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                               SECURITY AGREEMENT

        THIS SECURITY AGREEMENT (this "AGREEMENT"), dated as of February 22,
2005, is made by AMERICAN BUSINESS FINANCIAL SERVICES, INC., as a debtor and a
debtor-in-possession, a Delaware corporation, ("ABFS"), THE AFFILIATES OF ABFS
LISTED ON ANNEX I HERETO, each as a debtor and a debtor-in-possession (together
with ABFS, each individually a "BORROWER" or a "GRANTOR", and collectively, the
"BORROWERS" or the "GRANTORS"), in favor of GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC., as agent for the Secured Parties (in such capacity, the
"AGENT").

                              W I T N E S S E T H :

        WHEREAS, the Grantors, the lenders party thereto (the "LENDERS") and the
Agent are parties to a Debtor-in-Possession Loan and Security Agreement, dated
as of the date hereof (such Agreement, as amended, restated or otherwise
modified from time to time, being hereinafter referred to as the "LOAN
AGREEMENT");

        WHEREAS, pursuant to Section 5.01(b)(vi) of the Loan Agreement, the
Agent has required Grantors to execute and deliver to the Agent a security
agreement providing for the grant to the Agent for the benefit of the Secured
Parties of a security interest in all personal property of the Grantors, except
as otherwise noted herein; and

        WHEREAS, the Grantors have each determined that the execution, delivery
and performance of this Agreement directly benefits, and is in the best interest
of such Grantor;

        NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Agent and the Lenders to enter into the Loan
Agreement with the Pledgors, each Pledgor hereby agrees with the Agent as
follows:

        NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Agent and the Lender to enter into the Loan
Agreement with the Grantors, the Grantors jointly and severally agree with the
Agent as follows:

        SECTION 1. DEFINITIONS. All terms used in this Agreement which are
defined in the Loan Agreement and which are not defined herein have the same
meanings as set forth in the Loan Agreement. All terms used in this Agreement
which are defined in Article 9 of the Uniform Commercial Code (the "CODE")
currently in effect in the State of New York and which are not defined herein or
in the Loan Agreement have the same meanings as set forth in the Code. In
addition, the following terms shall have the following meanings:

        "COPYRIGHT LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming a Grantor as licensee or licensor and providing
for the grant of any right to use or sell any works covered by any Copyright,
including, without limitation, all Copyright Licenses set forth in Schedule III
hereto.

<PAGE>

        "COPYRIGHTS" means all domestic and foreign copyrights, whether
registered or not, including, without limitation, all copyright rights
throughout the universe (whether now or hereafter arising) in any and all media
(whether now or hereafter developed), in and to all original works of authorship
fixed in any tangible medium of expression, acquired or used by any Grantor
(including, without limitation, all copyrights described in Schedule III
hereto), all applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in the United
States Copyright Office or in any similar office or agency of the United States
or any other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.

        "EXCLUDED COLLATERAL" means the items listed on Annex B hereto.

        "LICENSES" means all Trademark Licenses, Patent Licenses, and Copyright
Licenses.

        "PATENT LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming a Grantor as licensee or licensor and providing
for the grant of any right to manufacture, use or sell any invention covered by
any Patent, including, without limitation, all Patent Licenses set forth in
Schedule II hereto;

        "PATENTS" means all domestic and foreign letters patent, design patents,
utility patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how,
formulae, rights of publicity and other general intangibles of like nature, now
existing or hereafter acquired (including, without limitation, all domestic and
foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how and formulae described in Schedule
II hereto), all applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in the United
States Patent and Trademark Office, or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and
all reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.

        "RELATED CONTRACTS" means any and all credit insurance, guaranties,
letters of credit, security agreements, leases and other contracts giving rise
to, or potentially giving rise to, Accounts.

        "TRADEMARK LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming any Grantor as licensor or licensee and
providing for the grant of any right to use any Trademark, including, without
limitation, all Trademark Licenses described in Schedule I hereto, together with
any goodwill connected with and symbolized by any such trademark licenses or
agreements and the right to prepare for sale and sell any and all Inventory now
or hereafter owned by the Grantor and now or hereafter covered by such licenses;

        "TRADEMARKS" means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a's,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general

                                      -2-
<PAGE>

intangibles of like nature, now or hereafter owned, adopted, acquired or used by
any Grantor (including, without limitation, all domestic and foreign trademarks,
service marks, collective marks, certification marks, trade names, business
names, d/b/a's, Internet domain names, trade styles, designs, logos and other
source or business identifiers described in Schedule I hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any state thereof or any other country or any political subdivision
thereof), and all reissues, extensions or renewals thereof, together with all
goodwill of the business symbolized by such marks and all customer lists,
formulae and other records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are used.

        SECTION 2. GRANT OF SECURITY INTEREST. As collateral security for all of
the Obligations, each Grantor hereby assigns, pledges, transfers and grants to
the Agent, for the benefit of the Secured Parties, pursuant to Section 364 of
the Bankruptcy Code and subject to the limitations set forth in the Orders
(including, without limitation, paragraphs d.i, d.ii and d.iii, paragraph XIII,
paragraphs 17.a.v through 17.a.vii and paragraphs 51.b and 51.c of the Interim
Order), a continuing Lien on and perfected security interest in all of such
Grantor's now owned or hereafter acquired right, title and interest in and to
each of the following (including, without limitation, all Property of the estate
of each Borrower (within the meaning of the Bankruptcy Code) other than
Avoidance Actions and the Excluded Collateral (as defined in the Security
Agreement) (the "COLLATERAL"):

        (a)     Accounts;

        (b)     Books;

        (c)     Chattel Paper (whether tangible or electronic);

        (d)     Commercial Tort Claims;

        (e)     Deposit Accounts (including the Collection Account, the IOS
Account, the Mortgage Collection Account and the other Control Accounts);

        (f)     Documents;

        (g)     Equipment;

        (h)     Fixtures;

        (i)     General Intangibles and Payment Intangibles (including all
Servicing Reimbursement Rights, the Servicing Rights, all causes of action under
the Bankruptcy Code or otherwise, other than Avoidance Actions, and all rights
of the Borrowers under any Servicing Agreement, the Custodial Agreement or any
other document);

        (j)     Goods;

        (k)     Instruments;

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        (l)     all Interest Rate Protection Agreements;

        (m)     Intellectual Property;

        (n)     Inventory;

        (o)     Investment Property;

        (p)     Letter-of-Credit Rights;

        (q)     all Mortgage Loans;

        (r)     all Mortgage Loan Documents, including without limitation all
promissory notes, and all Servicing Records (as defined in SECTION 11.18(B) of
the Loan Agreement), and any other collateral pledged or otherwise relating to
such Mortgage Loans, together with all files, material documents, instruments,
surveys (if available), certificates, correspondence, appraisals, computer
records, computer storage media, Mortgage Loan accounting records and other
books and records relating thereto;

        (s)     all mortgage guaranties and insurance (issued by governmental
agencies or otherwise) and any mortgage insurance certificate or other document
evidencing such mortgage guaranties or insurance relating to any Mortgage Loans
and all claims and payments thereunder;

        (t)     all other insurance policies and Insurance Proceeds relating to
any Mortgage Loans or the related Mortgaged Property

        (u)     Negotiable Collateral;

        (v)     all IOS;

        (w)     Supporting Obligations;

        (x)     money or other assets of each such Borrower that now or
hereafter come into the possession, custody, or control of any Secured Party;

        (y)     all interests in real property owned by any Borrower or
collateralizing any Mortgage Loan;

        (z)     all other Personal Property of the Borrowers, wherever located
and whether now or hereafter existing, and whether now owned or hereafter
acquired, of every kind and description, whether tangible or intangible; and

        (aa)    Proceeds, products, rents and profits, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the Proceeds
thereof;

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<PAGE>

        SECTION 3. SECURITY FOR OBLIGATIONS. The security interest created
hereby in the Collateral constitutes continuing collateral security for the
payment in full, performance and observance of all of the Obligations.

