Consent and Release Agreement Regarding Purchased Securities Transaction among Clearwing Capital, LLC, ABFS Warehouse Trust 2003-1, and Related Parties

Summary

This agreement is between Clearwing Capital, LLC and ABFS Warehouse Trust 2003-1, with reference to several related parties and agreements. Clearwing consents to release certain liens and rights to facilitate ABFS's Purchased Securities Transaction, provided specific conditions are met, including payment of fees, delivery of documents, and satisfaction of legal requirements. The agreement also amends certain fee and loan terms. The parties confirm that a prior consent is not effective, and this agreement is only effective upon fulfillment of all listed conditions.

EX-10.6 7 ex10-6.txt EXHIBIT 10.6 Exhibit 10.6 Clearwing Capital, LLC c/o Chrysalis Management Group, LLC The Belgravia Building 1811 Chestnut Street, Suite 700 Philadelphia, Pennsylvania 19103 November 12, 2004 ABFS Warehouse Trust 2003-1 c/o Wilmington Trust Company as Owner Trustee Rodney Square North 1100 North Market Street Wilmington, DE 19890 Telephone No.: (302) 651-1000 Fax No.: (302) 636-4140 Attention: Corporate Trust Administration Re: PATRIOT - PURCHASED SECURITIES TRANSACTION To Whom It May Concern: Reference is made to (a) that certain Loan and Security Agreement, dated as of October 14, 2003 (the "Loan Agreement"), between ABFS Warehouse Trust 2003-2 (the "Borrower") and Chrysalis Warehouse Funding, LLC (the "Lender"), a wholly-owned affiliate of Clearwing Capital, LLC ("Clearwing"), (b) that certain Trust Agreement, dated as of October 14, 2003 (the "Trust Agreement"), among ABFS Consolidated Holdings, Inc. ("Holdings") and certain subsidiaries of Holdings and Wilmington Trust Company, as trustee for ABFS Warehouse Trust 2003-1, a Delaware statutory trust ("Trust 2003-1"), (c) that certain Pledge and Security Agreement, dated as of October 14, 2003 (the "Pledge Agreement"), between Trust 2003-1 and Clearwing, and (d) that certain Fee Letter, dated as of October 14, 2003, by and among Borrower and certain of its affiliates (Borrower and such affiliates, the "Obligors") and Clearwing, as amended by that certain letter agreement, dated as of September 27, 2004, by and among Clearwing and the Obligors (the "2003 Fee Letter"). Except as provided in Paragraph 4 herein or as otherwise indicated, capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Pledge Agreement. Further reference is made to that certain Consent and Amendment to Fee Letter, dated as of October 26, 2004 (the "October 26 Consent"), executed by Clearwing and accepted and agreed to by the Obligors. Trust 2003-1 has advised Clearwing (a) that American Business Financial Services, Inc. ("ABFS") desires to consummate the transaction for the "Purchased Securities" (as such term is defined in the Patriot Commitment Letter, the "Purchased Securities Transaction") prior to the consummation of the transaction for the "Wet Warehouse" (as such term is defined in the Patriot Commitment Letter); and (b) that certain of the conditions precedent to the effectiveness of the October 26 Consent will not be satisfied prior to the consummation of the Purchased Securities Transaction. To enable ABFS to consummate solely the Purchased Securities Transaction, Trust 2003-1 has requested that Clearwing agree solely to (a) release its lien on the interest-only strips listed on Schedule 1 attached hereto (the "Schedule 1 IOS"), and (b) release any lien that Clearwing might have on any of Trust 2003-1's rights to servicing advances arising under any of the agreements listed on Schedule 2 attached hereto (the "Schedule 2 Servicing Agreements"). Now therefore: 1. October 26 Consent. The parties hereby confirm that the October 26 Consent is not effective. 2. Consent. Subject to the terms and conditions contained herein (including without limitation Paragraph 4), Clearwing hereby (a) agrees to release its lien on the Schedule 1 IOS, (b) consents to the distribution by Trust 2003-1 to Holdings of the Schedule 1 IOS, (c) agrees to release any lien that Clearwing might have on any of Trust 2003-1's rights to servicing advances arising under the Schedule 2 Servicing Agreements, (d) consents to the distribution by Trust 2003-1 to American Business Credit, Inc. of any rights that Trust 2003-1 has to the servicing advances arising under the Schedule 2 Servicing Agreements, and (e) agrees to release any rights that Clearwing might have in or to Class X Certificate, No. X-1, issued by ABFS Mortgage Loan Trust 2001-2. 3. Conditions Precedent. The effectiveness of this letter agreement (and the consents provided herein) are subject to the fulfillment, to the satisfaction of Clearwing, of the following conditions: (a) Clearwing shall have received this letter agreement duly executed by the parties hereto, and the same shall be in full force and effect; (b) All documents and legal matters in connection with the Purchased Securities Transaction shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Clearwing; (c) All of the conditions set forth in the documents evidencing the Purchased Securities Transaction shall have been satisfied and the Purchased Securities Transaction shall be consummated in accordance with its terms; (d) The Obligors shall have received all licenses, approvals, or consents necessary to consummate the Purchased Securities Transaction; (e) The representations and warranties in this letter agreement, the Pledge Agreement, the Trust Agreement, and the 2003 Fee Letter shall be true and correct in all material respects as of the date hereof, as though made on such date (except