<PAGE>

                              AMENDED AND RESTATED
                                CREDIT AGREEMENT


                                     between


                         AMERICAN BUSINESS CREDIT, INC.,
                           HOMEAMERICAN CREDIT, INC.,
                            (d/b/a UPLAND MORTGAGE),
                                       and
                     NEW JERSEY MORTGAGE & INVESTMENT CORP.,
                                as Co-Borrowers,


                   AMERICAN BUSINESS FINANCIAL SERVICES, INC.,
                                   as Parent,


                   CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
                  as Administrative Agent and Collateral Agent,


                             CHASE SECURITIES, INC.,
                              as Syndication Agent,

                                       and

                                CERTAIN LENDERS,
                                   as Lenders


                                      Up to
                                  $200,000,000


                                 October 1, 1998










               --------------------------------------------------
               |      PREPARED BY HAYNES AND BOONE, L.L.P.      |
               --------------------------------------------------
<PAGE>




                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

<S>      <C>                                                                                                     <C>
SECTION 1         DEFINITIONS AND REFERENCES......................................................................1
         1.1      Definitions.....................................................................................1
         1.2      Time References................................................................................15
         1.3      Other References...............................................................................15
         1.4      Accounting Principles..........................................................................16

SECTION 2         BORROWING PROVISIONS...........................................................................16
         2.1      Commitments....................................................................................16
         2.2      Borrowing Request..............................................................................17
         2.3      Fundings.......................................................................................17
         2.4      Wet Borrowings.................................................................................18
         2.5      Swing Borrowing Procedures.....................................................................18
         2.6      Increases and Terminations.....................................................................19
         2.7      Multiple Borrowers.............................................................................20

SECTION 3         PAYMENT TERMS..................................................................................21
         3.1      Notes..........................................................................................21
         3.2      Payment Procedures.............................................................................21
         3.3      Scheduled Payments.............................................................................21
         3.4      Prepayments....................................................................................22
         3.5      Order of Application...........................................................................22
         3.6      Sharing........................................................................................23
         3.7      Interest Rates.................................................................................24
         3.8      Interest Periods...............................................................................25
         3.9      Basis Unavailable or Inadequate for LIBOR......................................................25
         3.10     Additional Costs...............................................................................25
         3.11     Change in Governmental Requirements............................................................26
         3.12     Funding Loss...................................................................................27
         3.13     Foreign Lenders, Participants, and Purchasers..................................................27
         3.14     Fees...........................................................................................27

SECTION 4         COLLATERAL PROCEDURES..........................................................................28
         4.1      Eligible Collateral............................................................................28
         4.2      Borrowing Base.................................................................................28
         4.3      Collateral Delivery............................................................................28
         4.4      Bailee and Administrative Agent................................................................28
         4.5      Shipment for Sale..............................................................................28
         4.6      Shipment for Correction........................................................................29
         4.7      Release of Collateral..........................................................................29

SECTION 5         CONDITIONS PRECEDENT...........................................................................30

SECTION 6         REPRESENTATIONS AND WARRANTIES.................................................................30
         6.1      Purpose of Credit..............................................................................30
         6.2      About the Companies............................................................................30
         6.3      Authorization and Contravention................................................................31

</TABLE>

                                       (i)

<PAGE>

<TABLE>
<CAPTION>

<S>      <C>                                                                                                    <C>
         6.4      Binding Effect.................................................................................31
         6.5      Fiscal Year....................................................................................31
         6.6      Current Financials.............................................................................31
         6.7      Debt...........................................................................................31
         6.8      Intellectual Property..........................................................................31
         6.9      Litigation.....................................................................................31
         6.10     Transactions with Affiliates...................................................................31
         6.11     Taxes..........................................................................................32
         6.12     Employee Plans.................................................................................32
         6.13     Property and Liens.............................................................................32
         6.14     Environmental Matters..........................................................................32
         6.15     Government Regulations.........................................................................32
         6.16     Insurance......................................................................................32
         6.17     Appraisals.....................................................................................32
         6.18     Full Disclosure................................................................................32
         6.19     Y2K............................................................................................33

SECTION 7         AFFIRMATIVE COVENANTS..........................................................................33
         7.1      Reporting Requirements.........................................................................33
         7.2      Use of Proceeds................................................................................34
         7.3      Books and Records..............................................................................34
         7.4      Inspections....................................................................................34
         7.5      Taxes..........................................................................................34
         7.6      Expenses.......................................................................................34
         7.7      Maintenance of Existence, Assets, and Business.................................................35
         7.8      Insurance......................................................................................35
         7.9      Appraisals.....................................................................................35
         7.10     Y2K............................................................................................35
         7.11     INDEMNIFICATION................................................................................35

SECTION 8         NEGATIVE COVENANTS.............................................................................36
         8.1      Debt...........................................................................................36
         8.2      Liens..........................................................................................37
         8.3      Investments....................................................................................38
         8.4      Distributions..................................................................................39
         8.5      Merger or Consolidation........................................................................39
         8.6      Liquidations and Dispositions of Assets........................................................39
         8.7      Use of Proceeds................................................................................39
         8.8      Transactions with Affiliates.  ................................................................40
         8.9      Employee Plans.................................................................................40
         8.10     Compliance with Governmental Requirements and Documents........................................40
         8.11     Government Regulations.........................................................................40
         8.12     Fiscal Year Accounting.........................................................................40
         8.13     New Businesses.................................................................................40
         8.14     Assignment.....................................................................................40
         8.15     Retention of Servicing Portfolio...............................................................40
         8.16     Strict Compliance..............................................................................40

SECTION 9         FINANCIAL COVENANTS............................................................................40
         9.1      Tangible Net Worth.............................................................................40

</TABLE>


                                      (ii)

<PAGE>

<TABLE>
<CAPTION>


<S>      <C>                                                                                                    <C>
         9.2      Leverage Ratio.................................................................................40

SECTION 10        EVENTS OF DEFAULT AND REMEDIES.................................................................41
         10.1     Event of Default...............................................................................41
         10.2     Remedies.......................................................................................42
         10.3     Right of Offset................................................................................43
         10.4     Waivers........................................................................................43
         10.5     Performance by Administrative Agent............................................................43
         10.6     No Responsibility..............................................................................44
         10.7     No Waiver......................................................................................44
         10.8     Cumulative Rights..............................................................................44
         10.9     Rights of Individual Lenders...................................................................44
         10.10    Notice to Administrative Agent.................................................................44
         10.11    Costs..........................................................................................44

SECTION 11        ADMINISTRATIVE AGENT...........................................................................44
         11.1     Authorization and Action.......................................................................45
         11.2     Administrative Agent's Reliance, Etc...........................................................45
         11.3     Administrative Agent and Affiliates............................................................45
         11.4     Credit Decision................................................................................45
         11.5     INDEMNIFICATION................................................................................45
         11.6     Successor Administrative Agent.................................................................46
         11.7     Inspection.....................................................................................46

SECTION 12        MISCELLANEOUS..................................................................................46
         12.1     Nonbusiness Days...............................................................................46
         12.2     Communications.................................................................................46
         12.3     Form and Number of Documents...................................................................47
         12.4     Exceptions to Covenants........................................................................47
         12.5     Survival.......................................................................................47
         12.6     Governing Law..................................................................................47
         12.7     Invalid Provisions.............................................................................47
         12.8     Conflicts Between Credit Documents.............................................................47
         12.9     Discharge and Certain Reinstatement............................................................47
         12.10    Amendments, Consents, Conflicts, and Waivers...................................................47
         12.11    Multiple Counterparts..........................................................................48
         12.12    Parties........................................................................................48
         12.13    Participations.................................................................................49
         12.14    Transfers......................................................................................49
         12.15    VENUE, SERVICE OF PROCESS, AND JURY TRIAL......................................................50
         12.16    Limitation of Liability........................................................................50
         12.17    Confidentiality................................................................................50
         12.18    ENTIRE AGREEMENT...............................................................................51

</TABLE>


                                      (iii)

<PAGE>



                             SCHEDULES AND EXHIBITS


 Schedule 2               -             Lenders and Commitments
 Schedule 4.1             -             Eligibility Conditions
 Schedule 4.3             -             Collateral Procedures
 Schedule 5               -             Closing Conditions
 Schedule 6.2             -             Companies
 Schedule 6.9             -             Litigation and Judgments
 Schedule 6.10            -             Affiliate Transactions

 Exhibit A-1              -             Warehouse Note
 Exhibit A-2              -             Amended and Restated Swing Note
 Exhibit B                -             Guaranty
 Exhibit C-1              -             Amended and Restated Security Agreement
 Exhibit C-2              -             Financing Statement
 Exhibit C-3              -             Shipping Request
 Exhibit C-4              -             Bailee Letter
 Exhibit C-5              -             Trust Receipt and Agreement
 Exhibit C-6              -             Release Request
 Exhibit D-1              -             Borrowing Request
 Exhibit D-2              -             Collateral-Delivery Notice
 Exhibit D-3              -             Borrowing-Base Report
 Exhibit D-4              -             Compliance Certificate
 Exhibit D-5              -             Acquisition-Compliance Certificate
 Exhibit E                -             Opinion of Counsel
 Exhibit F                -             Assignment and Assumption Agreement



                                      (iv)

<PAGE>



                      AMENDED AND RESTATED CREDIT AGREEMENT


         THIS AGREEMENT is entered into as of October 1, 1998, between AMERICAN
BUSINESS CREDIT, INC., a Pennsylvania corporation ("ABC"), HOMEAMERICAN CREDIT,
INC., a Pennsylvania corporation d/b/a Upland Mortgage ("HAC"), and NEW JERSEY
MORTGAGE & INVESTMENT CORP., a New Jersey corporation ("NJMI") (ABC, HAC, and
NJMI are "Co-Borrowers"); AMERICAN BUSINESS FINANCIAL SERVICES, INC., a Delaware
corporation ("Parent"); the Lenders described below; CHASE SECURITIES, INC., as
syndication agent; and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as
administrative agent and collateral agent for Lenders.

                       (see Section 1.1 for defined terms)

         A. Co-Borrowers have requested Lenders and Administrative Agent to
enter into this agreement to extend, renew, and entirely amend and restate the
Existing-Credit Agreement.

         B. Co-Borrowers are direct-wholly-owned Subsidiaries of ABC, and have
borrowed certain amounts under the Existing-Credit Agreement guaranteed by
Parent to finance the origination and acquisition of Commercial Loans and
Mortgage Loans until those Commercial Loans and Mortgage Loans are sold in the
secondary market.

         C. Co-Borrowers have requested Lenders to commit to provide Borrowings
under this agreement initially in an amount necessary to renew the outstanding
borrowings under the Existing-Credit Agreement and additionally in amounts
necessary to finance Co-Borrowers' origination and acquisition of additional
Commercial Loans and Mortgage Loans until such Commercial Loans and Mortgage
Loans are sold in the secondary market.

         D. Co-Borrowers, among other things, granted a Lien on the Collateral
under the Existing-Credit Agreement to secure the Existing Obligation related to
those borrowings. Under Section 4 of this agreement, among other things,
Co-Borrowers renew, extend, and ratify that Lien as a Lender Lien under this
agreement in respect of the Obligation under this agreement.

         E. Lenders have agreed upon the terms and applicable sublimits of this
agreement to provide those Borrowings up to the lesser of either the total
Commitments or the total Borrowing Base.

         ACCORDINGLY, for adequate and sufficient consideration, Co-Borrowers,
Parent, Lenders, Syndication Agent, and Administrative Agent agree as follows:

SECTION 1 DEFINITIONS AND REFERENCES. Unless stated otherwise, the following
provisions apply to each Credit Document, and annexes, exhibits, and schedules
to (and certificates, reports, and other writings delivered under) the Credit
Documents.

         1.1      Definitions.

         "ABC" is defined in the preamble to this agreement.

         "Acquisition" by any Person means any transaction or series of
transactions on or after the Closing Date pursuant to which that Person directly
or indirectly -- whether in the form of a capital expenditure, an Investment, a
merger, a consolidation, or otherwise and whether through a solicitation or
tender of equity securities, one or more negotiated block, market, private,
other transactions, or any combination of the


                                        1

<PAGE>



foregoing -- purchases (a) all or substantially all of the business or assets of
any other individual or entity or operating division or business unit of any
other individual or entity, (b) assets of an individual, entity, operating
division, or business unit for a total purchase price (including all cash or
deferred payment and all Debt to be guaranteed, assumed, or paid by any Company
other than Debt owed by the acquired Person for which no other Company has any
obligation whatsoever) of $1,000,000 or more, or (c) more than 50% of the equity
interest in any other entity.

         "Acquisition-Compliance Certificate" means a certificate that must be
signed by one or more Responsible Officers of Parent and Co-Borrowers and must
be substantially in the form of Exhibit D-5.

         "Administrative Agent" means, at any time, Chase Bank of Texas,
National Association, formerly named Texas Commerce Bank, National Association
(or its successor appointed under Section 11.6), acting as administrative,
collateral, and managing agent for Lenders under the Credit Documents.

         "Affiliate" of a Person means any other individual or entity who
directly or indirectly controls, is controlled by, or is under common control
with that Person. For purposes of this definition (a) "control," "controlled
by," and "under common control with" mean possession, directly or indirectly, of
power to direct or cause the direction of management or policies (whether
through ownership of voting securities or other interests, by contract, or
otherwise), and (b) the Companies are "Affiliates" of each other.

         "Agent's Request" is defined in Section 2.3(f).

         "Applicable-Covered Rate" means -- for each Borrowing-Purpose Category
in the table below --the annual interest rate stated beside that category:

-------------------------------------------------------------------------------
             Borrowing-Purpose Category                 Applicable-Covered Rate
--------------------------------------------------      -----------------------
Wet Borrowings and High LTV Borrowings                          1.6250%
-------------------------------------------------------------------------------
Seasoned Borrowings and Commercial Loan Borrowings              1.7500%
-------------------------------------------------------------------------------
Other Borrowings                                                1.3875%
-------------------------------------------------------------------------------

         "Applicable Margin" means -- for each Borrowing-Purpose Category and
relevant Borrowing-Price Category in the table below -- the interest margin
beside those categories:
-------------------------------------------------------------------------------

Borrowing-Purpose Category      Borrowing-Price Category      Applicable Margin
---------------------------     ------------------------      -----------------
Wet Borrowings and High LTV     Base Rate                     0.2500%
Borrowings
-------------------------------------------------------------------------------
                                LIBOR                         1.6250%
-------------------------------------------------------------------------------
Seasoned Borrowings and         Base Rate                     0.3750%
Commercial Loan Borrowings
-------------------------------------------------------------------------------
                                LIBOR                         1.7500%
-------------------------------------------------------------------------------
Other Borrowings                Base Rate                     0.0000%
-------------------------------------------------------------------------------
                                LIBOR                         1.3875%
-------------------------------------------------------------------------------

                                        2

<PAGE>



         "Appraisal" means for any Mortgage Loan or Commercial Loan, a written
statement of the market value of the real property securing it.

         "Appraisal Requirement" means any Governmental Requirement that is
applicable to appraisals of mortgaged-residential real property, mortgaged
non-residential real property, or other property in connection with transactions
involving that property, including, without limitation, Title XI of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the
Federal Deposit Insurance Corporation Improvement Act of 1991, 12 C.F.R. Chapter
I, Part 34, Subpart C, 12 C.F.R. Chapter II, Subchapter A, Part 225, Subpart G,
and 12 C.F.R. Chapter III, Subchapter B, Part 323.

         "Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement executed by a selling Lender and a Purchaser under Section
12.12 and Section 12.14, and delivered to Administrative Agent in substantially
the form of Exhibit F.

         "Average-Adjusted-Base Rate" means, for any period, an annual interest
rate equal to the quotient of (a) the sum of the Base Rate plus the Applicable
Margin, for each calendar day during that period, divided by (b) the number of
calendar days during that period.

         "Average-Adjusted-LIBOR" means, for any period, an annual interest rate
equal to the quotient of (a) the sum of LIBOR plus the Applicable Margin, for
each calendar day during that period, divided by (b) the number of calendar days
during that period.

         "Average Commitment" means, for any period and any Lender, the quotient
of the (a) the sum of that Lender's Commitment as of the close of business for
each calendar day (which for any day that is not a Business Day is deemed for
this definition to be such Lender's Commitment for the preceding Business Day)
during that period divided by (b) the number of calendar days during that
period.

         "Average-Eligible Balances" means, for any period and any Lender, an
amount equal to (a) the quotient of (i) the sum of that Lender's Eligible
Balances as of the close of business for each calendar day (which for any day
that is not a Business Day are deemed for this definition to be those balances
for the preceding Business Day) during that period divided by (ii) the number of
calendar days during that period minus (b) amounts necessary to satisfy any
deposit insurance, reserve, special deposit, Taxes (other than that Lender's
general corporate income or franchise Taxes), duty, or other imposition (in each
case at the applicable rates) requirements applicable to that Lender for those
accounts, minus (c) amounts required to compensate that Lender for direct
processing and transaction costs and other services actually rendered in
connection with those accounts in accordance with that Lender's system of
charges for similar accounts, minus (d) unless otherwise paid directly to that
Lender, any amounts in those accounts utilized as of that day in the calculation
of interest on any other Debt payable by any Co-Borrower to that Lender.

         "Average-Principal Debt" means, for any period and any Lender, the
quotient of (a) the sum of the Principal Debt owed to that Lender as of the
close of business for each calendar day (which for any day that is not a
Business Day is deemed for this definition to be the Principal Debt as of the
close of business for the preceding Business Day) during that period divided by
(b) the number of calendar days during that period.

         "Bailee Letter" means a letter executed and delivered by Administrative
Agent in substantially the form of Exhibit C-4.

         "Base Rate" means an annual interest rate equal from day to day to the
floating annual interest rate established by Administrative Agent from time to
time as its prime-rate of interest, which may not be the lowest interest rate
charged by Administrative Agent on loans similar to Borrowings.


                                       3

<PAGE>



         "Base-Rate Borrowing" means any Borrowing bearing interest at the
Average-Adjusted-Base Rate.

         "Borrowing" means any amount disbursed (a) by any Lender to any
Co-Borrower under the Credit Documents as an original disbursement of funds or
(b) by Administrative Agent or any Lender in accordance with, and to satisfy a
Company's obligations under, any Credit Document.

         "Borrowing Base" means, at any time, the sum of:

                  (a) the total collateral value of each Eligible-Mortgage Loan
         and each Eligible-Commercial Loan, equal to 98% of the lowest of (i)
         the unpaid principal balance of the underlying promissory note, (ii)
         the actual amount funded by ABC, HAC, or NJMI, as the case may be, with
         respect to that Eligible-Mortgage Loan or Eligible-Commercial Loan, or
         (iii) the Market Value thereof, as determined by Administrative Agent;
         plus

                  (b) the total collateral value of each Eligible-Seasoned Loan,
         equal to 90% of the lowest of (i) the unpaid principal balance of the
         underlying promissory note, (ii) the actual amount funded by ABC, HAC,
         or NJMI, as the case may be, with respect to that Eligible-Seasoned
         Loan, or (iii) the Market Value thereof, as determined by
         Administrative Agent; plus

                  (c) the total collateral value of each Eligible-High LTV Loan,
         equal to 95% of the lowest of (i) the unpaid principal balance of the
         underlying promissory note, (ii) the actual amount funded by ABC, HAC,
         or NJMI, as the case may be, with respect to that Eligible-High LTV
         Loan, or (iii) the Market Value thereof, as determined by
         Administrative Agent.

         "Borrowing-Base Report" means a report executed by Administrative Agent
and delivered to Co-Borrowers and Lenders in substantially the form of Exhibit
D-3.

         "Borrowing Date" means, for any Borrowing, the date it is disbursed.

         "Borrowing Excess" means, at any time, the amount by which any of the
limitations of Section 2.1 is exceeded.

         "Borrowing-Price Category" means any category of Borrowing determined
with respect to the applicable interest option (e.g., a Base-Rate Borrowing,
LIBOR Borrowing, or Fixed-Rate Borrowing).

         "Borrowing-Purpose Category" means any category of Borrowing determined
with respect to its purpose (e.g., a Dry Borrowing, Wet Borrowing, Swing
Borrowing, Second-Lien Borrowing, Seasoned Borrowing, High LTV Borrowing, or
Commercial Loan Borrowing).

         "Borrowing Request" means a request executed by one or more Responsible
Officers of Co-Borrowers requesting a Borrowing and delivered to Administrative
Agent in substantially the form of Exhibit D-1.

         "Business-Purpose Loan" means a loan that is (a) extended to a
business, (b) evidenced by a valid promissory note, and (c) secured by a
mortgage, deed of trust, or trust deed that grants a perfected first-priority
Lien (or a second-priority Lien with respect to Second-Lien Borrowings) on
residential or commercial real property.

         "Business Day" means (a) for purposes of any LIBOR Borrowing or
Fixed-Rate Borrowing, a day specified in clause (b) of this definition when
commercial banks are open for international business in London,


                                        4

<PAGE>



England, and (b) for all other purposes, any day other than Saturday, Sunday,
and any other day that commercial banks are authorized by applicable
Governmental Requirements to be closed in Texas.

         "Calendar Month" means that portion of a calendar month that occurs at
any time from the date of this agreement to the Termination Date.

         "Calendar Quarter" means that portion of a calendar quarter that occurs
at any time from the date of this agreement to the Termination Date.

         "CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. (Sections) 9601 et seq.

         "Closing Date" means October 1, 1998.

         "Co-Borrowers" is defined in the preamble to this agreement.

         "Collateral" means all Collateral as defined in the Security Agreement
or as otherwise delivered by any Person as security for the Obligation.

         "Collateral Agent" means Administrative Agent.

         "Collateral-Delivery Notice" means a notice executed by Co-Borrowers
and delivered to Administrative Agent in substantially the form of Exhibit D-2.

         "Collateral Documents" means the documents and other items described on
Schedule 4.3 and required to be delivered to Administrative Agent under Section
4.3.

         "Commercial Loan" means a loan that is not a construction or
residential loan, is evidenced by a valid promissory note, and is secured by a
mortgage, deed of trust, or trust deed that grants a perfected first-or
second-priority Lien on commercial real property.

         "Commercial Loan Borrowing" means a Borrowing that is subject to the
Commercial Loan Sublimit and the Commercial Loan for which meets the eligibility
requirements set forth on Schedule 4.1.

         "Commercial Loan Sublimit" means, at any time, 5% of the total
Commitments.

         "Commitment" means, at any time and for any Lender, the amounts stated
beside that Lender's name on the most-recently amended Schedule 2 (which amount
is subject to reduction and cancellation as provided in this agreement).

         "Commitment Percentage" means, for any Lender, the proportion (stated
as a percentage) that its Commitment bears to the total Commitments of all
Lenders.

         "Companies" means, at any time, Parent and each of its Subsidiaries
(including, without limitation, Co-Borrowers).

         "Compliance Certificate" means a certificate substantially in the form
of Exhibit D-4 and signed by one or more Responsible Officers of Parent and each
Co-Borrower.

         "Correction Period" means 14 calendar days.


