ARCADIA FINANCIAL LTD, 10-Q, 1998-08-10

ARCADIA FINANCIAL LTD
10-Q, 1998-08-10
SHORT-TERM BUSINESS CREDIT INSTITUTIONS

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-Q

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED JUNE 30, 1998

COMMISSION FILE NUMBER 0-20526

------------------------

ARCADIA FINANCIAL LTD.

(Exact name of registrant as specified in its charter)

MINNESOTA 41-1664848
(State or other jurisdiction (I.R.S. Employer
Of incorporation or organization) Identification Number)

7825 WASHINGTON AVENUE SOUTH, MINNEAPOLIS, MN
55439-2435
(Address of principal executive offices) (Zip
Code)

Registrant's telephone number, including area code (612) 942-9880

------------------------

Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

The number of shares of the Common Stock of the registrant outstanding as of
July 31, 1998 was 39,129,964.

- --------------------------------------------------------------------------------
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<PAGE>

FORM 10-Q INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11

PART II OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23

SIGNATURES 26

EXHIBIT INDEX 27
</TABLE>

The financial information for the interim periods presented herein is
unaudited. In the opinion of management, all adjustments necessary (which are of
a normal recurring nature) have been included for a fair presentation of the
results of operations. The results of operations for an interim period are not
necessarily indicative of the results that may be expected for a full year or
any other interim period.

SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and elsewhere in this Form
10-Q constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements may be
identified by the use of terminology such as "may," "will," "expect,"
"anticipate," "estimate," "should," or "continue" or the negative thereof or
other variations thereon or comparable terminology. Such forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or from those
results presently anticipated or projected. Such factors include, among other
things, the following: delinquency and loan loss rates which vary from
assumptions; modifications to the Company's retail disposition program;
accounting and regulatory changes; interest rate fluctuations; difficulties or
delays in the securitization of automobile loans; availability of adequate
short- and long-term financing; general economic and business conditions; and
other matters set forth under the caption "Cautionary Statements" in exhibit
99.1 filed herewith.

<PAGE>

ARCADIA FINANCIAL LTD.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) JUNE 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
ASSETS

Cash and cash equivalents $ 8,160 $ 17,274
Due from securitization trust 133,551 107,207
Auto loans held for sale 15,480 49,133
Finance income receivable 326,852 371,985
Restricted cash in spread accounts 266,682 250,297
Furniture, fixtures and equipment 16,756 17,371
Other assets 30,225 32,483
------------- ----------------
Total assets $ 797,706 $ 845,750
------------- ----------------
------------- ----------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Amounts due under warehouse facilities $ 53,962 $ 30,880
Other secured borrowings 25,000 -
Senior notes 366,149 365,640
Subordinated notes 49,681 50,772
Capital lease obligations 4,366 5,368
Deferred income taxes - 18,846
Accounts payable and accrued liabilities 39,368 26,302
------------- ----------------
Total liabilities 538,526 497,808

Commitments and contingencies

Shareholders' equity:
Capital stock, $.01 par value, 100,000,000 shares authorized:
Common stock 38,966,697 and 38,813,735 shares issued
and outstanding, respectively 390 388
Additional paid-in capital 323,775 322,819
Retained earnings (deficit) (64,985) 24,735
------------- ----------------
Total shareholders' equity 259,180 347,942
------------- ----------------
Total liabilities and shareholders' equity $ 797,706 $ 845,750
------------- ----------------
------------- ----------------
</TABLE>

See notes to unaudited consolidated financial statements.

<PAGE>

ARCADIA FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1998 1997
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
REVENUES:
Net interest margin $ 14,380 $ 16,995 $ 29,049 $ 33,721
Gain (loss) on sale of loans (82,301) 26,459 (51,247) (51,428)
Servicing fee income 20,184 15,385 39,850 28,683
------------ ------------ ------------ -----------
Total revenues (47,737) 58,839 17,652 10,976

EXPENSES:
Salaries and benefits 15,773 15,115 33,120 29,593
General and administrative and other operating expenses 38,918 23,810 67,405 49,975
------------ ------------ ------------ -----------
Total operating expenses 54,691 38,925 100,525 79,568
Long-term debt and other interest expense 12,908 10,651 25,693 18,242
------------ ------------ ------------ -----------
Total expenses 67,599 49,576 126,218 97,810
------------ ------------ ------------ -----------
Operating income (loss) before income taxes and
extraordinary item (115,336) 9,263 (108,566) (86,834)
Income tax expense (benefit) (21,419) 3,520 (18,846) (33,066)
------------ ------------ ------------ -----------
Income (loss) before extraordinary item (93,917) 5,743 (89,720) (53,768)
Extraordinary item, net of tax - - - (15,828)
------------ ------------ ------------ -----------

Net income (loss) $ (93,917) $ 5,743 $ (89,720) $(69,596)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------

BASIC EARNINGS PER SHARE:
Net income (loss) per share before extrordinary item $ (2.41) $ 0.15 $ (2.30) $ (1.39)
Extraordinary item per share - - - (0.41)
------------ ------------ ------------ -----------
Net income (loss) per share $ (2.41) $ 0.15 $ (2.30) $ (1.80)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------

DILUTED EARNINGS PER SHARE:
Net income (loss) per share before extraordinary item $ (2.41) $ 0.15 $ (2.30) $ (1.39)
Extraordinary item per share - - - (0.41)
------------ ------------ ------------ -----------

Net income (loss) per share $ (2.41) $ 0.15 $ (2.30) $ (1.80)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Weighted average shares outstanding:
Basic 38,966,697 38,702,011 38,965,549 38,558,754
Diluted 38,966,697 39,182,748 38,965,549 38,558,754
</TABLE>

See notes to unaudited consolidated financial statements.

<PAGE>

ARCADIA FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
(DOLLARS IN THOUSANDS) 1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (89,720) $ (69,596)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 5,138 3,262
(Increase) decrease in assets:
Automobile loans held for sale:
Purchases of automobile loans (1,159,784) (1,557,818)
Sales of automobile loans 1,159,976 1,522,135
Repayments of automobile loans 33,461 24,496
Finance income receivable 45,133 24,824
Restricted cash in spread accounts (16,385) (46,666)
Due from securitization trusts (26,344) 8,865
Prepaid expenses and other assets 1,026 (733)
Increase (decrease) in liabilities:
Deferred income taxes (18,846) (42,767)
Accounts payable and accrued liabilities 13,066 14,794
------------ ------------

Total cash used in operating activities (53,279) (119,204)

CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchase of furniture, fixtures and equipment (2,655) (5,006)
Collections on subordinated certificates 527 572
------------ ------------
Total cash used in investing activities (2,128) (4,434)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock 304 2,485
Proceeds from borrowings under warehouse facilities 1,512,737 1,074,410
Repayment of borrowings under warehouse facilities (1,489,655) (1,087,828)
Proceeds from other secured borrowings 25,000 -
Unsecured subordinated notes, net (1,091) (1,947)
Repayments of long-term debt - (145,000)
Proceeds from issuance of long term debt - 300,000
Deferred debt issuance cost - (5,127)
Reduction of capital lease obligations (1,002) (1,277)
------------ ------------
Total cash provided by financing activities 46,293 135,716
------------ ------------

Net increase (decrease) in cash and cash equivalents (9,114) 12,078
Cash and cash equivalents at beginning of period 17,274 16,057
------------ ------------
Cash and cash equivalents at end of period $ 8,160 $ 28,135
------------ ------------
------------ ------------

Supplemental disclosures of cash flow information:
Non cash activities:
Additions to capital leases - $ 132
Cash paid for:
Interest $ 29,480 $ 14,656
</TABLE>

See notes to unaudited consolidated financial statements.

<PAGE>

ARCADIA FINANCIAL LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998
--------------------------------------------------------------------------
NUMBER OF ADDITIONAL RETAINED
COMMON COMMON PAR PAID IN EARNINGS
SHARES VALUE CAPITAL (DEFICIT) TOTAL
-------------- -------------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

BALANCE, DECEMBER 31, 1997 38,813,735 $388 $322,819 $ 24,735 $ 347,942
Exercise of options and warrants 39,357 1 104 - 105
Issuance of Common Stock:
Benefit plans 113,605 1 198 - 199
Amortization of deferred compensation - - 654 - 654
Net loss - - - (89,720) (89,720)
-------------- -------------- -------------- -------------- ----------

BALANCE, JUNE 30, 1998 38,966,697 $390 $323,775 $(64,985) $ 259,180
-------------- -------------- -------------- -------------- ----------
-------------- -------------- -------------- -------------- ----------
</TABLE>

See notes to unaudited consolidated financial statements.

<PAGE>

ARCADIA FINANCIAL LTD.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION. The interim financial statements have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission applicable to quarterly reports on Form
10-Q. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although management believes that the disclosures present
fairly the financial position of the Company and its subsidiaries for the
periods presented. These financial statements should be read in conjunction
with the audited consolidated financial statements and related notes and
schedules included in the Company's 1997 Annual Report on Form 10-K/A filed
March 30, 1998.

The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.

Certain reclassifications have been made to the June 30, 1997 balances
to conform to current period presentation.

USE OF ESTIMATES

In conformity with generally accepted accounting principles, management
utilizes assumptions and estimates that affect the reported value of finance
income receivable and the gain on sale of automobile receivables. Such
assumptions include, but are not limited to, estimates of loan prepayments,
defaults, recovery rates and present value discount. The Company uses a
combination of its own historical experience, industry statistics and
expectation of future performance to determine such estimates. The Company's
estimation process is evaluated on a regular basis and modified when deemed
necessary. Modifications to the estimation process may result in changes in
estimates utilized to determine the carrying value of finance income receivable.
Actual results may differ from the Company's estimates due to numerous
factors both within and beyond the control of Company management. Changes in
these factors could require the Company to revise its assumptions concerning
the amount of voluntary prepayments, the frequency and/or severity of
defaults and the recovery rates associated with the disposition of
repossessed vehicles. The range of assumptions, as well as actual
performance, are reflective of the risk characteristics of the loans within
specific securitization pools.

<PAGE>

ARCADIA FINANCIAL LTD.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE QUARTER ENDED JUNE 30, 1998

2. FINANCE INCOME RECEIVABLE

The following table sets forth the components of finance income receivable:

<TABLE>
<CAPTION>
AT AT
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Estimated cash flows on loans sold, net of estimated prepayments $ 899,783 $ 735,557
Deferred servicing income (102,855) (88,282)
Reserve for loan losses (429,182) (235,599)
------------ ------------

Undiscounted cash flows on loans sold, net of estimated prepayments 367,746 411,676
Discount to present value (40,894) (39,691)
------------ ------------
$ 326,852 $ 371,985
------------ ------------
------------ ------------

Reserve for loan losses as a percentage of servicing portfolio 8.44% 4.75%
</TABLE>

The following represents the roll-forward of the finance income
receivable balance:

<TABLE>
<CAPTION>
<S> <C>
(DOLLARS IN THOUSANDS)
BALANCE, DECEMBER 31, 1997 $ 371,985
Estimated cash flows on loans sold, net of estimated prepayments 126,389
Recognition of present value effect of discounted cash flows 11,739
Less:
Excess cash flows deposited to spread accounts (68,761)
Changes in estimates of charge-offs, recovery rates and prepayments (114,500)
----------
BALANCE, JUNE 30, 1998 $ 326,852
----------
----------
</TABLE>

3. RESTRICTED CASH IN SPREAD ACCOUNTS

The following represents the roll-forward of restricted cash in spread
accounts:

<TABLE>
<CAPTION>
<S> <C>
(DOLLARS IN THOUSANDS)
BALANCE, DECEMBER 31, 1997 $250,297
Excess cash flows deposited to spread accounts 68,761
Interest earned on spread accounts 7,314
Less:
Excess cash flows released to the Company (1) (59,690)
----------
BALANCE, JUNE 30, 1998 $266,682
----------
----------
</TABLE>
- --------------
(1) Includes $7.0 million that has been restricted pursuant to an
arrangement between the Company and its provider of asset-backed
securities insurance. Such arrangement provides that, if any insured
securitization trust exceeds the specified portfolio performance test as
defined within the trust agreement, the Company may, in lieu of
retaining excess cash from that securitization trust in the related
spread accounts, pledge an equivalent amount of cash, which has the
effect of preventing the violation of the portfolio performance test.
Such pledged amounts are included in cash and cash equivalents.
Restrictions on the pledged amounts may be lifted if the portfolio
performance tests are met and maintained for the related securitization
trusts as defined in the arrangement, the violations are waived, or the
loans within the securitization trust are repurchased by the Company.

