AMERICAN BUSINESS FINANCIAL SERVICES INC /DE/
EXHIBIT 10.2
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>ex10-2.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>
<PAGE>


                                                                    Exhibit 10.2

                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT, dated as of November 15, 2004 (as amended,
modified or supplemented from time to time in accordance with the terms hereof,
the "Security Agreement") is made by American Business Credit, Inc., a
Pennsylvania corporation (together with its successors and permitted assigns,
the "Grantor"), in favor of The Patriot Group, LLC (the "Buyer").

                                    RECITALS

         WHEREAS, simultaneously with the execution of this Security Agreement,
Buyer and certain affiliates of Grantor, including ABFS WAREHOUSE TRUST 2004-2
(the "Seller") are entering into a Master Repurchase Agreement, dated as of
November 15, 2004 (as amended, restated or supplemented from time to time in
accordance with its terms, the "Repurchase Agreement"), pursuant to which the
Buyer will obtain from the Seller various securities set forth on Schedule I of
the Repurchase Agreement and related rights (the "Purchased Assets");

         WHEREAS, pursuant to the terms of the Repurchase Agreement, the
affiliates of the Grantor parties thereto have agreed to cause the grant to the
Buyer of a first priority security interest in specified assets to secure the
Seller's obligations under the Repurchase Agreement;

         NOW, THEREFORE, in satisfaction of such condition and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Grantor hereby represents,
warrants, covenants and agrees as follows:

                                    AGREEMENT

         1. DEFINED TERMS. Unless otherwise defined herein, the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):

         "ABFS ENTITY" means each of the Grantor, the Seller, American Business
Financial Services, Inc. and ABFS Consolidated Holdings, Inc.

         "COLLATERAL" shall have the meaning assigned to such term in Section 2
of this Security Agreement.

         "DOCUMENTS" means any "documents", as such term is defined in Section
9-102(a)(30) of the UCC as in effect in the State of New York on the date
hereof.

          "EVENT OF DEFAULT" shall have the meaning set forth in the Repurchase
Agreement.

         "GRANTOR" means American Business Credit, Inc. and any affiliate
thereof which may act as a mortgage loan servicer under an Operative Document.
Such an affiliate shall become a party to this Security Agreement as a grantor
and be bound by its terms and conditions.
<PAGE>


         "LIEN" means any security interest, lien, charge, pledge, equity,
encumbrance or preferential arrangement of any kind.

         "OPERATIVE DOCUMENTS" means the underlying pooling and servicing
agreements, sale and servicing agreements, and other similar agreements under
which the Collateral arose or will arise and any future agreements executed in
connection with any warehouse loan transaction, including without limitation any
securitization transaction, pursuant to which the Grantor or any affiliate will
act as servicer including, without limitation, those agreements listed on
Schedule 3 hereto.

         "PERSON" shall have the meaning set forth in the Repurchase Agreement.

         "PROCEEDS" shall have the meaning set forth in Section 9-102(a)(64) of
the UCC as in effect in the State of New York on the date thereof.

         "PROGRAM DOCUMENTS" shall have the meaning assigned to such term in the
Repurchase Agreement.

         "SECURED OBLIGATIONS" means all obligations to the Buyer arising under
or pursuant to the Repurchase Agreement or any other Program Document.

         "SECURITY AGREEMENT" means this Security Agreement and all Schedules
hereto, as the same may from time to time be amended, modified or supplemented
from time to time in accordance with the terms hereof.

         "SERVICING ADVANCES" shall have the meaning assigned to such term in
Section 2(a) below.

          "UCC" or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code
as the same may, as indicated in the Program Documents, be in effect in the
State of New York on the date hereof; provided, however, in the event that by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of Buyer's security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, the term UCC shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection of priority and for purposes of definitions related to
such provisions.

         Other capitalized terms used herein and not otherwise defined shall
have the meaning ascribed to such term in the Repurchase Agreement.