                                        5

<PAGE>

         "Coupon Rate" means the pre-maturity interest rate applicable to a
Mortgage Loan or Commercial Loan on any day, stated as an annual interest rate,
less 0.375% (rounded down to the nearest 0.125%), and each determination by
Administrative Agent of any Coupon Rate may be computed using any reasonable
averaging and attribution method and, absent manifest error, shall be conclusive
and binding.

         "Credit Documents" means (a) this agreement, certificates and reports
delivered under this agreement, and exhibits and schedules to this agreement,
including without limitation the Notes, the Guaranties, and the Security
Agreement, (b) all agreements, documents, and instruments in favor of
Administrative Agent or Lenders (or Administrative Agent on behalf of Lenders)
ever delivered under this agreement or otherwise delivered in connection with
any of the Obligation (other than assignments), and (c) all renewals,
extensions, and restatements of, and amendments and supplements to, any of the
foregoing.

         "Current Financials" means either (a) the Companies' Financials for the
year ended June 30, 1998, or (b) at any time after the Companies' annual
Financials are first delivered under Section 7.1(a), the Companies' annual
Financials then most recently delivered to Administrative Agent, together with
the Companies' interim Financials then most recently delivered to Administrative
Agent.

         "Debt", for any Person and without duplication, means (a) all
obligations required by GAAP to be classified upon that Person's balance sheet
as liabilities, (b) liabilities secured (or for which the holder of the
liabilities has an existing Right, contingent or otherwise, to be so secured) by
any Lien existing on property owned or acquired by that Person, (c) obligations
that under GAAP should be capitalized for financial reporting purposes, and (d)
all guaranties, endorsements, and other contingent obligations with respect to
Debt of others or in respect of any Employee Plan.

         "Debtor Laws" means the Bankruptcy Code of the United States of America
and all other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension of payments,
or similar Governmental Requirements affecting creditors' Rights.

         "Default Condition," in respect of any action or event, means that (a)
an Event of Default or Potential Default exists immediately before, or will
occur as a result of (or otherwise will exist immediately after), the occurrence
of that action or event or (b) the occurrence of the event or action will cause
any of the representations or warranties (unless they speak to a specific date
or are based on facts which have changed by transactions contemplated or
expressly permitted by this agreement) in the Credit Documents to be materially
incorrect.

         "Default Rate" means, for any day, an annual interest rate equal to the
lesser of either (a) the Fed-Funds Rate plus 5%, or (b) the Maximum Rate.

         "Distribution" means, at any time and with respect to any shares of any
capital stock or other equity securities issued by a Person, (a) the retirement,
redemption, purchase, or other acquisition for value of those securities, (b)
the declaration or payment of any dividend on or with respect to those
securities, (c) any loan or advance by that Person to, or other Investment by
that Person in, the holder of any of those securities, and (d) any other payment
by that Person with respect to those securities.

         "Dry Borrowing" means a Borrowing for which all of the Collateral
Documents have been delivered to Administrative Agent in accordance with Section
4.3.

         "Eligible Balances" means, for any calendar day and Lender, the sum
(which for any day that is not a Business Day is deemed for this definition to
be that sum as determined as of the close of business on the preceding Business
Day) of collected balances as of the close of business on that day in all
identified non-

                                        6

<PAGE>

interest bearing demand deposit accounts or money market zero reserve accounts
of or maintained by Co-Borrowers with such Lender.

         "Eligible-Commercial Loan" means, at any time, a Commercial Loan for
which the applicable conditions for eligibility described in Schedule 4.1 are
satisfied and which may under Section 4.1 be included in the Borrowing Base.

         "Eligible-High LTV Loan" means, at any time, a High LTV Loan for which
the applicable conditions for eligibility described in Schedule 4.1 are
satisfied and which may under Section 4.1 be included in the Borrowing Base.

         "Eligible-Mortgage Loan" means, at any time, a Mortgage Loan (other
than a Seasoned Loan or High LTV Loan) for which the applicable conditions for
eligibility described in Schedule 4.1 are satisfied and which may under Section
4.1 be included in the Borrowing Base.

         "Eligible-Seasoned Loan" means, at any time, a Seasoned Loan for which
the applicable conditions for eligibility described in Schedule 4.1 are
satisfied and which may under Section 4.1 be included in the Borrowing Base.

         "Employee Plan" means any employee-pension-benefit plan (a) covered by
Title IV of ERISA and established or maintained by any Company or any ERISA
Affiliate (other than a Multiemployer Plan) or (b) established or maintained by
any Company or any ERISA Affiliate, or to which any Company or any ERISA
Affiliate contributes, under the Governmental Requirements of any foreign
country.

         "Environmental Governmental Requirement" means any applicable
Governmental Requirement that relates to protection of the environment or to the
regulation of any Hazardous Substances, including, without limitation, CERCLA,
the Hazardous Materials Transportation Act (49 U.S.C.(Section) 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. (Section) 6901 et seq.),
the Clean Water Act (33 U.S.C. (Section) 1251 et seq.), the Clean Air Act (42
U.S.C. (Section) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
(Section) 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. (Section) 136 et seq.), the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. (Section) 11001 et seq.), the Safe Drinking Water
Act (42 U.S.C. (Section) 201 and (Section) 300f et seq.), the Rivers and Harbors
Act (33 U.S.C. (Section) 401 et seq.), the Oil Pollution Act (33 U.S.C.
(Section) 2701 et seq.), analogous state and local Governmental Requirements,
and any analogous future enacted or adopted Governmental Requirement.

         "ERISA" means the Employee Retirement Income Security Act of 1974.

         "ERISA Affiliate" means any Person that, for purposes of Title IV of
ERISA, is a member of any Company's controlled group or is under common control
with any Company within the meaning of Section 414 of the IRC.

         "Event of Default" is defined in Section 10.1.

         "Existing-Credit Agreement" means that certain Credit Agreement (as
renewed, extended, amended, or restated through the date of this agreement)
dated as of July 31, 1997, between Co-Borrowers, Chase Bank of Texas, National
Association (formerly Texas Commerce Bank, National Association), as
Administrative Agent, and certain lenders.

         "Existing Obligation" means the Obligation as defined in and arising
under the Existing-Credit Agreement.


                                        7

<PAGE>


         "Fed-Funds Rate" means, for any day, the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal-funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average of the quotations for
the day of such transactions received by Administrative Agent from three
federal-funds brokers of recognized standing selected by Administrative Agent.
If for any reason Administrative Agent shall determine (and its determination
shall be conclusive absent manifest error) that it is unable to ascertain for
any reason -- including Administrative Agent's inability or failure (as a result
of such inability) to obtain sufficient quotations in accordance with the
immediately preceding sentence -- the Fed-Funds Rate for any day, then for each
such day that such circumstances exist, the Fed-Funds Rate shall be deemed to be
equal to the Base Rate for that day minus 2.0%. Any rate of interest based on
the Fed-Funds Rate shall be (a) computed on the basis of a year consisting of
360 days applied for the actual number of days for which the principal sum to
which it applies is outstanding and bears interest in accordance with this
agreement at such rate of interest based on the Fed-Funds Rate (i.e., on the
360-day basis) and (b) adjusted as of the effective date of each change in the
Fed-Funds Rate.

         "FHA" means the Federal Housing Administration within the United States
Department of Housing and Urban Development.

         "FHLMC" means the Federal Home Loan Mortgage Corporation.

         "Financials" of a Person means balance sheets, profit and loss
statements, reconciliations of capital and surplus, and statements of cash flow
prepared (a) according to GAAP (subject to year end audit adjustments with
respect to interim Financials) and (b) except as stated in Section 1.4, in
comparative form to prior year-end figures or corresponding dates or periods of
the preceding fiscal year or other relevant period, as applicable.

         "Fixed Rate" means, for any Fixed-Rate Borrowing, a fixed rate of
interest equal to the sum of LIBOR on the Borrowing Date of that Fixed-Rate
Borrowing plus the Applicable Margin for LIBOR Borrowings.

         "Fixed-Rate Borrowing" means any Borrowing that bears interest at a
Fixed Rate (except that Swing Borrowings and Wet Borrowings may not bear
interest at a Fixed Rate), which Borrowing shall be in an amount of at least
$10,000,000 or any higher integral multiple of $100,000.

         "FNMA" means the Federal National Mortgage Association.

         "Funding Loss" means any reasonable, out-of-pocket loss or expense that
any Lender incurs because any Co-Borrower (a) fails or refuses, for any reason
other than a default by the Lender claiming that loss or expense, to take any
Fixed-Rate Borrowing that it has requested under this agreement, or (b) prepays,
pays, or converts any Fixed-Rate Borrowing at any time other than the last day
of the applicable Interest Period.

         "GAAP" means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board that are applicable from time to time.

         "GNMA" means the Government National Mortgage Association.



                                        8
<PAGE>

         "Governmental Authority" means any (a) local, state, territorial,
federal, or foreign judicial, executive, regulatory, administrative,
legislative, or governmental agency, board, bureau, commission, department, or
other instrumentality, (b) private arbitration board or panel, or (c) central
bank.

         "Governmental Requirements" means all applicable statutes, laws,
treaties, ordinances, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, and interpretations of any Governmental Authority.

         "Guarantor" means Parent and each other Person that has executed, or is
required to execute, a Guaranty.

         "Guaranty" means a Guaranty in substantially the form of Exhibit B.

         "HAC" is defined in the preamble to this agreement.

         "Hazardous Substance" means any substance that is designated, defined,
classified, or regulated as a hazardous waste, hazardous material, pollutant,
contaminant, explosive, corrosive, flammable, infectious, carcinogenic,
mutagenic, radioactive, or toxic or hazardous substance under any Environmental
Governmental Requirement, including, without limitation, any hazardous substance
within the meaning of (Section) 101(14) of CERCLA.

         "Hedge Contract" means, for any Person, any present or future, whether
master or single, agreement, document or instrument providing for, or
constituting an agreement to enter into, (a) commodity hedges in the normal
course of business in accordance with prior practices of that Person before the
date of this agreement for purposes of hedging material purchases, (b)
foreign-currency purchases and swaps, and (c) interest-rate swap, cap, collar,
or similar arrangements.

         "High LTV Borrowing" means a Borrowing that is subject to the High LTV
Sublimit and the High LTV Loan for which meets the eligibility requirements set
forth on Schedule 4.1.

         "High LTV Investor" means an investor that has delivered its
underwriting guidelines to and has been approved to purchase certain High LTV
Loans by Co-Borrowers and Administrative Agent.

         "High LTV Loan" means a Mortgage Loan which has a loan-to-value ratio
greater than 90%, and less than or equal to 125%.

         "High LTV Sublimit" means, at any time, 5% of the total Commitments.

         "Interest Period" is determined in accordance with Section 3.8.

         "Investment," in respect of any Person, means any (a) loan, advance,
extension of credit, or capital contribution to that Person, (b) investment in
that Person, (c) purchase or commitment to purchase any equity securities or
Debt issued by that Person or substantially all of the assets or a division or
other business unit of that Person, or (d) any Hedge Contract with that Person.

         "Investor" means an investor in Mortgage Loans and Commercial Loans
generally, or a High LTV Investor.

         "IRC" means the Internal Revenue Code of 1986.



                                        9
<PAGE>


         "Lender Lien" means any present or future first-priority Lien securing
the Obligation and assigned, conveyed, and granted to, or created in favor of,
Administrative Agent for the benefit of Lenders under the Credit Documents.

         "Lenders" means the financial institutions (including, without
limitation, the entity which is Administrative Agent in respect of its share of
Borrowings) named on Schedule 2 or on the most-recently-amended Schedule 2, if
any, delivered by Administrative Agent under this agreement, and, subject to
this agreement, their respective successors and permitted assigns (but not any
Participant who is not otherwise a party to this agreement).

         "Leverage Ratio" means, as of the last day of each fiscal quarter of
Borrower, the ratio of (a) Total-Adjusted Debt to (b) the sum of Parent's Net
Worth plus the outstanding principal amount of Subordinated Debt.

         "LIBOR" means, for any day, the rate of interest per annum which is
equal to the arithmetic mean of the rates appearing on Bloomberg as of 11:00
a.m. London time for that day for the offering by such institutions as are named
therein to prime banks in the interbank dollar market in London, England, of One
Million Dollar ($1,000,000) deposits in United States dollars for a one month
period. If Administrative Agent cannot determine that rate for any day, then
LIBOR for that day shall be the rate that deposits in United States dollars in
that amount and for that period are offered to the entity which is
Administrative Agent at approximately 11:00 a.m., London time, on that day or,
if that information is not reasonably available to Administrative Agent, on the
next later day for which such information is so available. Administrative
Agent's determination of LIBOR for each day shall be conclusive and binding,
absent manifest error. For purposes of this agreement and each Note, LIBOR shall
fluctuate upward and downward automatically and concurrently with day-to-day
changes in such arithmetic mean, and in the amount of the change.

         "LIBOR Borrowing" means any Borrowing that bears interest at LIBOR.

         "Lien" means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind and any other
arrangement for a creditor's claim to be satisfied from assets or proceeds prior
to the claims of other creditors or the owners (other than title of the lessor
under an operating lease).

         "Litigation" means any action by or before any Governmental Authority.

         "Market Value" means, on any day for any Mortgage Loan or Commercial
Loan at Administrative Agent's sole (but reasonably-exercised) discretion, the
market value of that Mortgage Loan or Commercial Loan as determined by
Administrative Agent based on the then-most recent posted net yield for Mortgage
Loans or Commercial Loans of the same type and Coupon Rate furnished by FNMA and
published and distributed by Telerate Mortgage Services, or, if such posted net
yield is not available from Telerate Mortgage Services, upon the posted net
yield stated by FNMA as determined by Administrative Agent or, for any Mortgage
Loan or Commercial Loan not eligible for purchase by FNMA, upon the current net
yield for Mortgage Loans or Commercial Loans of the same type and Coupon Rate as
reasonably determined by Administrative Agent.

         "Material-Adverse Event" means any circumstance or event that,
individually or collectively, is reasonably expected to result (at any time
before the Commitments are fully canceled or terminated and the Obligation is
fully paid and performed) in any (a) material impairment of (i) the ability of
Parent, Co-Borrowers, or any Guarantor to perform any of its payment or other
material obligations under any Credit Document or (ii) the ability of
Administrative Agent or any Lender to enforce any of those obligations or any of
their


                                       10

<PAGE>


respective Rights under the Credit Documents, (b) material and adverse effect on
the financial condition of the Companies as a whole as represented to Lenders in
the Current Financials most recently delivered before the date of this
agreement, (c) material and adverse impact on any Collateral, or (d) Event of
Default.

         "Material Agreement" means, for any Person, any material written or
oral agreement, contract, commitment, or understanding to which such Person is a
party, by which such Person is directly or indirectly bound, or to which any
assets of such Person may be subject, (a) that involves revenues to, or
financial obligations of, any such Person in excess of 5% of Parent's Net Worth
from time to time in the aggregate during any 12-month period, being
Co-Borrowers' fiscal year, and which is not cancelable by such Person upon 30
days or less notice without liability for further payment other than nominal
penalty.

         "Maximum Amount" and "Maximum Rate" respectively mean, for any day and
for any Lender, the maximum non-usurious amount and the maximum non-usurious
rate of interest that, under applicable Governmental Requirements, such Lender
is permitted to contract for, charge, take, reserve, or receive (from
Co-Borrowers, Parent, or each of them) on its portion of the Obligation.

         "Mortgage Collateral" means all Mortgage Loans and Commercial Loans and
related Collateral Documents held as Collateral under the Credit Documents.

         "Mortgage Loan" means a loan that is not a construction loan or
Commercial Loan, is evidenced by a valid promissory note, and is secured by a
mortgage, deed of trust, or trust deed that grants a perfected first-priority
Lien (or second-priority Lien with respect to Second-Lien Borrowings) on
residential real property.

         "Multiemployer Plan" means a multiemployer plan as defined in Section
3(37) or 4001(a)(3) of ERISA or Section 414(f) of the IRC (or any similar type
of plan established or regulated under the Governmental Requirements of any
foreign country) to which any Company or any ERISA Affiliate is making, or has
made, or is accruing, or has accrued, an obligation to make contributions.

         "Net Income" means, for any period and any Person, the amount that
should, in accordance with GAAP, be reflected on that Person's income statement
as net income (reflecting that Person's profit or loss after deducting its Tax
expense).

         "Net Worth" means, for any Person, the sum of its stockholders' equity
or other equity as determined under GAAP.

         "NJMI" is defined in the preamble to this agreement.

         "Note Payment Accounts" means the following non-interest bearing
restricted checking accounts maintained with Administrative Agent separately for
each Co-Borrower:

          o    For ABC, Account No. 0010-267-2640, styled "American Business
               Financial Services, Inc. - Note Payment Account."

          o    For HAC, Account No. 0010-267-2640, styled "American Business
               Financial Services, Inc. - Note Payment Account."

          o    For NJMI, Account No. 0010-267-2640, styled "American Business
               Financial Services, Inc. - Note Payment Account"



                                       11
<PAGE>



which accounts are to be used for (a) Administrative Agent's deposits of
proceeds of Borrowings and payments constituting the proceeds of principal from
any Collateral (other than regular principal and interest payments on the
Mortgage Collateral) of the particular Co-Borrower; (b) Administrative Agent's
deposits of principal and interest payments for the repayment of Borrowings
received from the particular Co-Borrower or for the particular Co-Borrower's
account; and (c) only if and when no Event of Default exists unless
Administrative Agent has declared in writing that is has been cured or waived,
the particular Co-Borrower's withdrawal of proceeds of its Borrowings for the
purposes permitted under this agreement and Administrative Agent's transfer from
that Note Payment Account to that Co-Borrower's own account (or to a controlled
disbursement account maintained by that Co-Borrower with Administrative Agent)
or proceeds of sales or other dispositions of released Collateral for that
Co-Borrower in excess of its Borrowings borrowed and then outstanding against
that released Collateral. The Note Payment Accounts are (and shall continuously
be) part of the Collateral for the Obligation. The Note Payment Accounts shall
be subject to set off by Administrative Agent. Co-Borrowers shall not have any
right to directly withdraw funds from any Note Payment Account, but instead
those funds may be withdrawn or paid out only against the order of any
authorized officer of Administrative Agent, although under the circumstances
described in clause (c) of the first sentence of this definition and subject to
the conditions specified in that clause, Administrative Agent shall use diligent
and reasonable efforts to cause Borrowings and excess Collateral proceeds that
are received as therein described and that are deposited to the Note Payment
Account before 3:00 p.m. on a Business Day to be transferred to an account on
which the particular Co-Borrower does have withdrawal order authority on that
same Business Day.

         "Notes" means the Warehouse Notes and the Swing Note

         "Obligation" means all (a) present and future indebtedness,
obligations, and liabilities of Co-Borrowers or Parent to Administrative Agent
or any Lender and related to any Credit Document, whether principal, interest,
fees, costs, attorneys' fees, or otherwise, (b) Debts, liabilities, or
obligations owed by Parent or any Co-Borrower to any Lender or any Affiliate of
any Lender who, in either case, is also a Rate-Protection Party under any Hedge
Contract, (c) amounts that would become due but for operation of 11 U.S.C.
(Sections) 502 and 503 or any other provision of Title 11 of the United States
Code, and all renewals, extensions, and modifications of any of the foregoing,
and (d) pre- and post-maturity interest on any of the foregoing, including,
without limitation, all post-petition interest if Parent or any Co-Borrower
voluntarily or involuntarily files for protection under any Debtor Law.

         "Organizational Documents" means, for any Person, the documents for its
formation and organization, which, for example, for a (a) corporation are its
corporate charter and bylaws, (b) for a partnership is its partnership
agreement, (c) for a limited-liability company are its certificate of
organization and regulations, and (d) for a trust is the trust agreement or
indenture under which it is created.

         "Parent" is defined in the preamble to this agreement.

         "Participant" is defined in Section 12.13.

         "PBGC" means the Pension Benefit Guaranty Corporation.

         "Permitted Acquisition" means any Acquisition for which all of the
following conditions are satisfied:

          (a)  No Default Condition will exist as a result of such Acquisition;

          (b)  The Acquisition is within the Companies' lines of business;



                                       12

<PAGE>


     (c)  At least 15 days before such Acquisition, subject to prescriptions
          under applicable securities laws and to non-disclosure obligations of
          the Administrative Agent and Lenders under Section 12.17(c),
          Co-Borrowers give to Administrative Agent and Lenders (A) a written
          description of the target entity and of its business and operations,
          (B) a written description of such Acquisition, which includes a
          reasonably-detailed calculation of (and description of the funding
          sources, if applicable, for) the total Investment involved, including
          all Debt for which the acquired Person is to remain obligated and what
          portion of it, if any, is to be guaranteed, assumed, or paid (through
          merger or otherwise) by any other Company, (C) a copy of the related
          purchase, merger, or other governing agreement, and (D) an Acquisition
          Compliance Certificate with respect to the Companies immediately
          before completion of such Acquisition;

     (d)  The total of all Investments involved in all Permitted Acquisitions
          (including, but without duplication, any Debt to be guaranteed,
          assumed, or paid by any Company other than Debt owed by the acquired
          Person for which no Company has any obligation whatsoever) during any
          fiscal year of the Companies does not cause the Leverage Ratio to
          exceed 4.0 to 1.0;

     (e)  The board of directors of the Person to be acquired has not notified
          any Company or Lender that it opposes the offer by any Company to
          acquire that Person or such opposition has been withdrawn;

     (f)  If structured as a merger or consolidation, Section 8.5 is complied
          with; and

     (g)  Concurrently with and as a condition precedent to the closing of such
          Acquisition, Co-Borrowers shall (A) deliver to Administrative Agent
          all documents necessary to be in compliance with the applicable
          provisions of Section 4 (except to the extent of any exceptions in
          those provisions), (B) shall deliver to Administrative Agent and
          Lenders supplements or amendments to the schedules delivered under
          Section 6 that are required to make the disclosures in those schedules
          accurate after giving effect to such Acquisition, (C) obtain the prior
          written consent of Required Lenders as to the supplements or
          amendments to the schedules under clause (B) preceding, (D) deliver to
          Administrative Agent and Lenders an Acquisition Compliance Certificate
          with respect to the Companies immediately after giving effect to such
          Acquisition, and (E) deliver to Administrative Agent such other
          documents and take such action as Administrative Agent or any Lender
          may reasonably request in order to effect the provisions of the Credit
          Documents.

Notwithstanding the foregoing, the conditions set forth in clauses (c) and (g)
above shall not need to be satisfied for any Acquisition to be a Permitted
Acquisition provided the aggregate total purchase price for such Acquisitions in
any fiscal year is less than or equal to $2,000,000.

         "Permitted Debt" is defined in Section 8.1.

         "Permitted Investments" is defined in Section 8.3.

         "Permitted Liens" is defined in Section 8.2.

         "Person" means any individual, entity, or Governmental Authority.

         "Potential Default" means any event's occurrence or any circumstance's
existence that would -- upon any required notice, time lapse, or both -- become
an Event of Default.

         "Principal Debt" means, at any time, the outstanding principal balance
of all Borrowings.


                                       13
<PAGE>



         "Purchaser" is defined in Section 12.14.

         "Ratable Borrowing" means a Borrowing that is advanced by Lenders to a
Co-Borrower in accordance with their Commitment Percentages.