<PAGE>

ARCADIA FINANCIAL LTD.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE QUARTER ENDED JUNE 30, 1998

4. OTHER ASSETS
<TABLE>
<CAPTION>
AT AT
JUNE 30, DECEMBER 31,
1998 1997
----------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Advances due to servicer $ 5,612 $ 6,072
Deferred debt issuance costs 10,814 11,518
Investment in subordinated certificates 2,337 2,864
Servicing fee receivable 4,706 4,389
Prepaid expenses 1,275 1,078
Repossessed assets 397 1,181
Other assets 5,084 5,381
----------- -----------

$30,225 $32,483
----------- -----------
----------- -----------
</TABLE>

5. SUBORDINATED NOTES
<TABLE>
<CAPTION>
AT AT
JUNE 30, DECEMBER 31,
1998 1997
----------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Senior subordinated notes, Series 1996-A $30,000 $30,000
Junior subordinated notes 19,681 20,772
----------- -----------
$49,681 $50,772
----------- -----------
----------- -----------
</TABLE>

6. OTHER SECURED BORROWINGS

In May 1998, the Company and its provider of asset-backed securities
insurance (FSA) entered into an arrangement whereby FSA allowed the
Company to receive $25 million of excess cash flows from certain spread
accounts sooner than it would have absent such arrangement. The
arrangement may be extended on an annual basis upon mutual arrangement
by and between the Company and FSA. The Company pays a monthly fee to
FSA to maintain the arrangement. The $25 million will be replenished in
the relevant spread accounts by means of a $3 million reduction in the
level of monthly cash releases from the spread accounts. The
replenishment period will begin in May 1999, unless the terms of the
arrangement are extended.

<PAGE>

ARCADIA FINANCIAL LTD.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE QUARTER ENDED JUNE 30, 1998

7. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings per share for each of the three and six month periods ended
June 30:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ---------------------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 1998 1997 1998 1997
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss ) before
extraordinary item $(93,917) $ 5,743 $(89,720) $(53,768)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Denominator:
Denominator for basic earnings per
share - weighted average shares 38,966,697 38,702,011 38,965,549 38,558,754
Dilutive effect of options and warrants (1) - 480,737 - -
---------- ---------- ---------- ----------

Denominator for diluted earnings per
share - adjusted weighted average
shares 38,966,697 39,182,748 38,965,549 38,558,754
---------- ---------- ---------- ----------

Basic earnings (loss) per share before
extraordinary item $ (2.41) $ 0.15 $ (2.30) $ (1.39)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Diluted earnings (loss) per share before
extraordinary item $ (2.41) $ 0.15 $ (2.30) $ (1.39)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
- ------------

(1) For the three and six months ended June 30, 1998 and the six months
ended June 30, 1997, the weighted average shares under the diluted
computation have an anti-dilutive effect; therefore diluted earnings per
share are shown equal to basic earnings per share.

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

Substantially all of the Company's revenues are derived from the
purchase, securitization and servicing of consumer automobile loans
originated in 45 states primarily by car dealers affiliated with major
foreign and domestic manufacturers. Loans are purchased through 18 regional
buying centers (or "hubs") located in 15 states, supplemented by a network of
dealer development representatives ("DDRs") which develop and maintain
relationships with car dealers operating within each "hub's" immediate market
area or in surrounding market areas referred to as "spokes." Credit approval
and loan processing are generally performed at the "hub" or at the Company's
headquarters in Minneapolis, Minnesota. The Company acts as the servicer of
all loans originated and securitized by it in return for a monthly servicing
fee. To perform its servicing responsibilities the Company operates a
national customer service center in Minneapolis, Minnesota and four regional
collection centers located in Charlotte, North Carolina; Dallas, Texas;
Denver, Colorado; and Minneapolis, Minnesota.

THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997

RESULTS OF OPERATIONS

CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING CHARGES

Included in the Company's financial results for the three and six months
ended June 30, 1998, are two non-cash charges totaling $125 million. The
non-cash charges include a pre-tax $114.5 million charge to gain on sale of
loans associated with a change in accounting estimates to reflect (i) a
higher estimate of the frequency of defaulted receivables (ii) a reduction in
assumed loan loss recovery rates, (iii) a reduction in estimated voluntary
loan prepayments, and (iv) additions to general reserves applicable to
unanticipated changes in the future performance of the existing portfolio of
receivables. An additional $10.5 million pre-tax charge relates to the
elimination of the Company's retail remarketing program and other
organizational changes designed to improve future operating efficiencies.

Historically, management's estimate of the frequency of loan defaults
was based on actual credit performance incurred to date segregated by each
securitization transaction and loan product (Premier and Classic) as well as
comparisons to externally-generated industry information when available. In
response to a perception of increased risk within the consumer finance
industry and the Company's dependence on internal historical experience as an
indicator of future credit performance, management commenced a project to
identify what it hoped would be a more predictive alternative to estimating
future performance of its servicing portfolio to not only improve the
Company's assessment of its finance income receivable carrying amount but
also to enhance the Company's pricing of its loan products. This project
focused on identifying correlations between the credit performance of the
loans in the Company's servicing portfolio and the credit characteristics of
each contract at the time of origination, including externally-developed
credit score, loan-to-value ratio, debt-to-income ratio and payment-to-income
ratio. The Company's decision to obtain and utilize a credit score from a
nationally recognized independent credit scoring company rather than
utilizing its own internally-developed credit score was based on its desire
to reduce the subjectivity of the analysis. As a result of this project,
management determined that the combination of externally-developed credit
score and loan-to-value ratio was most predictive of future loan performance.
Using the information derived from this process, management was then able to
segregate the loans in its servicing portfolio into eight distinct tranches
of credit performance that management believes provide a higher level of
precision in estimating future default experience than its previous
methodology. As a result, management determined in June 1998 that it was
necessary to revise its estimate with respect to the frequency of future loan
defaults and reduce the carrying value of its finance income receivable by
approximately $67 million.

<PAGE>

In addition to the frequency of loan defaults, the valuation of the
Company's finance income receivable is based in part on an estimate of the
recovery upon the disposition of repossessed vehicles. Although the Company
was reserved for and realized recovery rates slightly above 50% on the sale
of repossessed vehicles during the first six months of 1998, management
believes that market pressure on used car prices will force future recovery
rates downward and therefore, believes that it is appropriate to lower the
estimated recovery rate to 45%. This decrease to the Company's estimated
recovery rate, taking into consideration the increase in the estimated
frequency of defaults discussed above, led to a further reduction in the
carrying value of finance income receivable of approximately $51 million.

A third component in the valuation of finance income receivable is
an estimate of the amount and timing of voluntary prepayments of loans.
Historically, management has estimated the percentage of receivables it
expects to prepay on a monthly basis and has assumed that such monthly
prepayment speed would remain constant throughout the life of the
securitization trust. A detailed analysis of the Company's actual prepayment
data indicated, however, that for an extended period of time prepayment
speeds have performed slower than expected and have progressively declined as
a securitization trust ages. As a result, management determined that it was
appropriate to reduce its prepayment speed assumption, which resulted in an
increase to its finance income receivable carrying value of approximately $49
million.

Finally, to provide for current uncertainties related to the
consumer finance industry and the remaining subjectivity of the estimates
used in valuing the finance income receivable, management believes that it
was appropriate to increase its finance income receivable reserves by an
additional $45.5 million.

Also during the second quarter of 1998, the Company decided to
discontinue its retail remarketing operations and finalized plans aimed at
reducing infrastructure costs and improving operating efficiencies. After a
detailed review during the past 18 months, the Company determined that its
retail remarketing operation which was responsible for the liquidation of
repossessed vehicles through retail consignment lots did not provide an
adequate risk-adjusted return commensurate with the attention necessary by
management to operate such strategy and therefore decided to cease such
operations. Also during this time period, the Company conducted an exhaustive
study of substantially all Company functions and developed a plan which
includes further consolidation of the Company's servicing and collection
operations into its four regional collection centers and streamlining of
other operating procedures. As a result, the Company has recognized a $10.5
million pre-tax charge through other operating expenses associated with
estimated severance and benefit costs, termination or subleasing of certain
lease commitments, and legal expenses associated with the operational changes.

Included in the Company's financial results during the three and six
month periods ended June 30, 1997, are two special charges taken in March
1997. These charges included a non-cash pre-tax charge of approximately $103
million, due primarily to a change in accounting estimate related to the
assumed recovery rates on repossessed vehicles and modifications to the
Company's retail disposition strategy, and an extraordinary charge of
approximately $15.8 million, net of tax, due to the early extinguishment of
the Company's 13% Senior Term Notes, due 2000 (the "13% Notes").

<PAGE>

NET INTEREST MARGIN. The components of net interest margin for each of
the three and six months ended June 30 were:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1998 1997 1998 1997
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Interest income on loans, net $ 6,753 $ 8,961 $13,032 $17,131
Interest income on short-term investments
and other cash accounts 2,887 3,474 5,947 6,492
Recognition of present value discount 5,440 4,736 11,739 10,932
Provision for credit losses on loans held for sale (700) (176) (1,669) (834)
---------- ---------- ---------- ---------

Net interest margin $14,380 $16,995 $29,049 $33,721
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
</TABLE>

Net interest margin declined 15% and 14% during the three and six months
ended June 30, 1998, respectively, compared with the same periods in 1997.
The decline in net interest margin is primarily due to a reduction in the
average balance of loans held for sale pending securitization and an increase
in the provision for credit losses on loans held for sale to reflect an
increased proportion of Classic loan purchases, partially offset by wider net
interest rate spreads earned on loans held for sale.

A 22% and 24% decline in loan purchasing volume (see table below)
and the timing of securitization transactions during the three and six months
ended June 30, 1998, respectively, resulted in a reduction in the average
monthly balance of loans held for sale, on which the Company earns interest
income until such loans are securitized, to $191.4 million and $187.3
million, respectively, down from $255.0 million and $246.0 million in the
same periods of 1997, respectively. The decline in purchasing volume is
primarily due to the Company's emphasis on more selective loan purchases.
During the three and six months ended June 30, 1998, the weighted average net
interest rate spread earned rose to 11.04% and 11.23% respectively, compared
with 9.82% and 9.93%, respectively, during the same periods in 1997. The rise
in net interest rate spread earned on loans held for sale is principally due
to higher average annual percentage rates ("APRs") paid by obligors primarily
resulting from a greater proportion of loan volume consisting of higher rate
Classic loans.

The Company's loan purchasing and securitization volume for each
of the three and six months ended June 30 are set forth in the table below.

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Premier $161,555 $358,543 $ 333,838 $ 761,738
Classic 411,325 379,959 823,015 758,636
-------------- -------------- -------------- -----------

Total loans purchased $572,880 $738,502 $1,156,853 $1,520,374
-------------- -------------- -------------- -----------
-------------- -------------- -------------- -----------

Automobile loans securitized $571,782 $747,391 $1,159,976 $1,522,135
</TABLE>

GAIN ON SALE OF LOANS. During the three months ended June 30, 1998, the
Company recognized a non-recurring pre-tax charge to gain on sale of loans of
$114.5 million resulting in a loss on sale of loans of $82.3 million and $51.2
million for the three and six months ended June 30, 1998, respectively. Included
in gain on sale of loans during the six months ended June 30, 1997 was a
non-recurring pre-tax charge of $98.0 million resulting in a loss on sale of
loans of $51.4 million. See "CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING
CHARGES" for discussion of these charges. Excluding these charges, gain on sale
of loans increased 22% and 36% during the three and six months ended June 30,
1998, respectively, compared with the same periods in 1997. The increases are
primarily due

<PAGE>

to a widening of the gross interest spread earned on loans securitized (see
table below) and a decline in the average participation rate paid to dealers
for loan originations, partially offset by the decrease in loan
securitization volume.

The following table summarizes the Company's gross interest rate
spreads for each of the three and six month periods ended June 30:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ------------------------
1998 1997 1998 1997
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Weighted average APR of loans securitized 17.06% 15.83% 17.05% 15.65%
Weighted average securitization rate 5.97 6.50 5.97 6.51
--------- --------- ---------- ---------
Gross interest rate spread (1) 11.09% 9.33% 11.08% 9.14%
--------- --------- ---------- ---------
--------- --------- ---------- ---------
</TABLE>
- -----------
(1) Before gains/losses on hedging transactions.