         2. GRANT OF SECURITY INTEREST; AUTHORITY TO FILE FINANCING STATEMENTS.

                  (a) Grant of Security Interest. As collateral security for (x)
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all of the Secured Obligations and
(y) the payment and performance of all of the Grantor's covenants and agreements
in this Security Agreement, Grantor hereby assigns, conveys, mortgages, charges,
pledges, hypothecates and transfers to Buyer and hereby grants to Buyer a first
priority security interest in and to all of Grantor's right, title and interest



                                      -2-
<PAGE>

in, to and under, whether now owned or hereafter existing: all existing and
future rights to reimbursement for servicer advances (including, without
limitation, forbearance advances, deferment advances, bankruptcy advances,
advances of forced place insurance premiums and property taxes, and advances of
legal fees, property/REO preservation expenses, collection expenses, first lien
buy-outs, and REO expenses for professional fees, property tax, utilities and
maintenance), unearned fees of all types and prepayment fees, late fees,
forbearance fees, satisfaction fees, not-sufficient-funds fees and other similar
earned fees (such amounts, collectively, the "Servicing Advances") due, or which
become due in the future, to Grantor as servicer of mortgage loans in connection
with the securitizations and warehouse lines described in the Operative
Documents (such rights to the Servicing Advances, the "Collateral").
Notwithstanding the foregoing, the Collateral shall not include with respect to
each Operative Document (i) the per annum Servicing Fee (as defined in the
Operative Document) due to the Grantor and (ii) any income or interest earned on
amounts deposited into the Collection Account (as defined in the Operative
Document). For the avoidance of doubt, Servicing Advances includes amounts due
the Grantor under future securitizations and applies to all mortgage loans
serviced by the Grantor for affiliates and third parties.

         (b) Authority to File Financing Statements. The Grantor hereby
irrevocably authorizes the Buyer at any time, and from time to time, to file in
any filing office in any jurisdiction any initial financing statements, any
amendments thereto and certifications thereof that (i) indicate the Collateral,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code, is mortgaged and
collaterally assigned to the Buyer and (ii) provide any other information
required for the sufficiency or filing office acceptance of any financing
statement or amendment. The Grantor agrees to furnish any such information to
the Buyer promptly upon its request. The Grantor also ratifies its authorization
for the Buyer to have filed in any jurisdiction any UCC Financing Statement or
amendments thereto if filed prior to the date hereof.

         3. RIGHTS OF BUYER; RELEASE OF COLLATERAL.

                  (a) Grantor to Remain Liable. Notwithstanding anything
contained in this Security Agreement to the contrary, Grantor expressly agrees
that it shall remain liable under the Operative Documents to observe and perform
all the conditions and obligations to be observed and performed by the Grantor
thereunder and that the Grantor shall perform all of its duties and obligations
thereunder, all in accordance with and pursuant to the terms and provisions of
each such Operative Document. The Buyer shall not have any obligation or
liability under any Operative Document or other agreement by reason of, or
arising out of, this Security Agreement or the granting to the Buyer of any
payment relating to any such Operative Document, nor shall the Buyer be required
or obligated in any manner to perform or fulfill any of the obligations of
Grantor under or pursuant to any such Operative Agreement or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party
thereunder, or to present or file any claim, or to take any action to collect or
enforce any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.


                                      -3-
<PAGE>

                  (b) Event of Default. Upon the occurrence of any Event of
Default or in the even of a Margin Deficit, the Buyer may, at its sole
discretion exercise the Grantor's rights to collect Servicing Advances as
described in Section 2(a) above.

                  4. REPRESENTATIONS AND WARRANTIES. In addition, the Grantor
hereby represents and warrants to the Buyer that:

                  4.1 Title; No Other Liens. Except for the security interest
granted to the Buyer pursuant to this Agreement, the Grantor owns each item of
the Collateral, free and clear of any and all Liens or claims of others. No
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as have
been filed in favor of the Buyer pursuant to the terms of this Security
Agreement.