         "Rate-Protection Exposure" means -- at any time and for any Hedge
Contract described in clause (c) of the definition of Hedge Contract above --
the amount, if any, that would be payable to the Rate-Protection Party in that
Hedge Contract for any "agreement value" as though that Hedge Contract were
terminated at that time, in each case (a) calculated as provided in the
International Swap Dealers Association Inc. Code of Standard Wording,
Assumptions, and Provisions for SWAPS and (b) determined by Administrative Agent
in good faith in reliance upon any information (including any information
provided by that Rate-Protection Party) that Administrative Agent believes (with
no obligation to verify accuracy) to be accurate, absent manifest error.

         "Rate-Protection Party" means, at any time, any party that has entered
into a Hedge Contract with Parent or any Co-Borrower that could give rise to
Rate-Protection Exposure.

         "Regulation U" means Regulation U promulgated by the Board of Governors
of the Federal Reserve System, 12 C.F.R. Part 221.

         "Release Request" means a Release Request executed and delivered by a
Responsible Officer of Co-Borrowers to Administrative Agent in substantially the
form of Exhibit C-6.

         "Representatives" means authorized representatives, officers,
directors, employees, attorneys, and agents.

         "Required Lenders" means, at any time, any combination of Lenders whose
(a) Termination Percentages total at least 66 2/3% at any time on or after the
Termination Date, or (b) Commitment Percentages total at least 66 2/3% at all
other times.

         "Responsible Officer" means (a) the chairman, president, chief
executive officer, any vice president, or chief financial officer of
Co-Borrowers and Parent to the extent that such officer's name, title, and
signature have been certified to Administrative Agent by the secretary or an
assistant secretary of Co-Borrowers and Parent, or (b) any other officer
designated as a "Responsible Officer" in writing to Administrative Agent by any
officer in clause (a) preceding.

         "Rights" means rights, remedies, powers, privileges, and benefits.

         "Seasoned Borrowing" means a Borrowing which is subject to the Seasoned
Sublimit and the Mortgage Loan or Commercial Loan for which meets the
eligibility requirements set forth on Schedule 4.1.

         "Seasoned Loan" means, at any time, either (a) a Mortgage Loan or
Commercial Loan for which the Collateral Documents have been included in the
Borrowing Base for more than 364 days, or (b) a Mortgage Loan or Commercial Loan
which is initially included in the Borrowing Base more than 364 days following
its date of origination.

         "Seasoned Sublimit" means $25,000,000.

         "Second-Lien Borrowing" means a Borrowing which is subject to the
Second-Lien Sublimit and the Commercial Loan or Mortgage Loan for which meets
the eligibility requirements set forth on Schedule 4.1.


                                       14
<PAGE>


         "Second-Lien Sublimit" means, at any time, 35% of the total
Commitments.

         "Security Agreement" means the Amended and Restated Security Agreement
in substantially the form of Exhibit C-1.

         "Shipping Period" means 45 calendar days.

         "Shipping Request" means a Shipping Request executed and delivered by a
Responsible Officer of Co-Borrowers to Administrative Agent in substantially the
form of Exhibit C-3.

         "Stated-Termination Date" means October 1, 2000.

         "Subordinated Debt" is defined in Section 8.1(i).

         "Subsidiary" of any Person means any entity of which more than 50% (in
number of votes) of the stock (or equivalent interests) is owned of record or
beneficially, directly or indirectly, by that Person. Unless otherwise specified
or the context otherwise requires, "Subsidiary" refers to a Subsidiary of
Parent.

         "Swing Borrowing" means a Borrowing that is advanced by Administrative
Agent to any Co-Borrower under the Swing Sublimit.

         "Swing Note" means a promissory note executed and delivered by
Co-Borrowers, payable to the order of Administrative Agent, in the stated
principal amount of the Swing Sublimit, and substantially in the form of Exhibit
A-2.

         "Swing Sublimit" means $50,000,000.

         "Syndication Agent" means Chase Securities, Inc.

         "Take-Out Commitment" means a binding commitment from an Investor to
purchase Mortgage Collateral, acceptable in form and substance to Administrative
Agent, in favor of a Co-Borrower, with respect to which there is be no condition
which cannot be reasonably anticipated to be satisfied or complied with before
its expiration.

         "Tangible Net Worth" means, as of the last day of each fiscal quarter
of Borrower, the sum (without duplication) of (a) Parent's Net Worth, minus (b)
treasury stock, minus (c) any surplus resulting from the write-up of assets,
minus (d) goodwill, including, without limitation, any amounts representing the
excess of the purchase price paid for acquired assets, stock, or interests over
the book value assigned to them, minus (e) patents, trademarks, service marks,
trade names, and copyrights, minus (f) other intangible assets, plus (g) to the
extent already deducted under clauses (b) through (f) above, receivables or
Investments consisting of the excess spread relating to the Companies' asset
securitizations, plus (h) to the extent already deducted under clauses (b)
through (f) above, mortgage servicing rights retained or obtained in connection
with the Companies' asset securitizations.

         "Taxes" means, for any Person, taxes, assessments, or other
governmental charges or levies imposed upon it, its income, or any of its
properties, franchises, or assets.

         "Termination Date" means the earlier of either (a) the
Stated-Termination Date, or (b) the date that Lenders' commitments under this
agreement are fully canceled or terminated.



                                       15
<PAGE>



         "Termination Percentage" means -- at any time for any Lender -- the
proportion (stated as a percentage) that its Principal Debt bears to the total
Principal Debt.

         "Total-Adjusted Debt" means, on any date of determination, Parent's
total Debt minus the Subordinated Debt, minus (b) obligations under repurchase
agreements, minus (c) obligations under escrow-arbitrage facilities.

         "Trust Receipt" means a Trust Receipt and Agreement executed and
delivered by Co-Borrowers to Administrative Agent in substantially the form of
Exhibit C-5.

         "UCC" means the Uniform Commercial Code as enacted in Texas or other
applicable jurisdictions.

         "VA" means the Department of Veterans' Affairs.

         "Warehouse Note" means a promissory note executed and delivered by
Co-Borrowers, jointly and severally, payable to a Lender's order, in the stated
principal amount of that Lender's Commitment, and substantially in the form of
Exhibit A-1.

         "Wet Borrowing" means a Borrowing for which all of the Collateral
Documents have not been delivered to Administrative Agent in accordance with
Section 4.3.

         "Wet Period" means seven Business Days.

         "Wet Sublimit" means, at any time, a percentage of the total
Commitments, which percentage is (a) 25% for the first four and last three
Business Days of each Calendar Month, and (b) 15% at all other times.

         "Wire Instructions" means, for any Person, the information for wire
transfers of funds to that Person, which (until changed by written notice to all
other parties to this agreement) are stated for Co-Borrowers, Administrative
Agent, and each Lender, below their names on Schedule 2.

         "Y2K" means the risk that computer applications used by any Company or
by any of its suppliers or vendors may be unable properly to recognize and
perform date-sensitive functions involving certain dates before and any date
after December 31, 1999.

         1.2 Time References. Unless otherwise specified, in the Credit
Documents (a) time references (e.g., 10:00 a.m.) are to time in Houston, Texas,
and (b) in calculating a period from one date to another (A) in the case of
provisions addressing the giving of notice, the word "from" means "from but
excluding," and the word "to" or "until" means "to and including," and (B) in
all other cases the word "from" means "from and including," and the word "to" or
"until" means "to but excluding,"

         1.3 Other References. Unless otherwise specified, in the Credit
Documents (a) where appropriate, the singular includes the plural and vice
versa, and words of any gender include each other gender, (b) heading and
caption references may not be construed in interpreting provisions, (c) monetary
references are to currency of the United States of America, (d) section,
paragraph, annex, schedule, exhibit, and similar references are to the
particular Credit Document in which they are used, (e) references to "telecopy,"
"facsimile," "fax," or similar terms are to facsimile or telecopy transmissions,
(f) references to "including" mean including, without limiting the generality of
any description preceding that word, (g) the rule of construction that
references to general items that follow references to specific items as being
limited to the same type or character of those specific items is not applicable,
(h) references to any Person include that Person's heirs, personal
representatives, successors, trustees, receivers, and permitted assigns, (i)


                                       16
<PAGE>



references to any Governmental Requirement include every amendment or supplement
to it, rule and regulation adopted under it, and successor or replacement for
it, and (j) references to any Credit Document or other document include every
renewal and extension of it, amendment and supplement to it, and replacement or
substitution for it.

         1.4 Accounting Principles. Unless otherwise specified, in the Credit
Documents (a) GAAP in effect on this date determines all accounting and
financial terms and compliance with financial covenants, (b) otherwise, all
accounting principles applied in a current period must be comparable in all
material respects to those applied during the preceding comparable period, and
(c) while Parent has any consolidated Subsidiaries (i) all accounting and
financial terms and compliance with reporting covenants must be on a
consolidating and consolidated basis, as applicable, and (ii) compliance with
financial covenants must be on a consolidated basis.

SECTION 2       BORROWING PROVISIONS.

         2.1 Commitments. Subject to the limitations below and other provisions
of the Credit Documents and on Business Days before the Termination Date, each
Lender severally agrees to provide its Commitment Percentage of Borrowings
(except for Administrative Agent in respect of Swing Borrowings) so long as, in
each case, no Borrowing may be disbursed for less than $100,000 or that would
cause any of the following applicable limitations to be exceeded, which
limitations must be read together and are not mutually exclusive:

          o    The total Principal Debt may never exceed the lesser of either
               (a) the total Commitments or (b) the total Borrowing Base.

          o    The total Principal Debt of all Swing Borrowings may never exceed
               the Swing Sublimit.

          o    The total Principal Debt of Wet Borrowings may never exceed the
               Wet Sublimit.

          o    The total Principal Debt of Fixed-Rate Borrowings may never
               exceed $100,000,000.

          o    The total Principal Debt of Second-Lien Borrowings may never
               exceed the Second-Lien Sublimit.

          o    The total Principal Debt of Seasoned Borrowings may never exceed
               the lesser of either (i) the Seasoned Sublimit, or (ii) the
               portion of the Borrowing Base attributable to Eligible-Seasoned
               Loans.

          o    The total Principal Debt of Commercial Loan Borrowings may never
               exceed the lesser of either (i) the Commercial Loan Sublimit, or
               (ii) the portion of the Borrowing Base attributable to
               Eligible-Commercial Loans.

          o    The total Principal Debt of High LTV Borrowings may never exceed
               the High LTV Sublimit.

          o    The Principal Debt of Borrowings funded to and actually received
               and used by a Co-Borrower may not exceed the Borrowing Base
               attributable to the Collateral owned by such Co-Borrower.

          o    Except for Administrative Agent in respect of Swing Borrowings,
               no Lender's direct or indirect portion of the Principal Debt
               under this Section may ever exceed either its Commitment or its
               Commitment Percentage.


                                       17
<PAGE>




         2.2   Borrowing Request. Co-Borrowers may only request a Borrowing by
timely delivering to Administrative Agent a Collateral-Delivery Notice and
required Collateral Documents under Section 4.3 and by delivering to
Administrative Agent a Borrowing Request for the Borrowing before 12:00 p.m. on
the applicable Borrowing Date for a Base-Rate Borrowing or a LIBOR Borrowing or
the third Business Day before the Borrowing Date for a Fixed-Rate Borrowing.
Unless otherwise indicated on the Borrowing Request, any Borrowing will be
funded as a LIBOR Borrowing. A Borrowing Request is irrevocable and binding on
Co-Borrowers when delivered. Administrative Agent shall use its best efforts to
promptly -- but at least by 1:00 p.m. on the day it timely receives a Borrowing
Request for a Ratable Borrowing -- send a copy of it to each Lender by fax and
confirm it by telephone.

         2.3   Fundings.

                  (a) Remittance by Lenders. Each Lender shall remit its
         Commitment Percentage of any Ratable Borrowing requested in a Borrowing
         Request to Administrative Agent's principal office in Houston, Texas,
         by wire transfer according to Administrative Agent's Wire Instructions,
         in funds that are available for immediate use by Administrative Agent,
         by 2:00 p.m. on the Borrowing Date.

                  (b) Funding by Administrative Agent. Subject to receipt of
         those funds, Administrative Agent shall (i) for a Borrowing under an
         Agent's Request, treat those funds as a payment by Co-Borrowers on the
         Principal Debt of Swing Borrowings, and (ii) for any other Borrowing on
         the Borrowing Date -- unless to its actual knowledge any of the
         applicable conditions precedent have not been satisfied by Co-Borrowers
         or waived by the requisite Lenders -- either deposit those funds into
         the applicable Note Payment Account for a Dry Borrowing, or wire
         transfer those funds in accordance with the Borrowing Request for a Wet
         Borrowing.

                  (c) Non-remittance under Borrowing Request. Absent contrary
         written notice from a Lender received by Administrative Agent by 3:00
         p.m. on the Borrowing Date, Administrative Agent may assume that each
         Lender has made its Commitment Percentage of a Ratable Borrowing under
         a Borrowing Request available to Administrative Agent on the Borrowing
         Date and may -- but is not obligated to -- make available to
         Co-Borrowers a corresponding amount. If a Lender fails to make its
         Commitment Percentage of that Borrowing available to Administrative
         Agent on the Borrowing Date -- whether because of that Lender's
         default, because that Lender is not open for business on that Business
         Day, or otherwise -- then Administrative Agent may recover that amount
         on demand (i) from that Lender, together with interest at the Fed-Funds
         Rate, during the period from the Borrowing Date to the date
         Administrative Agent recovers that amount from that Lender, which
         payment is then deemed to be that Lender's Commitment Percentage of
         that Borrowing and upon which interest shall accrue from the Borrowing
         Date until such payment is made, or (ii) if that Lender fails to pay
         that amount upon demand, then from Co-Borrowers, if actually advanced,
         together with interest which shall accrue at an annual interest rate
         equal to the rate applicable to the requested Borrowing during the
         period from the Borrowing Date to the date Administrative Agent
         recovers that amount from Co-Borrowers. For purposes of this
         subparagraph (c), payments collected by Administrative Agent shall be
         deemed received in accordance with Section 3.2(a). Notwithstanding
         these provisions, each Lender remains obligated to lend its Commitment
         Percentage of that Borrowing, assumes the credit risk for that amount
         when that Borrowing is made available to or for Co-Borrowers, and,
         after Administrative Agent has recovered the amount of interest
         provided for in clause (i) above, is entitled to interest on that
         amount from the Borrowing Date.

                  (d) Non-remittance under Agent's Request. If a Lender fails to
         make its Commitment Percentage of a Ratable Borrowing under an Agent's
         Request available to Administrative Agent on


                                       18
<PAGE>



         its Borrowing Date, then -- without acquiescing in that Lender's
         default or waiving any Rights Administrative Agent has against that
         Lender -- by 10:00 a.m. on the next Business Day, Administrative Agent
         shall notify Co-Borrowers of the amount of Principal Debt of Swing
         Borrowings that remains.

                  (e) Other Lenders. Although no Lender is responsible for the
         failure of any other Lender to make its Commitment Percentage of any
         Ratable Borrowing, that failure does not excuse any other Lender from
         making its Commitment Percentage of that Borrowing.

                  (f) Agent's Request. On any Business Day on which there are
         Swing Borrowings outstanding, Administrative Agent may -- but at least
         once every five Business Days when those circumstances exist,
         Administrative Agent shall (without any liability for failing to) --
         unilaterally request a Ratable Borrowing under this Section 2.3, that
         is (i) to be made in the amount of the Principal Debt of Swing
         Borrowings outstanding on the date of such request, (ii) to be advanced
         on the Business Day following such request, and (iii) to be made as a
         Base-Rate Borrowing. That Ratable Borrowing is for the account of
         Co-Borrowers, but does not require any Co-Borrower's joinder or other
         action. Administrative Agent shall fax that request (an "Agent's
         Request") to each Lender and Co-Borrowers and confirm it by telephone
         by 2:00 p.m. on the Borrowing Date for the requested Ratable Borrowing.
         When so made, an Agent's Request irrevocably binds Co-Borrowers.

         2.4   Wet Borrowings. The conditions and procedures of Section 2.2 and
Section 2.3 apply to Wet Borrowings, except as follows:

                  (a) Collateral Documents. A Wet Borrowing may be funded before
         delivery to Administrative Agent of all of the required Collateral
         Documents for the eligible Collateral supporting that Wet Borrowing.
         The Collateral-Delivery Notice delivered to Administrative Agent for a
         Wet Borrowing may be sent to Administrative Agent by fax but must
         identify and describe each Mortgage Loan or Commercial Loan that
         supports that Wet Borrowing and the amount of the Borrowing Base
         applicable to it. By delivering the Collateral-Delivery Notice,
         Co-Borrowers confirm their grant under this agreement of Lender Liens
         -- from the Borrowing Date for each Wet Borrowing -- on each Collateral
         Document offered as Collateral in that Collateral-Delivery Notice that
         is perfected subject to the delivery of the related promissory notes
         for those Mortgage Loans and Commercial Loans to Administrative Agent
         or its bailee.

                  (b) Funding by Administrative Agent. Administrative Agent
         shall make the funds available to Co-Borrowers by 3:00 p.m. on the
         Borrowing Date by wire transferring these funds in accordance with the
         Borrowing Request or by depositing these funds into the applicable Note
         Payment Account.

         2.5   Swing Borrowing Procedures. The conditions and procedures of
Section 2.2, Section 2.3, and Section 2.4 apply to Swing Borrowings except as
follows:

                  (a)  Borrowing Request. The Borrowing Request for a Swing 
         Borrowing must be delivered to Administrative Agent by 3:00 p.m. on the
         Borrowing Date and may not request a Base-Rate Borrowing or Fixed-Rate 
         Borrowing.

                  (b) Election by Administrative Agent. Administrative Agent 
         shall then elect in its sole discretion whether to loan that Swing 
         Borrowing. If Administrative Agent elects to loan that Swing Borrowing,
         then it shall follow the funding procedures that are applicable under 
         Sections 2.2, 2.3, and 2.4.


                                       19
<PAGE>



                  (c) Participations. Immediately upon Administrative Agent's
         funding a Swing Borrowing, Administrative Agent is deemed to have sold
         and transferred to each other Lender -- and each other Lender is deemed
         irrevocably and unconditionally to have purchased and received from
         Administrative Agent -- without recourse or warranty, an undivided
         interest and participation in that Swing Borrowing to the extent of
         that Lender's Commitment Percentage of the amount of it, which
         participation must be paid for on demand by Administrative Agent.

         2.6   Increases and Terminations.

                  (a) Increases up to $200,000,000. Co-Borrowers may from time
         to time request any one or more Lenders to increase their respective
         Commitments or other financial institutions first approved by
         Administrative Agent to agree to a Commitment so that the total
         Commitments may be increased to no more than $200,000,000. That
         increase must be effected by an amendment that is executed in
         accordance with Section 12.10 by the Companies, Administrative Agent,
         and the one or more Lenders who have agreed to increase their
         Commitments or new Lenders who have agreed to new Commitments in
         accordance with Section 12.10. Co-Borrowers shall execute and deliver
         to each such Lender a Warehouse Note in the stated amount of its new
         Commitment. No Lender is obligated to increase its Commitment under any
         circumstances, and no Lender's Commitment may be increased except by
         its execution of an amendment to this agreement in accordance with
         Section 12.10. Each new Lender providing such additional Commitment
         shall be a "Lender" hereunder, entitled to the rights and benefits, and
         subject to the duties, of a Lender under the Credit Documents. All
         amounts advanced hereunder pursuant to any such additional Commitment
         shall be secured by the Collateral on a pari passu basis with all other
         amounts advanced hereunder. In the event the total Commitments are
         increased, Co-Borrowers shall execute a new Warehouse Note in favor of
         the Lender extending such additional Commitment in a stated amount of
         its new Commitment and shall notify each Lender in writing of such
         additional Commitment. In such case, each Lender's Commitment
         Percentage shall be recalculated to reflect the new proportionate share
         of the revised total Commitments and the Lender responsible for the
         additional Commitment shall, immediately upon receiving notice from
         Administrative Agent, pay to each Lender an amount equal to its pro
         rata share of the Borrowings outstanding as of such date. All such
         payments shall reduce the outstanding principal balance of the Note of
         each Lender receiving such payments and shall represent Borrowings to
         Co-Borrowers under the purchasing Lender's Warehouse Note. The
         purchasing Lender shall be entitled to share ratably in interest
         accruing on the balances purchased, at the rates provided herein for
         such balances, from and after the date of purchase. All new Borrowings
         occurring after an increase of the total Commitments shall be funded in
         accordance with each Lender's revised Commitment Percentage.

                  (b) Termination of a Lender. After giving written and
         irrevocable notice to Agent and each Lender at least three Business
         Days before the effective date of any termination, Co-Borrowers may
         fully terminate any Lender's Commitment before the Stated-Termination
         Date. Also, a Lender may agree to a partial termination of its
         Commitment before the Stated-Termination Date by executing an amendment
         under Section 12.10. A full or partial termination under this clause
         (b) may occur on one or more occasions but may only occur if (i) no
         Event of Default or Potential Default exists unless otherwise consented
         to by Lenders (other than the terminating Lender), whose Termination
         Percentages total at least 51%, and (ii) such termination requires (A)
         no full or partial termination of any other Lender's Commitment, (B) a
         mandatory prepayment under Section 3.4 on the effective date of the
         termination, (C) payment of any related Funding Loss, and (D) no other
         premium or penalty. All fees under Sections 3.14(b) and (c) cease to
         accrue in respect of the portion of the Commitment so terminated
         effective as of the date the termination is effective. Notwithstanding
         the termination of any Lender's Commitment, the rights of such Lender
         under Sections 3.10, 7.6, and


                                       20
<PAGE>


         7.11 shall continue as to any portion of the Obligation which remains
         owing to such Lender and for any period of time prior to such date of
         termination.

                  (c) Terminations of all Lenders. After giving written and
         irrevocable notice to Administrative Agent and each Lender at least
         three Business Days before the effective date of any termination,
         Co-Borrowers may fully or partially terminate the Commitments. A
         termination under this clause (c) (i) if partial, (A) must be at least
         $10,000,000 or a greater integral multiple of $5,000,000, (B) must be
         ratable for each Lender according to its Commitment Percentage, (C)
         requires a mandatory prepayment under Section 3.4 on the effective date
         of termination, and (D) requires no other premium or penalty, or (ii)
         if full, requires (A) a mandatory prepayment under Section 3.4 on the
         effective date of the termination, and (B) no other premium or penalty.

                  (d) Termination Date. The total Commitments automatically
         terminate on the Termination Date.

                  (e) Reinstatement. Once terminated, no part of any commitment
         or agreement to extend credit under this agreement may be reinstated
         except by an amendment to this agreement under Section 12.10.

         2.7   Multiple Borrowers.

                  (a) Co-Borrowers. Each representation and warranty in the
         Credit Documents by any Co-Borrower is deemed to be its separate
         representation and warranty and the joint and several representation
         and warranty of each other Co-Borrower, and vice versa. Each covenant
         and agreement by any Co-Borrower under the Credit Documents is deemed
         to be its separate covenant and agreement and the joint and several
         covenant and agreement of each other Co-Borrower, and vice versa. Any
         communication under the Credit Documents to any Co-Borrower is deemed
         to have been concurrently received by each other Co-Borrower, and vice
         versa.