The rise in gross interest rate spread during the three and six
months ended June 30, 1998 is primarily due to an increased proportion of
higher-yielding Classic loans, resulting in an increased average APR earned
on loans purchased and subsequently securitized, and due to a reduction in
the securitization interest rate primarily reflecting a general decline in
market interest rates.

Any unamortized balance of participations paid to dealers is
expensed at the time the related loans are securitized and recorded as a
reduction to gain on sale. Due to the increased proportion of Classic loan
purchases, which generally require lower participation rates than Premier
loans, participations paid as a percentage of the principal balance of loans
purchased declined to 2.80% and 2.83% during the three and six months ended
June 30, 1998, from 3.14% and 3.20%, respectively, in the same periods a year
ago.

Gain on sale of loans has been adjusted for net realized losses on
hedging transactions of $2.6 million and $8.4 million during the three and
six months ended June 30, 1998, compared with net realized losses of $1.6
million and $0.2 million, respectively, in the same periods a year ago.

SERVICING FEE INCOME. The components of servicing fee income for
each of the three and six months ended June 30 were:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -----------------------
1998 1997 1998 1997
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Contractual servicing fee income $14,251 $11,047 $28,179 $20,525
Other servicing income 5,933 4,338 11,671 8,158
----------- ----------- ---------- ----------

Total servicing fee income $20,184 $15,385 $39,850 $28,683
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>

The Company earns contractual servicing fee income for servicing loans
sold to investors through securitizations. The servicing fee is 1% per annum
of the outstanding principal balance of the loans for all securitizations
entered into prior to September 1997 and 1.25% per annum on loans included in
and subsequent to the third quarter 1997 securitization. The growth in
contractual servicing fee income is primarily related to an increase in the
average servicing portfolio outstanding (see table below).

14
<PAGE>

Other servicing income consists primarily of collection fees, such as
late payment fees and insufficient fund charges, and interest on collection
accounts earned by the Company as servicer of the loans. The rise in other
servicing income is principally due to increases in income from late fees and
insufficient fund charges reflecting the increase in delinquency rates and
growth in the Company's servicing portfolio compared to the same periods a
year ago and increased collection account interest attributable to the growth
in the average servicing portfolio outstanding.

The following table reflects the growth in the Company's servicing
portfolio from June 30, 1997 to June 30, 1998:

<TABLE>
<CAPTION>
AT JUNE 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
Principal balance of automobile loans held for sale $ 14,726 $ 51,487
Principal balance of loans serviced under securitizations 5,070,879 4,462,522
---------- ----------
Servicing portfolio $5,085,605 $4,514,009
---------- ----------
---------- ----------
Average unpaid principal balance (actual dollars) $ 11,609 $ 12,382
Number of loans serviced 438,063 364,553
</TABLE>

The Company's servicing portfolio increased 13% from June 30, 1997 to
June 30, 1998. This increase reflects loan purchases and subsequent
securitizations, partially offset by defaults, prepayments and scheduled
repayments. The decline in average outstanding balance of loans during the
first six months of 1998 reflects an increase in the proportion of used to
new cars financed by the Company and a reduction in loan-to-value ratios on
loan purchases during the past 18 months.

The Company's servicing fee approximates adequate compensation as
defined by SFAS 125 and therefore, the Company has not recorded a servicing
asset or liability at June 30, 1998.

OPERATING EXPENSES. During the three and six months ended June 30, 1998,
salaries and benefits increased 4% and 12%, respectively, from the same
periods a year ago. Beginning in the first quarter of 1998, the Company began
to move collection personnel out of buying centers into centralized sites to
better leverage collections resources and technology and to control
collection processes more tightly. While this organizational change has
resulted in a reduction in the number of collection personnel, primarily due
to anticipated improvements in efficiencies and a temporary delay in the
staffing of the new centralized sites, it has also had the effect of
increasing salaries and benefits during the second quarter and first six
months of 1998 over the same periods in 1997 due to severance expenses
associated with the change.

Other operating costs, including administrative, occupancy, depreciation
and amortization, origination, servicing and collection expenses, increased
63% and 35% for the three and six months ended June 30, 1998, respectively,
compared with the same periods in 1997. Included in operating costs during
the three and six months ended June 30, 1998 is a pre-tax charge of
approximately $10.5 million. This charge is related to the elimination of the
Company's retail remarketing program and other organizational changes
designed to improve operating efficiency. (See "CHANGES IN ACCOUNTING
ESTIMATES AND NON-RECURRING CHARGES"). Included in operating costs during the
first six months of 1997 was a pre-tax charge of approximately $5.0 million
primarily related to legal costs and severance expenses for certain former
executives of the Company. Excluding these charges, other operating costs
increased 19% and 27% for the three and six months ended June 30, 1998,
respectively, compared with the same periods in 1997. The increase in other
operating costs is primarily a result of the higher percentage of Classic
program loans in the portfolio, since these loans generally require greater
collection efforts and related costs (including increased telephone, fax,
postage and repossession expenses) than Premier program loans.

IMPACT OF YEAR 2000. The Company recognizes that the arrival of the Year
2000 poses a unique worldwide challenge to the ability of all computer
systems to recognize the date change from December 31, 1999 to January 1,

15
<PAGE>

2000 and, like other companies, is assessing, enhancing and updating its
computer applications and business processes to provide for their continued
functionality after said date. In connection with its initiative to replace
and enhance key operating systems, the Company has engaged outside
consultants to assist in the design and implementation of various systems
that will be Year 2000 compliant. The Company anticipates that the testing
and implementation of such systems will be completed by mid-1999, which is
prior to any anticipated impact on its operating systems. The Company
believes that with conversions to new software, the Year 2000 issue will not
pose significant operational problems for its computer systems. However, if
such conversions are not made, or are not completed in a timely manner, the
Year 2000 issue could have a material impact on the operations of the Company.

The costs associated with the Year 2000 project will be primarily for
the purchase of the new software being developed to replace and enhance the
Company's current operating systems. Consistent with its capitalization
policy, the costs of the Company's new operating software will be capitalized
and amortized over its expected useful life. As such, the Company believes
that the impact of the Year 2000 issue will not have a material effect on the
Company's results of operations.

LONG-TERM DEBT AND OTHER INTEREST EXPENSE. Long-term debt and other
interest expense increased 21% and 41% for the three and six months ended
June 30, 1998, respectively, compared to the same periods in 1997. The
increases are primarily due to the issuance of $300.0 million and $75.0
million of 11.5% Senior Notes ("the Senior Notes") in March 1997 and October
1997, respectively, partially offset by the concurrent extinguishment of
$145.0 million of the 13% Notes in March 1997.

EXTRAORDINARY ITEM. In March 1997, the Company issued $300.0 million of
its Senior Notes and utilized approximately $173.5 million of the proceeds to
repurchase and covenant defease the Company's $145.0 million of 13% Notes,
including accrued interest of $7.9 million and a premium of approximately
$20.3 million. These charges and additional professional fees incurred to
retire such debt were treated as an extraordinary item, net of tax.

FINANCIAL CONDITION

FINANCE INCOME RECEIVABLE. Finance income receivable decreased to $326.9
million at June 30, 1998 from $372.0 million at December 31, 1997. This 12%
decrease reflects a non-recurring $114.5 million pre-tax charge during the
second quarter (see "CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING
CHARGES") partially offset by amounts capitalized upon completion of the
Company's first and second quarter securitizations related to the present
value of estimated cash flows.

RESTRICTED CASH IN SPREAD ACCOUNTS. Restricted cash in spread accounts
increased to $266.7 million at June 30, 1998 from $250.3 million at December
31, 1997. This increase reflects the Company's continued securitization of
loan purchases and the related accumulation of excess cash flows in
restricted cash accounts to reach levels defined within each securitization
agreement, partially offset by the release of excess cash flows to the
Company through its wholly-owned subsidiary, Arcadia Receivables Finance Corp.

DEFERRED INCOME TAX. There were no deferred income taxes at June 30,
1998 compared with a net deferred tax liability of $18.8 million at December
31, 1997. This decrease reflects the recognition of a portion of the tax
benefit from the current quarter loss from operations. In accordance with
SFAS No. 109, "Accounting for Income Taxes," the Company established a
valuation allowance during the quarter ended June 30, 1998. The valuation
allowance was established to offset the deferred tax asset associated with
the Company's net operating loss carryforward resulting in no net deferred
income taxes at June 30, 1998.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES. Accounts payable and accrued
liabilities increased 50% to $39.4 million at June 30, 1998 as compared with
$26.3 million at December 31, 1997. This increase is primarily due to
accruals recorded during the second quarter of 1998 related to the
elimination of the Company's retail remarketing program and other
organizational changes designed to improve operating efficiency (see "CHANGES
IN ACCOUNTING ESTIMATES AND NON-RECURRING CHARGES").

<PAGE>

DELINQUENCY, CREDIT LOSS AND REPOSSESSION EXPERIENCE

The following tables describe the Company's delinquency, credit loss and
repossession experience for the periods indicated. A delinquent loan may
result in the repossession and foreclosure of the collateral for the loan.
Losses resulting from repossession and foreclosure of loans are charged
against applicable allowances.

DELINQUENCY EXPERIENCE (1):
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
----------------------------- -----------------------------
NUMBER OF NUMBER OF
LOANS BALANCE LOANS BALANCE
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Servicing portfolio at end of period 438,063 $5,085,605 411,429 $4,956,090
Delinquencies:
31-60 days 8,172 $ 96,169 8,297 $ 100,161
61-90 days 3,740 44,733 3,635 45,485
91 days or more 4,685 51,810 3,019 34,047
------------- ------------ ------------- ------------

Total loans delinquent 31 or more days 16,597 $ 192,712 14,951 $ 179,693
Delinquencies as a percentage of
number of loans and amount
outstanding at end of period (2) 3.79% 3.79% 3.63% 3.63%
Amount in repossession (3) 4,184 $ 28,861 6,083 $ 55,300
------------- ------------ ------------- ------------

Total delinquencies and amount in
repossession (2) (3) 20,781 $ 221,573 21,034 $ 234,993
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
</TABLE>
- -----------
(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each loan. The information in the table includes previously sold
loans which the Company continues to service.

(2) Amounts shown do not include loans which are less than 31 days delinquent.

(3) Amount in repossession represents financed automobiles which have been
charged-off but not yet liquidated.

<PAGE>

CREDIT LOSS/REPOSSESSION EXPERIENCE (1):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Average servicing portfolio outstanding during the period $5,049,786 $4,335,962 $5,025,684 $4,150,719

Average number of loans outstanding during the period 432,007 340,143 425,408 324,169
Number of charge-offs 8,677 5,672 16,274 10,365

Gross charge-offs (2) $ 78,947 $ 33,261 $ 131,426 $ 79,671
Recoveries (3) 4,172 2,533 7,748 4,413
------------- ----------- ------------- -----------

Net losses $ 74,775 $ 30,728 $ 123,678 $ 75,258
------------- ----------- ------------- -----------
------------- ----------- ------------- -----------
Annualized gross charge-offs as a percentage of average
servicing portfolio 6.25% 3.07% 5.23% 3.84%
Annualized net losses as a percentage of average
servicing portfolio 5.92% 2.83% 4.92% 3.63%
</TABLE>
- ----------
(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each loan. The information in the table includes previously sold
loans which the Company continues to service.

(2) Gross charge-offs represent principal amounts which management estimated to
be uncollectable after the consideration of anticipated proceeds from the
disposition of repossessed assets and selling expenses.

(3) Includes post-disposition amounts received on previously charged off loans.

The increase in delinquency rate at June 30, 1998, compared with
December 31, 1997, reflects the continued rise in the proportion of Classic
loans in the Company's servicing portfolio, which approximated 50% of loans
serviced at June 30, 1998, compared with 43% at December 31, 1997.
Repossessed inventory has decreased since December 31, 1997, primarily due to
the Company's decision to increase its use of wholesale disposition channels
to liquidate repossessed vehicles. During the first six months of 1998 the
Company sold approximately 74% of its repossessed inventory through wholesale
channels compared with 45% in the same period a year ago.