        SECTION 4. REPRESENTATIONS AND WARRANTIES. Each Grantor jointly and
severally represents and warrants as follows:

                (a)     Schedule V hereto, sets forth (i) the exact legal name
        of each Grantor and (ii) the organizational identification number of
        each Grantor or states that no such organizational identification number
        exists.

                (b)     Each Grantor (i) is a corporation duly organized,
        validly existing and in good standing under the laws of the state or
        jurisdiction of its organization as set forth on Schedule V hereto; (ii)
        is qualified to do business in each jurisdiction where the failure to be
        so qualified reasonably could be expected to have a Material Adverse
        Effect; and (iii) subject to the entry of the Interim Order (or the
        Final Order, when applicable), has all requisite power and authority to
        execute, deliver and perform this Agreement and each other Loan Document
        to be executed and delivered by it pursuant hereto.

                (c)     The execution, delivery and performance by each Grantor
        of this Agreement and each other Loan Document to which such Grantor is
        a party, (i) upon entry of the Interim Order (or the Final Order, when
        applicable), have been duly authorized by all necessary action on the
        part of the Grantor, (ii) do not and will not contravene its charter or
        by-laws, any law or any contractual restriction binding on or affecting
        such Grantor or any of its properties (other than conflicts, breaches
        and defaults the enforcement of which will be stayed by virtue of the
        filing of the Chapter 11 Cases), and (iii) do not and will not result in
        or require the creation of any Lien upon or with respect to any of its
        properties.

                (d)     Upon entry of the Interim Order (or the Final Order,
        when applicable), this Agreement is, and each other Loan Document to
        which any Grantor is or will be a party, when executed and delivered
        pursuant hereto, will be, a legal, valid and binding obligation of such
        Grantor, enforceable against such Grantor in accordance with its terms.

                (e)     There is no pending or, to the knowledge of the Grantor,
        threatened action, suit, proceeding or claim before any court or other
        Governmental Authority or any arbitrator other than the Chapter 11
        Cases, or any order, judgment or award by any court or other
        Governmental Authority or arbitrator, that may adversely affect the
        grant by any Grantor, or the perfection, of the security interest
        purported to be created hereby in the Collateral, or the exercise by the
        Agent of any of its rights or remedies hereunder.

                (f)     Subject to the requirements of the Bankruptcy Code, all
        taxes, assessments and other governmental charges imposed upon any
        Grantor or any property of any Grantor (including, without limitation,
        all federal income and social security taxes on employees' wages) and
        which have become due and payable on or prior to the date

                                      -5-
<PAGE>

        hereof have been paid, except to the extent contested in good faith by
        proper proceedings which stay the imposition of any penalty, fine and
        Lien resulting from the non-payment thereof and with respect to which
        adequate reserves in accordance with GAAP have been established for the
        payment thereof.

                (g)     All Equipment and Inventory now existing is, and all
        Equipment and Inventory hereafter existing will be, located at the
        addresses specified therefor in Schedule IV hereto or at such other
        locations permitted by the terms of Section 5(b) hereof. Each Grantor's
        chief place of business and chief executive office, the place where each
        Grantor keeps its records concerning Accounts, and all originals of all
        chattel paper which constitute Accounts are located at the addresses
        specified therefor in Schedule V hereto. None of the Accounts is
        evidenced by a promissory note or other instrument. Set forth in
        Schedule V hereto is a complete and correct list of each trade name used
        by each Grantor.

                (h)     Each Grantor owns, or otherwise possesses adequate
        rights to use, all Trademarks, Patents and Copyrights necessary to
        conduct its business in substantially the same manner as conducted as of
        the date hereof. Schedule I hereto sets forth a true and complete list
        of all Trademarks owned by each Grantor and all Trademark Licenses to
        which each Grantor is a party, in each case as of the date hereof.
        Schedule II hereto sets forth a true and complete list of all Patents
        and Patent Licenses owned or used by each Grantor as of the date hereof.
        Schedule III hereto sets forth a true and complete list of all
        Copyrights owned by any Grantor and all Copyright Licenses (other than
        licenses for commercially available software entered into by each
        Grantor in the ordinary course of its business) to which any Grantor is
        a party, in each case as of the date hereof. All of such Patents,
        Trademarks and Copyrights are subsisting and in full force and effect,
        have not been abandoned in whole or in part, have not been adjudged
        invalid or unenforceable, and to the best knowledge of each Grantor, are
        valid and enforceable. Except as set forth in Schedule I, III or IV
        hereto, (i) other than licensing agreements solely among the Grantors,
        none of such Patents, Trademarks or Copyrights is the subject of any
        licensing or franchising agreement and (ii) each Grantor has no
        knowledge of any conflict with the rights of others to any Trademark,
        Patent or Copyright and, to the best knowledge of each Grantor, no
        Grantor is now infringing or in conflict with any such rights of others
        in any material respect, and to the best knowledge of each Grantor, no
        other Person is now infringing or in conflict in any material respect
        with any such properties, assets and rights owned or used by any
        Grantor. No Grantor has received any notice that it is violating or has
        violated the trademarks, patents, copyrights, inventions, trade secrets,
        proprietary information and technology, know-how, formulae, rights of
        publicity or other intellectual property rights of any third party.

                (i)     The Grantors are and will be at all times the sole and
        exclusive owner of, or otherwise have and will have adequate rights in,
        the Collateral free and clear of any Lien except for (i) the Lien
        created by this Agreement, and (ii) the Liens permitted by the Loan
        Agreement. No effective financing statement or other instrument similar
        in effect covering all or any part of the Collateral is on file in any
        recording or filing office, except (i) such as may have been filed in
        favor of the Agent relating to this Agreement,

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<PAGE>

        and (ii) such as may have been filed to perfect or protect any security
        interest or encumbrance permitted by the Loan Agreement.

                (j)     The exercise by the Agent of any of its rights and
        remedies hereunder will not contravene any law or any contractual
        restriction binding on or otherwise affecting any Grantor or any of its
        properties and will not result in or require the creation of any Lien
        upon or with respect to any of its properties.

                (k)     No authorization or approval or other action by, and no
        notice to or filing with, any Governmental Authority or any other
        Person, is required for (i) the grant by any Grantor, or the perfection,
        of the security interest purported to be created hereby in the
        Collateral or (ii) the exercise by the Agent of any of its rights and
        remedies hereunder, except (A) for the filing under the Code as in
        effect in the applicable jurisdiction of the financing statements
        described in Schedule VI hereto, (B) with respect to any action that may
        be necessary to obtain control in Collateral described in Sections 5(i)
        and 5(j) hereof, the taking of such actions, (C) the taking possession
        of all Documents, Chattel Paper, Instruments and cash constituting
        Collateral, (D) with respect to the perfection of the security interest
        created hereby in the United States Trademarks, the United States
        Patents, and the United States Copyrights, for the recording of the
        Grant of Security Interest (Trademarks), substantially in the form of
        Exhibit A hereto and the Collateral Assignment for Security (Patents),
        substantially in the form of Exhibit B hereto, in the United States
        Patent and Trademark Office, (E) with respect to the perfection of the
        security interest created hereby in the United States Copyrights, the
        registration of such United States Copyrights and the recordation of the
        Collateral Assignment for Security (Copyrights), substantially in the
        form of Exhibit C hereto, in the United States Copyright Office, (F)
        with respect to the perfection of the security interest created hereby
        in foreign Trademarks, Patents and Copyrights, for recordings and
        filings in jurisdictions located outside of the United States and
        covering rights in such jurisdictions relating to Patents, Trademarks,
        Copyrights, Patent Licenses, Trademark Licenses and Copyright Licenses,
        (G) with respect to the perfection of the security interest created
        hereby in motor vehicles for which the title to such motor vehicles is
        governed by a certificate of title or ownership (collectively, the
        "MOTOR VEHICLES"), for the submission of an appropriate application
        requesting that the Lien of the Agent be noted on the certificate of
        title or ownership, completed and authenticated by the Grantor, together
        with the certificate of title, with respect to each Motor Vehicle, to
        the appropriate state agency and (H) entry of the Interim Order (or the
        Final Order, as applicable).

