loans in such pool or grouping); or


(iii) (only for Pledged Loans as to which failure to be covered by a Purchase Commitment is a Disqualifier, as stated in Schedule DQ and that are Late Pledged Loans), ninety percent (90%) of the purchase price provided to be paid by an Approved Investor as provided in the relevant Purchase Commitment;


provided that if the Agent shall elect to mark it to market, such Late Pledged Loan's Collateral Value for that day shall be the lesser of (i) its Book Collateral Value or (ii) ninety-seven percent (97%) of its Market Value on that day.


o The Collateral Value on any day of the Class R Certificate shall be twenty-five percent (25%) of the Class R Certificate's Value for that day.


The applicable percentage factors (stated above) for determining the value of any particular item of Collateral is the "Advance Rate" for that Collateral. Each determination by the Agent of Collateral Value (and of each element of each such determination, including Market Value) may be computed using any reasonable averaging, interpolation and attribution method and, absent manifest error, shall be conclusive and binding.


"Commercial Mortgage Loan" means a Mortgage Loan secured by a Mortgage on real property other than Single-family residential property.


"Committed Sum" means, for any day, the maximum amount a Lender is committed on that day to lend to the Companies (or for their account) on a revolving credit basis pursuant to this Agreement, on its terms and subject to its conditions. From the Effective Date of this Agreement until the Termination Date or such other date (if any) when all or any of them is changed by operation of the provisions of any agreement or Legal Requirement, the Committed Sums for the Lenders are as set forth on Schedule LC, as it may be amended and restated from time to time.


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"Commitment" means, for each Lender, its commitment under Section 3.1 to fund its Funding Share of Advances under the Credit Line, limited to such Lender's Committed Sum.


"Commitments Cancellation Date" is defined in the definition of "Termination Date".


"Company" is defined in this Agreement's preamble.


"Company Underwriting Guidelines" means each of the Companies' underwriting guidelines for Mortgage Loans (see Schedule UG).


"Conforming Mortgage Loan" means a Conventional Mortgage Loan underwritten in accordance with FNMA or FHLMC underwriting standards and eligible for inclusion in a pool of mortgages respectively backing a FNMA- or FHLMC-guaranteed Structured Security.


"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 Parent or any Company, are treated as a single employer under Section 414 of the Code.


"Conventional Mortgage Loan" means a Prime Single-family Mortgage Loan that is neither insured by FHA nor guaranteed by VA.


"Credit Line" means the revolving line of credit established by this Agreement, and governed by it and the other Facilities Papers, of up to Fifty Million Dollars ($50,000,000) of principal borrowed by the Companies and outstanding from time to time -- with a Wet Warehousing sublimit to finance Wet Loans -- to acquire and accumulate Eligible Collateral to hold pending their transfers and assignments from time to time either (i) as Whole Loans sold for cash to investors or (ii) as pools of Mortgage Loans sold to issuers of Structured Securities to be based on and backed by those Mortgage Loans in exchange for proceeds of the sale of those Structured Securities to investors, with the entire net sale proceeds in each case to be paid to the Agent for concurrent deposit in the Note Payment Account and to be applied toward repayment to the Lenders of such Advances with any remaining balance (in the absence of a Default or Event of Default) to be transferred by the Agent to the Companies' own accounts with the Agent.


"Cumulative Loan-to-Value Ratio" means the ratio of (x) the sum of the original principal amount(s) of its first lien mortgage note and (if it is a second lien mortgage loan) its second lien mortgage note to (y) the value of the real property securing it, as such value has been determined by the most recent appraisal or broker's price opinion of such real property made by an appraiser or local licensed real estate broker experienced in estimating the value of and marketing property of that same type in the community where it is located and who is not an employee or otherwise affiliated with the Companies or the Parent or a director, officer or employee of any of the Companies or the Parent or related as a parent, sibling, child or first cousin to any of the Companies' or the Parent's directors or officers or any of their spouses.


"Current Credit Agreement" is defined in this Agreement's preamble.


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"Custodian" means Chase, as Custodian under the Custody Agreement, or any successor custodian under the Custody Agreement.


"Custodian's Exception Report" is a report issued by the Custodian listing Pledged Loans whose Basic Papers have been reviewed by the Custodian and appear not to satisfy the review standards and requirements stated in the Custody Agreement and indicating (either by coding, a summary statement or both) the defect or deficiency disclosed by such review for each Pledged Loan (or grouping of Pledged Loans) listed therein.


"Custodian's Fees" are the fees to be paid by the Companies to the Custodian for its services under the Custody Agreement, as provided for in the Custody Agreement or by a separate agreement. Such fees are separate from and in addition to other fees to be paid to the Agent or the Lenders provided for in this Agreement.


"Custody Agreement" means the Custody Agreement dated as of December 22, 2000 between the Companies and Chase, as Custodian, as it may hereafter be supplemented, amended or restated from time to time.


"Custo ...