Annualized gross charge-offs and net losses during the three and six
month periods ended June 30, 1998, include a charge of 1.72% and 0.86%,
respectively, representing the impact of a write-down of current inventory
resulting from a revision to the estimate of net realizable value (see
"CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING CHARGES") and the
write-off of all remaining problem loans from one of the Company's original
consignment dealers which it has since ceased doing business. The remaining
increase in gross charge-offs and net losses during the three and six months
ended June 30, 1998, compared to the same periods a year ago primarily
reflects the continued rise in the proportion of Classic loans in the
Company's servicing portfolio and the increase in the utilization of
wholesale disposition channels. As previously discussed, the Company
announced that it is planning to discontinue the sale of repossessed vehicles
through retail disposition channels and anticipates that it will be
completely out of these operations by the end of 1998 (see "CHANGES IN
ACCOUNTING ESTIMATES AND NON-RECURRING CHARGES"). The Company believes that
its decision to discontinue its retail remarketing operations will enable it
to better manage its level of repossessed inventory and improve the timing of
excess cash flows released to the Company from securitization trusts as a
result of an increase in the speed at which repossessed vehicles can be
liquidated.

18
<PAGE>

LIQUIDITY

The Company's business requires substantial cash to support its
operating activities. The principal cash requirements include (i) amounts
necessary to purchase and finance automobile loans pending securitization,
(ii) payment of dealer participations, (iii) cash held from time to time in
restricted spread accounts to support securitizations and warehouse
facilities and other securitization expenses, (iv) interest advances to
securitization trusts, (v) repossessed inventory, and (vi) interest expense.
The Company also uses significant amounts of cash for operating expenses. The
Company receives cash principally from interest on loans held pending
securitization, from excess cash flow received from securitization trusts and
from fees earned through servicing of loans held by such trusts. The Company
has operated on a negative operating cash flow basis and expects to continue
to do so in the near future. The Company has historically funded these
negative operating cash flows principally through borrowings from financial
institutions, sales of equity securities and sales of senior and subordinated
notes. The Company may require additional capital in the future to fund
continued negative cash flows, although there can be no assurance that the
Company will have access to capital markets in the future or that financing
will be available to satisfy the Company's operating and debt service
requirements or to fund its future growth. See "Capital Resources."

PRINCIPAL USES OF CASH IN OPERATING ACTIVITIES

PURCHASE AND FINANCING OF AUTOMOBILE LOANS. Automobile loan purchases
represent the Company's most significant cash flow requirement. The Company
funds the purchase price of loans primarily through the use of warehouse
facilities. However, because advance rates under the warehouse facilities
generally provide funds from 93% to 97% of the principal balance of the
loans, the Company is required to fund the remainder of all purchases prior
to securitization with other available cash resources. The Company purchased
$1.2 billion of loans during the first six months of 1998 compared to $1.5
billion during the same period in 1997.

DEALER PARTICIPATIONS. Consistent with industry practice, the Company
pays dealers participations for selling loans to the Company. These
participations typically require the Company to advance an up-front amount to
dealers. Participations paid by the Company to dealers during the six months
ended June 30, 1998 were $32.7 million, or approximately 2.83% of the
principal balance of loans purchased, compared with $48.7 million, or
approximately 3.20% of loans purchased, during the same period in 1997. The
decrease in dealer participations as an aggregate amount and as a percentage
of loans purchased reflects the growth in volume in Classic loans, which are
generally associated with lower dealer participations.

SECURITIZATION OF AUTOMOBILE LOANS. In connection with securitizations,
the Company is required to fund spread accounts related to each transaction.
The Company funds these spread accounts by foregoing receipt of excess cash
flow until these spread accounts exceed predetermined levels. In addition,
for certain securitizations prior to the third quarter of 1997, the Company
has been required to provide initial cash deposits into the spread accounts.
The Company had $266.7 million of restricted cash in spread accounts at June
30, 1998, compared with $250.3 million at December 31, 1997. The increase in
restricted cash in spread accounts reflects the Company's continued
securitization of loan purchases and the related accumulation of excess cash
flows to levels defined within each securitization agreement, partially
offset by the release of excess cash flows.

The Company also incurs certain expenses in connection with
securitizations, including underwriting fees, credit enhancement fees,
trustee fees and other costs, which approximate 0.5% of the principal amount
of the asset-backed securities sold in the securitizations.

ADVANCES DUE TO SERVICER. As the servicer of loans sold in
securitizations, the Company periodically makes interest advances to the
securitization trusts to provide for temporary delays in the receipt of
required interest payments from borrowers. In accordance with the relevant
servicing agreements, the Company makes advances only in the event it expects
to recover such advances through payments from the obligor

<PAGE>

over the life of the loan.

REPOSSESSED INVENTORY. At June 30, 1998, repossessed inventory managed
or owned by the Company and held for resale was $28.9 million, compared with
$55.3 million at December 31, 1997. The rate of repossessed inventory
turnover impacts cash available for spread accounts under securitization
trusts and, consequently, the excess cash available for distribution to the
Company. At June 30, 1998, repossessed inventory was 0.6% of the total
servicing portfolio compared with 1.1% at December 31, 1997. In June 1998,
the Company decided to discontinue liquidating its repossession inventory
through retail disposition channels and begin disposing of its repossessed
vehicles exclusively through wholesale auctions (see "CHANGES IN ACCOUNTING
ESTIMATES AND NON-RECURRING CHARGES"). Any improvement in excess cash flows
due to an increase in the inventory turnover rate may be partially reduced by
lower recoveries realized through the exclusive use of wholesale auctions and
generally lower wholesale used car prices.

INTEREST EXPENSE. Although the Company records net interest margin as
earned, a significant portion of the interest income component is generally
received in cash from excess cash flow, while the interest expense component
(primarily warehousing interest) is paid prior to securitization. The Company
also incurs interest expense related to both short-term and long-term debt
obligations.

PRINCIPAL SOURCES OF CASH IN OPERATING ACTIVITIES

EXCESS CASH FLOW. The Company receives excess cash flow from
securitization trusts, including the realization of gain on sale, the
recovery of dealer participations, and the recovery of accrued interest
receivable earned, but not yet collected, on loans held for sale prior to
securitization. Recovery of dealer participations and accrued interest
receivable, which occur throughout the life of the securitization, result in
a reduction of the finance income receivable but, because they have been
considered in the original determination of the gain on sale of loans, have
no effect on the Company's results of operations in the year in which the
participations and interest are recovered from the securitization trust.
During the first six months of 1998, the Company received $59.6 million of
excess cash flow, compared with $33.7 million during the same six months in
1997. Included in the 1998 cash released from spread accounts is $7.0 million
of cash which is restricted pursuant to an arrangement between the Company
and its asset-backed securities insurance provider.

SERVICING FEES. The Company receives servicing fees for servicing
securitized loans included in various securitization trusts. The servicing
fee for loans in securitization trusts is equal to one percent per annum of
the outstanding principal balance of the loans for all securitizations
entered into prior to September 1997 and 1.25 percent per annum on loans
subsequently securitized. The Company also receives collection fees, such as
late payment fees and insufficient fund charges, and interest on collection
accounts earned by the Company as servicer of the loans. During the six
months ended June 30, 1998 and 1997, the Company received cash for such
servicing in the amount of $39.2 million and $27.5 million, respectively.
Servicing fee income is reflected in the Company's revenues as earned.

CAPITAL RESOURCES

The Company finances the acquisition of automobile loans primarily
through (i) warehouse facilities, pursuant to which loans are sold or
financed generally on a temporary basis, and (ii) the securitization of
loans, pursuant to which loans are sold as asset-backed securities.
Additional financing is required to fund the Company's operations.

WAREHOUSE FACILITIES. Automobile loans held for sale are funded
primarily through warehouse facilities. At June 30, 1998, the Company had
three warehouse facilities in place with various financial institutions and
institutional lenders with an aggregate capacity of $875.0 million, of which
$821.0 million was available. Based on anticipated loan purchasing volume
during the next few quarters, the Company decided to terminate one of its
warehouse facilities with a capacity of $175.0 million in July 1998, and
eliminate the related commitment fees. The remaining facilities expire in
October 1998 and July 1999, subject to renewal

<PAGE>

or extension at the lenders' option. Proceeds from securitizations, generally
received within seven to ten days following the cut-off date established for
the securitization transaction, are applied to repay amounts outstanding
under warehouse facilities.

SECURITIZATION PROGRAM. An important capital resource for the Company
has been its ability to sell automobile loans in the secondary markets
through securitizations. The following table summarizes the Company's
securitization transactions for the six months ended June 30, 1998, all of
which were publicly issued and rated "AAA/Aaa".

<TABLE>
<CAPTION>
REMAINING CURRENT
REMAINING BALANCE AS A CURRENT WEIGHTED GROSS
BALANCE AS PERCENTAGE WEIGHTED AVERAGE INTEREST
ORIGINAL OF JUNE 30, OF ORIGINAL AVERAGE SECURITIZATION RATE
DATE BALANCE 1998 BALANCE APR RATE SPREAD
- ---------------------- ---------- ---------- ------------- ---------- -------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
March 1998 $ 525,000 $ 492,057 93.73% 17.15% 5.93% 11.22%
June 1998 (1) 550,000 532,293 96.78% 17.26% 5.97% 11.29%
---------- ----------
$1,075,000 $1,024,350
---------- ----------
---------- ----------
</TABLE>
- ----------------------
(1) As of June 30, 1998, the Company had delivered $536.6 million of automobile
loans and $13.4 million of cash remained in the pre-funded portion of the
trust.

HEDGING STRATEGY

The Company enters into hedging transactions to manage its gross
interest rate spread on loans held for sale. The Company sells forward US
Treasuries that most closely parallel the average life of its portfolio of
loans held for sale. Hedging gains and losses are recognized as a component
of the gain on sale of loans on the date such loans are sold. To the extent
hedging gains or losses are significant, the resulting up-front cash payments
or receipts may impact the Company's liquidity. The Company receives the
up-front gains or losses back over time through a lower or higher spread,
respectively, at the time of securitization. During the first six months of
1998, the Company had net realized losses on hedging transactions of $8.4
million. The Company had unrealized losses on hedge contracts of $1.0 million
that remain outstanding at June 30, 1998.

OTHER CAPITAL RESOURCES

Historically, the Company has utilized various debt and equity
financings to offset negative operating cash flows and support its
operations. No such offerings were completed by the Company during the first
six months of 1998.

In May 1998, the Company and its provider of asset-backed securities
insurance (FSA) entered into an arrangement whereby FSA allowed the Company
to receive $25 million of excess cash flows from certain spread accounts
sooner than it would have absent such arrangement. The arrangement may be
extended on an annual basis upon mutual arrangement by and between the
Company and FSA. The Company pays a monthly fee to FSA to maintain the
arrangement. The $25 million will be replenished in relevant spread accounts
by means of a $3 million reduction in the level of monthly cash releases from
the spread accounts. The replenishment period will begin in May 1999, unless
the terms of the arrangement are extended.

<PAGE>

PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company resolved Powell et al. v. Arcadia Financial Ltd. et al.
through the mediation process on June 5, 1998. The terms of the settlement
included the Company's agreement to pay $2.9 million to the plaintiffs and
their attorneys and to release the plaintiffs from any debt to the Company.
In exchange, the Company received approximately 95 vehicles, a release of the
plaintiffs' claims against the Company and assignment of the plaintiffs'
claims against certain of the co-defendants.

Under the applicable Securities and Exchange Commission rules, there is
no further new information with respect to legal proceedings that the Company
is required to report in connection with this Quarterly Report on Form 10-Q.

ITEM 2. CHANGES IN SECURITIES

On May 1, 1998 the Company exercised its right of optional redemption
and redeemed all of its outstanding 13% Senior Notes due 2000 from holders
who had not elected to have their notes repurchased in March 1997. The
redemption price of $7,890,150 consisted of $6,861,000 in principal, $445,965
in interest and $583,185 in premium, as provided for in the related
Indenture. Funds utilized for the redemption were deposited with the Trustee
in March 1997, when the 13% Senior Notes were covenant defeased and removed
from the balance sheet of the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURING HOLDERS

On May 28, 1998, the Company held its annual shareholder's meeting.
There were 38,966,455 shares of common stock outstanding and entitled to vote
on the record date (March 30, 1998), and a total of 36,655,989 shares
(94.07%) were represented at the meeting in person or by proxy. The following
summarizes vote results for the proposals submitted to the Company's
shareholders.

1. Proposal to elect nine directors, each for a one-year term.

<TABLE>
<CAPTION>
FOR WITHHELD
-------------- ------------
<S> <C> <C>
Scott H. Anderson 35,622,144 1,033,845
Lawerence H. Bistodeau 35,876,745 779,244
Robert J. Cresci 35,870,359 785,630
James L. Davis 35,615,976 1,040,013
Richard A. Greenawalt 35,657,945 998,044
Warren Kantor 35,506,078 1,149,911
Robert A. Marshall 35,884,049 771,940
</TABLE>

<PAGE>

2. Proposal to amend the Company's Bylaws to set the number of Directors
within a range of no fewer than five and no more than eleven, and to grant
the Board of Directors the authority to determine from time to time the
actual number of Directors within that range.