                (l)     This Agreement creates valid security interests in favor
        of the Agent for the benefit of the Agent and the Secured Parties in the
        Collateral, as security for the Obligations. The Agent's possession of
        all Instruments and cash constituting Collateral and its Control of all
        Collateral described in Sections 5(i) and 5(j) hereof from time to time,
        the recording of the Collateral Assignment for Security (Trademarks),
        the Collateral Assignment for Security (Patents) and the Collateral
        Assignment for Security (Copyrights), as applicable, executed pursuant
        hereto in the United States Patent and Trademark Office and the United
        States Copyright Office, as applicable, and the filing of

                                      -7-
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        the financing statements described in Schedule VI hereto and, with
        respect to Patents, Trademarks and Copyrights hereafter existing and not
        covered by a Collateral Assignment for Security (Trademarks), a
        Collateral Assignment for Security (Patents) or a Collateral Assignment
        for Security (Copyrights), as applicable, the recording in the United
        States Patent and Trademark Office or the United States Copyright
        Office, as applicable, of appropriate instruments of assignment with
        respect to such after-acquired Patents, Trademarks and Copyrights and,
        in the case of such after acquired Copyrights, the registration of such
        Copyrights in the United States Copyright Office, will result in the
        perfection of such security interests. Such security interests are, or
        in the case of Collateral in which any Grantor obtains rights after the
        date hereof, will be, perfected, first priority security interests,
        subject only to the security interests and other encumbrances permitted
        pursuant to the Loan Agreement. Such filings and all other action
        necessary or desirable to perfect and protect such security interests
        have been duly taken, except for the Agent's having possession of
        Collateral consisting of Instruments or cash after the date hereof, the
        recording of a Collateral Assignment for Security (Trademarks), a
        Collateral Assignment for Security (Patents) or a Collateral Assignment
        for Security (Copyrights), as applicable, with respect to hereafter
        existing Trademarks, Patents or Copyrights and the taking of appropriate
        action with respect to foreign Trademarks.

                (m)     No Grantor holds any Commercial Tort Claims or is aware
        of any such pending claims, except for such claims described in Schedule
        VI.

        SECTION 5. COVENANTS AS TO THE COLLATERAL. So long as any of the
Obligations shall remain outstanding or the Loan Agreement and the other Loan
Documents or the Total Commitment shall not have terminated, unless the Agent
shall otherwise consent in writing:

                (a)     FURTHER ASSURANCES. Each Grantor will at its expense, at
        any time and from time to time, promptly execute and deliver all further
        instruments and documents and take all further action that may be
        necessary or desirable or that the Agent may reasonably request in order
        (i) to perfect and protect the security interest purported to be created
        hereby; (ii) to enable the Agent to exercise and enforce its rights and
        remedies hereunder in respect of the Collateral; or (iii) otherwise to
        effect the purposes of this Agreement, including, without limitation:
        (A) marking conspicuously each Chattel Paper included in the Accounts
        and each License and Related Contract and, at the request of the Agent,
        each of its records pertaining to the Collateral with a legend, in form
        and substance satisfactory to the Agent, indicating that such Chattel
        Paper, License, Related Contract or Collateral is subject to the
        security interest created hereby, (B) if any Account shall be evidenced
        by a promissory note or other Instrument or Chattel Paper, delivering
        and pledging to the Agent hereunder any such note, Instrument or Chattel
        Paper duly endorsed and accompanied by executed instruments of transfer
        or assignment, all in form and substance satisfactory to the Agent, (C)
        executing and filing (to the extent, if any, that such Grantor's
        signature is required thereon) or authenticating the filing of, such
        financing or continuation statements, or amendments thereto, as may be
        necessary or desirable or that the Agent may request in order to perfect
        and preserve the security interest purported to be created hereby, and
        (D) furnishing to the Agent from time to time

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        statements and schedules further identifying and describing the
        Collateral and such other reports in connection with the Collateral as
        the Agent may reasonably request, all in reasonable detail, (E) if any
        Collateral shall be in the possession of a third party, notifying such
        Person of the Agent's security interest created hereby and obtaining a
        written acknowledgment from such Person that such Person holds
        possession of the Collateral for the benefit of the Agent, which such
        written acknowledgement shall be in form and substance satisfactory to
        the Agent, (F) if at any time after the date hereof, any Grantor
        acquires or holds any Commercial Tort Claim, immediately notifying the
        Agent in a writing signed by such Grantor setting forth a brief
        description of such Commercial Tort Claim and granting to the Agent a
        security interest therein and in the proceeds thereof, which writing
        shall incorporate the provisions hereof and shall be in form and
        substance satisfactory to the Agent, (G) upon the acquisition after the
        date hereof by any Grantor of any Equipment subject to a certificate of
        title or ownership (other than Equipment that is subject to a purchase
        money security interest permitted by Section 7.17(ii) of the Loan
        Agreement), at the request of the Agent, cause the Agent to be listed as
        the lienholder on such certificate of title or ownership within 2 days
        of the acquisition thereof, and within 5 days of the acquisition thereof
        deliver evidence of the same to the Agent and (H) taking all actions
        required by any applicable law in any relevant Code jurisdiction or by
        other law as applicable in any foreign jurisdiction.

                (b)     LOCATION OF EQUIPMENT AND INVENTORY. Each Grantor will
        keep the Equipment and Inventory (other than used Equipment and
        Inventory sold in the ordinary course of business in accordance with
        Section 5(g) hereof) at the locations specified therefor in Section 4(c)
        hereof, unless it is in transit from one such location to another such
        location, or, upon not less than thirty (30) days' prior written notice
        to the Agent accompanied by a new Schedule IV hereto indicating each new
        location of the Equipment and Inventory, at such other locations in the
        continental United States as the Grantor may elect, provided that (i)
        all action has been taken to grant to the Agent a perfected, first
        priority security interest in such Equipment and Inventory (subject to
        Permitted Liens (to the extent that such Permitted Liens are accorded
        priority as a matter of law or pursuant to agreement)), and (ii) the
        Agent's rights in such Equipment and Inventory, including, without
        limitation, the existence, perfection and priority of the security
        interest created hereby in such Equipment and Inventory, are not
        adversely affected thereby.

                (c)     CONDITION OF EQUIPMENT. Each Grantor will maintain or
        cause to be maintained in good repair, working order and condition,
        excepting ordinary wear and tear and damage due to casualty, all of the
        Equipment and make or cause to be made all of the appropriate repairs,
        renewals and replacements thereof which are necessary or desirable and
        consistent with past practice of the Grantor, as quickly as practicable
        after the occurrence of any loss or damage thereto. Each Grantor shall
        promptly furnish to the Agent a statement describing in reasonable
        detail any loss or damage in excess of $100,000 to any Equipment or
        Inventory due to casualty.