                  (b) Basis for Structure. Co-Borrowers desire to utilize their
         borrowing potential on a combined basis to the same extent possible if
         they were merged into a single-corporate entity. Each Co-Borrower has
         determined that it will specifically and materially benefit from all
         Borrowings. Each Co-Borrower intends, and Lenders have required, that
         each Co-Borrower execute and deliver this agreement, the Notes, and
         certain other Credit Documents. Each Co-Borrower has requested and
         bargained for the structure and terms of, and security for, Borrowings.

                  (c) Joint and Several Obligation. Each Co-Borrower irrevocably
         and unconditionally agrees (i) that it is jointly and severally liable
         to Administrative Agent and Lenders for full payment and performance of
         the Obligation and all obligations of Co-Borrowers under the Credit
         Documents, (ii) to fully pay and perform the Obligation and all of
         those obligations of Co-Borrowers, and (iii) TO INDEMNIFY, AS A PRIMARY
         OBLIGOR, ADMINISTRATIVE AGENT AND EACH LENDER FOR AND AGAINST ANY LOSS
         THAT ADMINISTRATIVE AGENT OR ANY LENDER INCURS AS A RESULT OF ANY
         OBLIGATIONS OR BORROWINGS BEING OR BECOMING VOID, VOIDABLE,
         UNENFORCEABLE, OR INEFFECTIVE FOR ANY REASON (OTHER THAN AS A RESULT OF
         THE OPERATION OF DEBTOR LAWS OR THE GROSS NEGLIGENCE OR WILLFUL
         MISCONDUCT OF ADMINISTRATIVE AGENT, OR ANY LENDER) WHATSOEVER (WHETHER
         KNOWN TO ADMINISTRATIVE AGENT, ANY LENDER, OR ANY OTHER PERSON) THE
         AMOUNT OF THAT LOSS BEING THE AMOUNT WHICH ADMINISTRATIVE AGENT OR THAT
         LENDER, AS THE CASE MAY BE, WOULD OTHERWISE HAVE BEEN ENTITLED TO
         RECOVER FROM ANY CO-BORROWER. THIS INDEMNITY SURVIVES FOR A PERIOD OF
         TWO YEARS FOLLOWING THE PAYMENT AND PERFORMANCE OF THE OBLIGATION AND
         TERMINATION OF THE CREDIT DOCUMENTS.


                                       21
<PAGE>


                  (d) Contribution Rights. Each Co-Borrower intends that its
         obligations under the Credit Documents are not subject to challenge on
         any basis. Therefore, as of the date any transfer is deemed to occur
         under the Credit Documents, each Co-Borrower's liabilities under the
         Credit Documents and all other liabilities -- calculated in each case
         to the full extent of their probable-net exposure when and if those
         liabilities become absolute and mature (i.e., "dated liabilities") --
         are intended by them to be less than the fair valuation of all of its
         assets as of that date (i.e., its "dated assets"). To that end, each
         Co-Borrower (i) grants to and recognizes in the others ratable Rights
         of subrogation and contribution in the amount, if any, by which the
         granting party's dated assets (but for the total subrogation and
         contribution in its favor under this section) would exceed the granting
         party's dated liabilities, and (ii) acknowledges receipt of and
         recognizes its ratable Rights to subrogation and contribution from each
         other Co-Borrower in the amount that the other Co-Borrower's dated
         assets (but for the total subrogation and contribution in its favor
         under this section) would exceed the other Co-Borrower's dated
         liabilities. Each Co-Borrower will recognize Rights of subrogation and
         contribution at least equal to its obligations under the Credit
         Documents. It is a material objective of this section that each
         Co-Borrower recognize Rights to subrogation and contribution rather
         than be deemed insolvent by reason of an arbitrary interpretation of
         its obligations under the Credit Documents.

SECTION 3   PAYMENT TERMS.

         3.1 Notes. The Principal Debt and interest on it are evidenced by the
Notes. Notwithstanding any sale of participating interests under Section 12.13
or any contrary notice, other than an Assignment and Assumption Agreement,
Co-Borrowers and Administrative Agent may deem and treat each Lender as the
absolute owner of its respective Note or Notes for all purposes.

         3.2      Payment Procedures.

                  (a) Payments. Co-Borrowers shall make each payment and
         prepayment on the Obligation to Administrative Agent, on behalf of
         Lenders, in accordance with Administrative Agent's Wire Instructions,
         in funds that are available for immediate use by Administrative Agent.
         Payments that are received by 1:00 p.m. on a Business Day are deemed
         received on that Business Day. Payments that are received after 1:00
         p.m. on a Business Day are deemed received on the next Business Day.
         Subject to Section 3.7(f), applicable interest continues to accrue
         through the calendar day immediately before the Business Day on which a
         payment is deemed received. No Lender directly invoices Co-Borrowers
         for (and only Administrative Agent invoices Co-Borrowers for) interest
         under the Credit Documents.

                  (b) Distributions. When received under clause (a) above,
         Administrative Agent shall distribute each payment to each Lender, in
         accordance with Section 3.5 and each Lender's Wire Instructions,
         reasonably promptly after receipt, but by no later than 3:30 p.m. on
         the Business Day that payment is deemed to be received by
         Administrative Agent under clause (a) above. If Administrative Agent
         fails to distribute any payment to any Lender as required by this
         clause, then Administrative Agent shall pay to that Lender on demand
         interest on that payment, from the date due under this clause until
         paid, at an annual interest rate equal from day to day to the Fed-Funds
         Rate.

         3.3   Scheduled Payments. Unless otherwise provided in this agreement,
Co-Borrowers shall pay the Obligation in accordance with the following table:


                                       22
<PAGE>

--------------------------------------------------------------------------------
               Obligation                                 Payable 
================================================================================
Interest on each Fixed-Rate Borrowing      As it accrues on (a) the last day of
except at the Default Rate                 that Borrowing's Interest Period    
                                           and -- if that Interest Period is   
                                           longer than three months -- 90 days 
                                           after its first day and each 90 days
                                           after that, and (b) on the          
                                           Termination Date.    
--------------------------------------------------------------------------------
Interest on each Base-Rate Borrowing       On (a) the 15th day of each Calendar
or LIBOR Borrowing except at the           Month as it accrued on the last day 
Default Rate                               of the preceding Calendar Month and 
                                           (b) on the Termination Date.        
--------------------------------------------------------------------------------
Interest at the Default Rate               On demand as it accrues.
--------------------------------------------------------------------------------
Principal of Swing Borrowings              On demand
--------------------------------------------------------------------------------

         3.4   Prepayments.

                  (a) Commitment Termination. On the effective date of any (i)
         termination of a Lender's Commitment under Section 2.6(b), Co-Borrowers
         shall pay to Administrative Agent for that Lender the Obligation owed
         to that Lender, (ii) partial termination of the Commitments under
         Section 2.6(c), Co-Borrowers shall pay to Administrative Agent for
         Lenders the amount that the Principal Debt exceeds the reduced total
         Commitments, together with accrued and unpaid interest on such excess,
         all accrued fees, if any, and any related Funding Loss, and (iii) full
         termination of the Commitments under Section 2.6(c) or Section 2.6(d),
         Co-Borrowers shall prepay the full Obligation.

                  (b) Borrowing Excess. Co-Borrowers shall, on demand when any
         Borrowing Excess exists, prepay the appropriate Principal Debt
         (together with any related Funding Loss) or take any other actions in
         accordance with this agreement necessary to eliminate the Borrowing
         Excess and any accrued unpaid interest thereon.

                  (c) Voluntary Prepayments. Co-Borrowers may otherwise
         voluntarily prepay any of the Obligation at any time without premium or
         penalty, but with any applicable Funding Loss and accrued unpaid
         interest on any such portion of the Obligation being prepaid.

         3.5   Order of Application. All payments and proceeds (whether 
voluntary, involuntary, through the exercise of any Right of set-off or other 
Right, realization against any Collateral, or otherwise) shall be applied in the
following order:

                  (a) No Event of Default. While no Event of Default exists, (i)
         all payments of regularly scheduled interest shall be applied to
         accrued and unpaid interest on the Obligation, payable ratably to
         Lenders in the proportion that the amount of interest owed to each
         Lender bears to the total of all interest owed to all Lenders, (ii) all
         payments and proceeds from the sale or other disposition of Collateral
         shall be applied to the Principal Debt for the applicable
         Borrowing-Purpose Category, applied first against the then-outstanding
         Swing Borrowings (in each case payable solely to Administrative Agent,
         which Administrative Agent shall distribute in accordance with the
         participation interests in that Principal Debt that any one or more
         Lenders may have purchased and paid for under Section 2.5(c)) and then
         to non-Swing Borrowings, payable ratably to each Lender in accordance
         with its Commitment Percentage, and (iii) all other payments and
         proceeds shall be applied as Co-Borrowers direct, except that principal
         payments must always be applied first to Swing Borrowings (in each case
         payable solely to Administrative Agent, which Administrative Agent
         shall distribute in accordance with the participation interests in that
         Principal Debt that any one or more Lenders may have purchased and paid
         for under Section 2.5(c)) before being applied to non-Swing Borrowings


                                       23
<PAGE>



         (in each case payable ratably to each Lender in accordance with its
         Commitment Percentage). Administrative Agent may, to the extent
         possible, rearrange the order of application of payments and proceeds
         against Principal Debt to avoid the application of any Funding Loss.

                  (b) Event of Default. While an Event of Default exists, to:

                           (i) all costs and expenses incurred by Administrative
                  Agent in connection with its duties under the Credit Documents
                  -- including, without limitation, reasonable fees and expenses
                  paid by Administrative Agent to any servicing companies
                  reasonably and necessarily retained by Administrative Agent to
                  assist it in servicing any Collateral required to be serviced,
                  to any attorneys, or to Administrative Agent -- that have not
                  been reimbursed by Lenders, together with interest at the
                  Default Rate, payable solely to Administrative Agent;

                           (ii) all costs and expenses incurred by any Lender in
                  connection with the Credit Documents that are reimbursable to
                  it under the Credit Documents, and all amounts paid by that
                  Lender to Administrative Agent as a reimbursement to it of
                  costs and expenses incurred by Administrative Agent in
                  connection with its duties under the Credit Documents,
                  together with interest at the Default Rate -- payable ratably
                  to Lenders in the proportion that each Lender's share of those
                  costs and expenses bears to the total of those costs and
                  expenses for all Lenders;

                           (iii) accrued and unpaid interest on the Obligation,
                  payable ratably to Lenders in the proportion that the amount
                  of interest owed to each Lender bears to the total of all
                  interest owed to all Lenders;

                           (iv) Principal Debt of Swing Borrowings -- in each
                  case payable solely to Administrative Agent, which
                  Administrative Agent shall distribute in accordance with the
                  participation interests in that Principal Debt that any one or
                  more Lenders may have purchased and paid for under Section
                  2.5(c);

                           (v) Principal Debt of non-Swing Borrowings, payable
                  ratably to each Lender in accordance with its Termination
                  Percentage (except as the order may be rearranged by
                  Administrative Agent to the extent possible to avoid the
                  application of any Funding Loss;

                           (vi) all other portions of the Obligation, payable
                  ratably to Lenders and their Affiliates in the proportion that
                  each Lender's or Lender's Affiliate's share of those amounts
                  bears to the total of those amounts for all Lenders and their
                  Affiliates; and

                           (vii) either (i) to Co-Borrowers or to their
                  successors or assigns on their behalf, to be divided among
                  them as they may agree, or (ii) as a court of competent
                  jurisdiction may direct.

         3.6   Sharing. If any Lender obtains any amount (whether voluntary,
involuntary, or otherwise, including, without limitation, as a result of
exercising its Rights under Section 10.3) that exceeds the portion of that
amount to which it is otherwise entitled under the Credit Documents, then that
Lender shall purchase from the other Lenders participations that result in the
purchasing Lender's sharing the excess amount ratably with each Lender in
accordance with the portion it is entitled to receive under the Credit
Documents. If all or any of that excess amount is subsequently recovered from
that purchasing Lender, then the purchase of participations in it is
automatically rescinded and the purchase price is restored to that purchasing
Lender to the extent of the recovery. Any Lender purchasing a participation from
another Lender under this section may,


                                       24
<PAGE>


to the extent lawful, exercise all of its Rights of payment (including the Right
of offset) with respect to that participation as fully as if that Lender were
the direct creditor of Co-Borrowers in the amount of that participation.

         3.7   Interest Rates.

                  (a) Non-Default Rate. Subject to clause (b) below, all
         Principal Debt bears an annual interest rate equal to the lesser of
         either the Maximum Rate or the rate applicable in the following table:




--------------------------------------------------------------------------------
               Principal Debt                            Rate
================================================================================
Average-Principal Debt of all Borrowings       Applicable-Covered Rate
(other than Fixed-Rate Borrowings) owed to
any Lender during any Calendar Month that 
does not exceed the Average-Eligible
Balances with that Lender for that Calendar 
Month 
--------------------------------------------------------------------------------
Average-Principal Debt of all Borrowings      For LIBOR Borrowings, Average-
owed to any Lender during any Calendar        Adjusted-LIBOR for that Calendar 
Month and not bearing interest under          Month    
the above section of this table               ----------------------------------
                                              For Base-Rate Borrowings, the 
                                              Average-Adjusted-Base Rate for 
                                              that Calendar Month
                                              ----------------------------------
                                              For each Fixed-Rate Borrowing, 
                                              the Fixed Rate applicable to its 
                                              Interest Period
--------------------------------------------------------------------------------

                  (b) Default Rate. All past-due Principal Debt and past-due
         interest on it bears interest at the Default Rate from the date due
         (stated or by acceleration) until paid, whether or not payment is
         before or after entry of a judgment.

                  (c) Rate Changes. Each change in the Base Rate, LIBOR, the
         Fed-Funds Rate, and the Maximum Rate is effective upon the effective
         date of change without contemporaneous notice to Co-Borrowers or any
         other Person; provided, however, that Administrative Agent shall use
         reasonable efforts to provide notification of each such rate change to
         Co-Borrowers and Lenders within five Business Days of the effective
         date of such change.

                  (d) Calculations. Interest is calculated on the basis of
         actual days (including the first but excluding the last) over a 360-day
         year, unless the calculation would result in an interest rate greater
         than the Maximum Rate, in which event interest is calculated on the
         basis of the actual days in that year. All interest rate determinations
         and calculations by Administrative Agent are conclusive and binding
         absent manifest error.

                  (e) Recapture. If the designated interest rate applicable to
         any Borrowing exceeds the Maximum Rate, the interest rate on that
         Borrowing is limited to the Maximum Rate. However, any subsequent
         reductions in the designated interest rate shall not become effective
         until the total amount of accrued interest equals the amount of
         interest that would have accrued, to the extent lawful, if that
         designated interest rate had always been in effect. If at maturity
         (stated or by acceleration), or at


                                       25
<PAGE>


         final payment of the Notes, the total interest paid or accrued is less
         than the interest that would have accrued if the designated interest
         rates had always been in effect, then, at that time and to the extent
         permitted by Governmental Requirements, Co-Borrowers shall pay an
         amount equal to the difference of (i) the lesser of either the amount
         of interest that would have accrued if the designated interest rates
         had always been in effect, or the amount of interest that would have
         accrued if the Maximum Rate had always been in effect, minus (ii) the
         amount of interest actually paid or accrued on the Notes.

                  (f) Maximum Rate. Regardless of any Credit Document provision,
         no Lender is entitled to contract for, charge, take, reserve, receive,
         or apply, as interest on all or any of the Obligation, any amount in
         excess of the Maximum Rate. If a Lender ever does so, then any excess
         is treated as a partial prepayment of principal (such payment not
         subject to the accrual of prepayment premiums or penalties), if any,
         and any remaining excess shall be refunded to Co-Borrowers promptly
         after determination. In determining if the interest paid or payable
         exceeds the Maximum Rate, Co-Borrowers and Lenders shall, to the extent
         lawful (i) treat all Borrowings as but a single extension of credit,
         (ii) characterize any nonprincipal payment as an expense, fee, or
         premium rather than as interest, (iii) exclude voluntary prepayments
         and their effects, and (iv) amortize, prorate, allocate, and spread the
         total amount of interest throughout the full-contemplated term of the
         Obligation. However, if the Obligation is paid in full before the end
         of that full-contemplated term and the interest received for the
         Obligation's actual period of existence exceeds the Maximum Amount,
         then Lenders shall promptly refund any excess without being subject to
         any penalties provided by any Governmental Requirements. If Texas
         Governmental Requirements are applicable for purposes of determining
         the "Maximum Rate" or the "Maximum Amount," then those terms mean the
         "indicated rate ceiling" from time to time in effect under Article
         1.04, Title 79, Texas Revised Civil Statutes, as amended. Chapter 15,
         Subtitle 79, Texas Revised Civil Statutes, 1925 (which regulates
         certain revolving credit loan accounts and revolving tri-party
         accounts), does not apply to the Obligation.

         3.8   Interest Periods. When any Co-Borrower requests any Fixed-Rate
Borrowing, it may elect the applicable interest period (each an "Interest
Period") -- which may be either seven days, 14 days, or one, two, three, or six
months at its option or such other period as it and Administrative Agent may
agree (after first obtaining approval of all Lenders) -- subject to the
following conditions: (a) the initial Interest Period commences on the
applicable Borrowing Date and each subsequent applicable Interest Period
commences on the day when the next preceding applicable Interest Period expires;
(b) if any Interest Period (other than an Interest Period consisting of either
seven or 14 days) begins on a day for which no numerically corresponding
Business Day in the Calendar Month at the end of that Interest Period exists,
then that Interest Period ends on the last Business Day of such Calendar Month;
(c) if an Interest Period would otherwise not end on a Business Day, it shall
end on the immediately succeeding Business Day unless such succeeding Business
Day is in the next Calendar Month in which case such Interest Period shall end
on the immediately preceding Business Day; (d) no Interest Period for any
portion of the Obligation may extend beyond the scheduled repayment date for
that portion of the Obligation; and (e) no more than four Interest Periods may
be in effect at any time.

         3.9   Basis Unavailable or Inadequate for LIBOR. If, on or before any
date when LIBOR is to be determined for either a LIBOR Borrowing or a Fixed-Rate
Borrowing, Administrative Agent or any Lender (upon notice to Administrative
Agent) reasonably determines that the basis for determining the applicable rate
is not available or that the resulting rate does not accurately reflect the cost
to any Lender of making or converting Borrowings at that rate (and, if
applicable, for the applicable Interest Period), then Administrative Agent shall
promptly notify Co-Borrowers and Lenders of that determination (which is
conclusive and binding on Co-Borrowers, absent manifest error), and that
Borrowing shall be a Base-Rate Borrowing. Until Administrative Agent notifies
Co-Borrowers and Lenders that it or the notifying Lender (upon notice to


                                       26
<PAGE>



Administrative Agent) has determined that those circumstances no longer exist
(which it shall promptly do), then Lenders' commitments under this agreement to
make LIBOR Borrowings and Fixed-Rate Borrowings are suspended.

         3.10 Additional Costs. This section survives the full satisfaction of
the Obligation, termination of the Credit Documents, and release of Lender
Liens.

                  (a) For any LIBOR Borrowing or Fixed-Rate Borrowing, if (i)
         (A) any change after the date of this agreement in any present or
         future Governmental Requirement (and, for purposes of this Section
         3.10, Governmental Requirement includes interpretations and guidelines
         of any Governmental Authority, whether or not having the force of law)
         or any future Governmental Requirement imposes, modifies, or deems
         applicable (or if compliance by any Lender with any requirement of any
         Governmental Authority results in) any requirement that any reserves
         (including, without limitation, any marginal, emergency, supplemental,
         or special reserves) be maintained, (B) those reserves reduce any sums
         receivable by any Lender under this agreement or increase the costs
         incurred by any Lender in advancing or maintaining any portion of any
         LIBOR Borrowing or Fixed-Rate Borrowing, and (C) that Lender determines
         that the reduction or increase is material (and it may, in determining
         the material nature of the reduction or increase, utilize reasonable
         assumptions and allocations of costs and expenses and use any
         reasonable averaging or attribution method), then (ii) that Lender
         (through Administrative Agent) shall deliver to Co-Borrowers a
         certificate, within six months of any such change, stating in
         reasonable detail the calculation of the amount necessary to compensate
         it for its reduction or increase (which certificate is conclusive and
         binding absent manifest error), and Co-Borrowers shall pay that amount
         to that Lender within ten days after demand.

                  (b) If (i) (A) any change after the date of this agreement in
         any present or future Governmental Requirement regarding capital
         adequacy or compliance by any Lender with any request, directive, or
         requirement now or in the future imposed by any Governmental Authority
         regarding capital adequacy or any change in the risk category of this
         transaction reduces the rate of return on its capital as a consequence
         of its obligations under this agreement to a level below that which it
         otherwise could have achieved (taking into consideration its policies
         with respect to capital adequacy) by an amount deemed by it to be
         material (and it may, in determining the material nature of the
         reduction, utilize reasonable assumptions and allocations of costs and
         expenses and use any reasonable averaging or attribution method), then
         (ii) that Lender (through Administrative Agent) shall deliver to
         Co-Borrowers a certificate, within six months of any such change,
         stating in reasonable detail the calculation of the amount necessary to
         compensate it for its reduction (which certificate is conclusive and
         binding absent manifest error), and Co-Borrowers shall pay that amount
         to that Lender within ten days after demand.

                  (c) Any Taxes payable by Administrative Agent or any Lender or
         ruled (by a Governmental Authority) payable by Administrative Agent or
         any Lender in respect of any Credit Document shall -- if permitted by
         Governmental Requirement and if deemed material by Administrative Agent
         or that Lender (who may, in determining the material nature of the
         amount payable, utilize reasonable assumptions and allocations of costs
         and expenses and use any reasonable averaging or attribution method) --
         be paid by Co-Borrowers, together with interest and penalties, if any
         (except for Taxes payable on the overall Net Income of Administrative
         Agent or that Lender and except for interest and penalties incurred as
         a result of the gross negligence or willful misconduct of
         Administrative Agent or any Lender). Administrative Agent or that
         Lender (through Administrative Agent) shall notify Co-Borrowers and
         promptly deliver to Co-Borrowers a certificate stating in reasonable
         detail the calculation of the amount of payable Taxes, which
         certificate is conclusive and binding (absent manifest error), and
         Co-Borrowers shall pay that amount to


                                       27
<PAGE>



         Administrative Agent for the account of Administrative Agent or that
         Lender, as the case may be, within ten days after demand. If
         Administrative Agent or that Lender subsequently receives a refund of
         the Taxes paid to it by Co-Borrowers, then the recipient shall promptly
         pay the refund to Co-Borrowers.

                  (d) Notwithstanding anything to the contrary in Section 10,
         any breach of Section 9.1 or Section 9.2 arising solely as a result of
         payments made to any Lender pursuant to this Section 3.10 shall not be
         deemed to be an Event of Default.