FOR AGAINST ABSTAIN BROKER NON-VOTE
35,291,209 1,019,019 345,761 0

3. Proposal to approve an amendment to the Employee Stock Purchase Plan
to increase the number of shares of the Company's Common Stock reserved for
issuance under the Plan.

FOR AGAINST ABSTAIN BROKER NON-VOTE
34,552,170 1,740,227 363,592 0

4. Proposal to approve the grant of a stock option to Warren Kantor.

FOR AGAINST ABSTAIN BROKER NON-VOTE
32,312,262 3,767,302 576,425 0

5. Ratification of selection of independent public accountants.

FOR AGAINST ABSTAIN BROKER NON-VOTE
36,152,503 276,314 227,172 0

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

The following exhibits are filed in response to Item 601 of Regulation
S-K.

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NO.
<S> <C>
3.1 Restated Articles of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).

3.2 Restated Bylaws of the Company, as amended (filed herewith).

4.1 Rights Agreement dated as of November 1, 1996, between the Company
and Norwest Bank Minnesota, National Association, as Rights Agent
(incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A filed November 7, 1996).

4.2 Amendment No. 1 to Rights Agreement, dated January 16, 1998, to
Rights Agreement, dated as of November 1, 1996 between the Company
and Norwest Bank Minnesota, N.A. (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
January 8, 1998 and filed January 20, 1998).

<PAGE>

Exhibit No. 4.8.1 to Post-Effective Amendment No. 2 on Form S-3 to
the Company's Registration Statement on Form S-1, File No.
33-81512).

4.4 Indenture dated as of March 15, 1996, between the Company and
Norwest Bank Minnesota, National Association, as Trustee, relating
to the Company's Subordinated Notes, Series 1996-A due 2001
(incorporated by reference to Exhibit 4.5 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996).

4.5 First Supplemental Indenture, dated as of March 15, 1996, to
Indenture, dated as of March 15, 1996, between the Company and
Norwest Bank Minnesota, National Association, as Trustee, relating
to the Company's Subordinated Notes, Series 1996-A due 2001
(incorporated by reference to Exhibit 4.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996).

4.6 Indenture dated as of March 12, 1997, between the Company and
Norwest Bank Minnesota, National Association, as Trustee, relating
to the Company's 11 1/2% Senior Notes due 2007 (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on Form
8-K dated March 12, 1997 and filed March 18, 1997).

4.7 First Supplemental Indenture, dated as of March 12, 1997 between
the Company and Norwest Bank Minnesota, National Association, as
Trustee, relating to $300,000,000 of the Company's 11 1/2% Senior
Notes due 2007 issued March 12, 1997 (incorporated by reference to
Exhibit 4.2 to the Company's Current Report on Form 8-K dated March
12, 1997 and filed March 18, 1997).

4.8 Warrant Agreement, dated as of March 12, 1997 by and between the
Company and Norwest Bank Minnesota, National Association, as
Warrant Agent (incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K dated March 12, 1997 and filed
March 18, 1997).

4.9 Form of Unit (incorporated by reference to Exhibit 4.4 to the
Company's Current Report on Form 8-K dated March 12, 1997 and filed
March 18, 1997).

4.10 Form of 11 1/2% Senior Notes due March 15, 2007 (incorporated by
reference to Exhibit 4.5 to the Company's Current Report on Form
8-K dated March 12, 1997 and filed March 18, 1997).

4.11 Form of Initial Warrant Certificate (incorporated by reference to
Exhibit 4.6 to the Company's Current Report on Form 8-K dated March
12, 1997 and filed March 18, 1997).

4.12 Second Supplemental Indenture, dated as of October 8, 1997, to
Indenture, dated as of March 12, 1997, between the Company and
Norwest Bank Minnesota, National Association, as Trustee, including
form of Notes , relating to $75,000,000 of the Company's 11 1/2%
Senior Notes due 2007 issued October 8, 1997 (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on Form
8-K dated October 8, 1997, filed October 15, 1997).

10.1 Series 1998-B Supplement, dated as of June 23, 1998, to Spread
Account Agreement dated as of March 25, 1993, as amended and
restated as of June 23, 1998, among the Company, Arcadia
Receivables Finance Corp., Financial Security Assurance, Inc. and
Norwest Bank Minnesota, N.A. (filed herewith).

10.2 Insurance and Indemnity Agreement, dated as of June 23, 1998, among
Financial Security Assurance, Inc., Arcadia Automobile Receivables
Trust 1998-B, Arcadia Receivables Finance Corp. and the Company
(filed herewith).

10.3 Amendment Agreement No. 1 dated as of June 9, 1998 to the
Receivables Funding and Servicing Agreement dated as of October 17,
1997 among Arcadia Receivables Finance Corp. III, Arcadia Financial
Ltd., DLJ Mortgage Capital, Inc. and Norwest Bank Minnesota,
National Association (filed herewith).

10.4 Amendment Agreement No. 2 dated as of July 17, 1998 to the
Receivables Funding and Servicing Agreement dated as of October 17,
1997 among Arcadia Receivables Finance Corp. III, Arcadia Financial
Ltd., DLJ Mortgage Capital, Inc. and Norwest Bank Minnesota,
National Association (filed herewith).

10.5 Trust Agreement dated as of July 21, 1998 between Arcadia
Receivables Finance Corp. and Wilmington Trust Company (filed
herewith).

10.6 Amended and Restated Receivables Purchase Agreement and Assignment
dated as of July 21, 1998 between Arcadia Receivables Finance Corp.
and Arcadia Financial Ltd. (filed herewith).

10.7 Amended and Restated Sale and Servicing Agreement dated as of July
21, 1998 by and among Arcadia Automobile Receivables Warehouse
Trust, Arcadia Receivables Conduit Corp., Arcadia Receivables
Finance Corp., Arcadia Financial Ltd., Bank of America National
Trust and Savings Association, Morgan Guaranty Trust Company of New
York and Norwest Bank Minnesota, National Association (filed
herewith).

10.8 Amended and Restated Security Agreement dated as of July 21, 1998
by and among Arcadia Financial
</TABLE>

<PAGE>

Ltd., Arcadia Receivables Finance Corp., Arcadia Receivables
Conduit Corp., Arcadia Automobile Receivables Warehouse Trust,
Financial Security Assurance Inc., Bank of America National Trust
and Savings Association and Norwest Bank Minnesota, National
Association (filed herewith).

10.9 US $400,000,000 Floating Rate Variable Funding, FSA Insured,
Automobile Receivables-Backed Amended and Restated Note Purchase
Agreement dated as of July 21, 1998 by and among Arcadia Automobile
Receivables Warehouse Trust, Arcadia Financial Ltd., Receivables
Capital Corporation, Bank of America National Trust and Savings
Association, Delaware Funding Corporation, and Morgan Guaranty
Trust Company of New York (file herewith).

10.10 Insurance and Indemnity Agreement dated as of December 3, 1996
amended and restated as of July 21, 1998 by and among Financial
Security Assurance Inc., Arcadia Financial Ltd., Arcadia
Receivables Finance Corp., and Arcadia Automobile Receivables
Warehouse Trust (filed herewith).

10.11 Warehouse Series Supplement, dated as of December 3, 1996 as
amended and restated as of July 21, 1998 Spread Account Agreement
dated as of March 25, 1993, as amended and restated as of July 21,
1998 by and among Arcadia Financial Ltd., Arcadia Receivables
Finance Corp., Financial Security Assurance Inc., and Norwest Bank
Minnesota, National Association (filed herewith).

10.12 Spread Account Agreement as amended and restated as of July 21,
1998 by and among Arcadia Financial Ltd., Arcadia Receivables
Finance Corp., Financial Security Assurance Inc. and Norwest Bank
Minnesota, National Association (filed herewith).

27.1 Financial Data Schedule (filed herewith).

99.1 Cautionary Statement (filed herewith).

(b) REPORTS ON FORM 8-K

None

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

ARCADIA FINANCIAL LTD.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard A. Greenawalt President, Chief Executive Officer, and Director August 10, 1998
- -------------------------
Richard A. Greenawalt

/s/ John A. Witham Executive Vice President and Chief Financial Officer August 10, 1998
- ------------------------- (Principal Financial Officer)
John A. Witham

/s/ Brian S. Anderson Senior Vice President, Corporate Controller and August 10, 1998
- ------------------------- Assistant Secretary (Principal Accounting Officer)
Brian S. Anderson
</TABLE>

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-- -----------
<S> <C>
3.1 Restated Articles of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997).

3.2 Restated Bylaws of the Company, as amended (filed herewith).

4.3 First Amendment and Restatement, dated as of April 28, 1995 of
Indenture, dated July 1, 1994, between the Company and Norwest Bank
Minnesota, National Association, as Trustee, relating to the
Company's Unsecured Extendible Notes and Fixed Term Notes,
including forms of Notes (incorporated by reference to Exhibit No.
4.8.1 to Post-Effective Amendment No. 2 on Form S-3 to the
Company's Registration Statement on Form S-1, File No. 33-81512).

4.9 Form of Unit (incorporated by reference to Exhibit 4.4 to the
Company's Current Report on Form 8-K dated March 12, 1997 and filed
March 18, 1997).

4.10 Form of 11 1/2% Senior Notes due March 15, 2007 (incorporated by
reference to Exhibit 4.5 to the Company's Current Report on Form
8-K dated March 12, 1997 and filed March 18, 1997).

4.11 Form of Initial Warrant Certificate (incorporated by reference to
Exhibit 4.6 to the Company's Current Report on Form 8-K dated March
12, 1997 and filed March 18, 1997).

10.2 Insurance and Indemnity Agreement, dated as of June 23, 1998, among
Financial Security

<PAGE>

Assurance, Inc., Arcadia Automobile Receivables Trust 1998-B,
Arcadia Receivables Finance Corp. and the Company (filed herewith).

10.5 Trust Agreement dated as of July 21, 1998 between Arcadia
Receivables Finance Corp. and Wilmington Trust Company (filed
herewith).

10.6 Amended and Restated Receivables Purchase Agreement and Assignment
dated as of July 21, 1998 between Arcadia Receivables Finance Corp.
and Arcadia Financial Ltd. (filed herewith).

10.8 Amended and Restated Security Agreement dated as of July 21, 1998
by and among Arcadia Financial Ltd., Arcadia Receivables Finance
Corp., Arcadia Receivables Conduit Corp., Arcadia Automobile
Receivables Warehouse Trust, Financial Security Assurance Inc.,
Bank of America National Trust and Savings Association and Norwest
Bank Minnesota, National Association (filed herewith).

27.1 Financial Data Schedule (filed herewith).

99.1 Cautionary Statement (filed herewith).
</TABLE>

(b) REPORTS ON FORM 8-K

None

<PAGE>

AMENDED AND RESTATED BYLAWS

ARCADIA FINANCIAL LTD.

ARTICLE 1
OFFICES, CORPORATE SEAL

Section 1.1 REGISTERED AND OTHER OFFICES. The registered office of
the Corporation in Minnesota shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of
Incorporation or statement of the Board of Directors filed with the Secretary
of State of Minnesota changing the registered office in the manner prescribed
by law. The Corporation may have such other offices, within or without the
State of Minnesota, as the Board of Directors shall, from time to time,
determine.

Section 1.2 CORPORATE SEAL. If so directed by the Board of Directors
by resolution, the Corporation may use a corporate seal. The failure to use
such seal, however, shall not affect the validity of any documents executed
on behalf of the Corporation. The seal need only include the word "seal",
but it may also include, at the discretion of the Board, such additional
wording as is permitted by law.

Section 1.3 ARTICLES OF INCORPORATION. In the event of any conflict
or inconsistency between these Bylaws, or any amendment thereto, and the
Articles of Incorporation or any amendment thereto, whenever adopted, the
Articles of Incorporation shall govern.

ARTICLE 2
MEETINGS OF SHAREHOLDERS

Section 2.1 TIME AND PLACE OF MEETINGS. Regular or special meetings
of the shareholders, if any, shall be held on the date and at the time and
place fixed by the Chief Executive Officer, the Chairman of the Board, or the
Board, except that a regular or special meeting called by, or at the demand
of a shareholder or shareholders, pursuant to Minnesota Statutes, Section
302A.431, Subd. 2, shall be held in the county where the principal executive
office is located.