                (d)     TAXES, ETC. Subject to any applicable restrictions
        imposed under the Bankruptcy Code or by the Bankruptcy Court, each
        Grantor jointly and severally

                                      -9-
<PAGE>

        agrees to pay promptly when due all property and other taxes,
        assessments and governmental charges or levies imposed upon, and all
        claims (including claims for labor, materials and supplies) against, the
        Equipment and Inventory, except to the extent the validity thereof is
        being contested in good faith by proper proceedings which stay the
        imposition of any penalty, fine or Lien resulting from the non-payment
        thereof and with respect to which adequate reserves in accordance with
        GAAP have been set aside for the payment thereof.

                (e)     INSURANCE.

                (i)     Each Grantor will, at its own expense, maintain
          insurance (including, without limitation, comprehensive general
          liability and property insurance) with respect to the Equipment and
          Inventory in such amounts, against such risks, in such form and with
          such insurers as shall be reasonably satisfactory to the Agent from
          time to time. Each policy for liability insurance shall provide for
          all losses to be paid on behalf of the Agent and the Grantor as their
          respective interests may appear. Each such policy shall in addition
          (A) name the Grantor and the Agent as insured parties thereunder
          (without any representation or warranty by or obligation upon the
          Agent) as their interests may appear, (B) contain the agreement by the
          insurer that any loss thereunder shall be payable to the Agent on its
          own account, notwithstanding any action, inaction or breach of
          representation or warranty by the Grantor, (C) provide that there
          shall be no recourse against the Agent for payment of premiums or
          other amounts with respect thereto, and (D) provide that at least 30
          days' prior written notice of cancellation or of lapse, expiration or
          other adverse change shall be given to the Agent by the insurer. Each
          Grantor will, if so requested by the Agent, deliver to the Agent
          original or duplicate policies of such insurance and, as often as the
          Agent may reasonably request, a report of a reputable insurance broker
          with respect to such insurance. Each Grantor will also, at the request
          of the Agent, execute and deliver instruments of assignment of such
          insurance policies and cause the respective insurers to acknowledge
          notice of such assignment.

                (ii)    Payment under any liability insurance maintained by each
          Grantor pursuant to this Section 5(e) may be paid directly to the
          Person who shall have incurred liability covered by such insurance. In
          the case of any loss involving damage to Equipment or Inventory as to
          which clause (iii) of this Section 5(e) is not applicable, the Grantor
          will make or cause to be made the necessary repairs to or replacements
          of such Equipment and Inventory, and any proceeds of insurance
          maintained by any Grantor pursuant to this Section 5(e) shall be paid
          to the Grantor as reimbursement for the costs of such repairs or
          replacements.

                (iii)   Upon the occurrence and during the continuance of an
          Event of Default under the Loan Agreement or the actual or
          constructive total loss of any Equipment that will not be promptly
          replaced with the proceeds of such insurance or Inventory, all
          insurance payments in respect of such Equipment and Inventory shall,
          to the extent required by the Loan Agreement, be paid to the Agent and
          applied as specified in Section 7(b) hereof.

                                      -10-
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                (f)     PROVISIONS CONCERNING THE ACCOUNTS, THE RELATED
        CONTRACTS AND THE  LICENSES.

                (i)     Each Grantor will (A) give the Agent at least 30 days'
          prior written notice of any change in the Grantor's name, identity or
          corporate structure, (B) maintain its state of incorporation, chief
          place of business and chief executive office and all originals of all
          chattel paper which constitute Accounts at the location(s) specified
          therefor in Schedule IV hereof, (C) immediately notify the Agent upon
          obtaining an organizational identification number, if on the date
          hereof such Grantor did not have such identification number, and (D)
          keep adequate records concerning the Accounts and such chattel paper
          and permit representatives of the Agent to inspect and make abstracts
          from such records and chattel paper pursuant to the terms of the Loan
          Agreement.

                (ii)    Each Grantor will duly perform and observe all of its
          obligations under each Related Contract and, except as otherwise
          provided in this subsection (f), continue to collect, at its own
          expense, all amounts due or to become due under the Accounts. In
          connection with such collections, the Grantor may (and, at the Agent's
          direction, will) take such action as the Grantor or the Agent may deem
          necessary or advisable to enforce collection or performance of the
          Accounts; provided, however, that the Agent shall have the right at
          any time, upon the occurrence and during the continuance of an Event
          of Default, to notify the Account Debtors or obligors under any
          Accounts of the assignment of such Accounts to the Agent and to direct
          such Account Debtors or obligors to make payment of all amounts due or
          to become due to the Grantor thereunder directly to the Agent or its
          designated agent and, upon such notification and at the expense of the
          Grantor and to the extent permitted by law, to enforce collection of
          any such Accounts and to adjust, settle or compromise the amount or
          payment thereof, in the same manner and to the same extent as the
          Grantor might have done. After receipt by any Grantor of a notice from
          the Agent that the Agent has notified or intends to notify the Account
          Debtors or obligors under any Accounts as referred to in the proviso
          to the immediately preceding sentence, (A) all amounts and Proceeds
          (including Instruments) received by any Grantor in respect of the
          Accounts shall be received in trust for the benefit of the Agent and
          the Secured Parties hereunder, shall be segregated from other funds of
          the Grantor and shall be forthwith paid over to the Agent in the same
          form as so received (with any necessary indorsement) to be held as
          cash collateral and either (1) credited to an account of the Grantor
          so long as no Event of Default shall have occurred and be continuing
          or (2) if any Event of Default shall have occurred and be continuing,
          applied as specified in Section 7(b) hereof, and (B) no Grantor will
          adjust, settle or compromise the amount or payment of any Receivable
          or release, in whole or in part, any Account Debtor or obligor thereof
          or allow any credit or discount thereon. In addition, upon the
          occurrence and during the continuance of an Event of Default, the
          Agent may (in its sole and absolute discretion) (i) notify the United
          States Postal Service authorities to change to any address Agent may
          designate the address for delivery of mail addressed to any Grantor
          and (ii) direct any or all

                                      -11-
<PAGE>

          of the banks and financial institutions with which any Grantor either
          maintains a Deposit Account or a lockbox or deposits the proceeds of
          any Accounts to send immediately to the Agent by wire transfer (to
          such account as the Agent shall specify, or in such other manner as
          the Agent shall direct) all or a portion of such securities, cash,
          investments and other items held by such institution. Any such
          securities, cash, investments and other items so received by the Agent
          shall (in the sole and absolute discretion of the Agent) be held as
          additional Collateral for the Obligations or distributed in accordance
          with Section 7 hereof.

                (iii)   Upon the occurrence and during the continuance of any
          material breach or default under any material Related Contract or
          other Related Contract specified in writing by the Agent from time to
          time or any License referred to in Schedule I, III or IV hereto by any
          party thereto other than a Grantor, the Grantors will (A) promptly
          after obtaining knowledge thereof, give the Agent written notice of
          the nature and duration thereof, specifying what action, if any, it
          has taken and proposes to take with respect thereto, and (B) upon
          written instructions from the Agent and at the Grantor's expense, take
          such action as the Agent may deem necessary or advisable in respect
          thereof.

                (iv)    Each Grantor will, at its expense, promptly deliver to
          the Agent a copy of each notice or other communication received by it
          by which any other party to any material Related Contract or other
          Related Contract specified in writing by the Agent from time to time
          or any License referred to in Schedule I, III or IV hereto purports to
          exercise any of its rights or affect any of its obligations
          thereunder, together with a copy of any reply by the Grantor thereto.

                (v)     Each Grantor will exercise promptly and diligently each
          and every right which it may have under each License (other than any
          right of termination) to the extent warranted in the conduct of its
          business and will duly perform and observe in all respects all of its
          obligations under each License and will take all action necessary to
          maintain all Licenses necessary for the operation of its business in
          full force and effect. No Grantor will, without the prior written
          consent of the Agent, cancel, terminate, amend or otherwise modify in
          any material respect, or waive any material provision of, any material
          Related Contract except for amendments which would not adversely
          affect Agent and the Secured Parties or any License referred to in
          Schedule I, III or IV hereto.