to the extent that such representations and warranties relate solely to an earlier date); (f) No Event of Default under the Pledge Agreement and no Event of Default under and as defined in the Loan Agreement shall have occurred and be continuing on the date hereof, nor shall result from the consummation of the transactions contemplated herein; (g) No injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the consummation of the transactions contemplated herein shall have been issued and remain in force by any governmental authority against any of the Obligors, Patriot, Clearwing, any of their affiliates, or any other Person; (h) The Obligors shall have paid Clearwing, for the benefit of Clearwing, the Lender, and their affiliates, a work fee in an amount equal to $500,000, which amount (i) shall be in addition to all other work fees and all expense deposits paid by any of the Obligors to Clearwing or the Lender, (ii) shall be applied to the payment of costs and expenses incurred at any time by Clearwing and its affiliates in connection with the Patriot Financing or any other financing in favor of any of the Obligors, and (iii) shall be paid as follows: (x) $200,000 of such work fee shall be paid on the date of execution of this letter agreement, and (y) the remaining $300,000 of such work fee shall be paid on the date of the initial funding of the Purchased Securities Transaction. (i) Clearwing shall have received the fees set forth in the 2003 Fee Letter, as amended by Paragraph 4 of this letter agreement; (j) Clearwing shall have received an opinion from counsel for Trust 2003-1 in form and substance satisfactory to Clearwing; (k) Clearwing shall have received the consent, if necessary or appropriate, from the Pledgee Lender (as defined in the Loan Agreement); and (l) The Lender shall have (i) consummated an amendment to the Loan Agreement, which increases the advance rate on Eligible Mortgage Loans to an advance rate satisfactory to the Lender and the Borrower, and (ii) received the consent of the Pledgee Lender (as defined in the Loan Agreement) to such amendment. 4. Amendments to 2003 Fee Letter and Loan Agreement. Each capitalized term used solely in this Paragraph 4 and not otherwise defined in this letter agreement shall have the meaning ascribed to such term in the 2003 Fee Letter. As consideration for Clearwing's consent as provided herein and effective upon the date of execution of the documents evidencing the Purchased Securities Transaction (the "Patriot Closing Date"), the Obligors, jointly and severally, and Clearwing agree to the following amendments to the 2003 Fee Letter and the Loan Agreement: (a) The expiration date of the Commitment Transaction Fee set forth in Section 4(b) of the 2003 Fee Letter shall be extended from January 11, 2005 to and including September 30, 2006; (b) Subject to the amendment set forth in Section 4(c) below, the definition of "Maximum Credit" as set forth in the Loan Agreement shall be amended and restated to read as follows: "Maximum Credit" means $250,000,000, provided, however, that the amount of the Maximum Credit may, in the sole discretion of the Lender at any time after the first anniversary of the Closing Date up November 30, 2005, be increased to at least $400,000,000, provided further, however, that the Company shall have the right to terminate the option of the Lender to so increase the amount of the Maximum Credit so long as (i) the Company and the Lender agree in writing to terminate such option, and (ii) the Increase Option Termination Fee (as defined in the Fee Letter) is paid to Clearwing pursuant to the terms of the Fee Letter. (c) Section 5 of the 2003 Fee Letter shall be amended and restated to read as follows: "5. Increase Commitment Fees. If the Maximum Credit is increased to at least $400,000,000 at the sole discretion of Clearwing (the date of such increase, the "Increase Date"), the Obligors shall pay to Clearwing the following fees: a. Increase Commitment Exercise Fee. A commitment exercise fee (the "Increase Commitment Exercise Fee") of $10,000,000, which shall be fully earned on the Increase Date, nonrefundable when paid, and due and payable in equal monthly installments on the first day of each month commencing with the first day of the first full month following the Increase Date and continuing until all Obligations have been paid in full, with any remaining balance due and payable on the Termination Date, provided, however, that if the Increase Date is on or after June 30, 2005, the Increase Commitment Exercise Fee shall be reduced by an amount equal to (i) $250,000, times (ii) the total number of full months that exist during the period from June 30, 2005 through and including the Increase Date. b. Increase Credit Support Fee. An increase credit support fee of $1,350,000, which fee shall be fully earned and due and payable on the Termination Date, and nonrefundable when paid. c. Increase Loan Commitment Fee. An increase loan commitment fee of $10,500,000, which fee shall be fully earned and due and payable on the Increase Date, and nonrefundable when paid, and shall be payable in advance in 24 equal monthly installments of $437,500 each, payable on the first day of each calendar month from and after the Increase Date through the date on which all of the Obligations are paid in full in accordance with the terms of the Loan Agreement, and the commitments of the Lender under the Loan Agreement are terminated, provided, however, that (a) the increase loan commitment fee that is due in advance for the period from the Increase Date through the last day of the calendar month in