Section 2.2 REGULAR MEETINGS. At any regular meeting of the
shareholders, there shall be an election of qualified successors for
directors who serve for an indefinite term or whose terms have expired or are
due to expire within six months after the date of the meeting. Any business
appropriate for action by the shareholders may be transacted at a regular
meeting. No meeting shall be considered a regular meeting unless
specifically designated as such in the notice of meeting or unless all the
shareholders are present in person or by proxy and none of them objects to
such designation. Regular meetings may be held no more frequently than once
per year.

Page 1 of 1

<PAGE>

Section 2.3 DEMAND BY SHAREHOLDERS. Regular or special meetings may
be demanded by a shareholder or shareholders, pursuant to the provisions of
Minnesota Statutes, Sections 302A.431, Subd. 2, and 302A.433, Subd. 2,
respectively. If a regular meeting of shareholders has not been held during
the immediately preceding fifteen (15) months, a shareholder or shareholders
holding three (3) percent or more of the voting power of all shares entitled
to vote may demand a regular meeting of shareholders by written notice of
demand given to the Chief Executive Officer or the Chief Financial Officer of
the Corporation. A shareholder or shareholders holding ten (10) percent or
more of the voting power of all shares entitled to vote may demand a special
meeting of shareholders by written notice of demand given to the Chief
Executive Officer or Chief Financial Officer of the Corporation and
containing the purposes of the meeting except that a special meeting for the
purpose of considering any action to directly or indirectly facilitate or
effect a business combination, including any action to change or otherwise
affect the composition of the Board of Directors for that purpose, must be
called by twenty-five (25) percent or more of the voting power of all shares
entitled to vote. Within thirty (30) days after receipt of the demand by one
of those officers, the Board shall cause a special meeting of shareholders to
be called and held on notice no later than ninety (90) days after receipt of
the demand, all at the expense of the Corporation. If the Board fails to
cause a special meeting to be called and held as required by this
subdivision, the shareholder or shareholders making the demand may call the
meeting by giving notice as required by Minnesota Statutes, Section 302A.435,
all at the expense of the Corporation. The business transacted at a special
meeting is limited to the purposes stated in the notice of the meeting. Any
business transacted at a special meeting that is not included in those stated
purposes is voidable by or on behalf of the Corporation, unless all of the
shareholders have waived notice of the meeting in accordance with Minnesota
Statutes, Section 302A.435.

Section 2.4 QUORUM; ADJOURNED MEETINGS. The holders of a majority of
the voting power of the shares entitled to vote at a meeting constitute a
quorum for the transaction of business; said holders may be present at the
meeting either in person or by proxy. If a quorum is present when a duly
called or held meeting is convened, the shareholders present may continue to
transact business until adjournment, even though withdrawal of shareholders
originally present leaves less than the proportion or number otherwise
required for a quorum. If the adjourned meeting is to be held not more than
120 days after the date fixed for the original meeting, a meeting may be
adjourned from time to time without notice, other than announcement at the
meeting of the date, time and place of the adjourned meeting. At adjourned
meetings at which a quorum is present in person or by proxy, any business
which could have been transacted at the meeting as originally noticed may be
transacted .

Section 2.5 VOTING. At each meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote either in
person or by proxy. Unless otherwise provided by the Articles of
Incorporation or a resolution of the Board of Directors filed with the
Secretary of State, each shareholder shall have one vote for each share held.
Upon demand of any shareholder, the vote upon any question before the meeting
shall be by ballot.
Page 2 of 1

<PAGE>

Section 2.6 NOTICE OF MEETINGS. Notice of all meetings of
shareholders shall be given to every holder of voting shares, except where
the meeting is an adjourned meeting to be held not more than 120 days after
the date fixed for the original meeting and the date, time and place of the
adjourned meeting were announced at the time of adjournment. Notice of
regular meetings of shareholders shall be given at least ten (10), but not
more than sixty (60) days before the date of the meeting. Notice of special
meetings of shareholders may be given upon not less than ten (10) nor more
than sixty (60) days, except that written notice of meeting at which an
agreement of merger or exchange is to be considered shall be given to all
shareholders, whether entitled to vote or not, at least fourteen (14) days
prior thereto. Every notice of any special meeting shall state the purpose
or purposes for which the meeting has been called, and the business
transacted at all special meetings shall be confined to the purpose stated in
the call, unless all of the shareholders are present in person or by proxy
and none of them objects to consideration of a particular item of business.

Section 2.7 WAIVER OF NOTICE. A shareholder may waive notice of any
meeting of shareholders. A waiver of notice by a shareholder entitled to
notice is effective whether given before, at or after the meeting and whether
given in writing, orally or by attendance.

Section 2.8 NOTICE OF SHAREHOLDER BUSINESS

(A) REGULAR MEETINGS OF SHAREHOLDERS.

(1) The proposal of business, except nominations of persons for
election to the Board of Directors of the Corporation, to be considered by
the shareholders at a regular meeting of shareholders may be made by any
shareholder of the Corporation who is entitled to vote at the meeting and
who complies with the notice procedures set forth in clause (2) of this
paragraph (A) of this Bylaw and who was a shareholder of record at the time
such notice is delivered to the Secretary of the Corporation.

(2) For business, except nominations of persons for election to the
Board of Directors of the Corporation, to be properly brought before a
regular meeting by shareholder pursuant to Paragraph (A) (1) of this Bylaw
the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice shall
be delivered to the Secretary at the principal executive office of the
Corporation not less than one hundred twenty (120) days prior to the first
anniversary of the date that the Corporation first released or mailed its
proxy statement to shareholders in connection with the preceding year's
annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than thirty (30) days or delayed by more
than sixty (60) days from the anniversary of the preceding year's annual
meeting date, notice by the shareholder to be timely must be so delivered
not later than the close of business on the later of the one hundred
twentieth (120th) day prior to such annual meeting or the tenth (10th) day
following the day on which public announcement of the date of such meeting
is first made. Such shareholder's notice shall set forth (a) as to any
business, except for nominations of persons for election to the

Page 3 of 1

<PAGE>

Board of Directors of the Corporation, that the stockholder proposes to
bring before the meeting, a brief description of the business desired to
be brought before the meeting, the reasons for conducting such business
at the meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the proposal
is made and (b) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (i) the
name and address of such shareholder, as they appear on the Corporation's
books, and of such beneficial owner and (ii) the class and number of shares
of the Corporation which are owned beneficially and of record by such
shareholder and such beneficial owner.

(B) SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting pursuant
to Section 2.6 of these Bylaws.

(1) Only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance
with the procedures set forth in this Bylaw. Except as otherwise provided
by law, the Articles of Incorporation or these Bylaws, the chairman of the
meeting shall have the power and duty to determine whether any business
proposed to be brought before the meeting was made in accordance with the
procedures set forth in this Bylaw, and, if any proposed business is not in
compliance with this Bylaw, to declare that such defective proposal shall
be disregarded.

(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

Section 2.9 AUTHORIZATION WITHOUT A MEETING. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting as authorized by law.

Section 2.10 RECORD DATE. The Board of Directors may fix a time, not
exceeding sixty (60) days preceding the date of any meeting of shareholders,
as a record date for the determination of the shareholders entitled to notice
of and to vote at such meeting, notwithstanding any transfer of shares on the
books of the Corporation after any record date so fixed. The Board of
Directors may close the books of the Corporation against the transfer of
shares during the whole or any part of such period. If the Board of
Directors fails to fix a record date for the determination of the
shareholders entitled to notice of and to vote at any meeting of the
shareholders, the record date shall be the twentieth (20th) day preceding the
date of such meeting.

Page 4 of 1

<PAGE>

ARTICLE 3
DIRECTORS

Section 3.1 GENERAL. The business and affairs of the Corporation
shall be managed by or shall be under the direction of the Board of Directors.

Section 3.2 NUMBER, QUALIFICATION AND TERM OF OFFICE. The Board of
Directors shall consist of no fewer than five persons and no more than eleven
persons. The Board of Directors may determine from time to time the number
of directors within that range. The Board of Directors may increase or
decrease the number of directors by an affirmative vote of the majority of
the directors then serving; provided however, any such decrease in the number
of directors shall not affect the term of any incumbent director. Each of
the directors shall hold office until the regular meeting of the shareholders
next held after his or her election, until his or her successor shall have
been elected and shall qualify, or until he or she resigns or is removed as
hereinafter provided. No person (other than a person nominated by or on
behalf of the Board of Directors) shall be eligible for election as a
director at any annual or special meeting of shareholders unless a written
request that his or her name be placed in nomination together with the
written consent of such person to serve as director was received from a
shareholder of record by the secretary of the Corporation not less than one
hundred twenty (120) days prior to the date fixed for the meeting.

Section 3.3 BOARD MEETINGS; PLACE AND NOTICE. Meetings of the Board
of Directors may be held from time to time at any place within or without the
State of Minnesota that the Board of Directors may designate. In the absence
of designation by the Board of Directors, Board meetings shall be held at the
principal executive office of the Corporation, except as may be otherwise
unanimously agreed orally or in writing or by attendance, Special or regular
meetings of the Board of Directors may be called by the Chairman of the
Board, the Chief Executive Officer, or the Chief Financial Officer, upon not
less than twenty-four (24) hours notice. Any director may call a Board
meeting by giving not less than five (5) business days notice to all
directors of the date and time of the meeting. The notice need not state the
purpose of the meeting. Notice may be given by mail, telephone, telegram,
telecopy or by personal service. If the meeting schedule is adopted by the
Board, or if the date and time of a Board meeting has been announced at a
previous meeting, no notice is required.

Section 3.4 WAIVER OF NOTICE. A director may waive notice of a
meeting of the Board. A waiver of notice by a director is effective, whether
given before, at or after the meeting and whether given in writing, orally or
by attendance.

Section 3.5 QUORUM. A majority of the directors currently holding
office is a quorum for the transaction of business.

Section 3.6 VACANCIES. Vacancies on the Board resulting from the
death, resignation or removal of a director, or by an increase in the number
of directors, may be filled by the

Page 5 of 1

<PAGE>

affirmative vote of a majority of the remaining directors, even though less
than a quorum. Each director elected under this Section to fill a vacancy
holds office until a qualified successor is elected by the shareholders at
the next regular or special meeting of the shareholders.

Section 3.7 COMMITTEES. The Board may by resolution establish
committees in the manner provided by law. Committee members need not be
directors. The following committees, if established by the Board, shall have
the responsibilities set forth respectively, subject to enlargement or
restriction of such responsibilities, as the Board, by resolutions, shall
determine:

a. AUDIT COMMITTEE

*Recommending the appointment of independent auditors.
*Consulting with the independent auditors on the plan of the auditors.
*Reviewing, in consultation with the independent auditors, their
report of audit or proposed report of audit and the accompanying
management letter.
*Consulting with the independent auditors on the adequacy of internal
controls.

b. COMPENSATION COMMITTEE

*Strategically, considers how the achievement of the overall goals and
objectives of the Corporation can be aided through adoption of an
appropriate compensation philosophy and effective compensation program
elements.
*Administratively, reviews salary progression, bonus allocations,
stock awards and the awards of supplemental benefits and perquisites
for key executives against the compensation objectives of the
Corporation and its overall performance.
*Approves the compensation arrangements for the Corporation's senior
management; also reviews and approves the adoption of any compensation
plans in which officers and directors are eligible to participate.

Page 6 of 1

<PAGE>

Section 3.8 ABSENT DIRECTORS. A director may give advance written
consent or opposition to a proposal to be acted on at a Board meeting. If
the director is not present at the meeting, consent or opposition to a
proposal does not constitute presence for purposes of determining the
existence of a quorum, but consent or opposition shall be counted as a vote
in favor of, or against, the proposal and shall be entered in the minutes or
other record of action of the meeting if the proposal acted on at the meeting
is substantially the same or has substantially the same effect as the
proposal to which the director has consented or objected.

Section 3.9 WRITTEN ACTION BY BOARD. An action required or permitted
to be taken by the Board of Directors of this Corporation may be taken by
written action signed by the number of directors that would be required to
take the same action at a meeting of the Board at which all directors are
present except as to those matters which require shareholder approval, in
which case the written action must be signed by all members of the Board of
Directors.