                (g)     TRANSFERS AND OTHER LIENS.

                (i)     No Grantor will sell, assign (by operation of law or
          otherwise), lease, exchange or otherwise transfer or dispose of any of
          the Collateral except to the extent permitted under Section 7.17 of
          the Loan Agreement, subject to the obligation of the Borrowers to make
          payments pursuant to Section 2.06 of the Loan Agreement.

                                      -12-
<PAGE>

                (ii)    No Grantor will create or suffer to exist any Lien upon
          or with respect to any Collateral, except for (A) the Liens created by
          this Agreement and the other Loan Documents and (B) the Liens
          permitted by the Loan Agreement.

                (h)     TRADEMARKS, PATENTS AND COPYRIGHTS.

                (i)     If applicable, each Grantor has duly executed and
          delivered the Grant of Security Interest (Trademarks) in the form
          attached hereto as Exhibit A, the Collateral Assignment for Security
          (Patents) in the form attached hereto as Exhibit B or the Collateral
          Assignment for Security (Copyrights) in the form attached hereto as
          Exhibit C. Each Grantor (either itself or through licensees) will, and
          will cause each licensee thereof to, take all action necessary to
          maintain all of the Trademarks, Patents and Copyrights in full force
          and effect, including, without limitation, using the proper statutory
          notices and markings and using the Trademarks on each applicable
          trademark class of goods in order to so maintain the Trademarks in
          full force free from any claim of abandonment for non-use, and no
          Grantor will (nor permit any licensee thereof to) do any act or
          knowingly omit to do any act whereby any Trademark, Patent or
          Copyright may become invalidated; provided, however, that so long as
          no Event of Default has occurred and is continuing, the Grantors shall
          have no obligation to use or to maintain any Trademark, Patent or
          Copyright (A) that relates solely to any product or work that has
          been, or is in the process of being, discontinued, abandoned or
          terminated, (B) that is being replaced with a trademark, patent or
          copyright substantially similar to the Trademark, Patent or Copyright,
          as the case may be, that may be abandoned or otherwise become invalid,
          so long as such replacement Trademark, Patent or Copyright, as the
          case may be, is subject to the security interest purported to be
          created by this Agreement, (C) that is substantially the same as
          another Trademark, Patent or Copyright that is in full force, so long
          as such other Trademark, Patent or Copyright, as the case may be, is
          subject to the Lien created by this Agreement, or (D) that is not
          necessary for the operation of the Grantor's business and is
          discontinued or disposed of in the ordinary course of business. Each
          Grantor will cause to be taken all necessary steps in any proceeding
          before the United States Patent and Trademark Office and the United
          States Copyright Office to maintain each registration of the
          Trademarks, the Patents and the Copyrights (other than those
          Trademarks, Patents and Copyrights described in the proviso to the
          immediately preceding sentence), including, without limitation, filing
          of renewals, affidavits of use, affidavits of incontestability and
          opposition, interference and cancellation proceedings and payment of
          maintenance fees, filing fees, taxes or other governmental fees. If
          any Trademark, Patent or Copyright is infringed, misappropriated or
          diluted or otherwise violated in any material respect by a third
          party, the Grantors shall (x) upon learning of such infringement,
          misappropriation or dilution or other violation, promptly notify the
          Agent and (y) to the extent the Grantors shall reasonably deem
          appropriate under the circumstances, promptly sue for infringement,
          misappropriation or dilution or other violation, seek injunctive
          relief where appropriate and recover any and all damages for such
          infringement, misappropriation or dilution or other violation, or

                                      -13-
<PAGE>

          take such other actions as the Grantors shall reasonably deem
          appropriate under the circumstances to protect such Trademark, Patent
          or Copyright. Each Grantor shall furnish to the Agent from time to
          time (but, unless an Event of Default has occurred and is continuing,
          no more frequently than quarterly) statements and schedules further
          identifying and describing the Patents, the Trademarks and the
          Copyrights and such other reports in connection with the Patents, the
          Trademarks and the Copyrights as the Agent may reasonably request, all
          in reasonable detail and promptly upon request of the Agent, following
          receipt by the Agent of any such statements, schedules or reports, the
          Grantors shall modify this Agreement by amending Schedules II, III or
          IV hereto, as the case may be, to include any Patent, Trademark or
          Copyright, as the case may be, which becomes part of the Collateral
          under this Agreement and shall execute and authenticate such documents
          and do such acts as shall be necessary or, in the judgment of the
          Agent, desirable to subject such Trademarks, Patents or Copyrights to
          the Lien created by this Agreement. Notwithstanding anything herein to
          the contrary, upon the occurrence and during the continuance of an
          Event of Default the Grantor may not abandon or otherwise permit a
          Trademark, Patent or Copyright to become invalid without the prior
          written consent of the Agent, and if any Trademark, Patent or
          Copyright is infringed, misappropriated or diluted or otherwise
          violated in any material respect by a third party, the Grantor will
          take such action as the Agent shall deem appropriate under the
          circumstances to protect such Trademark, Patent or Copyright.

                (ii)    If any Grantor or any agent, employee, licensee or
          designee thereof files an application for the registration of any
          Trademark or Copyright or for the issuance of any Patent with the
          United States Patent and Trademark Office or the United States
          Copyright Office, as applicable, within 5 days of such filing the
          Grantor shall provide the Agent written notice thereof. Upon request
          of the Agent, the Grantor shall execute, authenticate and deliver any
          and all assignments, agreements, instruments, documents and papers as
          the Agent may reasonably request to evidence the Agent's security
          interest hereunder in such Trademark, Patent or Copyright and the
          general intangibles of the Grantor relating thereto or represented
          thereby. The Grantor constitutes the Agent as its attorney-in-fact to
          execute and/or authenticate and file all such writings for the
          foregoing purposes, and confirms and ratifies all acts of such
          attorney, and such power (being coupled with an interest) shall be
          irrevocable until the termination of the Total Commitment, the
          repayment of all of the Obligations in full and the termination of
          each of the Loan Documents.

                (i)     DEPOSIT, COMMODITIES AND SECURITIES ACCOUNTS. Without
        the prior written consent of the Agent, no Grantor shall make or
        maintain any Deposit Account, Commodity Account or Securities Account,
        except in accordance with the terms of the Loan Agreement.

                (j)     CONTROL. Each Grantor hereby agrees to take any or all
        action that may be necessary or desirable or that the Agent may request
        in order for the Agent to

                                      -14-
<PAGE>

        obtain control in accordance with Sections 9-105 - 9-107 of the Code
        with respect to the following Collateral: (i) Electronic Chattel Paper,
        (ii) Investment Property and (iii) Letter-of-Credit Rights.

                (k)     INSPECTION AND REPORTING. Each Grantor shall permit the
        Agent or any Lender, or any agents or representatives thereof or such
        professionals or other Persons as the Agent may designate (i) to examine
        and inspect the books and records of the Grantor and take copies and
        extracts therefrom, (ii) to visit and inspect its properties, (iii) to
        verify materials, leases, notes, receivables, inventory and other assets
        of the Grantor from time to time, and (iv) to conduct physical counts,
        appraisals and/or valuations at the locations of the Grantor, in each
        case as provided in the Loan Agreement.

        SECTION 6. ADDITIONAL PROVISIONS CONCERNING THE COLLATERAL.

                (a)     Each Grantor authorizes the Agent to file, without the
        signature of the Grantor where permitted by law, one or more financing
        or continuation statements, and amendments thereto, relating to the
        Collateral and ratifies such authorization to the extent that the Agent
        has filed any such financing or continuation statements, or amendments
        thereto prior to the date hereof. A photocopy or other reproduction of
        this Agreement or any financing statement covering the Collateral or any
        part thereof shall be sufficient as a financing statement where
        permitted by law.