         3.11 Change in Governmental Requirements. If any change, after the date
of this agreement, in any present or future Governmental Requirement makes it
unlawful for any Lender to make or maintain LIBOR Borrowings or Fixed-Rate
Borrowings, then that Lender shall promptly notify Administrative Agent, who
shall promptly notify Co-Borrowers and (a) as to undisbursed funds, any
requested Borrowing shall be made as a Base-Rate Borrowing, (b) as to any
outstanding Borrowing (i) if maintaining that Borrowing as a LIBOR Borrowing or
Fixed-Rate Borrowing is unlawful, that Borrowing shall be converted to a
Base-Rate Borrowing as of the date of notice, or (ii) if maintaining that
Borrowing as a LIBOR Borrowing or Fixed-Rate Borrowing is not unlawful, that
Borrowing shall be converted to a Base-Rate Borrowing only at the option of
Co-Borrowers, or (iii) if any conversion will not resolve the unlawfulness,
Co-Borrowers shall promptly prepay that Borrowing.

         3.12 Funding Loss. Subject to Section 3.11, CO-BORROWERS AGREE TO
INDEMNIFY EACH LENDER AGAINST (AND PAY TO IT UPON DEMAND) ANY FUNDING LOSS OF
THAT LENDER. When any Lender demands that Co-Borrowers pay any Funding Loss,
that Lender shall deliver to Administrative Agent, who shall promptly deliver to
Co-Borrowers, a certificate stating in reasonable detail the basis for imposing
Funding Loss and the calculation of the amount (which certificate is conclusive
and binding absent manifest error). This Section 3.12 survives the satisfaction
and payment of the Obligation and termination of the Credit Documents for a
period of six months.

         3.13 Foreign Lenders, Participants, and Purchasers. Each Lender,
Participant (by accepting a participation interest under this agreement), and
Purchaser (by executing an assignment and assumption agreement) that is not
organized under the Governmental Requirements of the United States of America or
one of its states (a) represents to Administrative Agent and Co-Borrowers that
(i) no Taxes are required to be withheld by Administrative Agent or Co-Borrowers
with respect to any payments to be made to it in respect of the Obligation, and
(ii) it has furnished to Administrative Agent and Co-Borrowers, two duly
completed copies of either U.S. Internal Revenue Service Form 4224, Form 1001,
Form W-8, or any other form acceptable to Administrative Agent that entitles it
to exemption from U.S. federal withholding Tax on all interest payments under
the Credit Documents, and (b) covenants to (i) provide Administrative Agent and
Co-Borrowers a new Form 4224, Form 1001, Form W-8, or other form acceptable to
Administrative Agent upon the expiration or obsolescence of any previously
delivered form according to applicable Governmental Requirements, duly executed
and completed by it, and (ii) comply from time to time with all Governmental
Requirements with regard to the withholding Tax exemption. If any of the
foregoing is not true or the applicable forms are not provided, then
Co-Borrowers and Administrative Agent (without duplication) may deduct and
withhold any United States federal income Tax (at the full rate applicable under
the IRC) from interest payments under the Credit Documents.

         3.14 Fees. The following fees are not compensation for the use,
detention, or forbearance of money, are in addition to, and not in lieu of,
interest and expenses otherwise described in the Credit Documents, are
non-refundable, bear interest if not paid when due at the Default Rate, and are
calculated on the basis of actual days (including the first but excluding the
last) elapsed over a year of 360 days (or actual


                                       28
<PAGE>



days during that year, if the calculation would otherwise result in exceeding
the Maximum Amount and the payment were deemed to be interest, notwithstanding
the above provisions to the contrary):

                  (a) Administrative Agent's Fees. Co-Borrowers shall promptly
         pay to Administrative Agent (for its sole account) administration,
         syndication, and custodial fees in amounts and upon such payment terms
         as may be separately agreed upon by Co-Borrowers and Administrative
         Agent.

                  (b) Facility Fee. On the Closing Date, Co-Borrowers shall pay
         to Administrative Agent for the account of each initial Lender to this
         agreement a facility fee equal to $46,875. On the first day of each
         Calendar Quarter thereafter, Co-Borrowers shall pay to Administrative
         Agent for the account of each Lender a facility fee equal to a
         percentage per annum calculated as the product of 0.125% multiplied by
         each Lender's Commitment. When received, Administrative Agent shall pay
         to each Lender that Lender's Commitment Percentage of this fee.

                  (c) Non-use Fee. On the first Business Day of each Calendar
         Quarter Co-Borrowers shall pay to Administrative Agent a non-use fee
         for the account of all Lenders. Each payment of that fee is calculated
         for the period from the first day of the preceding Calendar Quarter to
         and including the last day of that preceding Calendar Quarter. When
         received, Administrative Agent shall pay to each Lender that Lender's
         Commitment Percentage of that fee less the applicable portion of that
         fee accruing for any period before that Lender became a Lender. The
         amount of that fee for that period is:

                           (i)  0.125%, multiplied by

                           (ii) the remainder of (A) the Average Commitments for
                  all Lenders for that period, minus (B) the Average-Principal
                  Debt for all Lenders for that period. If the amount remaining
                  after subtracting clause (B) from clause (A) above is less
                  than $0, then that remainder shall be deemed to be zero for
                  the subject Calendar Quarter.

SECTION 4   COLLATERAL PROCEDURES.

         4.1 Eligible Collateral. The requirements for Mortgage Collateral to be
included in the Borrowing Base are listed on Schedule 4.1. If at any time any
item of Mortgage Collateral ceases to meet those requirements, then that item is
automatically excluded from all calculations of the Borrowing Base.

         4.2 Borrowing Base. By 1:00 p.m. on the date of any Borrowing, any
payment of Principal Debt, or removal of any Collateral, and in any event, at
least quarterly, Administrative Agent shall deliver to Co-Borrowers and Lenders
a Borrowing-Base Report prepared on the basis of the information then available
to Administrative Agent as provided in this agreement.

         4.3 Collateral Delivery. Co-Borrowers must comply with all the required
procedures in Schedule 4.3 for Mortgage Collateral offered in connection with
this agreement by no later than 11:00 a.m. on the Borrowing Date for Collateral
supporting any new Borrowing.

         4.4 Bailee and Administrative Agent. Administrative Agent and Lenders
appoint Co-Borrowers, and Co-Borrowers shall act, as their (a) special agent,
for the sole and limited purpose of obtaining and maintaining Appraisals for
Mortgage Loans and Commercial Loans as required by the Credit Documents, and (b)
bailee, until delivery of all such Collateral Documents as required by Schedule
4.3, to (i) hold in trust for Administrative Agent for the benefit of Lenders
(A) the original recorded copy of the mortgage, deed of trust, or trust deed
securing each Mortgage Loan or Commercial Loan, (B) a mortgagee policy of title
insurance (or


                                       29
<PAGE>



binding unexpired and unconditional commitment to issue such insurance if the
policy has not yet been delivered to Co-Borrowers) insuring Co-Borrowers'
perfected, first priority Lien (or second-priority Lien with respect to
Second-Lien Borrowings) created by that mortgage, deed of trust, or trust deed,
(C) the original insurance policies referred to on Schedule 4.1, (D) original
copies of all Take-Out Commitments, and (E) all other original documents, (ii)
specifically identify those items in the appropriate Collateral-Delivery Notice,
and (iii) deliver to Administrative Agent any of the foregoing items as soon as
reasonably practicable upon Administrative Agent's request.

         4.5   Shipment for Sale.

                  (a) Shipment of Collateral. If no Event of Default, Potential
         Default, or Borrowing Excess exists, and if shipment would not result
         in any Investor (other than FNMA, FHLMC, and GNMA, or any other
         Investor that Administrative Agent has approved in writing), or its
         servicers and custodians, holding Collateral Documents for Mortgage
         Loans or Commercial Loans with more than a total $5,000,000 face amount
         (or $7,500,000 face amount for the first three and last five days of
         each Calendar Month), then Co-Borrowers may, by a Shipping Request
         delivered to Administrative Agent by 11:00 a.m. on the Business Day
         immediately preceding the requested shipping date, request
         Administrative Agent to ship Collateral Documents to an Investor, or
         its servicer or custodian, for purchase of the related Mortgage Loans
         or Commercial Loans; provided that such limitations shall not apply to
         shipment of Collateral Documents in connection with the securitization
         of the related Mortgage Loans or Commercial Loans. If Administrative
         Agent has no actual knowledge that any of the above conditions have not
         been satisfied, then Administrative Agent shall use its best efforts to
         ship the Collateral Documents it holds for those Mortgage Loans or
         Commercial Loans to that Investor, or its servicer or custodian, under
         an appropriate Bailee Letter by the end of the Business Day following
         the date of receipt of the applicable Shipping Request.

                  (b) Ineligible Collateral. Collateral shipped under clause (a)
         above, unless returned timely to Administrative Agent, ceases to be an
         Eligible-Mortgage Loan, Eligible-Commercial Loan, or Eligible-High LTV
         Loan, as applicable, (i) to the extent that Collateral Documents for
         Mortgage Loan or Commercial Loan with more than a total face amount of
         $1,000,000 are held by or for any Investor (other than FNMA, FHLMC, and
         GNMA, or any other Investor that Administrative Agent has approved in
         writing), and (ii) upon the earlier of either the release of the Lender
         Liens in that Collateral under clause (c) below, or the expiration of
         the Shipping Period for that Collateral.

                  (c) Release of Liens. The Lender Liens on any Collateral
         shipped under clause (a) above continue on that Collateral until
         Administrative Agent receives payment in the applicable Note Payment
         Account in an amount at least equal to the full amount of the
         Borrowings made with respect to those Eligible-Mortgage Loans,
         Eligible-Commercial Loans, or Eligible-High LTV Loans.

                  (d) Certain Credits. Neither Administrative Agent nor any
         Lender is obligated at any time to credit Co-Borrowers for any amounts
         due from any purchase of any Mortgage Collateral contemplated under
         this agreement until Administrative Agent has actually received
         immediately available funds for that Mortgage Collateral in the amount
         required under this agreement. Neither Administrative Agent nor any
         Lender is obligated at any time to collect any amounts or otherwise
         enforce any obligations due from any purchaser in respect of any such
         purchase.

         4.6   Shipment for Correction. If no Event of Default, Potential 
Default, or Borrowing Excess exists or occurs as a result of the shipment, and
if shipment would not result in any Collateral Documents for Mortgage Loans,
Commercial Loans with more than an aggregate total face amount of $500,000 being
outstanding for correction, then Co-Borrowers may, by a Trust Receipt delivered
to Administrative Agent,


                                       30
<PAGE>



request that Administrative Agent ship to Co-Borrowers the entire file of
Collateral Documents for any Mortgage Loan or Commercial Loan so that certain of
those Collateral Documents may be corrected or replaced for clerical or other
non-substantive mistakes. If Administrative Agent has no actual knowledge that
any of the above conditions have not been satisfied, then, and subject to the
limitations below, Administrative Agent shall use its best efforts to ship to
Co-Borrowers the entire file of Collateral Documents to be corrected or replaced
by the end of the Business Day following the date of receipt of the applicable
Trust Receipt. Co-Borrowers shall re-deliver to Administrative Agent the
corrected Collateral Documents (meeting the requirements of Schedule 4.3) before
the expiration of the Correction Period. Collateral shipped under this section,
unless returned to Administrative Agent, ceases to be an Eligible-Mortgage Loan,
Eligible-Commercial Loan, or Eligible-High LTV Loan (a) to the extent that
Collateral Documents for Mortgage Loans or Commercial Loans with more than an
aggregate total face amount of $500,000 are outstanding for correction at any
time, and (b) upon the expiration of the Correction Period. The Lender Liens on
any Collateral shipped under this section continue in full force and effect.

         4.7      Release of Collateral.

                  (a) Excess Collateral. If no Event of Default or Potential
         Default exists, and no Borrowing Excess exists or would occur (after
         taking into account any corresponding payment on the Obligation) as a
         result of the release, Co-Borrowers may, by a Release Request delivered
         to Administrative Agent by 11:00 a.m. on the Business Day of the
         release, request that Administrative Agent release the Lender Liens on
         any Collateral.

                  (b) Satisfaction of Obligation. If the Obligation is fully
         paid and performed, and all commitments by each Lender to extend credit
         under the Credit Documents are terminated or canceled, Co-Borrowers
         may, by written request to Administrative Agent, request that
         Administrative Agent release the Lender Liens on all of the Collateral,
         return to Co-Borrowers or their respective designees all Collateral
         Documents then held by Administrative Agent, and execute a release of
         any financing statements or other documents filed or recorded to
         perfect the Lender Liens.

                  (c) Releases. If Administrative Agent has no actual knowledge
         that any of the above conditions for a release have not been satisfied,
         then Administrative Agent shall effect those releases.

SECTION 5   CONDITIONS PRECEDENT.

                  (a) Initial Borrowing. No Lender is obligated to fund its part
         of any Borrowing unless Administrative Agent has received all of the
         documents and items described on Schedule 5.

                  (b) Each Borrowing. In addition, no Lender is obligated to
         fund its part of any Borrowing unless on the applicable Borrowing Date
         (and after giving effect to the requested Borrowing): (a)
         Administrative Agent has timely received a Borrowing Request; (b) all
         of the representations and warranties of the Companies in the Credit
         Documents are true and correct in all material respects (unless they
         speak to a specific date or are based on facts which have changed by
         transactions contemplated or permitted by this agreement); (c) no Event
         of Default or Potential Default exists; (d) the funding of the
         Borrowing is permitted by all Governmental Requirements and does not
         cause a Borrowing Excess; and (e) if reasonably requested by
         Administrative Agent, it has received evidence substantiating any of
         the matters in the Credit Documents that are necessary to enable
         Co-Borrowers to qualify for that Borrowing.

                  (c) General. Each condition precedent in this agreement
         (including, without limitation, those on Schedule 5) is material to the
         transactions contemplated by this agreement, and time is of


                                       31
<PAGE>



         the essence with respect to each. Subject to first obtaining the
         approval of all Lenders, Administrative Agent or any Lender may fund
         any Borrowing without all conditions being satisfied. However, to the
         extent lawful, that funding is not a waiver of the requirement that
         each condition precedent be satisfied as a prerequisite for any
         subsequent funding, unless all Lenders specifically waive an item in
         writing.

SECTION 6   REPRESENTATIONS AND WARRANTIES. Parent and each Co-Borrower jointly 
and severally represent and warrant to Administrative Agent and Lenders as 
follows:

         6.1   Purpose of Credit. Borrowings are to be used as stated in the
recitals of this agreement. No Company is engaged principally (or as one of its
important activities) in the business of extending credit for the purpose of
purchasing or carrying any "margin stock" within the meaning of Regulation U. No
part of the proceeds of any Borrowing is to be used, directly or indirectly, for
a purpose that violates any Governmental Requirement, including, without
limitation, the provisions of Regulation U.

         6.2   About the Companies.

                  (a) Subsidiaries and Trade Names. Except as described on
         Schedule 6.2 (i) no Company has any Subsidiaries, and (ii) no
         Co-Borrower has used or transacted business under any other corporate
         or trade name in the six month period preceding the date of this
         agreement.

                  (b) Existence, Qualification, and Compliance. Each of Parent
         and each Co-Borrower is duly organized, validly existing, and in good
         standing under the Governmental Requirements of the jurisdiction in
         which it is incorporated or formed as stated on Schedule 6.2. Except
         where such failure is not a Material-Adverse Event, each of Parent and
         each Co-Borrower (i) is duly qualified to transact business and is in
         good standing as a foreign corporation or other entity in each
         jurisdiction where the nature and extent of its business and properties
         require due qualification and good standing (as described on Schedule
         6.2), (ii) possesses all requisite authority, permits, and power to
         conduct its business as is now being, or as is contemplated by this
         agreement to be, conducted, and (iii) is in compliance with all
         applicable Governmental Requirements.

                  (c) Offices. Each Co-Borrower's chief executive office and
         other principal offices are described on Schedule 6.2. The present and
         foreseeable location of each Co-Borrower's books and records concerning
         accounts and accounts receivable is at its chief executive office, and
         all of its books and records are in its possession.

         6.3   Authorization and Contravention. The execution and delivery by
Parent and each Co-Borrower of each Credit Document to which it is a party, and
the performance by it of its related obligations (a) are within its corporate
power or partnership authority, as applicable, (b) have been duly authorized by
all necessary corporate or partnership action, as applicable, (c) except for any
action or filing that has been taken or made on or before the date of this
agreement, require no action by, or filing with, any Governmental Authority, (d)
do not violate any provision of its charter, articles of incorporation, bylaws,
or partnership agreement, as applicable, (e) except where not a Material-Adverse
Event, do not violate any provision of Governmental Requirement applicable to
it, or of any material agreements to which it is a party, and (f) except for
Lender Liens, do not result in the creation or imposition of any Lien on any
asset of any Company.

         6.4   Binding Effect. Upon execution and delivery by all parties to it,
each Credit Document will constitute a legal and binding obligation of Parent
and each Co-Borrower party to it, and is enforceable against it in accordance
with its terms, except as enforceability may be limited by applicable Debtor
Laws and general principles of equity.


                                       32
<PAGE>



         6.5   Fiscal Year. The Companies' fiscal year ends each June 30.

         6.6   Current Financials. The Current Financials were prepared in
accordance with GAAP and present fairly, in all material respects, the financial
condition, results of operations, and cash flows of the Companies as of, and for
the portion of the fiscal year ending on, their date or dates (subject only to
normal year-end adjustments). All material liabilities of the Companies as of
the date or dates of the Current Financials are reflected in them or notes to
them. Except for transactions directly related to, or specifically contemplated
by, the Credit Documents, no subsequent material adverse changes have occurred
in the financial condition of the Companies from that shown in the Current
Financials in effect as of the Closing Date, nor has any Company incurred any
subsequent material liability.

         6.7   Debt. Neither Parent nor any Co-Borrower has any Debt except 
Permitted Debt.

         6.8   Intellectual Property. Each of Parent and each Co-Borrower owns 
all material licenses, patents, patent applications, copyrights, copyright
applications, service marks, service mark applications, trademarks, trademark
applications, and trade names necessary to continue to conduct its businesses as
presently conducted by it and proposed to be conducted by it immediately after
the date of this agreement. Each of Parent and each Co-Borrower is conducting
its business without infringement or claim of infringement of any license,
patent, copyright, service mark, trademark, trade name, trade secret, or other
intellectual property right of others, other than any infringements or claims
that, if successfully asserted against or determined adversely to that Company,
are not a Material-Adverse Event. To Parent's and each Co-Borrower's knowledge,
no infringement or claim of infringement by others of any material license,
patent, copyright, service mark, trademark, trade name, trade secret, or other
intellectual property of that Company exists.

         6.9  Litigation. Except as disclosed on Schedule 6.9 (a) neither Parent
nor any Co-Borrower is subject to, or aware of the threat of, any investigation
by any Governmental Authority or Litigation that is reasonably likely to be
determined adversely to it, or, if so adversely determined, would be a
Material-Adverse Event, and (b) no outstanding or unpaid judgments against
Parent or any Co-Borrower exist.

         6.10  Transactions with Affiliates. Neither Parent nor any Co-Borrower
is a party to a material transaction with any of its Affiliates, except (a)
transactions in the ordinary course of business and upon fair and reasonable
terms not materially less favorable than it could obtain or could become
entitled to in an arm's-length transaction with a Person that was not its
Affiliate, and (b) the transactions described on Schedule 6.10.

         6.11  Taxes. All Tax returns of each Company required to be filed have
been filed (or extensions have been granted) before delinquency, except for
returns for which the failure to file is not a Material-Adverse Event, and all
Taxes imposed upon each Company that are due and payable have been paid before
delinquency.

         6.12 Employee Plans. Except where occurrence or existence is not a
Material-Adverse Event, (a) no Employee Plan has incurred an "accumulated
funding deficiency" (as defined in (Section) 302 of ERISA or (Section) 412 of
the IRC), (b) no Company has incurred liability under ERISA to the PBGC in
connection with any Employee Plan, (c) no Company has withdrawn in whole or in
part from participation in a Multiemployer Plan, (d) no Company has engaged in
any "prohibited transaction" (as defined in (Section) 406 of ERISA or (Section)
4975 of the IRC), and (e) no "reportable event" (as defined in (Section) 4043 of
ERISA) has occurred in respect of any Employee Plan, excluding events for which
the notice requirement is waived under applicable PBGC regulations.



                                       33
<PAGE>



         6.13 Property and Liens. Each of Parent and each Co-Borrower has good
and marketable title to all its property reflected on the Current Financials,
except for property that is obsolete or that has been disposed of either in the
ordinary course of business, or, after the date of this agreement, as otherwise
permitted by this agreement. All Collateral is free and clear of any Liens and
adverse claims of any nature except Permitted Liens.

         6.14 Environmental Matters. Except where not a Material-Adverse Event,
neither Parent nor any Co-Borrower (a) knows of any environmental condition or
circumstance adversely affecting any Company's properties or operations, or any
material portion of the properties subject to Mortgage Loans or Commercial
Loans, (b) has received any report of any Company's violation of any
Environmental Governmental Requirement, or (c) knows that any Company is under
any obligation to remedy any violation of any Environmental Governmental
Requirement. Each Company has taken prudent steps to determine that its
properties and operations, and substantially all of the properties subject to
Mortgage Loans or Commercial Loans do not violate any Environmental Governmental
Requirement, except those that are not a Material-Adverse Event.

         6.15 Government Regulations. Neither Parent nor any Co-Borrower is
subject to regulation under the Investment Company Act of 1940, as amended, or
the Public Utility Holding Company Act of 1935, as amended.

         6.16 Insurance. Parent and each Co-Borrower maintains with financially
sound, responsible, and reputable insurance companies or associations (or, as to
workers' compensation or similar insurance, with an insurance fund or by
self-insurance authorized by the jurisdictions in which it operates) insurance
concerning its properties and businesses against casualties and contingencies,
and of types and in amounts (and with co-insurance and deductibles) as is
customary in the case of similar businesses.

         6.17 Appraisals. With respect to the property the subject of any
Mortgage Loan or Commercial Loan, each Co-Borrower has obtained Appraisals in
material compliance with all Appraisal Requirements.

         6.18 Full Disclosure. Each material fact or condition relating to the
Credit Documents or the financial condition, business, or property of the
Companies that is a Material-Adverse Event has been disclosed in writing to
Administrative Agent and Lenders. All information previously furnished by any
Company to Administrative Agent or any Lender in connection with the Credit
Documents was (and all information furnished in the future by any Company to
Administrative Agent or any Lender will be) true and accurate in all material
respects or based on reasonable estimates on the date the information is stated
or certified.

         6.19 Y2K. Co-Borrowers have (a) initiated a review and assessment of
all areas within each Company's business and operations (including those
affected by suppliers and vendors) that could be adversely affected by Y2K, (b)
developed a plan and time line for addressing Y2K on a timely basis, and (c) to
date implemented in all material respects that plan in accordance with that
timetable.