                  4.2 Perfected First Priority Lien. The security interests
granted pursuant to this Security Agreement (i) upon completion of the filings
and other actions specified on Schedule 1 hereto will constitute valid perfected
security interests in all of the Collateral, as collateral security for the
Secured Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any Collateral
from such Grantor and (ii) are, with respect to the security interests granted
in the Collateral, the only Liens on the Collateral.

                  4.3 Jurisdiction of Organization; Chief Executive Office. On
the date hereof, the Grantor's jurisdiction of organization, identification
number from the jurisdiction of organization (if any), and the location of the
Grantor's chief executive office or sole place of business or principal
residence, as the case may be, are specified on Schedule 4. The Grantor (i) has
furnished to the Buyer a certified organizational document and long-form good
standing certificate as of a date which is recent to the date hereof, (ii) is
qualified to do business in each jurisdiction where the failure to be so
qualified reasonably could be expected to have a material adverse effect on the
Grantor, and (iii) have all requisite power and authority to execute, deliver
and perform this Security Agreement and each agreement and document to be
executed and delivered by it pursuant hereto.

                  4.4 Title to Collateral. The Grantor has good title to the
Collateral, free of all claims, liens, security interests and restrictions on
transfer or pledge other than the lien in favor of the Buyer created pursuant to
this Security Agreement.

                  4.5 No Default or Event of Default. No Default or Event of
Default has occurred and is continuing as of the date hereof.

                  4.6 UCC Classifications. The Grantor's contractual rights
under any Program Document to which it is a party constitute "accounts" or
"general intangibles" within the meaning of the UCC.

                  4.7 Consents. The Grantor has received all necessary consents
and approvals required by the terms of the Collateral to the pledge to the Buyer
of its interest and rights in such Collateral hereunder.


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<PAGE>

                  4.8 Possession of Collateral. No creditor of the Grantor has
in its possession any portion of the Collateral.

                  4.9 Sole Source of Collateral. The Grantor is and will be the
only ABFS Entity that owns and controls the Collateral subject to the rights
being granted therein to the Buyer hereunder.

                  4.10 Description and Value of Servicing Advances. A true and
complete summary of the existing Servicing Advances as of October 31, 2004 is
set forth on Schedule 2 attached hereto and made a part hereof. Grantor
acknowledges that Schedule 2 does not include future Servicing Advances which
pursuant to Section 2(a) hereof are included in the Collateral.

                  4.11 Solvency. Grantor is solvent as of the date hereof.

                  4.12 Grantor as Servicer. Grantor is the named servicer and
current primary servicer and sole servicer of the mortgage loans under the
Operative Documents listed on Schedule 3 attached hereto and no agreement or
other document exists which would permit the Grantor to cause the servicing or
subservicing of the mortgage loans under such Operative Documents to be sold or
transferred in any way to a back-up servicer, a subservicer or any other third
party, except that with respect to mortgage loans serviced by Grantor under a
warehouse agreement, Grantor may have entered into forward sale agreements for
the sale of such mortgage loans to whole loan purchasers which may service the
mortgage loans upon such sale.

                  4.13 Due Authorization. The execution, delivery and
performance by the Grantors of this Security Agreement (i) have been duly
authorized by all necessary action on the part of the Grantor, (ii) do not and
will not contravene its certificate of formation or operating agreement, any law
or any contractual restriction binding on or affecting the Grantor or any of its
properties, and (iii) do not and will not result in or require the creation of
any Lien upon or with respect to any of their properties (other than the
security interest created hereby in the Collateral).

                  4.14 Taxes, Etc. All taxes, assessments and other governmental
charges imposed upon the Grantor or any property of the Grantor (including,
without limitation, all federal income and social security taxes on employees'
wages) and which have become due and payable on or prior to the date hereof have
been paid, except to the extent contested in good faith by proper proceedings
which stay the imposition of any penalty, fine and Lien resulting from the
non-payment thereof and with respect to which adequate reserves in accordance
with GAAP have been established for the payment thereof.