                (b)     Each Grantor irrevocably appoints the Agent as the
        Grantor's attorney-in-fact and proxy, with full authority in the place
        and stead of the Grantor and in the name of the Grantor or otherwise,
        from time to time in the Agent's discretion upon the occurrence and
        during the continuance of an Event of Default, to take any action and to
        execute any instrument which the Agent may deem necessary or advisable
        to accomplish the purposes of this Agreement (subject to the rights of
        the Grantor under Section 5(f) hereof), including, without limitation,
        (i) to obtain and adjust insurance required to be paid to the Agent
        pursuant to Section 5(e) hereof, and to receive, indorse and collect any
        drafts or other instruments, documents and chattel paper in connection
        therewith, (ii) to ask, demand, collect, sue for, recover, compound,
        receive and give acquittance and receipts for moneys due and to become
        due under or in respect of any Collateral, (iii) to receive, indorse,
        and collect any drafts or other instruments, documents and chattel paper
        in connection with clause (i) or (ii) above, and (iv) to file any claims
        or take any action or institute any proceedings which the Agent may deem
        necessary or desirable for the collection of any Collateral or otherwise
        to enforce the rights of the Agent and the Lenders with respect to any
        Collateral. This power is coupled with an interest and is irrevocable
        until all of the Obligations are paid in full after the termination of
        the Loan Agreement and the other Loan Documents.

                (c)     For the purpose of enabling the Agent to exercise rights
        and remedies hereunder, at such time as the Agent shall be lawfully
        entitled to exercise such rights and remedies, and for no other purpose,
        each Grantor grants to the Agent, to the extent assignable, an
        irrevocable, non-exclusive license (exercisable without payment of
        royalty or other compensation to the Grantor) to use, assign, license or
        sublicense any of

                                      -15-
<PAGE>

        the Patents, Trademarks or Copyrights now owned or hereafter acquired by
        the Grantor, wherever the same may be located, including in such license
        reasonable access to all media in which any of the licensed items may be
        recorded or stored and to all computer programs used for the compilation
        or printout thereof, subject with respect to Trademarks to the
        reasonable rights of quality control and inspection in favor of the
        Grantor as shall be reasonably necessary to preserve the validity of
        such Trademarks. Notwithstanding anything contained herein to the
        contrary, but subject to the provisions of the Loan Agreement that limit
        the right of any Grantor to dispose of its property and Section 5(h)
        hereof, so long as no Event of Default shall have occurred and be
        continuing, the Grantors may exploit, use, enjoy, protect, license,
        sublicense, assign, sell, dispose of or take other actions with respect
        to the Patents, Trademarks or Copyrights in the ordinary course of the
        business of the Grantors. In furtherance of the foregoing, unless an
        Event of Default shall have occurred and be continuing, the Agent shall
        from time to time, upon the request of a Grantor, execute and deliver
        any instruments, certificates or other documents, in the form so
        requested, which the Grantor shall have certified are appropriate (in
        its judgment) to allow it to take any action permitted above (including
        relinquishment of the license provided pursuant to this clause (c) as to
        any Patents, Trademarks or Copyrights). Further, upon the payment in
        full of all of the Obligations and termination of the Loan Agreement,
        the Agent (subject to Section 10(e) hereof) shall release and reassign
        to the Grantor all of the Agent's right, title and interest in and to
        the Patents, Trademarks, Copyrights and the Licenses, all without
        recourse, representation or warranty whatsoever. The exercise of rights
        and remedies hereunder by the Agent shall not terminate the rights of
        the holders of any licenses or sublicenses theretofore granted by any
        Grantor in accordance with the second sentence of this clause (c). The
        Grantors release the Agent from any claims, causes of action and demands
        at any time arising out of or with respect to any actions taken or
        omitted to be taken by the Agent under the powers of attorney granted
        herein other than actions taken or omitted to be taken through the
        Agent's gross negligence or willful misconduct.

                (d)     If any Grantor fails to perform any agreement contained
        herein, the Agent may itself perform, or cause performance of, such
        agreement or obligation, in the name of the Grantor or the Agent, and
        the expenses of the Agent incurred in connection therewith shall be
        jointly and severally payable by the Grantor pursuant to Section 8
        hereof and shall be secured by the Collateral.

                (e)     The powers conferred on the Agent hereunder are solely
        to protect its interest in the Collateral and shall not impose any duty
        upon it to exercise any such powers. Except for the safe custody of any
        Collateral in its possession and the accounting for moneys actually
        received by it hereunder, the Agent shall have no duty as to any
        Collateral or as to the taking of any necessary steps to preserve rights
        against prior parties or any other rights pertaining to any Collateral.

                (f)     Anything herein to the contrary notwithstanding (i) each
        Grantor shall remain liable under the Related Contracts and Licenses and
        otherwise with respect to any of the Collateral to the extent set forth
        therein to perform all of its obligations thereunder to the same extent
        as if this Agreement had not been executed, (ii) the exercise

                                      -16-
<PAGE>

        by the Agent of any of its rights hereunder shall not release any
        Grantor from any its obligations under the Related Contracts and
        Licenses or otherwise in respect of the Collateral, and (iii) the Agent
        shall not have any obligation or liability by reason of this Agreement
        under the Related Contracts and Licenses or with respect to any of the
        other Collateral, nor shall the Agent be obligated to perform any of the
        obligations or duties of any Grantor thereunder or to take any action to
        collect or enforce any claim for payment assigned hereunder.

                (g)     To the extent that any provision of this Agreement
        requires the Grantors to take action within a specified period of time,
        or requires the Grantors to deliver written notice to the Agent within a
        specified period of time, such specified period of time may be extended
        or shortened by the Agent, at the Grantors' request, in the Agent's sole
        discretion

        SECTION 7. REMEDIES UPON DEFAULT. If any Event of Default shall have
occurred and be continuing:

                (a)     The Agent may exercise in respect of the Collateral,
        without further order of, or application to, the Bankruptcy Court and in
        addition to other rights and remedies provided for herein or otherwise
        available to it, all of the rights and remedies of a secured party upon
        default under the Bankruptcy Code and the Code (whether or not the Code
        applies to the affected Collateral), and also may (i) take absolute
        control of the Collateral, including, without limitation, (x) transfer
        into the Agent's name or into the name of its nominee or nominees (to
        the extent the Agent has not theretofore done so) and thereafter
        receive, for the benefit of the Secured Parties, all payments made
        thereon, give all consents, waivers and ratifications in respect thereof
        and otherwise act with respect thereto as though it were the outright
        owner thereof, (y) obtain physical possession of the Servicing Records
        and all other files of the Grantors relating to the Collateral and all
        documents relating to the Collateral which are then or may thereafter
        come into the possessions of the Grantors or any third party acting for
        the Grantors and (z) exercise Control over all Control Accounts, (ii)
        require the Grantors to, and each Grantor agrees that it will at its
        expense and upon request of the Agent forthwith, assemble all or part of
        the Collateral as directed by the Agent and make it available to the
        Agent at a place or places to be designated by the Agent which is
        reasonably convenient to both parties, and the Agent may enter into and
        occupy any premises owned or leased by any Grantor where the Collateral
        or any part thereof is located or assembled for a reasonable period in
        order to effectuate the Agent's rights and remedies hereunder or under
        law, without obligation to any Grantor in respect of such occupation,
        (iiii) use, assign, license or sublicense any of the Intellectual
        Property, to the extent permitted by the terms of such Intellectual
        Property, (iv) without notice except as specified below, and without any
        obligation to prepare or process the Collateral for sale, (A) sell the
        Collateral or any part thereof in one or more parcels at public or
        private sale, at any of the Agent's offices or elsewhere, for cash, on
        credit or for future delivery, and at such price or prices and upon such
        other terms as the Agent may deem commercially reasonable and/or (B)
        lease, license or dispose of the Collateral or any part thereof upon
        such terms as the Agent may deem commercially reasonable; PROVIDED,
        HOWEVER, in