SECTION 7   AFFIRMATIVE COVENANTS. Until all commitments by Lenders to extend
credit under this agreement have been canceled or terminated, and the Obligation
is fully paid and performed, Parent and each Co-Borrower jointly and severally
covenant and agree with Administrative Agent and Lenders as follows:

         7.1 Reporting Requirements. Parent shall furnish to Administrative
Agent the following, all in form and detail reasonably satisfactory to
Administrative Agent:

             (a)  Annual Financials. Promptly when available (but at least
         within 90 days after the last day of each fiscal year of the Companies)
         (i) audited consolidated Financials (reflecting the


                                       34
<PAGE>



         corresponding figures as of the end of and for the preceding fiscal
         year in comparative form) and an unaudited consolidating balance sheet
         and income statement of the Companies as of that year end, (ii) audited
         Financials (reflecting the corresponding figures as of the end of and
         for the preceding fiscal year in comparative form) of HAC as of that
         year end, (iii) audited Financials of NJMI and its Subsidiary as of
         that year end (reflecting the corresponding figures as of the end of
         and for the preceding fiscal year in comparative form), and (iv)
         unqualified opinions of a firm of independent certified public
         accountants acceptable to Administrative Agent stating that those
         audited Financials were prepared in accordance with GAAP applied on a
         basis consistent with prior periods, except for such changes in GAAP
         concurred in by the Companies' independent public accountants and
         present fairly the (in the case of the Companies, consolidated)
         financial condition and results of operations of the Companies, HAC, or
         NJMI, as the case may be, as of (and for the fiscal year ending on)
         that last day, and (vi) a Compliance Certificate.

                  (b) Monthly Financials. Promptly when available (but at least
         within 45 days after the end of each Calendar Month) (i) unaudited
         consolidated Financials, (ii) a current production report for the
         Companies, and (iii) a static pool analysis and a report detailing
         delinquencies and charge-offs, each in form and substance acceptable to
         Administrative Agent and prepared as of the last day of the Calendar
         Month just ended.

                  (c) Quarterly Reports. Promptly when available, but at least
         within 45 days after the end of each Calendar Quarter, a Compliance
         Certificate prepared as of the last day of the Calendar Quarter just
         ended.

                  (d) Other Reports. Promptly after preparation and
         distribution, accurate and complete copies of all reports and other
         material communications about material financial matters or material
         corporate plans or projections by or for any Company for distribution
         to any Governmental Authority or any existing or potential creditor or
         shareholder (i) including, without limitation, each Form 10-K (or
         10-KSB), 10-Q (or 10-QSB), and S-8 filed with the Securities and
         Exchange Commission but (ii) excluding (A) credit, trade, and other
         reports prepared and distributed in the ordinary course of business,
         and (B) information otherwise furnished to Administrative Agent and
         Lenders under this agreement.

                  (e) Audit Reports. Promptly when available, copies of each
         report prepared by any independent public accountants or other third
         parties with respect to a Co-Borrower's compliance with the minimum
         servicing standards identified in the Mortgage Bankers Association of
         America's Uniform Single Attestation Program for Mortgage Bankers
         (USAP).

                  (f) Information Regarding Brokers and Correspondents. Upon
         Administrative Agent's request, information regarding any brokers or
         correspondents from which any Co-Borrower purchases or otherwise
         acquires Mortgage Loans or Commercial Loans.

                  (g) Notices. Notice, promptly after Parent or any Co-Borrower
         knows or has reason to know, of (i) the existence and status of any
         Litigation that, if determined adversely to any Company, would be a
         Material-Adverse Event, (ii) any change in any material fact or
         circumstance represented or warranted by Parent or any Co-Borrower in
         any Credit Document that constitutes a Material-Adverse Event, (iii)
         the receipt by any Company of notice of any violation or alleged
         violation of ERISA, any Environmental Governmental Requirement, or
         other Governmental Requirement, if that violation is a Material-Adverse
         Event, or (iv) an Event of Default or Potential Default specifying the
         nature thereof and what action the Companies have taken, are taking, or
         propose to take with respect to it.


                                       35
<PAGE>



                  (h) Other Information. Promptly upon reasonable request by
         Administrative Agent or Required Lenders (through Administrative
         Agent), information (not otherwise required to be furnished under the
         Credit Documents and to the extent that neither Parent nor any
         Co-Borrower is prohibited by a binding confidentiality agreement with a
         Person who is not an Affiliate of any Company from providing that
         information) respecting the business affairs, assets, and liabilities
         of any Company, and opinions, certifications, and documents in addition
         to those mentioned in this agreement.

         7.2 Use of Proceeds. Co-Borrowers shall use the proceeds of Borrowings
only for the purposes represented in this agreement.

         7.3 Books and Records. Each Company shall maintain books, records, and
accounts necessary to prepare Financials in accordance with GAAP.

         7.4 Inspections. Upon reasonable request and notice, Parent and each
Co-Borrower shall allow Administrative Agent and its Representatives and
(subject to the following sentence) any Lender and its Representatives to
inspect any of its properties, to review reports, files, and other records, to
make and take away copies, to conduct tests or investigations, and to discuss
any of its affairs, conditions, and finances with its directors, officers,
employees, or representatives from time to time during reasonable business
hours. Lenders and their Representatives shall make their requests for the
foregoing through Administrative Agent, shall endeavor to conduct the foregoing
in reasonable groups, and shall not make on-site inspections more than once each
12-month period unless an Event of Default exists. Upon reasonable request,
Parent and each Co-Borrower shall allow Administrative Agent, any Lender, or
their respective Representatives to inspect any of its properties, to review
reports, files, and other records, to make and take away copies, to conduct
tests or investigations, and to discuss any of its affairs, conditions, and
finances with its directors, appropriate officers, employees, or representatives
from time to time during reasonable business hours.

         7.5 Taxes. Parent and each Co-Borrower shall promptly pay when due any
and all Taxes, other than Taxes for which the failure to pay is not a
Material-Adverse Event or which are being contested in good faith by lawful
proceedings diligently conducted, against which reserve or other provision
required by GAAP has been made, and in respect of which levy and execution of
any Lien have been and continue to be stayed.

         7.6 Expenses. Parent and each Co-Borrower shall pay (a) all reasonable
legal fees and expenses incurred by Administrative Agent in connection with the
preparation, negotiation, and execution of the Credit Documents, (b) all
reasonable legal fees and expenses incurred by Administrative Agent in
connection with each separate future amendment, consent, waiver, or approval
executed in connection with any Credit Document, (c) all other reasonable legal
fees and expenses by Administrative Agent in connection with the exercise of any
right under any Credit Document on or after the Closing Date, (d) all fees,
charges, or Taxes for the recording or filing of any Credit Document to create
or perfect Lender Liens, (e) all other reasonable out-of-pocket expenses of
Administrative Agent or any Lender in connection with the preparation,
negotiation, execution, or administration of the Credit Documents -- including,
without limitation, courier expenses incurred in connection with the Mortgage
Collateral, (f) all amounts expended, advanced, or incurred by Administrative
Agent or any Lender to satisfy any obligation of any Company under any Credit
Document, to collect the Obligation, or to enforce the Rights of Administrative
Agent or any Lender under any Credit Document -- including, without limitation,
all court costs, attorneys' fees (whether for trial, appeal, other proceedings,
or otherwise), fees of auditors and accountants, and investigation expenses
reasonably incurred by Administrative Agent or any Lender in connection with any
such matters, (g) interest at an annual interest rate equal to the Default Rate
on each item specified in clause (f) above from 30 days after the date of
written demand or request for reimbursement to the date of reimbursement, and
(h) any and all stamp and other Taxes payable or determined to be payable in
connection with the execution, delivery, or recordation of any Credit Document
-- IN CONNECTION WITH WHICH PARENT AND EACH CO-BORROWER SHALL INDEMNIFY AND SAVE


                                       36
<PAGE>



ADMINISTRATIVE AGENT AND EACH LENDER HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES WITH RESPECT TO OR RESULTING FROM ANY DELAY IN PAYING OR OMISSION TO
PAY THOSE TAXES TO THE EXTENT THOSE LIABILITIES ARISE SOLELY BECAUSE PARENT OR
ANY CO-BORROWER FAILED TO PAY THE TAXES UPON DEMAND BY ADMINISTRATIVE AGENT OR
ANY LENDER, WHICH INDEMNITY, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY,
SURVIVES THE PAYMENT AND PERFORMANCE OF THE OBLIGATION AND TERMINATION OF THE
CREDIT DOCUMENTS WITH RESPECT TO AMOUNTS DUE BEFORE SUCH PAYMENT, PERFORMANCE,
AND TERMINATION.

         7.7 Maintenance of Existence, Assets, and Business. Each Company shall
(a) except as permitted by Section 8.5, maintain its corporate existence and
good standing in its state of incorporation and its authority to transact
business in all other states where failure to maintain its authority to transact
business is a Material-Adverse Event, and (b) maintain all licenses, permits,
and franchises necessary for its business where failure to do so is a
Material-Adverse Event.

         7.8 Insurance. Each Company shall (a) maintain with financially sound
and reputable insurers, insurance with respect to its assets and business
against such liabilities, casualties, risks, and contingencies and in such types
and amounts -- including, without limitation, a fidelity bond or bonds in form
and with coverage, with a company, and with respect to such individuals or
groups of individuals -- as satisfy prevailing FHA, VA, and other requirements
applicable to a qualified mortgage institution and otherwise as is customary in
the case of Persons engaged in the same or similar businesses and similarly
situated, and (b) upon Administrative Agent's request, furnish to Administrative
Agent from time to time (i) a summary of its insurance coverage, in form and
substance satisfactory to Administrative Agent, and (ii) originals or copies of
the applicable policies.

         7.9 Appraisals. Upon reasonable notice, each Co-Borrower shall promptly
(a) permit Administrative Agent's and (subject to the last sentence of this
section) any Lender's authorized Representatives to discuss with that
Co-Borrower's officers or with the appraisers furnishing Appraisals the
procedures for preparation, review, and retention of (and to review and obtain
copies of) all Appraisals pertaining to any Mortgage Collateral, and (b) upon
Administrative Agent's or (subject to the last sentence of this section) any
Lender's request, cooperate with it to ascertain that the Appraisals comply with
all Appraisal Requirements. Lenders and their Representatives shall exercise
their Rights under this section through Administrative Agent and shall endeavor
to conduct investigations in reasonable groups.

         7.10 Y2K. Except where any non-compliance is not a Material-Adverse
Event, Co-Borrowers shall (a) cause the Companies' computer applications to be
unaffected by Y2K on a timely basis and (b) promptly notify Administrative Agent
if any Company discovers or determines that any computer application of any of
the Companies' suppliers and vendors is not reasonably expected to be unaffected
by Y2K on a timely basis.

         7.11 INDEMNIFICATION. IN CONSIDERATION OF THE COMMITMENTS BY
ADMINISTRATIVE AGENT AND LENDERS UNDER THE CREDIT DOCUMENTS, EACH COMPANY SHALL
INDEMNIFY AND DEFEND ADMINISTRATIVE AGENT, EACH LENDER, AND THEIR RESPECTIVE
AFFILIATES AND REPRESENTATIVES (COLLECTIVELY, THE "INDEMNIFIED PARTIES") -- AND
DEFEND THEM AND HOLD EACH OF THEM HARMLESS -- AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, DEFICIENCIES, INTEREST, JUDGMENTS, COSTS, OR
EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES) INCURRED BY
ANY OF THEM ARISING FROM OR BECAUSE OF (A) ANY INVESTIGATION, LITIGATION, OR
OTHER PROCEEDING BROUGHT IN CONNECTION WITH ANY CREDIT DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED BY THE CREDIT DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, ANY USE BY ANY COMPANY OF THE PROCEEDS OF BORROWINGS, (B) ANY
IMPOUNDMENT, ATTACHMENT, OR RETENTION OF ANY MORTGAGE COLLATERAL, (C) ANY
VIOLATION OF ANY FEDERAL OR STATE GOVERNMENTAL REQUIREMENT RELATING TO USURY IN
CONNECTION WITH ANY MORTGAGE COLLATERAL ALLEGED IN WRITING, AND (D) ANY
REPRESENTATION MADE BY ANY COMPANY UNDER ANY CREDIT DOCUMENT. ALTHOUGH EACH
INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION FOR ANY INDEMNIFIED PARTY'S
ORDINARY NEGLIGENCE, NO INDEMNIFIED PARTY


                                       37
<PAGE>



IS ENTITLED TO INDEMNIFICATION FOR ITS OWN GROSS NEGLIGENCE, UNLAWFUL CONDUCT,
WILLFUL MISCONDUCT, OR FRAUD. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY,
THIS INDEMNITY SURVIVES FOR TWO YEARS AFTER THE PAYMENT AND PERFORMANCE OF THE
OBLIGATION AND TERMINATION OF THE CREDIT DOCUMENTS.

SECTION 8  NEGATIVE COVENANTS. Until all commitments by Lenders to extend credit
under this agreement have been canceled or terminated and the Obligation is
fully paid and performed, Parent and each Co-Borrower jointly and severally
covenant and agree with Administrative Agent and Lenders as follows, except as
provided in referenced Schedules:

         8.1 Debt. Neither Parent nor any Co-Borrower shall create, incur,
permit to exist, or commit to create or incur any (a) Debt used to fund wet
borrowings other than Wet Borrowings under this agreement, (b) any mortgage loan
repurchase agreements except in connection with any Permitted Debt, whose
description specifically allows for mortgage loan repurchase agreements, or (c)
any other Debt except the following (collectively, the "Permitted Debt"):

                  (a) The Obligation;

                  (b) Obligations to pay Taxes;

                  (c) Liabilities for accounts payable, non-capitalized
         equipment or operating leases, and similar liabilities if in each case
         incurred in the ordinary course of business;

                  (d) Accrued expenses, deferred credits, and loss contingencies
         that are properly classified as liabilities under GAAP;

                  (e) Debt incurred by any Company under any swap, collar,
         floor, cap, or other contract entered into by such Company with any
         Lender or an Affiliate of any Lender or another Person under the
         Governmental Requirements of a jurisdiction in which such contracts are
         legal and enforceable (except as enforceability may be limited by
         applicable Debtor Laws and general principles of equity), which is
         intended to reduce or eliminate the risk of fluctuations in interest
         rates applicable to Borrowings or any Company's portfolio and/or
         pipeline of loans and leases under this or any other agreement entered
         into by such Company;

                  (f) Liabilities for capital leases and similar liabilities of
         up to $2,000,000, in each case incurred in the ordinary course of
         business;

                  (g) Debt in an aggregate principal amount of up to
         $150,000,000 under one or more warehouse financing agreements so long
         as the lenders or their agents under each of those arrangements enter
         into intercreditor arrangements reasonably acceptable to Administrative
         Agent to the extent those financing arrangements extend to
         Business-Purpose Loans or Mortgage Loans that would be deemed supported
         Wet Borrowings if financed under this agreement.

                  (h) Debt in an aggregate principal amount of up to $20,000,000
         under one or more lease financing agreements;

                  (i) Subordinated Debt. For purposes of this agreement,
         "Subordinated Debt" means, at any time:

                           (i) Debt in an original aggregate principal amount of
                  up to $1,200,000 (as reduced by any amounts repaid thereunder)
                  under certain Subordinated Debentures issued


                                       38
<PAGE>



                  by American Business Finance Corporation, Inc. pursuant to a 
                  prospectus dated March 30, 1992;

                           (ii) Debt in an original aggregate principal amount
                  of up to $10,000,000 (as reduced by any amounts repaid
                  thereunder) under certain Subordinated Fixed Rate Term Notes
                  issued by Parent pursuant to a prospectus dated June 28, 1993;

                           (iii) Debt in an original aggregate principal amount
                  of up to $25,000,000 (as reduced by any amounts repaid
                  thereunder) under certain Subordinated Fixed Rate Term Notes
                  issued by Parent pursuant to a prospectus dated April 29,
                  1994; as supplemented by a prospectus dated March 23, 1995;

                           (iv) Debt in an original aggregate principal amount
                  of up to $50,000,000 (as reduced by any amounts repaid
                  thereunder) under certain Subordinated Investment Notes issued
                  by Parent pursuant to a prospectus dated December 18, 1995;

                           (v) Debt in an outstanding principal amount of
                  $3,000,000 under that certain Rothschild Senior Subordinated
                  Note issued by Parent and due July 1, 2002;

                           (vi) Debt in an aggregate principal amount of up to
                  $125,000,000 (as reduced by any amounts repaid thereunder)
                  under certain Unsecured Subordinated Investment Notes and
                  certain Unsecured Adjustable-Rate Subordinated Money Market
                  Notes issued pursuant to an Indenture with First Trust
                  National Association, as trustee, and Parent, as issuer, dated
                  as of May 27, 1997 (the Debt described in clauses (i)-(vi)
                  above being hereinafter referred to as the
                  "existing-Subordinated Debt"); and

                           (vii) Debt, so long as that Debt (A) is subject to
                  subordination, payment blockage, and standstill provisions at
                  least as favorable to Lenders as applicable to the
                  existing-Subordinated Debt under this agreement or otherwise,
                  and (B) is subject to representations, covenants, events of
                  default, and other provisions not significantly more onerous
                  to any Company than the existing-Subordinated Debt;

                  (j) Other Debt of Parent or a Co-Borrower that is acceptable 
         to Required Lenders;

                  (k) Debt incurred in connection with the collapsing and
         repurchasing of securities issued in connection with a securitization
         which repurchase is provided for and permitted under the applicable
         securitization documentation; and

                  (l) Debt secured solely by the residual interests of Parent or
         any Co-Borrower in the income stream to be received under any asset
         securitization program.

         8.2  Liens. Neither Parent nor any Co-Borrower shall (a) enter into,
permit to exist, or commit to enter into any arrangement or agreement (except
the Credit Documents) that directly or indirectly prohibits any Company from
creating or incurring any Lien on any of its assets, or (b) create, incur,
permit to exist, or commit to create or incur any Lien on any of its assets
except the following (the "Permitted Liens"):

                  (a) Any interest or title of a lessor in assets being leased 
         under any non-capitalized equipment or operating lease;



                                       39

<PAGE>



                  (b) Pledges or deposits that (i) do not encumber any
         Collateral and (ii) are made to secure payment of workers'
         compensation, unemployment insurance, or other forms of governmental
         insurance or benefits or to participate in any fund in connection with
         workers' compensation, unemployment insurance, pensions, or other
         social security programs;

                  (c) Good-faith pledges or deposits that (i) do not cover any
         Collateral and (ii) are either (A) not in excess of 10% of the amounts
         due under, and made to secure, any Company's performance of bids,
         tenders, contracts (except for the repayment of borrowed money), or
         leases, or (B) made to secure statutory obligations, surety or appeal
         bonds, or indemnity, performance, or other similar bonds benefitting
         any Company in the ordinary course of its business;

                  (d) Zoning and similar restrictions on the use of real
         property that do not materially impair the use of the real property and
         that are not violated by existing or proposed structures or land use;

                  (e) The following if no Lien has been filed in any
         jurisdiction or agreed to: (i) Liens for Taxes not yet due and payable
         and (ii) if, to the extent they cover any Collateral, they are
         subordinate to the Lender Liens in form and substance reasonably
         acceptable to Administrative Agent, (iii) mechanic's Liens and
         materialman's Liens for services or materials for which payment is not
         yet due and payable and (iv) landlord's Liens for rent not yet due and
         payable;

                  (f) The following if the validity or amount thereof is being
         contested in good faith and by appropriate and lawful proceedings
         diligently conducted, reserve or other appropriate provision (if any)
         required by GAAP has been made, levy and execution continue to be
         stayed, any of which covering any Collateral must be subordinate to the
         Lender Liens in form and substance reasonably acceptable to
         Administrative Agent, and any of which do not in the aggregate
         materially detract from the value of the property of the Company in
         question, or materially impair the use of that property in the
         operation of its business: (i) claims and Liens for Taxes due and
         payable; (ii) claims and Liens upon, and defects of title to, real or
         personal property (other than any Collateral), including any attachment
         of personal or real property or other legal process before adjudication
         of a dispute on the merits; (iii) claims and Liens of mechanics,
         materialmen, warehousemen, carriers, landlords, or other like Liens;
         and (iv) adverse judgments or orders on appeal for the payment of
         money;

                  (g) Lender Liens; and

                  (h) Liens disclosed in the UCC Search Reports as described on
         Schedule 5 that are not by the terms of Schedule 5 required to be
         terminated, partially released, or amended.

         8.3 Investments. Neither Parent nor any Co-Borrower shall make or
commit to make any Investments except the following (the "Permitted
Investments"):

                  (a) Permitted Acquisitions;

                  (b) Extensions of trade credit and other payables in the 
         ordinary course of business;

                  (c) Loans and advances to officers, directors, or employees of
         Parent or any Co-Borrower that are (i) in the ordinary course of
         business for travel, entertainment, or relocation or (ii) not in the
         ordinary course and are never more than an aggregate total outstanding
         of $1,000,000 for all officers, directors or employees of Parent and
         all Co-Borrowers;



                                       40
<PAGE>



                  (d) Loans to officers of Parent and all Co-Borrowers for the
         purpose of exercising company stock options secured by the stock
         purchased;

                  (e) Mortgage Loans and Commercial Loans originated or acquired
         by Co-Borrowers in the ordinary course of their businesses;

                  (f) Acquisitions of securities or evidences of Debt of others
         when acquired by Parent or any Co-Borrower in settlement of accounts
         receivable or other Debts arising in the ordinary course of business so
         long as the total of all of those securities or evidences of Debt is
         not material to the financial condition of the Companies;

                  (g) Investments in obligations issued or unconditionally
         guaranteed by (or issued by any of its agencies and backed by the full
         faith and credit of) the United States of America;

                  (h) Demand deposit accounts maintained in the ordinary course 
         of business;

                  (i) Certificates of deposit, bankers acceptances, and
         repurchase agreements issued by (i) any Lender or (ii) any other
         commercial bank organized under the Governmental Requirements of the
         United States of America or one of its states that has combined
         capital, surplus, and undivided profits of at least $250,000,000 and a
         rating of C or better by Thompson Bank Watch, Inc.;

                  (j) Repurchase agreements with Prudential Securities
         Incorporated or similar investment banking firms;

                  (k) Eurodollar Investments with (i) any Lender or (ii) any
         other financial institution that has (A) combined capital, surplus, and
         undivided profits of at least $100,000,000 and (B) a commercial-paper
         rating of at least P-1 or A-1 or (if it does not have a
         commercial-paper rating) a bond rating of at least A-1 or A- by Moody's
         Investors Service, Inc. or Standard & Poor's Ratings Group, a division
         of the McGraw-Hill Companies, Inc., respectively;

                  (l) Investments in commercial paper given the highest rating
         by a nationally-recognized-credit-rating agency;

                  (m) Investments in money market funds with asset sizes of at
         least $100,000,000; and

                  (n) Other Investments, so long as the aggregate amount
         outstanding (defined as the amount of any such loans or advances plus
         the cost of any such Investments) is never more than $5,000,000 at any
         one time.

         8.4 Distributions. Parent shall not directly or indirectly pay or
declare any Distribution except (a) Distributions payable solely in the form of
capital stock, (b) cash Distributions, so long as no Event of Default or
Potential Default exists or would be created by such Distribution, and (c)
Distributions otherwise approved in writing by Required Lenders.