which the Increase Date falls shall be due and payable on the Increase Date and shall be an amount equal to (i) $437,500, times (ii) the result of the total number of days that will elapse from (and including) the Increase Date through the last day of the calendar month in which the Increase Date falls divided by the total number of days in such month, and (b) on the Termination Date, the Obligors shall pay an amount necessary to pay in full the remaining balance of the increase loan commitment fee, provided further, however, that if the Increase Date is on or after June 30, 2005, the Increase Loan Commitment Fee shall be reduced by an amount equal to (i) $437,500, times (ii) the total number of full months that exist during the period from June 30, 2005 through and including the Increase Date. d. Increase Option Termination Fee. The Increase Option Termination Fee (as referenced in the definition of Maximum Credit Amount in the Loan Agreement) shall be an amount equal to (i) $7,500,000 plus (ii) an amount equal to $500,000 times each month during the term of the Loan Agreement that the Maximum Credit was not increased to at least $400,000,000." (d) The unpaid balance of the Loan Commitment Fee set forth in Paragraph 2 of the 2003 Fee Letter shall be accelerated such that (i) $2,000,000 of such unpaid balance shall be due and payable on the Patriot Closing Date, and (ii) the balance remaining after payment of such $2,000,000 shall be paid in equal monthly of $1,000,000 on the first day of each month commencing with the first day of the first full month following the Patriot Closing Date until the Loan Commitment Fee is paid in full. (e) The following new Paragraph 10 shall be added to the Fee Letter: 10. Evergreen Expense Deposit. From and after October 26, 2004 through and including the date that all Obligations have been paid in full in accordance with the terms of the Loan Agreement, the Obligors shall maintain at all times a $100,000 expense deposit with Clearwing, for the benefit of Clearwing, the Lender, and their affiliats. 5. Limited Consent. The consent provided in this letter agreement shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term, provision or Event of Default under Loan Agreement, the Pledge Agreement or of any term or provision of any other Loan Document or other instrument referred to therein or herein or of any transaction or further or future action on the part of the Borrower or Trust 2003-1 which would require the consent of the Lender or Clearwing under the Loan Agreement or the Pledge Agreement. 6. Reservation of Rights. You are hereby advised that the Lender and Clearwing expressly reserve all of their respective rights and remedies against the Borrower and Trust 2003-1 under the Loan Agreement, the Pledge Agreement and the other Loan Documents and at law and in equity with respect to all existing or future Events of Default. Neither the Lender nor Clearwing shall be deemed to have waived any term or condition of the Loan Agreement, the Pledge Agreement or any other Loan Document or to have agreed to a forbearance with respect to any right or remedy which the Lender or Clearwing may now have or in the future may have under the Loan Agreement, the Pledge Agreement or any other Loan Document, at law, in equity or otherwise on account of any Default or Events of Default. Neither the Lender nor Clearwing shall by virtue of any action or omission be deemed to have altered or prejudiced any rights or remedies under or in connection with the Loan Agreement, the Pledge Agreement or under or in connection with any Default under the Loan Documents except as specifically set forth herein. All of the terms and conditions of the Loan Agreement and the other Loan Documents are and shall remain in full force and effect. 7. Miscellaneous (a) This letter agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this letter agreement by facsimile or electronic mail shall be equally effective as delivery of a manually executed counterpart. (b) Section and paragraph headings herein are included for convenience of reference only and shall not constitute a part of this letter agreement for any other purpose. [Signature Pages Follow] (c) THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. Very truly yours, CLEARWING CAPITAL, LLC By: Chrysalis Capital Partners, LLC, Its Manager By: /s/ Gregory L. Segall --------------------------------- Name: Gregory L. Segall Its: Managing Member Accepted and Agreed to this th day of November 2004: ABFS WAREHOUSE TRUST 2003-2 By: /s/ Jeffrey M. Ruben -------------------------------------------- Name: Jeffrey M. Ruben Title: Executive Vice President ABFS WAREHOUSE TRUST 2003-1 By: /s/ Jeffrey M. Ruben -------------------------------------------- Name: Jeffrey M. Ruben Title: Executive Vice President AMERICAN BUSINESS FINANCIAL SERVICES, INC. By: /s/ Jeffrey M. Ruben -------------------------------------------- Name: Jeffrey M. Ruben Title: Executive Vice President ABFS CONSOLIDATED HOLDINGS, INC. By: /s/ Jeffrey M. Ruben -------------------------------------------- Name: Jeffrey M. Ruben Title: Executive Vice President AMERICAN BUSINESS CREDIT, INC. By: /s/ Jeffrey M. Ruben -------------------------------------------- Name: Jeffrey M. Ruben Title: Executive Vice President AMERICAN BUSINESS MORTGAGE SERVICES, INC. By: /s/ Jeffrey M. Ruben -------------------------------------------- Name: Jeffrey M. Ruben Title: Executive Vice President HOMEAMERICAN CREDIT, INC., D/B/A UPLAND MORTGAGE By: /s/ Jeffrey M. Ruben -------------------------------------------- Name: Jeffrey M. Ruben Title: Executive Vice President