                                      -17-
<PAGE>

        accordance with Section 9(a) of the Loan Agreement and the Orders of the
        Bankruptcy Court, the Agent may not consummate foreclosure on the
        Collateral or otherwise seize control of assets of the Grantors' Estates
        (as such term is defined in the Bankruptcy Code) absent five (5)
        Business Days' notice of an Event of Default. The Grantors agree that,
        to the extent notice of sale shall be required by law, 10 days' notice
        to any Grantor of the time and place of any public sale or the time
        after which any private sale is to be made shall constitute reasonable
        notification to all Grantors. The Agent shall not be obligated to make
        any sale of Collateral regardless of notice of sale having been given.
        The Agent may adjourn any public or private sale from time to time by
        announcement at the time and place fixed therefor, and such sale may,
        without further notice, be made at the time and place to which it was so
        adjourned. The Grantors waive any claims against the Agent and the other
        Secured Parties arising by reason of the fact that the price at which
        the Collateral may have been sold at a private sale was less than the
        price which might have been obtained at a public sale or was less than
        the aggregate amount of the Obligations, even if the Agent accepts the
        first offer received and does not offer the Collateral to more than one
        offeree and waives all rights which the Grantor may have to require that
        all or any part of the Collateral be marshalled upon any sale (public or
        private) thereof. Each Grantor hereby acknowledges that (i) any such
        sale of the Collateral by the Agent shall be made without warranty, (ii)
        the Agent may specifically disclaim any warranties of title, possession,
        quiet enjoyment or the like, and (iii) such actions set forth in clauses
        (i) and (ii) above shall not adversely effect the commercial
        reasonableness of any such sale of the Collateral. In addition to the
        foregoing, (i) upon written notice from the Agent, the Grantors shall
        cease any use of the Trademarks, Patents or Copyrights or any mark or
        patent similar thereto for any purpose described in such notice; (ii)
        the Agent may, at any time and from time to time, upon 10 days' prior
        notice to any Grantor, license, whether general, special or otherwise,
        and whether on an exclusive or non-exclusive basis, any of the
        Trademarks, Patents and Copyrights throughout the world for such term or
        terms, on such conditions, and in such manner, as the Agent shall in its
        sole discretion determine; and (iii) the Agent may, at any time,
        pursuant to the authority granted in Section 6 hereof (such authority
        being effective upon the occurrence of an Event of Default), execute and
        deliver on behalf of the Grantors, one or more instruments of assignment
        of the Trademarks, Patents and Copyrights (or any application or
        registration thereof), in form suitable for filing, recording or
        registration in any country.

                (b)     Subject to Section 4.01(k) of the Loan Agreement, any
        cash held by the Agent as Collateral and all cash proceeds received by
        the Agent in respect of any sale of or collection from, or other
        realization upon, all or any part the Collateral may, in the discretion
        of the Agent, be held by the Agent as collateral for, and/or then or at
        any time thereafter applied in whole or in part by the Agent against,
        all or any part of the Obligations as provided in Section 3.03 of the
        Loan Agreement. Any surplus of such cash or cash Proceeds held by the
        Agent and remaining after payment in full of all of the Obligations
        after termination of the Loan Agreement and the other Loan Documents
        shall be paid over to whomsoever shall be lawfully entitled to receive
        the same or as a court of competent jurisdiction shall direct.

                                      -18-
<PAGE>

                (c)     In the event that the proceeds of any such sale,
        collection or realization are insufficient to pay all amounts to which
        the Agent and the other Secured Parties are legally entitled, the
        Grantors shall be liable for the deficiency, together with interest
        thereon at the highest rate specified in any applicable Loan Document
        for interest on overdue principal thereof or such other rate as shall be
        fixed by applicable law, together with the costs of collection and the
        reasonable fees, costs, expenses of any attorneys employed by the Agent
        to collect such deficiency.

                (d)     Each Grantor hereby acknowledges that if the Agent
        complies with any applicable state or federal law requirements in
        connection with a disposition of the Collateral, such compliance will
        not adversely affect the commercial reasonableness of any sale or other
        disposition of the Collateral.

                (e)     The Agent shall not be required to marshal any present
        or future collateral security (including, but not limited to, this
        Agreement and the Collateral) for, or other assurances of payment of,
        the Obligations or any of them or to resort to such collateral security
        or other assurances of payment in any particular order, and all of the
        Agent's rights hereunder and in respect of such collateral security and
        other assurances of payment shall be cumulative and in addition to all
        other rights, however existing or arising. To the extent that any
        Grantor lawfully may, such Grantor hereby agrees that it will not invoke
        any law relating to the marshalling of collateral which might cause
        delay in or impede the enforcement of the Agent's rights under this
        Agreement or under any other instrument creating or evidencing any of
        the Obligations or under which any of the Obligations is outstanding or
        by which any of the Obligations is secured or payment thereof is
        otherwise assured, and, to the extent that it lawfully may, each Grantor
        hereby irrevocably waives the benefits of all such laws.

        SECTION 8. INTENTIONALLY OMITTED.

        SECTION 9. NOTICES, ETC. All notices and other communications provided
for hereunder shall be in writing and governed by the terms of Section 11.03 of
the Loan Agreement. Notice to any Grantor will be deemed notice to all Grantors.

        SECTION 10. MISCELLANEOUS.

                (a)     No amendment of any provision of this Agreement shall be
        effective unless it is in writing and signed by the Grantors and the
        Agent, and no waiver of any provision of this Agreement, and no consent
        to any departure by any Grantor therefrom, shall be effective unless it
        is in writing and signed by the Agent, and then such waiver or consent
        shall be effective only in the specific instance and for the specific
        purpose for which given.

                (b)     No failure on the part of the Agent to exercise, and no
        delay in exercising, any right hereunder or under any other Loan
        Document shall operate as a waiver thereof; nor shall any single or
        partial exercise of any such right preclude any other or further
        exercise thereof or the exercise of any other right. The rights and
        remedies of the Agent provided herein and in the other Loan Documents
        are cumulative

                                      -19-
<PAGE>

        and are in addition to, and not exclusive of, any rights or remedies
        provided by law. The rights of the Agent under any Loan Document against
        any party thereto are not conditional or contingent on any attempt by
        the Agent to exercise any of its rights under any other Loan Document
        against such party or against any other Person.

                (c)     Any provision of this Agreement which is prohibited or
        unenforceable in any jurisdiction shall, as to such jurisdiction, be
        ineffective to the extent of such prohibition or unenforceability
        without invalidating the remaining portions hereof or thereof or
        affecting the validity or enforceability of such provision in any other
        jurisdiction.

                (d)     This Agreement shall create a continuing security
        interest in the Collateral and shall (i) remain in full force and effect
        until the payment in full of the Obligations and the termination of the
        Loan Agreement and the other Loan Documents and (ii) be binding on the
        Grantors and their successors and assigns and shall inure, together with
        all rights and remedies of the Agent hereunder, to the benefit of the
        Agent and the other Secured Parties their respective permitted
        successors, transferees and assigns. Without limiting the generality of
        clause (ii) of the immediately preceding sentence and subject to the
        terms of the Loan Agreement, the Agent and Lenders may assign or
        otherwise transfer their respective rights under this Agreement and any
        other Loan Document, to any other Person and such other Person shall
        thereupon become vested with all of the benefits in respect thereof
        granted to the Agent and the Lenders herein or otherwise. Upon any such
        assignment or transfer, all references in this Agreement to the Agent or
        any such Lender shall mean the assignee or transferee of the Agent or
        such Lender. None of the rights or obligations of the Grantors hereunder
        may be assigned or otherwise transferred without the prior written
        consent of the Agent, and any such attempted assignment or transfer
        shall be null and void.