         8.5 Merger or Consolidation. Neither Parent nor any Co-Borrower shall
directly or indirectly merge or consolidate with or into any other Person,
except that (i) Parent and Co-Borrowers may merge into or be consolidated with
each other so long as, if Parent is involved, it is the surviving entity and
(ii) any Person may merge into Parent or any Co-Borrower, provided such Company
shall be the surviving corporation, the management of such Company shall be
substantially unchanged, and after giving effect to such merger, Parent and each
Co-Borrower shall be in full compliance with the terms of this Credit Agreement.


                                       41
<PAGE>


         8.6 Liquidations and Dispositions of Assets. Neither Parent nor any
Co-Borrower shall directly or indirectly dissolve or liquidate or sell,
transfer, lease, or otherwise dispose of any material portion of its assets or
business, except for sales or other dispositions by any Company, in the ordinary
course of business, of (a) subject to Section 4, Mortgage Loans and Commercial
Loans that are Collateral, or (b) Mortgage Loans and Commercial Loans that are
not Collateral.

         8.7 Use of Proceeds. No Co-Borrower shall directly or indirectly use
the proceeds of Borrowings (a) for any purpose other than as represented in this
agreement, (b) for the funding or acquisition of construction loans, (c) for the
funding or acquisition of Commercial Loans except to the extent permitted under
the Commercial Loan Sublimit, (d) for wages of employees, unless a timely
payment to or deposit with the United States of America of all amounts of Tax
required to be deducted and withheld with respect to such wages is also made, or
(e) in violation of Regulation U or (Section) 7 of the Securities Exchange Act
of 1934.

         8.8 Transactions with Affiliates. Neither Parent nor any Co-Borrower
shall directly or indirectly enter into any transaction with any of its
Affiliates, other than transactions in the ordinary course of its or their
business and of a character set forth on Schedule 6.10 or upon fair and
reasonable terms not materially less favorable than it could obtain or could
become entitled to in an arm's-length transaction with a Person that was not its
Affiliate.

         8.9 Employee Plans. Neither Parent nor any Co-Borrower, except where a
Material-Adverse Event would not result, shall directly or indirectly permit any
of the events or circumstances described in Section 6.12 to exist or occur.

         8.10 Compliance with Governmental Requirements and Documents. Neither
Parent nor any Co-Borrower shall directly or indirectly (a) violate the
provisions of any Governmental Requirements applicable to it or of any Material
Agreement to which it is a party if that violation alone or with all other
violations is a Material-Adverse Event, or (b) violate the provisions of its
charter, articles of incorporation, bylaws, or partnership agreement, as
applicable, or repeal, replace or amend any provision of its charter, articles
of incorporation, bylaws, or partnership agreement, as applicable, if any such
action is a Material-Adverse Event.

         8.11 Government Regulations. Neither Parent nor any Co-Borrower shall
directly or indirectly conduct its business in a way that it becomes regulated
under the Investment Company Act of 1940.

         8.12 Fiscal Year Accounting. Without first obtaining Administrative
Agent's written consent, neither Parent nor any Co-Borrower shall directly or
indirectly change its fiscal year or use any accounting method other than GAAP.

         8.13 New Businesses. Neither Parent nor any Co-Borrower shall directly
or indirectly engage in any business, except the businesses in which it or any
of its Affiliates is presently engaged, and any other reasonably-related
business.

         8.14 Assignment. Except as allowed in Section 12.12(a), neither Parent
nor any Co-Borrower shall directly or indirectly assign or transfer any of its
Rights, duties, or obligations under any of the Credit Documents.

         8.15 Retention of Servicing Portfolio. Without the consent of
Administrative Agent, neither Parent nor any Co-Borrower shall directly or
indirectly assign or transfer any of its rights, duties or obligations under the
servicing agreements in which it acts as servicer.



                                       42
<PAGE>



         8.16 Strict Compliance. Neither Parent nor any Co-Borrower shall
indirectly do anything that it may not directly do under any covenant in any
Credit Document.

SECTION 9  FINANCIAL COVENANTS. Until all commitments by Lenders to extend 
credit under this agreement have been canceled or terminated and the Obligation
is fully paid and performed, Parent and each Co-Borrower jointly and severally
covenant and agree with Administrative Agent and Lenders as follows:

         9.1 Tangible Net Worth. Tangible Net Worth as of the last day of each
fiscal quarter of Borrower may never be less than $25,000,000.

         9.2 Leverage Ratio. The Leverage Ratio as of the last day of each
fiscal quarter of Borrower may never exceed 4.0 to 1.0.

SECTION 10   EVENTS OF DEFAULT AND REMEDIES.

         10.1 Event of Default. The term "Event of Default" means the existence
or occurrence of any one or more of the following:

                  (a) Obligation. Any Co-Borrower fails to pay (i) any interest
         on the Obligation when due under the Credit Documents and that failure
         continues for five days following receipt of notice from Administrative
         Agent or any other Lender; provided, however, that notwithstanding
         anything to the contrary in Section 12.2, such notice shall be deemed
         received when sent by such party, or (ii) any other part of the
         Obligation when due under the Credit Documents.

                  (b) Covenants. Any Company's failure or refusal to punctually
         and properly perform, observe, and comply with any covenant (other than
         in respect of payments on the Obligation) applicable to it in:

                           (i) Sections 7.2, 8.4, 8.5, 8.6, 8.7, 8.8, or 8.15;

                           (ii) Sections 7.6, 7.7, 8.1, 8.2, 8.3, 9.1, or 9.2,
                  if that failure or refusal was inadvertent, is susceptible of
                  cure, and is not cured within 20 days after the earlier of
                  either any Company knows of it or any Company is notified of
                  it by Administrative Agent or any Lender; or

                           (iii) Any other provision of any Credit Document, if
                  that failure or refusal continues for 20 days after the
                  earlier of either any Company knows of it or any Company is
                  notified of it by Administrative Agent or any Lender.

                  (c) Misrepresentation. Any material statement, warranty, or
         representation by or on behalf of any Company in any Credit Document or
         other writing authored by any Company and furnished in connection with
         the Credit Documents proves to have been incorrect or misleading in any
         material respect as of the date made or deemed made.

                  (d) Debtor Law. Parent or any Co-Borrower (i) is insolvent,
         (ii) admits in writing its inability to pay its Debts generally as they
         become due, (iii) voluntarily seeks, consents to, or acquiesces in the
         benefit of any Debtor Law, or (iv) becomes a party to, or is made the
         subject of, any proceeding provided for by any Debtor Law (other than
         as a creditor or claimant) that could suspend or otherwise adversely
         affect the Rights of Administrative Agent or any Lender granted in the
         Credit


                                       43
<PAGE>



         Documents, unless, if the proceeding is involuntary, the applicable
         petition is dismissed within 90 days after its filing.

                  (e) Other Debt. (i) Parent or any Co-Borrower fails to make
         any payment due on any Debt or security in excess of $1,000,000 (with
         respect to which it has redemption, sinking fund, or other purchase
         obligations) or (ii) any event occurs or any condition exists in
         respect of any Debt or security of Parent or any Co-Borrower in excess
         of $1,000,000, the effect of which is (A) to cause or to permit any
         holder of that Debt or security or a trustee to cause (whether or not
         it elects to cause) any of that Debt or security to become due before
         its stated maturity or its regularly scheduled payment dates, or (B) to
         permit a trustee or the holder of any security (other than common stock
         of any Company) to elect (whether or not it does elect) a majority of
         the directors on the board of directors of that Company.

                  (f) Material Agreements. Any default or event of default under
         any Material Agreement to which Parent or a Co-Borrower is a party, the
         effect of which is to cause, or to permit any Person (other than a
         Company) to cause, an amount in excess of $1,000,000 to become due and
         payable prior to the date of payment stated in that Material Agreement,
         unless such default or event of default is being contested by that
         Company in good faith by appropriate proceedings and adequate reserves
         have been established on the books of that Company to the extent
         required by GAAP.

                  (g) Securitizations. In connection with any asset
         securitization to which Parent or any Co-Borrower is a party or for
         which it has any liability, (i) event of default occurs with respect to
         such asset securitization, or (ii) any "delinquency trigger" or "loss
         trigger" occurs with respect to such asset securitization.

                  (h) Judgments. Parent or any Co-Borrower fails to pay any
         money judgment in excess of the sum of $250,000 against it at least ten
         days prior to the date on which any of the assets of that Company may
         be lawfully sold to satisfy that judgment.

                  (i) Attachments. The failure to have discharged within a
         period of 30 days after the commencement of any attachment,
         sequestration, or similar proceeding against any material amount of the
         assets of Parent or any Co-Borrower.

                  (j) Unenforceability. Any material provision of any Credit
         Document for any reason ceases to be in full force and effect or is
         fully or partially declared null and void or unenforceable, and such
         condition exists for a period of 21 days, or the validity or
         enforceability of any Credit Document is challenged or denied by Parent
         or any Co-Borrower.

                  (k) Change of Ownership of Co-Borrowers. Except as otherwise
         approved by Required Lenders in writing prior to any such change,
         Parent or ABC, as the case may be, fails to own, beneficially and of
         record, with power to vote, 100% of the issued and outstanding shares
         of capital stock of each Co-Borrower.

                  (l) Change of Management of Parent. Except as otherwise
         approved by Required Lenders in writing prior to any such change, any
         material change in the executive management of Parent from the
         executive management of Parent as it exists on the date of this
         agreement.

                  (m) SEC Reporting Requirements. Any Company fails to comply
         with any reporting requirements of the Securities Exchange Act of 1934,
         for which the failure to report would constitute a Material-Adverse
         Event.


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<PAGE>



         10.2   Remedies.

                  (a) Debtor Law. Upon the occurrence of an Event of Default
         under Section 10.1(d), and to the extent permitted by law, the
         commitments of Lenders to extend credit under this agreement
         automatically terminate and the full Obligation is automatically due
         and payable, without presentment, demand, notice of default, notice of
         the intent to accelerate, notice of acceleration, or other requirements
         of any kind, all of which are expressly waived by Parent and each
         Co-Borrower.

                  (b) Other Defaults. While an Event of Default exists -- other
         than those described in clause (a) above -- Administrative Agent may
         (and, upon the direction of Required Lenders, shall) declare the
         Obligation to be immediately due and payable, whereupon it shall be due
         and payable without presentment, demand, notice of default, notice of
         the intent to accelerate, notice of acceleration, or other requirements
         of any kind, all of which are expressly waived by Parent and each
         Co-Borrower, and the commitments of Lenders to extend credit under this
         agreement are then automatically terminated.

                  (c) Other Remedies. Following the termination of the
         commitments of Lenders to extend credit under this agreement and the
         acceleration of the Obligation, Administrative Agent may (and, at the
         direction of Required Lenders, shall) do any one or more of the
         following: Reduce any claim to judgment; foreclose upon, or otherwise
         enforce, any Lender Liens; and exercise any other Rights in the Credit
         Documents, at law, in equity, or otherwise that Required Lenders may
         direct. Should any Event of Default continue that, in Administrative
         Agent's reasonable opinion, materially and adversely affects the
         Collateral or the interests of the Lenders under this agreement,
         Administrative Agent may, in a notice to the Lenders of that Event of
         Default, set forth one or more actions that Administrative Agent, in
         its opinion, believes should be taken. Unless otherwise directed by
         Required Lenders (excluding the Lender serving as Administrative Agent)
         within ten days following the date of the notice setting forth the
         proposed action or actions, Administrative Agent may, but shall not be
         obligated to, take the action or actions set forth in that notice.

         10.3 Right of Offset. Parent and each Co-Borrower hereby grant to
Administrative Agent and to each Lender a right of offset, to secure the
repayment of the Obligation, upon any and all monies, securities, or other
property of each such Company, and the proceeds therefrom now or hereafter held
or received by or in transit to Administrative Agent or such Lender from or for
the account of each such Company, whether for safekeeping, custody, pledge,
transmission, collection, or otherwise, and also upon any and all deposits
(general or special, time or demand, provisional or final) and credits of each
such Company, and any and all claims of any such Company against Administrative
Agent or such Lender, at any time existing. Upon the occurrence of any Event of
Default, Administrative Agent and each Lender are authorized at any time and
from time to time, without notice to any Company, to offset, appropriate, and
apply any and all of those items against the Obligation, subject to Section 3.6.
Notwithstanding anything in this section or elsewhere in this agreement to the
contrary, neither Administrative Agent nor any other Lender shall have any right
to offset, appropriate, or apply any accounts of any Company which consist of
escrowed funds (except and to the extent of any beneficial interest which any
Company has in such escrowed funds) which have been so identified by any Company
in writing at the time of deposit thereof.

         10.4 Waivers. To the extent permitted by law, each Company waives any
right to require Administrative Agent to (a) proceed against any Person, (b)
proceed against or exhaust any of the Collateral, or pursue its Rights and
remedies as against the Collateral in any particular order, or (c) pursue any
other remedy in its power. Administrative Agent shall not be required to take
any steps necessary to preserve any Rights of any Company against any Person
from which any Company purchased any Mortgage Loans or Commercial Loans, or to
preserve Rights against prior parties. Each Company and each surety, endorser,


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<PAGE>



guarantor, pledgor, and other party ever liable or whose property is ever liable
for payment of any of the Obligation jointly and severally waive presentment and
demand for payment, protest, notice of intention to accelerate, notice of
acceleration, and notice of protest and nonpayment, and agree that their or
their property's liability with respect to the Obligation, or any part thereof,
shall not be affected by any renewal or extension in the time of payment of the
Obligation, by any indulgence, or by any release or change in any security for
the payment of the Obligation, and hereby consent to any and all renewals,
extensions, indulgences, releases, or changes, regardless of the number thereof.

         10.5 Performance by Administrative Agent. Should any covenant, duty, or
agreement of any Company fail to be performed in accordance with the terms of
this agreement or of any document delivered under this agreement (and any
applicable grace period shall have expired and all required notices have been
given), Administrative Agent may, at its option, after notice to Parent,
perform, or attempt to perform such covenant, duty, or agreement on behalf of
that Company and shall notify each Lender that it has done so. In such event,
Parent or any Co-Borrower shall jointly and severally, at the request of
Administrative Agent, promptly pay any amount expended by Administrative Agent
in such performance or attempted performance to Administrative Agent at its
principal place of business, together with interest thereon at the Maximum Rate
from the date of such expenditure by Administrative Agent until paid.
Notwithstanding the foregoing, it is expressly understood that Administrative
Agent does not assume and shall never have, except by express written consent of
Administrative Agent, any liability or responsibility for the performance of any
duties of any Company under this agreement or under any other document delivered
under this agreement.

         10.6 No Responsibility. Except in the case of fraud, gross negligence,
or willful misconduct, neither Administrative Agent nor any of its officers,
directors, employees, or attorneys shall assume -- or ever have any liability or
responsibility for -- any diminution in the value of the Collateral or any part
of the Collateral.

         10.7 No Waiver. The acceptance by Administrative Agent or any Lender at
any time and from time to time of partial payment or performance by any Company
of any of their respective obligations under this agreement or under any Credit
Document shall not be deemed to be a waiver of any Event of Default then
existing. No waiver by Administrative Agent or any Lender shall be deemed to be
a waiver of any other then existing or subsequent Event of Default. No delay or
omission by Administrative Agent or any Lender in exercising any right under
this agreement or under any other document required to be executed under or in
connection with this agreement shall impair such right or be construed as a
waiver thereof or any acquiescence therein, 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 under this agreement or otherwise.

         10.8 Cumulative Rights. All Rights available to Administrative Agent
and the Lenders under this agreement or under any other document delivered under
this agreement shall be cumulative of and in addition to all other Rights
granted to Administrative Agent and the Lenders at law or in equity, whether or
not the Notes are due and payable and whether or not Administrative Agent has
instituted any suit for collection, foreclosure, or other action in connection
with this agreement or any other document delivered under this agreement.

         10.9 Rights of Individual Lenders. No Lender shall have any right by
virtue of, or by availing itself of, any provision of this agreement to
institute any actions or proceedings at law, in equity, or otherwise (excluding
any actions in bankruptcy), upon or under or with respect to this agreement, or
for the appointment of a receiver, or for any other remedy under this agreement,
unless (a) the Required Lenders previously shall have given to Administrative
Agent written notice of an Event of Default and the continuance thereof,
including a written request upon Administrative Agent to institute such action
or proceedings in its own name and offering to indemnify Administrative Agent
against the costs, expenses and liabilities to be incurred therein or


                                       46
<PAGE>



thereby, (b) Administrative Agent, for ten Business Days after its receipt of
such notice, shall have failed to institute any such action or proceeding, and
(c) no direction inconsistent with such written request shall have been given to
Administrative Agent by Required Lenders. It is understood and intended, and
expressly covenanted by the taker and holder of every Note with every other
taker and holder and Administrative Agent, that no one or more holders of Notes
shall have any right in any manner whatever by virtue, or by availing itself, of
any provision of this agreement to affect, disturb or prejudice the Rights of
any other Lenders, or to obtain or seek to obtain priority over or preference to
any other such Lender, or to enforce any right under this agreement, except in
the manner herein provided and for the equal, ratable and common benefit of all
Lenders. For the protection and enforcement of the provisions of this Section
10.9, each and every Lender and Administrative Agent shall be entitled to such
relief as can be given either at law or in equity.

         10.10 Notice to Administrative Agent. Should any Event of Default or
Potential Default occur and be continuing, any Lender having actual knowledge
thereof shall notify Administrative Agent and Co-Borrowers of the existence
thereof, but the failure of any Lender to provide that notice shall not
prejudice that Lender's Rights under this agreement.

         10.11 Costs. All court costs, reasonable attorneys' fees, other costs
of collection, and other sums spent by Administrative Agent or any Lender in the
exercise of any Right provided in any Credit Document is payable to
Administrative Agent or that Lender, as the case may be, on demand, is part of
the Obligation, and bears interest at the Default Rate from the date paid by
Administrative Agent or any Lender to the date repaid by any Company.

SECTION 11   ADMINISTRATIVE AGENT.

         11.1 Authorization and Action. Each Lender hereby appoints
Administrative Agent as administrative, collateral, and managing agent under the
Credit Documents and authorizes Administrative Agent to take such action on its
behalf and to exercise such powers and perform such duties as are expressly
delegated to Administrative Agent by the terms of the Credit Documents, together
with such powers as are reasonably incidental thereto. As to any matter not
expressly provided for by this agreement (including, without limitation,
enforcement or collection of the Notes), Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of Lenders, and those instructions
shall be binding upon all Lenders and all holders of the Notes. However,
Administrative Agent shall not be required to take any action that exposes
Administrative Agent to personal liability or that is contrary to this agreement
or applicable Governmental Requirements. Administrative Agent agrees to give to
each Lender prompt notice of each notice given to it by Parent or Co-Borrowers
pursuant to the terms of the Credit Documents. Administrative Agent also agrees
to promptly distribute to each Lender copies of the items required to be
delivered to Administrative Agent under Section 7.1.

         11.2 Administrative Agent's Reliance, Etc. Notwithstanding anything to
the contrary in any Credit Document, neither Administrative Agent nor any of its
Representatives shall be liable for any action taken or omitted to be taken by
it or them under or in connection with the Credit Documents, except for its or
their own fraud, gross negligence, or willful misconduct. Without limitation of
the generality of the foregoing, Administrative Agent: (a) may treat the payee
of any Note as the holder thereof; (b) may consult with legal counsel (including
counsel for Co-Borrowers), independent public accountants and other experts
selected by it or Co-Borrowers and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements,
warranties, or representations made in or in connection with the Credit
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
agreement on the part


                                       47
<PAGE>



of Co-Borrowers or to inspect the property (including the books and records) of
Co-Borrowers, except receipt of delivery of the items required under Sections
3.2, 4.1, 4.3, 5(a), 5(b), and 7.1; (e) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this agreement or any other instrument or document
furnished pursuant hereto; and (f) shall incur no liability under or in respect
of this agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy) believed by it to be genuine
and signed or sent by the proper party or parties.

         11.3 Administrative Agent and Affiliates. With respect to Borrowings
made by it, and the one or more Notes issued to it, the Lender which is
Administrative Agent shall have the same rights and powers under this agreement
and the other Credit Documents as any other Lender and may exercise the same as
though it were not the Administrative Agent; and the term "Lender" or "Lenders"
shall, unless otherwise expressly indicated, include the Lender which is
Administrative Agent in its individual capacity. The Lender which is
Administrative Agent and the Affiliates of such Lender may accept deposits from,
lend money to, act as trustee under indentures of, and generally engage in any
kind of business with, Co-Borrowers, any of its Affiliates and any Person who
may do business with or own securities of Co-Borrowers or any of its Affiliates,
all as if such Lender were not Administrative Agent and without any duty to
account therefor to Lenders.

         11.4 Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Administrative Agent or any other
Lender, and based on the financial statements referred to in Sections 6.6 and
7.1 and such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter this agreement. Each Lender also
acknowledges that it will, independently and without reliance upon
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, make its own credit
decisions in taking or not taking action under this agreement.

         11.5 INDEMNIFICATION. LENDERS SHALL INDEMNIFY ADMINISTRATIVE AGENT (TO
THE EXTENT NOT REIMBURSED BY PARENT OR CO-BORROWERS), RATABLY ACCORDING TO THEIR
RESPECTIVE COMMITMENT PERCENTAGES, FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, JUDGMENTS, SUITS, COSTS, EXPENSES, OR
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED
BY, OR ASSERTED AGAINST ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING
OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY ADMINISTRATIVE AGENT
UNDER THIS AGREEMENT (INCLUDING ANY OF SAME WHICH MAY RESULT FROM THE
NEGLIGENCE, BUT NOT GROSS NEGLIGENCE, OF ADMINISTRATIVE AGENT). HOWEVER, NO
LENDER SHALL BE LIABLE FOR ANY PORTION OF THOSE LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR
DISBURSEMENTS RESULTING FROM ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER SHALL REIMBURSE
ADMINISTRATIVE AGENT PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF ANY
OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES) INCURRED BY ADMINISTRATIVE AGENT
IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION,
MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL
PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR
RESPONSIBILITIES UNDER, THIS AGREEMENT, TO THE EXTENT THAT ADMINISTRATIVE AGENT
IS NOT REIMBURSED FOR SUCH EXPENSES BY PARENT OR CO-BORROWERS.

         11.6 Successor Administrative Agent. Administrative Agent (i) may
resign at any time by giving written notice thereof to Lenders and Co-Borrowers
and (ii) may be removed at any time with or without cause by 100% of Lenders
(other than the Lender which is Administrative Agent) and with Parent's consent,
not to be unreasonably withheld. Upon any such resignation or removal, 100% of
Lenders, with the consent of Parent not to be unreasonably withheld, shall have
the right to appoint a successor Administrative Agent in the capacity of
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by 100% of Lenders and reasonably approved by Parent, and shall have
accepted such appointment, within 30 days after the retiring Administrative
Agent's giving of notice of resignation or the Lenders' removal of the


                                       48
<PAGE>



retiring Administrative Agent, then the retiring Administrative Agent may, on
behalf of Lenders, appoint a successor Administrative Agent, which shall be a
commercial bank or savings bank organized under the laws of the United States of
America or of any state thereof which has a combined capital and surplus of at
least $200,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges, and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from any further duties,
and obligations under this agreement. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this agreement. The
appointment of a successor Administrative Agent shall not release the retiring
Administrative Agent from any liability it may have for any actions taken or
omitted to be taken by it while it was Administrative Agent under this
agreement.