Page 7 of 1

<PAGE>

ARTICLE 4
OFFICERS

Section 4.1 NUMBER. The officers of the Corporation shall consist of
a Chief Executive Officer and a Chief Financial Officer. The term "Chief
Executive Officer," as such term is used herein, shall include an individual
who has all the authority, rights and powers as would ordinarily reside in a
Chief Executive Officer of the Company (an "Acting Chief Executive Officer").
The Chairman of the Board shall preside at all meetings of the shareholders
and directors and shall have such other duties as may be prescribed from time
to time by the Board of Directors. The Chief Executive Officer shall see
that all orders and resolutions of the Board are carried into effect. The
Chief Executive Officer and Chief Financial Officer shall have such other
duties as are prescribed by statute. The Board may elect or appoint any
other officers it deems necessary for the operation and management of the
Corporation, each of who shall have the powers, rights, duties,
responsibilities and terms of office determined by the Board from time to
time. Any number of offices or functions of those offices may be held or
exercised by the same person. If specific persons have not been elected as
President or Secretary, the Chief Executive Officer may execute instruments
or documents in those capacities. If a specific person has not been elected
to office of Treasurer, the Chief Financial Officer of the Corporation may
sign instruments or documents in that capacity.

Section 4.2 VICE CHAIRMAN AND VICE PRESIDENT. Each Vice Chairman and
Vice President, if one or more are elected, shall have such powers and shall
perform such duties as may be specified in the Bylaws or prescribed by the
Board of Directors or by the Chairman of the Board or by the Chief Executive
Officer.

Section 4.3 SECRETARY. The Secretary, if one is elected, shall be
secretary of and shall attend all meetings of the shareholders and Board of
Directors and shall record all proceedings of such meetings in the minute
book of the Corporation. He shall give proper notice of meetings of
shareholders and directors. He shall perform such other duties as may, from
time to time, be prescribed by the Board of Directors, by the Chairman of the
Board, or by the Chief Executive Officer.

Section 4.4 ELECTION AND TERM OF OFFICE. The Board of Directors
shall from time to time elect a Chairman of the Board of Directors, Chief
Executive Officer and Chief Financial Officer and any other officers or
agents the Board deems necessary. Such officers shall hold office until they
are removed or their successors are elected and qualified.

Section 4.5 DELEGATION OF AUTHORITY. An officer elected or appointed
by the Board may delegate some or all of the duties or powers of his office
to other persons, provided that such delegation is in writing.

Section 4.6 COMPENSATION OF OFFICERS. An officer shall be entitled
only to such compensation as shall be established by written contract or
agreement duly approved by or on behalf of the Corporation, or established or
approved by resolution of the Board of Directors.

Page 8 of 1

<PAGE>

Absent such written contract, agreement or resolution of the Board of
Directors, no officer shall have a cause of action against the Corporation to
recover any amount due or alleged to be due as compensation for services in
his or her capacity as an officer of the Corporation.

ARTICLE 5
SHARES AND THEIR TRANSFER

Section 5.1 CERTIFICATE OF SHARES. Every shareholder of this
Corporation shall be entitled to a certificate, to be in such form as
prescribed by law and adopted by the Board of Directors, certifying the
number of shares of the Corporation owned by him. The certificates shall be
numbered in the order in which they are issued and shall be signed by the
Chief Executive Officer and Secretary of the Corporation; provided, however,
that when the certificate is signed by a transfer agent or registrar, the
signatures of any of such officers upon the certificate may be facsimiles,
engraved or printed thereon, if authorized by the Board of Directors. Such
certificate shall also have typed or printed thereon such legend as may be
required by any shareholder control agreement. Every certificate surrendered
to the Corporation for exchange or transfer shall be canceled, and no new
certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so canceled.

Section 5.2 TRANSFER OF SHARES. Transfer of shares on the books of
the Corporation may be authorized only by the shareholder named in the
certificate, or the shareholder's legal representative, or the shareholder's
duly authorized attorney in fact, and upon surrender of the certificate or
the certificates for such shares. The Corporation may treat, as the absolute
owner of shares of the Corporation, the person or persons in whose name or
names the shares are registered on the books of the Corporation.

Section 5.3 LOST CERTIFICATES. Any shareholder claiming that a
certificate for shares has been lost, destroyed or stolen shall make an
affidavit of that fact in such form as the Board of Directors shall require
and shall, if the Board of Directors so requires, give the Corporation a
sufficient indemnity bond, in form, in an amount, and with one or more
sureties satisfactory to the Board of Directors, to indemnify the Corporation
against any claims which may be made against it on account of the reissue of
such certificate. A new certificate shall then be issued to said shareholder
for the same number of shares as the one alleged to have been destroyed, lost
or stolen.

ARTICLE 6
INDEMNIFICATION

Section 6.1 INDEMNIFICATION. The Corporation shall indemnify, in
accordance with the terms and conditions of Minnesota Statutes, Section
302A.521, the following persons: (a) officers and former officers; (b)
directors and former directors; (c) members and former members of committees
appointed or designated by the Board of Directors; and (d) employees and
former employees of the Corporation. The Corporation shall not be obligated
to indemnify any other person or entity, except to the extent such obligation
shall be specifically approved by resolution of the Board of Directors. This
Section 6.1 is for the sole and exclusive benefit of the persons

Page 9 of 1

<PAGE>

designated herein and no person, firm or entity shall have any rights under
this Section by way of assignment, subrogation or otherwise and whether
voluntarily, involuntarily or by operation of law.

ARTICLE 7
MISCELLANEOUS

Section 7.1 GENDER REFERENCES. All referenced in these Bylaws to a
party in the masculine shall include the feminine and neuter.

Section 7.2 PLURALS. All references in the plural shall, where
appropriate, include the singular and all references in the singular shall,
where appropriate, be deemed to include the plural.

CERTIFICATION

I, James D. Atkinson III, do hereby certify that I am the duly elected,
qualified or acting Secretary of Arcadia Financial Ltd., a corporation
organized under the laws of the State of Minnesota, and that the foregoing is
a true and correct copy of the Bylaws as of , 1998.

James D. Atkinson III
Secretary

Page 10 of 1

<PAGE>

SERIES 1998-B SUPPLEMENT

dated as of June 23, 1998

SPREAD ACCOUNT AGREEMENT

dated as of March 25, 1993,

as amended and restated

as of June 23, 1998

among

ARCADIA FINANCIAL LTD.

ARCADIA RECEIVABLES FINANCE CORP.

FINANCIAL SECURITY ASSURANCE INC.

and

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION

<PAGE>
TABLE OF CONTENTS

Page
<S> <C> <C>
Article I.

DEFINITIONS

Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Rules of Interpretation . . . . . . . . . . . . . . . . . . . 5

Article II.

CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL

Section 2.1 Series 1998-B Credit Enhancement Fee. . . . . . . . . . . . . 5
Section 2.2 Series Supplements. . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Grant of Security Interest by Arcadia Financial and the
Seller. . . . . . . . . . . . . . . . . . . . . . . . . . 6

Article III.

SPREAD ACCOUNT

Section 3.1 Establishment of Series 1998-B Spread Account; Initial
Deposit into Series 1998-B Spread Account . . . . . . . . 7
Section 3.2 Spread Account Additional Deposits. . . . . . . . . . . . . . 7

Article IV.

MISCELLANEOUS

Section 4.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 7
Section 4.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.4 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Schedule I
</TABLE>

<PAGE>

SERIES 1998-B SUPPLEMENT

SERIES 1998-B SUPPLEMENT, dated as of June 23, 1998 (the "Series 1998-B
Supplement"), by and among ARCADIA FINANCIAL LTD., a Minnesota corporation
("Arcadia Financial"), ARCADIA RECEIVABLES FINANCE CORP., a Delaware corporation
(the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance
company ("Financial Security"), NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, in its capacity as Indenture Trustee under the
Indenture and as Collateral Agent hereunder.

RECITALS

1. The parties hereto have previously entered into a Spread Account
Agreement, dated as of March 25, 1993, as amended and restated as of June 23,
1998 (the "Spread Account Agreement"), and, as contemplated by Section 2.02 of
the Spread Account Agreement, this Series 1998-B Supplement constitutes a Series
Supplement to the Spread Account Agreement so that hereafter this Series 1998-B
Supplement shall form a part of the Spread Account Agreement for all purposes
thereof, and all references herein and hereafter to the Spread Account Agreement
shall mean the Spread Account Agreement, as supplemented hereby.

2. Arcadia Automobile Receivables Trust, 1998-B (the "Series 1998-B
Trust") is being formed contemporaneously herewith pursuant to the Series 1998-B
Trust Agreement (as defined herein).

3. Pursuant to the Series 1998-B Sale and Servicing Agreement, the
Seller is selling to the Series 1998-B Trust all of its right, title and
interest in and to the Initial Receivables (as defined in the Series 1998-B
Sale and Servicing Agreement) and certain other Trust Property (as defined in
the Series 1998-B Trust Agreement).

4. Pursuant to the Series 1998-B Indenture, the Series 1998-B Trust is
issuing the Series 1998-B Notes (as defined herein).

5. The Seller has requested that Financial Security issue the Series
1998-B Note Policy to the Trustee to guarantee payment of the Scheduled Payments
(as deemed in such Policy) on each Payment Date in respect of the Series 1998-B
Notes.

6. In partial consideration of the issuance of the Series 1998-B Note
Policy, the Seller has agreed that Financial Security shall have certain rights
as Controlling Party, to the extent set forth in the Spread Account Agreement
and the Series 1998-B Indenture.

7. The Seller is a wholly owned special purpose subsidiary of Arcadia
Financial. The Series 1998-B Trust has agreed to pay the Series 1998-B Credit
Enhancement Fee to the Seller in

1
<PAGE>

consideration of the obligations of the Seller and Arcadia Financial pursuant
hereto and in consideration of the obligations of Arcadia Financial pursuant
to the Series 1998-B Insurance Agreement (such obligations forming part of
the Series 1998-B Insurer Secured Obligations as referred to herein). The
Series 1998-B Insurer Secured Obligations form part of the consideration to
Financial Security for its issuance of the Series 1998-B Policy.

8. In order to secure the performance of the Series 1998-B Secured
Obligations, to further effect and enforce the subordination provisions to
which the Series 1998-B Credit Enhancement Fee is subject, and in
consideration of the receipt of the Series 1998-B Credit Enhancement Fee,
Arcadia Financial and the Seller have agreed to pledge the Series 1998-B
Collateral as Collateral to the Collateral Agent for the benefit of Financial
Security and for the benefit of the Trustee on behalf of the Trust, upon the
terms and conditions set forth herein.

AGREEMENTS

In consideration of the premises, and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.1 DEFINITIONS. All terms defined in Section 1.1 of
the Series 1998-B Sale and Servicing Agreement shall have the same meaning
with respect to this Series 1998-B Supplement. The following terms shall have
the following meanings:

"COLLECTION ACCOUNT SHORTFALL" means, with respect to Series 1998-B and
any Distribution Date, the Deficiency Claim Amount, as defined in the Series
1998-B Sale and Servicing Agreement, with respect to such Distribution Date.

"DEEMED CURED" means with respect to Series 1998-B, (a) with respect to
an event that has occurred pursuant to clause (A)(i) of the definition of
Trigger Event, as of a Determination Date with respect to Series 1998-B, that
no event as specified in clause (A)(i) of the definition thereof with respect
to such Series shall have occurred as of such Determination Date or as of any
of the two consecutively preceding Determination Dates, and (b) with respect
to an event that has occurred pursuant to clause (A)(ii) or clause (A)(iii)
of the definition of Trigger Event, as of the next Determination Date which
occurs in a calendar month which is a multiple of three months succeeding the
Series 1998-B Closing Date, that no event specified in clause (A)(ii) or
clause (A)(iii) of the definition of Trigger Event with respect to such
Series shall have occurred as of such Determination Date.

"INITIAL PRINCIPAL AMOUNT" means $550,000,000 with respect to Series
1998-B.

2
<PAGE>

"INITIAL SPREAD ACCOUNT DEPOSIT" means $0 for Series 1998-B.

"INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series
1998-B and any Distribution Date, an amount equal to the greater of (i) 8% of
the Series 1998-B Balance as of the close of business on such Distribution
Date and (ii) the Spread Account Minimum Amount as of the close of business
on such Distribution Date.

"SERIES 1998-B BALANCE" means, with respect to Series 1998-B and any
Distribution Date, the aggregate principal amount of the Series 1998-B Notes
as of such Distribution Date (after giving effect to the distributions in
respect of principal on the Notes made on such Distribution Date).

"SERIES 1998-B COLLATERAL" has the meaning specified in Section 2.3(a)
hereof.