                (e)     Upon the satisfaction in full of the Obligations and the
        termination of the Loan Agreement and the other Loan Documents, (i) this
        Agreement and the security interests created hereby shall terminate and
        all rights to the Collateral shall revert to the Grantors, and (ii) the
        Agent will, upon the Grantors' request and at the Grantors' sole
        expense, (A) return to the Grantors such of the Collateral as shall not
        have been sold or otherwise disposed of or applied pursuant to the terms
        hereof, and (B) execute and deliver to the Grantors such documents as
        the Grantors shall reasonably request to evidence such termination, all
        without any representation, warranty or recourse whatsoever.

                (f)     This Agreement shall be governed by, and construed and
        interpreted in accordance with, the laws of the State of New York,
        without reference to its conflict of law provisions (other than Section
        5-1401 of the New York General Obligations Law), except as governed by
        the Bankruptcy Code and as required by mandatory provisions of law and
        except to the extent that the validity and perfection or the perfection
        and effect of perfection or non-perfection of the security interest
        created hereby or remedies hereunder, in respect of any particular
        Collateral are required to be governed by the law of a jurisdiction
        other than the State of New York.

                                      -20-
<PAGE>

                (g)     Any legal action, suit or proceeding with respect to
        this Agreement or any document related thereto may be brought in the
        courts of the State of New York or the United States of America for the
        Southern District of New York, and appellate courts thereof, and, by
        execution and delivery of this Agreement, each Grantor hereby accepts
        for itself and in respect of its property, generally and
        unconditionally, the jurisdiction of the aforesaid courts. Each Grantor
        hereby irrevocably waives any objection, including, without limitation,
        any objection to the laying of venue or based on the grounds of FORUM
        NON CONVENIENS, which it may now or hereafter have to the bringing of
        any such action, suit or proceeding in such respective jurisdictions and
        consents to the granting of such legal or equitable relief as is deemed
        appropriate by the court.

                (h)     Each Grantor irrevocably consents to the service of
        process of any of the aforesaid courts in any such action, suit or
        proceeding by the mailing of copies thereof by registered or certified
        mail (or any substantially similar form of mail), postage prepaid, to
        such Grantor at its address provided herein, such service to become
        effective when received or 30 days after such mailing, whichever first
        occurs.

                (i)     Nothing contained herein shall affect the right of the
        Agent to serve process in any other manner permitted by law or commence
        legal proceedings or otherwise proceed against any Grantor or any
        property of any Grantor in any other jurisdiction.

                (j)     Each Grantor irrevocably and unconditionally waives any
        right it may have to claim or recover in any legal action, suit or
        proceeding referred to in this Section any special, exemplary, punitive
        or consequential damages.

                (K)     EACH OF THE GRANTORS AND (BY ITS ACCEPTANCE OF THE
        BENEFITS OF THIS AGREEMENT) THE AGENT WAIVES ANY RIGHT IT MAY HAVE TO
        TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF,
        UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
        OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT
        OR OTHER ACTION OF THE PARTIES HERETO.

                (l)     COMMERCIAL TORT CLAIMS. If the Grantor shall at any
        time, acquire a Commercial Tort Claim, the Grantor shall immediately
        notify the Agent in a writing signed by the Grantor of the brief details
        thereof and grant to the Agent in such writing a security interest
        therein and in the proceeds thereof, all upon the terms of this
        Agreement, with such writing to be in form and substance satisfactory to
        the Agent.

                (m)     PERFECTION BY FILING. The Agent may at any time and from
        time to time, pursuant to this Agreement, file financing statements,
        continuation statements and amendments thereto that describe the
        Collateral as all assets of the Grantor or words of similar effect and
        which contain any other information required by Article 9 of the Code
        for the sufficiency or filing office acceptance of any financing
        statement, continuation statement or amendment, including whether the
        Grantor is an organization, the type of organization and any
        organization identification number issued to the Grantor. The

                                      -21-
<PAGE>

        Grantor agrees to furnish any such information to the Agent promptly
        upon request. Any such financing statements, continuation statements or
        amendments may be signed by the Agent on behalf of the Grantor, and may
        be filed at any time in any jurisdiction.

                (n)     OTHER PERFECTION, ETC. The Grantor shall at any time and
        from time to time, take such steps as the Agent may reasonably request
        for the Agent (i) to obtain an acknowledgment, in form and substance
        satisfactory to the Agent, of any bailee having possession of any of the
        Collateral that the bailee holds such Collateral for the Agent, (ii) to
        obtain "CONTROL" (as defined in the Code) of any Investment Property,
        Deposit Accounts, Letter-of-Credit Rights or electronic Chattel Paper,
        with any agreements establishing control to be in form and substance
        satisfactory to the Agent, and (iii) otherwise to insure the continued
        perfection and priority of the Agent's security interest in any of the
        Collateral and of the preservation of its rights therein.

                (o)     This Agreement may be executed in any number of
        counterparts and by different parties hereto in separate counterparts,
        each of which shall be deemed to be an original.

                (p)     Section headings herein are included for convenience of
        reference only and shall not constitute a part of this Agreement for any
        other purpose.

                (q)     All of the obligations of the Grantors hereunder are
        joint and several. The Agent may, in its sole and absolute discretion,
        enforce the provisions hereof against any of the Grantors and shall not
        be required to proceed against all Grantors jointly or seek payment from
        the Grantors ratably. In addition, the Agent may, in its sole and
        absolute discretion, select the Collateral of any one or more of the
        Grantors for sale or application to the Obligations, without regard to
        the ownership of such Collateral, and shall not be required to make such
        selection ratably from the Collateral owned by all of the Grantors. The
        release or discharge of any Grantor by the Agent shall not release or
        discharge any other Grantor from the obligations of such Person
        hereunder.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]




                                      -22-
<PAGE>

        IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
executed and delivered by its duly authorized officer as of the date first above
written.

                                     GRANTORS

                                     AMERICAN BUSINESS FINANCIAL SERVICES, INC.


                                     By:  /s/ Albert W. Mandia
                                          --------------------------------------
                                     Name: Albert W. Mandia
                                     Title: Executive Vice President and CFO


                                     AMERICAN BUSINESS CREDIT, INC.


                                     By:  /s/ Albert W. Mandia
                                          --------------------------------------
                                     Name: Albert W. Mandia
                                     Title: Executive Vice President and CFO


                                     HOMEAMERICAN CREDIT, INC.


                                     By:  /s/ Albert W. Mandia
                                          --------------------------------------
                                     Name: Albert W. Mandia
                                     Title: Executive Vice President and CFO


                                     AMERICAN BUSINESS MORTGAGE SERVICES, INC.


                                     By:  /s/ Albert W. Mandia
                                          --------------------------------------
                                     Name: Albert W. Mandia
                                     Title: Executive Vice President and CFO


                                     TIGER RELOCATION COMPANY


                                     By:  /s/ Albert W. Mandia
                                          --------------------------------------
                                     Name: Albert W. Mandia
                                     Title: Executive Vice President and CFO


                                      -23-
<PAGE>

                                     ABFS CONSOLIDATED HOLDINGS, INC.


                                     By:  /s/ Albert W. Mandia
                                          --------------------------------------
                                     Name: Albert W. Mandia
                                     Title: Executive Vice President and CFO









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