                  4.15 No Litigation. There is no pending or, to the knowledge
of the Grantor, threatened action, suit, proceeding or claim before any court or
other Governmental Authority or any arbitrator, or any order, judgment or award
by any court or other Governmental Authority or arbitrator, that may adversely
affect the grant by the Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral, or the exercise by the Buyer
of any of its rights or remedies hereunder.

                  4.16 Remittance of Servicing Advances. Grantor has not
remitted, and does not remit, any Servicing Advances to the trustees of


                                      -5-
<PAGE>

securitizations and retains all of the Servicing Advances pursuant to the
instructions provided to JPMorgan Chase Bank (the "Payment Processing Bank"),
which will be amended and made subject to Section 9(c)(2) of the Repurchase
Agreement.

         5. COVENANTS. Grantor covenants and agrees with the Buyer that from and
after the date of this Security Agreement and until the Secured Obligations have
been performed and paid in full:

                  5.1 Further Assurances; Pledge of Instruments. At any time and
from time to time, upon the written request of Buyer and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as the Buyer may
reasonably deem desirable to obtain the full benefits of this Security Agreement
and of the rights and powers herein granted, including, without limitation, (i)
to secure all consents and approvals necessary or appropriate for the assignment
to Buyer of any agreements or license held by Grantor or in which Grantor has
any rights not heretofore assigned, (ii) filing any financing or continuation
statements under the UCC or other notices appropriate under applicable law with
respect to the security interests granted hereby, (iii) filing or cooperating
with Buyer in filing any forms or other documents required to be filed in any
foreign jurisdiction or under any international treaty, required to secure or
protect Buyer's interest in the Collateral, and (iv) without limiting the
generality of the foregoing, Grantor shall, at the Grantor's expense, take and
cause to be taken all such actions as Buyer may reasonably request in order to
perfect and continue the perfection of the liens and security interests granted
to Buyer in the Collateral.

                  5.2 Direction Letters. As provided in Section 9(c)(2) of the
Repurchase Agreement, by November 22, 2004, the Grantor shall deliver to the
Payment Processing Bank an acknowledgement and direction letter instructing the
Payment Processing Bank to remit all proceeds with respect to the Collateral
hereunder to the Buyer, if the Buyer so directs, upon an Event of Default or in
the event of a Margin Deficit.

                  5.3 Limitation on Liens on Collateral. Grantor shall not
create, permit or suffer to exist, and shall defend the Collateral against and
take such other action as is necessary to remove, any Lien on the Collateral.

                  5.4 Taxes, Assessments. Grantor shall promptly pay when due
all property and other taxes, assessments and government charges or levies
imposed upon, and all claims against, the Collateral, except to the extent the
validity thereof is being contested in good faith and adequate reserves are
being maintained in connection therewith.

                  5.5 Further Identification of Collateral. Grantor shall, if so
requested by Buyer, furnish to Buyer, as often as Buyer shall reasonably
request, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Buyer may
reasonably request, all in reasonable detail.

                  5.6 Notices. Grantor shall advise Buyer promptly, in
reasonable detail, of (i) any Lien attaching to or asserted against the
Collateral, (ii) any decline in the nominal amount of the Collateral below


                                      -6-
<PAGE>

US$32,000,000 at any time, (iii) any material change in the composition of the
Collateral, (iv) the occurrence of any other event which would have a material
adverse effect on the aggregate future proceeds of the Collateral or on the Lien
created hereunder, (v) any termination of Grantor's servicing rights by a bond
insurer, and (vi) with respect any securitization transaction pursuant to which
Grantor acts as a servicer, the failure of Grantor to be renewed as a servicer
of such securitization transaction.

                  5.7 Grantor's Legal Status. The Grantor (i) without providing
at least 30 days prior written notice to the Buyer, will not change its name,
its place of business or, if more than one, chief executive office, or its
mailing address or organizational identification number if it has one, (ii) if
the Grantor does not have an organizational identification number and later
obtains one, forthwith notify the Buyer of such organizational identification
number, and (iii) will not change its type of organization, jurisdiction of
organization or other legal structure.