         11.7 Inspection. Administrative Agent shall permit any officer,
employee, or agent of Co-Borrowers, or any Lender which may so request, to visit
and inspect the premises on which the custodial duties of Administrative Agent
hereunder are performed, examine the books and records of Administrative Agent
which pertain to such custodial duties, take copies and extracts therefrom, and
discuss the performance of such custodial duties with the officers, accountants
and auditors of Administrative Agent that are responsible therefor, all at such
reasonable times and as often as Co-Borrowers or any Lender may desire.

SECTION 12   MISCELLANEOUS.

         12.1 Nonbusiness Days. Any action that is due under any Credit Document
on a non-Business Day may be delayed until the next Business Day. However,
interest accrues on any payment until it is made.

         12.2 Communications. Unless otherwise stated, a communication under any
Credit Document to a party to this agreement must be written to be effective and
is deemed given:

          o    For Borrowing Requests, Collateral Delivery-Notices, Shipping
               Requests, and Release Requests, only when actually received by
               Administrative Agent.

          o    Otherwise, if by fax, when transmitted to the appropriate fax
               number -- but, without affecting the date deemed given, the fax
               must be promptly confirmed by telephone.

          o    Otherwise, if by mail, on the third Business Day after enclosed
               in a properly addressed, stamped, and sealed envelope deposited
               in the appropriate official postal service.

          o    Otherwise, when actually delivered.

Until changed by written notice to each other party to this agreement, the
address and fax number are stated for (a) Co-Borrowers, Administrative Agent,
and each initial Lender beside their names on the signature pages below, and (b)
each other Lender, beside its name on Schedule 2.

         12.3 Form and Number of Documents. The form, substance, and number of
counterparts of each writing to be furnished under the Credit Documents must be
satisfactory to Administrative Agent and its counsel.

         12.4 Exceptions to Covenants. An exception to any Credit Document
covenant does not permit violation of any other Credit Document covenant.



                                       49
<PAGE>



         12.5 Survival. All Credit Document provisions survive all closings and
are not affected by any investigation made by any party.

         12.6 Governing Law. Unless otherwise stated, each Credit Document must
be construed (and its performance enforced) under the laws of the State of Texas
and the United States of America.

         12.7 Invalid Provisions. If any provision of a Credit Document is
judicially determined to be unenforceable, all other provisions of it remain
enforceable. If the provision determined to be unenforceable is a material part
of that Credit Document, then, to the extent lawful, it shall be replaced by a
judicially-construed provision that is enforceable but otherwise as similar in
substance and content to the original provision as the context of it reasonably
allows.

         12.8 Conflicts Between Credit Documents. The provisions of this
agreement control if in conflict (i.e., the provisions contradict each other as
opposed to a Credit Document containing additional provisions not in conflict)
with the provisions of any other Credit Document.

         12.9 Discharge and Certain Reinstatement. The Companies' obligations
under the Credit Documents remain in full force and effect until no Lender has
any commitment to extend credit under the Credit Documents and the Obligation is
fully paid (except for provisions under the Credit Documents which by their
terms expressly survive payment of the Obligation and termination of the Credit
Documents). If any payment under any Credit Document is ever rescinded or must
be restored or returned for any reason, then all Rights and obligations under
the Credit Documents in respect of that payment are automatically reinstated as
though the payment had not been made when due.

         12.10 Amendments, Consents, Conflicts, and Waivers. An amendment of --
or an approval, consent, or waiver by Administrative Agent or by one or more
Lenders under -- any Credit Document must be in writing and must be:

                  (a) Executed by Parent, Co-Borrowers, and Administrative Agent
         if it purports to reduce or increase any fees payable to Administrative
         Agent by Co-Borrowers.

                  (b) Executed by Parent, Co-Borrowers, Administrative Agent and
         the particular existing or new Lender if it purports (subject to
         Section 2.6) to increase that Lender's Commitment or add that Lender
         with a new Commitment and is accompanied, as applicable, by a new
         Warehouse Note for that Lender in the stated amount of its increased or
         new Commitment, as the case may be.

                  (c) Executed by Parent, Co-Borrowers, and Administrative Agent
         and executed or approved in writing by all Lenders if action of all
         Lenders is specifically provided in any Credit Document or if it
         purports to (i) except as otherwise stated in Section 12.10(a), extend
         the due date or decrease the scheduled amount of any payment under --
         or reduce the rate or amount of interest, fees, or other amounts
         payable to Administrative Agent or any Lender under -- any Credit
         Document, (ii) change the definition of "Borrowing Base" (or any
         component of it), "Commitment", "Eligible-Mortgage
         Loan","Eligible-Commercial Loan", "Eligible-Seasoned Loan",
         "Eligible-High LTV Loan", "Market Value", "Required Lenders",
         "Stated-Termination Date", or "Termination Percentage", (iii) change
         the Swing Sublimit, the Wet Sublimit, the Second-Lien Sublimit, the
         Seasoned Sublimit, the High LTV Sublimit, or the Commercial Loan
         Sublimit, (iv) amend Schedule 4.1, or (v) partially or fully release
         any Guaranty or any Collateral, except releases of Collateral
         contemplated in this agreement.



                                       50
<PAGE>


                  (d) Otherwise (i) for this agreement, executed by Parent,
         Co-Borrowers, Syndication Agent, Administrative Agent, and Required
         Lenders, or (ii) for other Credit Documents, approved in writing by
         Required Lenders and executed by Parent, Co-Borrowers, Syndication
         Agent, Administrative Agent, and any other party to that Credit
         Document.

No course of dealing or any failure or delay by Administrative Agent, any
Lender, or any of their respective Representatives with respect to exercising
any Right of Administrative Agent or any Lender under the Credit Documents
operates as a waiver of that Right. An approval, consent, or waiver is only
effective for the specific instance and purpose for which it is given. The
Credit Documents may only be supplemented by agreements, documents, and
instruments delivered according to their respective express terms.

         12.11 Multiple Counterparts. Any Credit Document may be executed in any
number of counterparts with the same effect as if all signatories had signed the
same document, and all of those counterparts shall be construed together to
constitute the same document. This agreement is effective when counterparts of
it have been executed and delivered to Administrative Agent by each Lender,
Administrative Agent, Parent, and Co-Borrowers, or, in the case only of those
Lenders, when Administrative Agent has received faxed or other evidence
satisfactory to it that each Lender has executed and is delivering to
Administrative Agent a counterpart of it.

         12.12 Parties. This agreement binds and inures to Parent, Co-Borrowers,
each Lender, Administrative Agent, and their respective successors and permitted
assigns. Only those Persons may rely upon or raise any defense about this
agreement.

                  (a) Assignment by Companies; Assumptions by New Companies. No
         Company may assign any Rights or obligations under any Credit Document
         without first obtaining the written consent of Lenders.

                  (b) Assignment by Lender. Any Lender may assign, pledge, and
         otherwise transfer all or any of its Rights and obligations under the
         Credit Documents either (i) to a Federal Reserve Bank without the
         consent of any party to this agreement, so long as that Lender is not
         released from its obligations under the Credit Documents, or (ii) in
         the ordinary course of its lending business and in accordance with all
         Governmental Requirements and with Section 12.13 or 12.14, so long as
         (A) except for assignments, pledges, and other transfers by a Lender to
         its Affiliates, the written consent of Parent, Co-Borrowers, and
         Administrative Agent, which may not be unreasonably withheld, must be
         first obtained, (B) the assignment or transfer (other than a pledge)
         does not involve a purchase price that directly or indirectly reflects
         a discount from face value unless that Lender first offered that
         assignment or transfer to the other Lenders on a ratable basis
         according to their Commitment Percentages, (C) neither Parent,
         Co-Borrowers, nor Administrative Agent are required to incur any cost
         or expense incident to any assignment, pledge, or other transfer by any
         Lender, all of which are for the account of the assigning, pledging, or
         transferring Lender and its assignee, pledgee, or transferee as they
         may agree, and (D) if the Participant or Purchaser is organized under
         the Governmental Requirements of any jurisdiction other than the United
         States of America or any of its states, it complies with Section 3.13.

                  (c) Otherwise Void. Any purported assignment, pledge, or other
         transfer in violation of this section is void from the beginning and
         not effective.

         12.13 Participations. Subject to Section 12.12(b) and this section, a
Lender may at any time sell to one or more Persons (each a "Participant")
participating interests in its Commitment and its share of the Obligation.


                                       51
<PAGE>



                  (a) Additional Conditions. For each participation (i) the
         selling Lender must remain -- and the Participant may not become -- a
         "Lender" under this agreement, (ii) the selling Lender's obligations
         under the Credit Documents must remain unchanged, (iii) the selling
         Lender must remain solely responsible for the performance of those
         obligations, (iv) the selling Lender must remain the holder of its one
         or more Notes and its share of the Obligation for all purposes under
         the Credit Documents, and (v) Parent, Co-Borrowers and Administrative
         Agent may continue to deal solely and directly with the selling Lender
         in connection with those Rights and obligations.

                  (b) Participant Rights. The selling Lender may obtain for each
         of its Participants the benefits of the Credit Documents related to
         participations in its share of the Obligation, but Co-Borrowers are
         never obligated to pay any greater amount than would be due to the
         selling Lender under the Credit Documents calculated as though no
         participation had been made. Otherwise, Participants have no Rights
         under the Credit Documents, except certain permitted voting Rights
         described below.

                  (c) Participation Agreements. An agreement for a participating
         interest (i) may only provide to a Participant voting Rights in respect
         of any amendment of or approval, consent, or waiver under any Credit
         Document related to the matters in Section 12.10(c) if it also provides
         for a voting mechanism that a majority of that selling Lender's
         Commitment Percentage or Termination Percentage, as the case may be
         (whether directly held by that selling Lender or participated),
         controls the vote for that selling Lender, and (ii) may not permit a
         Participant to assign, pledge, or otherwise transfer its participating
         interest in the Obligation to any Person, except any Lender or its
         Affiliates.

         12.14 Transfers. Subject to Section 12.12(b) and this section, a Lender
may at any time sell to one or more financial institutions (each a "Purchaser")
all or part of its Rights and obligations under the Credit Documents.

                  (a) Additional Conditions. The sale (i) must be accomplished
         by the selling Lender and Purchaser executing and delivering to
         Administrative Agent and Co-Borrowers an Assignment and Assumption
         Agreement, (ii) must be in an amount not less than $5,000,000 (unless
         such sale is an assignment of all of a Lender's Rights and obligations
         under the Credit Documents, and (iii) may not occur until the selling
         Lender pays to Administrative Agent an administrative-transfer fee of
         $3,500.

                  (b) Procedures. Upon satisfaction of the foregoing conditions
         and as of the Effective Date in the Assignment and Assumption
         Agreement, which may not be before delivery of that document to
         Administrative Agent and Co-Borrowers, then (i) a Purchaser is for all
         purposes a Lender party to -- with all the Rights and obligations of a
         Lender under -- this agreement, with a Commitment as stated in the
         Assignment and Assumption Agreement, (ii) the selling Lender is
         released from its obligations under the Credit Documents to a
         corresponding extent, (iii) Schedule 2 is automatically deemed to
         reflect the name, address, and Commitment of the Purchaser and the
         reduced Commitment of the selling Lender, and Administrative Agent
         shall deliver to Co-Borrowers and Lenders an amended Schedule 2
         reflecting those changes, (iv) Co-Borrowers shall execute and deliver
         to each of the selling Lender and the Purchaser a Warehouse Note, each
         based upon their respective Commitments following the transfer, (v)
         upon delivery of the one or more Warehouse Notes under clause (iv)
         above, the selling Lender shall return to Co-Borrowers all Warehouse
         Notes previously delivered to it under this agreement, and (vi) the
         Purchaser is subject to all the provisions in the Credit Documents, the
         same as if it were a Lender that executed this agreement on its
         original date.



                                       52
<PAGE>



         12.15 VENUE, SERVICE OF PROCESS, AND JURY TRIAL. PARENT AND
CO-BORROWERS, FOR THEMSELVES AND THEIR SUCCESSORS AND ASSIGNS, IRREVOCABLY (A)
SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS IN
TEXAS, (B) WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT
THEY MAY NOW OR IN THE FUTURE HAVE TO THE LAYING OF VENUE OF ANY LITIGATION
ARISING OUT OF OR IN CONNECTION WITH ANY CREDIT DOCUMENT AND THE OBLIGATION
BROUGHT IN THE DISTRICT COURTS OF DALLAS COUNTY, TEXAS, OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, (C) WAIVE
ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY OF THE FOREGOING COURTS HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM OR ANY OBJECTION TO VENUE, (D) CONSENT TO THE
SERVICE OF PROCESS OF ANY OF THOSE COURTS IN ANY LITIGATION BY THE MAILING OF
COPIES OF THAT PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE
PREPAID, BY HAND DELIVERY, OR BY DELIVERY BY A NATIONALLY-RECOGNIZED COURIER
SERVICE, AND SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY OF THE LEGAL PROCESS
AT ITS ADDRESS FOR PURPOSES OF THIS AGREEMENT, (E) AGREE THAT ANY LEGAL
PROCEEDING AGAINST ANY PARTY TO ANY CREDIT DOCUMENT ARISING OUT OF OR IN
CONNECTION WITH THE CREDIT DOCUMENTS OR THE OBLIGATION MAY BE BROUGHT IN ONE OF
THE FOREGOING COURTS, AND (F) WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW,
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY CREDIT DOCUMENT. The scope of each of the foregoing
waivers is intended to be all encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including, without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. PARENT AND CO-BORROWERS
ACKNOWLEDGE THAT THESE WAIVERS ARE A MATERIAL INDUCEMENT TO ADMINISTRATIVE
AGENT'S AND EACH LENDER'S AGREEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
ADMINISTRATIVE AGENT AND EACH LENDER HAVE ALREADY RELIED ON THESE WAIVERS IN
ENTERING INTO THIS AGREEMENT, AND THAT ADMINISTRATIVE AGENT AND EACH LENDER WILL
CONTINUE TO RELY ON EACH OF THESE WAIVERS IN RELATED FUTURE DEALINGS. PARENT AND
CO-BORROWERS FURTHER WARRANT AND REPRESENT THAT THEY HAVE REVIEWED THESE WAIVERS
WITH THEIR LEGAL COUNSEL, AND THAT THEY KNOWINGLY AND VOLUNTARILY AGREE TO EACH
WAIVER FOLLOWING CONSULTATION WITH LEGAL COUNSEL. The waivers in this section
are irrevocable, meaning that they may not be modified either orally or in
writing, and these waivers apply to any future renewals, extensions, amendments,
modifications, or replacements in respect of the applicable Credit Document. In
connection with any Litigation, this agreement may be filed as a written consent
to a trial by the court.

         12.16 Limitation of Liability. Neither Administrative Agent nor any
Lender shall be liable to any Company for any amounts representing indirect,
special, or consequential damages suffered by any Company, except where such
amounts are based substantially on fraud, gross negligence, or willful or
unlawful misconduct by Administrative Agent or any Lender, but then only to the
extent any damages resulting from such willful misconduct are covered by
Administrative Agent's and the other Lenders' fidelity bond or other insurance.

         12.17 Confidentiality.

                  (a) Confidential Information. As used in this section, the
         term "confidential information" (i) includes all written, verbal, and
         electronic information provided by Parent or any Co-Borrower to
         Administrative Agent or any Lender pertaining to Parent's or any
         Co-Borrower's business plans and practices, financial condition,
         operations, trade secrets, customer lists, studies, analyses,
         compilations, or operations, but (ii) excludes (A) information that at
         the time of disclosure has been published or otherwise in the general
         public domain through no breach of this section by the applicable
         party, (B) information that is independently developed by or for
         Administrative Agent or any Lender without the use of any Confidential
         Information provided by Parent or a Co-Borrower, (C) information
         required to be disclosed pursuant to a valid and proper requirement of
         a Governmental Authority so long as, if not prohibited, Parent or a
         Co-Borrower is notified before disclosure.


                                       53
<PAGE>



                  (b) Permitted Disclosures. Notwithstanding anything to the
         contrary in this Section 12.17, Confidential Information may be
         disclosed (i) to regulators, or pursuant to subpoena or other legal
         process as to which (A) neither Co-Borrowers nor Parent has pending an
         objection to production or such objection has been granted and
         production prohibited or (B) such production has not been stayed, (ii)
         as may be required under applicable law, (iii) to a Lender's counsel,
         auditors, accountants and affiliates and (iv) to transferees who agree
         to maintain confidentiality with respect to such Confidential
         Information to the same extent provided for in this Section 12.17. Any
         such disclosure shall not require any investigation or examination by
         any Lender as to whether that disclosure is pursuant to a valid and
         proper requirement and a Lender shall not be in breach of this Section
         12.17 if any such disclosure should be determined to not be pursuant to
         a valid and proper requirement. Notwithstanding the notification
         requirements contained in this Section 12.17, notification of any
         disclosure of Confidential Information shall not be required if such
         disclosure is to a regulator or in the event such notification is
         prohibited.

                  (c) Non-Disclosure. Administrative Agent and each Lender shall
         hold the Confidential Information in accordance with its customary
         procedures for holding confidential information of this nature and in
         accordance with safe and sound banking practices and, except as
         described below or above, shall not disclose, publish or disseminate
         the Confidential Information to any third party without prior written
         consent of an officer of Parent. Administrative Agent and each Lender
         may disclose the Confidential Information to any of its Representatives
         or Affiliates with a need to know that Confidential Information.

                  (d) Use of Information. Administrative Agent and each Lender
         shall use Confidential Information solely in connection with the Credit
         Documents and all transactions related to them.

         12.18 ENTIRE AGREEMENT. THE CREDIT DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER OF THE CREDIT
DOCUMENTS AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK.
                            SIGNATURE PAGES FOLLOW.]


                                       54
<PAGE>



         EXECUTED as of the date first stated in this agreement.

(address)

American Business Credit, Inc.           AMERICAN BUSINESS CREDIT, INC.,    
BalaPointe Office Centre                 as a Co-Borrower                    
111 Presidential Boulevard, Suite 215
Bala Cynwyd, Pennsylvania 19004
Attn:    Amedeo G. Piccioni              By /s/ Anthony J. Santilli, Jr.      
         Treasurer                          ----------------------------------
Tel:     610/617-4942                       Anthony J. Santilli, Jr., Chairman
Fax:     610/668-1132                    


(address)

HomeAmerican Credit, Inc.                HOMEAMERICAN CREDIT, INC.,           
BalaPointe Office Centre                 as a Co-Borrower                     
111 Presidential Boulevard, Suite 215                                         
Bala Cynwyd, Pennsylvania 19004                                               
Attn:    Amedeo G. Piccioni              By /s/ Anthony J. Santilli, Jr.      
         Treasurer                          ----------------------------------
Tel:     610/617-4942                       Anthony J. Santilli, Jr., Chairman
Fax:     610/668-1132                    


(address)

American Business Financial                NEW JERSEY MORTGAGE AND              
  Services, Inc.                           INVESTMENT CORP., as a Co-Borrower   
BalaPointe Office Centre                                                        
111 Presidential Boulevard, Suite 215
Bala Cynwyd, Pennsylvania 19004            By /s/ Anthony J. Santilli, Jr.    
Attn:    Amedeo G. Piccioni                   ----------------------------------
         Treasurer                            Anthony J. Santilli, Jr., Chairman
Tel:     610/617-4942                      
Fax:     610/668-1132                        


(address)

American Business Financial                AMERICAN BUSINESS FINANCIAL          
  Services, Inc.                           SERVICES, INC., as Parent            
BalaPointe Office Centre                                                        
111 Presidential Boulevard, Suite 215                                           
Bala Cynwyd, Pennsylvania 19004            By /s/ Anthony J. Santilli, Jr.      
Attn:    Amedeo G. Piccioni                   ----------------------------------
         Treasurer                            Anthony J. Santilli, Jr., Chairman
Tel:     610/617-4942                      
Fax:     610/668-1132


                                Signature Page to
                      Amended and Restated Credit Agreement

<PAGE>


<TABLE>
<CAPTION>

(address)

<S>                                               <C>
Chase Bank of Texas, National Association      CHASE BANK OF TEXAS, NATIONAL             
717 Travis Street                              ASSOCIATION, as Administrative Agent 
P.O. Box 2558                                  and a Lender                                    
Houston, Texas 77002                                                                   
Attn:    Michael W. Nicholson                                                          
Tel:     713/216-5335                          By: /s/ Michael W. Nicholson              
Fax:     713/216-2082                              ------------------------------------  
                                                   Michael W. Nicholson, Vice President
  
(address)

The Bank of New York                           THE BANK OF NEW YORK
One Wall Street, 17th Floor
New York, New York 10286
Attn:    Patricia Dominus                      By: /s/ Patricia M. Dominus                           
Tel:     (212) 635-6467                            ------------------------------------
Fax:     (212) 635-6468                            Patricia M. Dominus, Vice President            


(address)

Colonial Bank                                  COLONIAL BANK
201 East Pine Street
Orlando, Florida  32801
Attn:    Catherine L. Kissick
Tel:     (407  648-2186                        By: /s/ David E. Clark 
Fax:     (407) 648-1849                            ----------------------------------------
                                                   David E. Clark, Executive Vice President


(address)

National City Bank of Kentucky                 NATIONAL CITY BANK OF KENTUCKY
421 West Market Street
Louisville, Kentucky 40202
Attn:    Robert Ogburn
Tel:     (502) 581-6455                        By: /s/ Robert J. Ogbum                         
Fax:     (502) 581-4154                            --------------------------------
                                                   Robert J. Ogburn, Vice President


(address)

First Union National Bank                      FIRST UNION NATIONAL BANK (successor in
1-8-11-24                                      interest by merger to CoreStates Bank, N.A.)
1339 Chestnut Street
Philadelphia, Pennsylvania 19101
Attn:    Joseph Romano                         By: /s/ Joseph A. Romano
Tel:     (215) 973-7038                            ------------------------------------
Fax:     (215) 786-7704                            Joseph A. Romano, Commercial Officer

</TABLE>

                                Signature Page to
                      Amended and Restated Credit Agreement

<PAGE>


<TABLE>
<CAPTION>

(address)

<S>                                               <C>
Hibernia National Bank                         HIBERNIA NATIONAL BANK
313 Carondelet Street, 11th Floor
New Orleans, Louisiana 70130
Attn:    Angela Bentley                        By: /s/ Angela Bentley               
Tel:     (504) 533-2319                            --------------------------------           
Fax:     (504) 533-5344                            Angela Bentley,                                             
                                                   National Accounts Representative 
                                                                           
(address)

Firstrust Bank                                 FIRSTRUST BANK
1931 Cottman Avenue
Philadelphia, Pennsylvania 19111
Attn:    John Hollingsworth                    By: /s/ John Hollingsworth                      
Tel:     (215) 728-8449                            ----------------------------------
Fax:     (215) 728-8767                            John Hollingsworth, Vice President

</TABLE>




                                Signature Page to
                      Amended and Restated Credit Agreement