                  5.8 Other Actions as to Any and All Collateral. The Grantor
further agrees, upon request of the Buyer, to take any and all other actions as
such Person may determine to be necessary or useful for the attachment,
perfection and first priority of, and the ability to enforce, the security
interest of the Buyer, in any and all of the Collateral.

                  5.9 Grantor as Servicer. Grantor shall not sell or transfer
any of the Collateral and shall use its best efforts to remain the named
servicer and current primary servicer and sole servicer of the mortgage loans
under the Operative Documents and Grantor will not enter into any agreement or
other document which would cause the servicing or subservicing of the mortgage
loans under the Operative Documents to be sold or transferred in any way to a
back-up servicer, a subservicer or any other third party, except that with
respect to mortgage loans serviced by Grantor under a warehouse agreement,
Grantor may enter into forward sale agreements for the sale of such mortgage
loans to whole loan purchasers which may service the mortgage loans upon such
sale. Additionally, Grantor shall use its best efforts to maintain its rights as
servicer under the Operative Documents, including without limitation any
securitization agreements.


         6. BUYER'S APPOINTMENT AS ATTORNEY-IN-FACT.

                  6.1 Appointment of Buyer and Scope of Power of Attorney.
Grantor hereby irrevocably constitutes and appoints Buyer, and any officer or
Buyer thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of Grantor and in the name of Grantor or in its own name, from time to
time at Buyer's discretion, for the purpose of carrying out the terms of this
Security Agreement, to take any and all appropriate action and to execute and
deliver any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement and, without
limiting the generality of the foregoing, hereby gives Buyer the power and
right, on behalf of Grantor, without notice to or assent by Grantor, to do the
following:

                  (a) to exercise Grantor's rights to realize upon the
Collateral;

                  (b) to pay or discharge any Liens, including, without
limitation, any tax lien, levied or placed on or threatened against the Grantor;
and


                                      -7-
<PAGE>

                  (c) to (i) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
realize upon the Collateral or any part thereof and to enforce any other right
in respect of any Collateral, (ii) defend any suit, action or proceeding brought
against Grantor with respect to any Collateral, (iii) settle, compromise or
adjust any suit, action or proceeding described above and, in connection
therewith, give such discharges or releases as Buyer may deem appropriate, (iv)
sell, transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though Buyer were the
absolute owner thereof for all purposes, and (v) to do, at Buyer's option and
Grantor's expense, at any time, or from time to time, all acts and things which
Buyer may reasonably deem necessary to protect, preserve or realize upon the
Collateral and Buyer's Lien therein in order to effect the intent of this
Security Agreement, all as fully and effectively as Grantor might do.

                  6.2 Exercise of Power of Attorney; Coupled with an Interest.
The Buyer agrees that, except upon the occurrence of an Event of Default or in
the event of a Margin Deficit, it shall not exercise the power of attorney or
any rights granted to Buyer pursuant to Sections 6.1(a) and (c). Grantor hereby
ratifies, to the extent permitted by law, all that said attorney shall lawfully
do or cause to be done by virtue hereof. The power of attorney granted pursuant
to this Section 6 is a power coupled with an interest and shall be irrevocable
until the Secured Obligations are paid and performed in full.

                  6.3 No Duty on Buyer. The powers conferred on Buyer hereunder
are solely to protect Buyer's interests in the Collateral and shall not impose
any duty upon it to exercise any such powers. Buyer shall be accountable only
for amounts that it actually receives as a result of the exercise of such powers
and neither it nor any of its officers, directors, employees, agents or
representatives shall be responsible to Grantor for any act or failure to act,
except for its own gross negligence or willful misconduct.

                  6.4 Buyer May Perform. If Grantor fails to perform or comply
with any of its agreements contained herein and Buyer, as provided for by the
terms of this Security Agreement, shall perform or comply, or otherwise cause
performance or compliance, with such agreement, the reasonable expenses,
including attorneys' fees, of Buyer incurred in connection with such performance
or compliance together with interest thereon at the rate then in effect in
respect of the Purchased Securities, shall be payable by Grantor to Buyer on
demand and shall constitute Secured Obligations secured hereby.

         7. RIGHTS AND REMEDIES; STANDARD FOR EXERCISING.

                  7.1 Rights and Remedies of Buyer. If an Event of Default shall
have occurred and be continuing, the Buyer, without any other notice to or
demand upon the Grantor, shall have in any jurisdiction in which enforcement
hereof is sought, in addition to all other rights and remedies, the rights and
remedies of a secured party under the Uniform Commercial Code and any additional
rights and remedies as may be provided to a secured party in any jurisdiction in
which Collateral is located, including, without limitation, the right to take
possession of the Collateral. In addition, the Grantor waives any and all rights
that it may have to a judicial hearing in advance of the enforcement of any of
the Buyer's rights and remedies hereunder.


                                      -8-
<PAGE>

                  7.2 Standards for Exercising Rights and Remedies. To the
extent that applicable law imposes duties on the Buyer to exercise remedies in a
commercially reasonable manner, the Grantor acknowledges and agrees that it is
not commercially unreasonable for the Buyer (i) to incur expenses reasonably
deemed significant by the Buyer to prepare Collateral for disposition, (ii) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain governmental or
third party consents for the collection or disposition of Collateral to be
collected or disposed of, (iii) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (iv) to contact other persons, whether or not in the
same business as the Grantor, for expressions of interest in acquiring all or
any portion of the Collateral, (v) to dispose of assets in wholesale rather than
retail markets or (vi) to the extent deemed appropriate by the Buyer, to obtain
the services of other brokers, investment bankers, consultants and other
professionals to assist the Buyer in the collection or disposition of any of the
Collateral. The Grantor acknowledges that the purpose of this Section 7.2 is to
provide non-exhaustive indications of what actions or omissions by the Buyer
would fulfill the Buyer's duties under the Uniform Commercial Code or any other
relevant jurisdiction in the Buyer's exercise of remedies against the Collateral
and that other actions or omissions by the Buyer shall not be deemed to fail to
fulfill such duties solely on account of not being indicated in this Section
7.2. Without limitation upon the foregoing, nothing contained in this Section
7.2 shall be construed to grant any rights to the Grantor or to impose any
duties on the Buyer that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section 7.2.

                  7.3 No Waiver by Buyer. The Buyer shall not be deemed to have
waived any of its rights and remedies in respect of the Secured Obligations or
the Collateral unless such waiver shall be in writing and signed by the Buyer.
No delay or omission on the part of the Buyer in exercising any right or remedy
shall operate as a waiver of such right or remedy or any other right or remedy.
A waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion. All rights and remedies of the Buyer
with respect to the Secured Obligations or the Collateral, whether evidenced
hereby or by any other instrument or papers, shall be cumulative and may be
exercised singularly, alternatively, successively or concurrently at such time
or at such times as the Buyer deems expedient.

                  7.4 Application of Proceeds of Collateral. The proceeds of any
sale, disposition or other realization upon all or any part of the Collateral
shall be distributed by Buyer in accordance with the provisions of the Program
Documents.

                  7.5 Waiver by Grantor. To the extent permitted by applicable
law, Grantor waives all claims, damages and demands against the Buyer and
arising out of the repossession, removal, retention, sale or lease of the
Collateral except to extent the same claims, damages and demands are due to such
Person's willful misconduct or gross negligence.

         8. PRESERVATION OF COLLATERAL; LIMITATION ON BUYER'S DUTY IN RESPECT OF
COLLATERAL. Buyer shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it takes such action as
Grantor requests in writing, but failure of Buyer to comply with any such


                                      -9-
<PAGE>

request shall not in itself be deemed a failure to act reasonably, and no
failure of Buyer to do any act not so requested shall be deemed a failure to act
reasonably.

         9. REINSTATEMENT. This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Grantor's
property and assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as an avoidable preference, "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.

         10. MISCELLANEOUS.

                  10.1 Notices. Any notice or other communication hereunder to
Buyer shall be addressed and delivered (and shall be deemed given) in accordance
with the Repurchase Agreement, and with respect to the Grantor, shall be
addressed and delivered to:

         American Business Financial Services, Inc
         The Wanamaker Building
         100 Penn Square East, 8th Floor
         Philadelphia, PA 19109

                  10.2 Severability. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

                  10.3 Headings. The various headings in this Security Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this agreement or any provisions hereof.

                  10.4     No Waiver; Cumulative Remedies.

                  (a) Buyer shall not by any act, delay, omission or otherwise
be deemed to have waived any of their respective rights or remedies hereunder,
nor shall any single or partial exercise of any right or remedy hereunder on any
one occasion preclude the further exercise thereof or the exercise of any other
right or remedy.

                  (b) The rights and remedies hereunder provided are cumulative
and may be exercised singly or concurrently, and are not exclusive of any rights
and remedies provided by law.


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<PAGE>

                  (c) None of the terms or provisions of this Security Agreement
may be waived, altered, modified or amended except by an instrument in writing,
duly executed by Grantor and Buyer.

                  10.5 Termination of this Security Agreement. This Security
Agreement shall terminate upon the indefeasible payment and performance in full
of the Secured Obligations.

                  10.6 Successor and Assigns. The Grantor shall not be permitted
to assign or otherwise transfer, in whole or in part, any of its rights and
obligations under this Security Agreement without the prior written consent of
the Buyer, and any attempted assignment or transfer without such consent shall
be null and void ab initio. This Security Agreement and all obligations of
Grantor hereunder shall be binding upon the successors and permitted assigns of
Grantor, and shall, together with the rights and remedies of Buyer hereunder,
inure to the benefit of Buyer and its respective successors and assigns. No
sales of participations, other sales, assignments, transfers or other
dispositions of any agreement governing or instrument evidencing the Secured
Obligations or any portion thereof or interest therein shall in any manner
affect the Lien granted to Buyer hereunder.

                  10.7 Further Indemnification. Grantor agrees to pay, and to
save Buyer, harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all excise, sales or other similar taxes which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Security
Agreement.

                  10.8 Governing Law. This Security Agreement shall be deemed to
be contracts under the laws of the State of New York and shall for all purposes
be construed in accordance with and governed by the laws of said State
(including Section 5-1401 and 5-1402 of the General Obligations Law, but
otherwise without giving effect to any conflicts of laws provisions contained
therein); provided, however, in the event that by reason of mandatory provisions
of law, any or all of the attachment, perfection or priority of Buyer's security
interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the term UCC shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection of
priority and for purposes of definitions related to such provisions.

                  10.9 Counterparts. This Security Agreement may be executed in
any number of counterparts, each of which when so delivered shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument.

                  10.10 Miscellaneous. The headings of each section of this
Agreement are for convenience only and shall not define or limit the provisions
thereof. This Agreement and all rights and obligations hereunder shall be
binding upon the Grantor and its successors and assigns, and shall inure to the
benefit of the Buyer, on behalf of the Lenders, and its successors and assigns.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby, and this Agreement shall be construed and be enforceable as if
such invalid, illegal or unenforceable term had not been included herein. The
Grantor acknowledges receipt of a copy of this Agreement.


                                      -11-
<PAGE>

                           [Signature page to follow]









































                                      -12-
<PAGE>


                  IN WITNESS WHEREOF, the Grantor has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.


                                American Business Credit, Inc., as Grantor


                                By:   /s/  Stephen M. Giroux
                                   --------------------------------
                                    Name:  Stephen M. Giroux
                                         -----------------------------------
                                    Title: Executive Vice President
                                          ----------------------------------



ACCEPTED AND ACKNOWLEDGED BY:

THE PATRIOT GROUP, LLC, as Buyer


By:     /s/   Jonathan T. Kane
   ---------------------------------
     Name:     Jonathan T. Kane
          ----------------------------------
     Title:    Senior Vice President
           ---------------------------------















                                      -13-

</TEXT>
</DOCUMENT>