"SERIES 1998-B CREDIT ENHANCEMENT FEE" means the amount distributable on
each Distribution Date pursuant to Section 4.6(viii) and (ix) of the Series
1998-B Sale and Servicing Agreement.

"SERIES 1998-B INDENTURE" means the Indenture, dated as of June 1, 1998,
among the Series 1998-B Trust, the Trustee and the Indenture Collateral Agent.

"SERIES 1998-B NOTE POLICY" means the financial guaranty insurance
policy issued by Financial Security with respect to the Series 1998-B Notes.

"SERIES 1998-B NOTES" means the Class A-1, Class A-2, Class A-3, Class
A-4, and Class A-5 Notes issued pursuant to the Series 1998-B Indenture.

"SERIES 1998-B OWNER TRUSTEE" means Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee, or its successor in
interest, and any successor Owner Trustee appointed as provided in the Series
1998-B Trust Agreement.

"SERIES 1998-B RECEIVABLE" means each Receivable referenced on the
Schedule of Receivables attached to the Series 1998-B Sale and Servicing
Agreement, as supplemented from time to time during the Funding Period by one
or more Subsequent Transfer Agreements.

"SERIES 1998-B RESERVE ACCOUNT" means the Reserve Account established
pursuant to Section 4.1(d) of the Series 1998-B Sale and Servicing Agreement.

"SERIES 1998-B SALE AND SERVICING AGREEMENT" means the Sale and
Servicing Agreement, dated as of June 1, 1998, among the Series 1998-B Trust,
Arcadia Financial, in its individual capacity and as Servicer, the Seller and
the Backup Servicer, as such agreement may be supplemented, amended or
modified from time to time.

"SERIES 1998-B SECURED OBLIGATIONS" means the Insurer Secured
Obligations and the Trustee Secured Obligations with respect to Series 1998-B.

3
<PAGE>

"SERIES 1998-B SPREAD ACCOUNT" means the Spread Account established
pursuant to Section 3.1(a) hereof.

"SERIES 1998-B SUPPLEMENT" means this Series 1998-B Supplement which
constitutes a Series Supplement to the Spread Account Agreement.

"SERIES 1998-B TRUST AGREEMENT" means the Trust Agreement, dated as of
June 1, 1998, among the Seller, Financial Security and the Series 1998-B
Owner Trustee.

"SPREAD ACCOUNT ADDITIONAL DEPOSIT" means, with respect to Series 1998-B
and any Subsequent Transfer Date, an amount equal to 0.00% of the aggregate
Principal Balance (as of the related Subsequent Cutoff Date) of the
Subsequent Receivables being transferred to the Series 1998-B Trust on such
Subsequent Transfer Date or such greater amount as required by the Rating
Agencies to confirm that the rating assigned to the Series 1998-B Notes will
be in the highest category by such Rating Agencies.

"SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1998-B and
any Distribution Date:

(i) if no Insurance Agreement Event of Default with respect to
Series 1998-B has occurred and is continuing, no Capture Event has occurred
and is continuing, no Trigger Event has occurred on the related
Determination Date, and if any Trigger Event with respect to Series 1998-B
has occurred as of a prior Determination Date, such Trigger Event is Deemed
Cured as of the related Determination Date, the Initial Spread Account
Maximum Amount with respect to Series 1998-B and such Distribution Date;

(ii) if an event specified in clause (A) of the definition of
Trigger Event with respect to Series 1998-B has occurred as of the
Determination Date or has occurred as of a prior Distribution Date (and
whether or not a Trigger Event shall occur or shall have occurred in
connection with such event), and such event is not Deemed Cured as of the
related Determination Date and no Insurance Agreement Event of Default with
respect to Series 1998-B has occurred and is continuing and no Capture
Event has occurred and is continuing, the Spread Account Maximum Amount
shall be equal to the greater of (i) 11% of the Series 1998-B Balance as of
the close of business on such Distribution Date and (ii) the Spread Account
Minimum Amount as of the close of business on such Distribution Date; or

(iii) if (A) an Insurance Agreement Event of Default with respect
to Series 1998-B has occurred and is continuing or (B) a Capture Event has
occurred and is continuing as of the related Determination Date, the Spread
Account Maximum Amount shall be equal to the greater of (i) 25% of the
Series 1998-B Balance as of the close of business on such Distribution Date
and (ii) the Spread Account Minimum Amount as of the close of business on
such Distribution Date.

"SPREAD ACCOUNT MINIMUM AMOUNT" means, with respect to Series 1998-B and
any Distribution Date, an amount equal to the greater of:

4
<PAGE>

(i) $100,000, and

(ii) the lesser of:

(A) 2.0% of the Initial Principal Amount of Series 1998-B, and

(B) the Series 1998-B Balance.

"TRIGGER EVENT" means, with respect to Series 1998-B and as of a
Determination Date, the occurrence of any of the events specified in clause
(A) together with the occurrence of the event specified in clause (B):

(A) (i) the Average Delinquency Ratio for such Determination Date shall
be 8.40% or greater;

(ii) with respect to any Determination Date, the Cumulative Default
Rate shall be equal to or greater than the percentage set forth
in Column A of Schedule I attached hereto corresponding to such
Determination Date;

(iii) with respect to any Determination Date, the Cumulative Net Loss
Rate shall be equal to or greater than the percentage set forth
in Column B of Schedule I attached hereto corresponding to such
Determination Date;

(B) The amount specified with respect to such Series in the last sentence
of Section 2.09(d) of the Spread Account Agreement is positive on such
Determination Date, and such amount has not been deposited in the
related Tag Account on such Determination Date.

Section 1.2 RULES OF INTERPRETATION. The terms "hereof,"
"herein," "hereto" or "hereunder," unless otherwise modified by more specific
reference, shall refer to this Series 1998-B Supplement. Unless otherwise
indicated in context, the terms "Article," "Section" or "Exhibit" shall refer
to an Article or Section of, or Exhibit to, this Series 1998-B Supplement.
The definition of a term shall include the singular, the plural, the past,
the present, the future, the active and the passive forms of such term. A
term defined herein and used herein preceded by a Series designation, shall
mean such term as it relates to the Series designated.

ARTICLE II.

CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL

Section 2.1 SERIES 1998-B CREDIT ENHANCEMENT FEE. The Series
1998-B Sale and Servicing Agreement provides for the payment to the Seller of
the Series 1998-B Credit Enhancement Fee, to be paid to the Seller by
distribution of such amounts to the Collateral Agent for deposit and
distribution pursuant to this Agreement. The Seller and Arcadia Financial
hereby agree that payment of the Series 1998-B Credit Enhancement Fee in the
manner and subject to the conditions set forth herein and in the Series
1998-B Sale and Servicing Agreement is

5
<PAGE>

adequate consideration and the exclusive consideration to be received by the
Seller or Arcadia Financial for the obligations of the Seller pursuant hereto
and the obligations of Arcadia Financial pursuant hereto (including, without
limitation, the transfer by the Seller to the Collateral Agent of the Initial
Spread Account Deposit with respect to Series 1998-B) and pursuant to the
Series 1998-B Insurance Agreement. The Seller and Arcadia Financial hereby
agree with the Trustee and with Financial Security that payment of the Series
1998-B Credit Enhancement Fee to the Seller is expressly conditioned on
subordination of the Series 1998-B Credit Enhancement Fee to payments on the
Notes (if any) and Certificates of any Series, payments of amounts due to
Financial Security and the other obligations of the Trusts, in each case to
the extent provided in Section 4.6 of the Standard Terms and Conditions or
Section 4.6 of the related Sale and Servicing Agreement, as applicable, and
Section 3.03 of the Spread Account Agreement, and the Security Interest of
the Secured Parties in the Series 1998-B Collateral is intended to effect and
enforce such subordination and to provide security for the Series 1998-B
Secured Obligations and subject to the terms hereof the Secured Obligations
with respect to other Series.

Section 2.2 SERIES SUPPLEMENTS. As provided in and subject to
the conditions specified in Section 2.02 of the Spread Account Agreement, the
parties hereto are entering into this Series 1998-B Supplement with respect
to the Series 1998-B Securities.

Section 2.3 GRANT OF SECURITY INTEREST BY ARCADIA FINANCIAL AND THE
SELLER.

(a) In order to secure the performance of the Secured Obligations
with respect to each Series, the Seller (and Arcadia Financial, to the extent it
may have any rights therein) hereby pledges, assigns, grants, transfers and
conveys to the Collateral Agent, on behalf of and for the benefit of the Secured
Parties to secure the Secured Obligations, a lien on and security interest in
(which lien and security interest is intended to be prior to all other liens,
security interests or other encumbrances), all of its right, title and interest
in and to the following (all being collectively referred to herein as the
"Series 1998-B Collateral"):

(i) the Series 1998-B Credit Enhancement Fee and all rights and
remedies that the Seller may have to enforce payment of the Series 1998-B
Credit Enhancement Fee whether under the Series 1998-B Sale and Servicing
Agreement or otherwise;

(ii) the Series 1998-B Spread Account established pursuant to
Section 3.1 of this Series 1998-B Supplement and Section 3.01 of the Spread
Account Agreement, and each other account owned by the Seller and
maintained by the Collateral Agent (including, without limitation, all
monies, checks, securities, investments and other documents from time to
time held in or evidencing any such accounts);

(iii) all of the Seller's right, title and interest in and to
investments made with proceeds of the property described in clauses (i) and
(ii) above, or made with amounts on deposit in the Series 1998-B Spread
Account; and

(iv) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the foregoing.

6
<PAGE>

(b) In order to effectuate the provisions and purposes of this
Series 1998-B Supplement, including for the purpose of perfecting the
security interests granted hereunder, the Seller represents and warrants that
it has, prior to the execution of this Series 1998-B Supplement, executed and
filed an appropriate Uniform Commercial Code financing statement in Minnesota
sufficient to ensure that the Collateral Agent, as agent for the Secured
Parties, has a first priority perfected security interest in all Series
1998-B Collateral which can be perfected by the filing of a financing
statement.

ARTICLE III.

SPREAD ACCOUNT

Section 3.1 ESTABLISHMENT OF SERIES 1998-B SPREAD ACCOUNT; INITIAL
DEPOSIT INTO SERIES 1998-B SPREAD ACCOUNT.

(a) On or prior to the Closing Date, the Collateral Agent shall
establish with respect to Series 1998-B, at its office or at another
depository institution or trust company, an Eligible Account, designated
"Spread Account-Series 1998-B-Norwest Bank Minnesota, National Association,
as Collateral Agent for Financial Security Assurance Inc. and another Secured
Party" (the "Series 1998-B Spread Account").

(b) On the Closing Date relating to Series 1998-B, the Collateral
Agent shall deposit the Initial Spread Account Deposit with respect to Series
1998-B received from the Seller into the Series 1998-B Spread Account.

Section 3.2 SPREAD ACCOUNT ADDITIONAL DEPOSITS. On each
Subsequent Transfer Date, the Series 1998-B Trust will, pursuant to Section
2.4 of the Series 1998-B Sale and Servicing Agreement, deliver on behalf of
the Seller the Spread Account Additional Deposit for such Subsequent Transfer
Date to the Collateral Agent. The Collateral Agent shall deposit each such
Spread Account Additional Deposit received from the Series 1998-B Trust into
the Series 1998-B Spread Account.

ARTICLE IV.

MISCELLANEOUS

Section 4.1 FURTHER ASSURANCES. Each party hereto shall take
such action and deliver such instruments to any other party hereto, in
addition to the actions and instruments specifically provided for herein, as
may be reasonably requested or required to effectuate the purpose or
provisions of this Series 1998-B Supplement or to confirm or perfect any
transaction described or contemplated herein.

Section 4.2 GOVERNING LAW. This Series 1998-B Supplement shall
be governed by and construed, and the obligations, rights and remedies of the
parties hereunder shall be determined, in accordance with the laws of the
State of New York.

7
<PAGE>

Section 4.3 COUNTERPARTS. This Series 1998-B Supplement may be
executed in two or more counterparts by the parties hereto, and each such
counterpart shall be considered an original and all such counterparts shall
constitute one and the same instrument.

Section 4.4 HEADINGS. The headings of sections and paragraphs
and the Table of Contents contained in this Series 1998-B Supplement are
provided for convenience only. They form no part of this Series 1998-B
Supplement and shall not affect its construction or interpretation.

8
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Series 1998-B
Supplement as of the date set forth on the first page hereof.

ARCADIA FINANCIAL LTD.

By: /s/ John A. Witham
--------------------------------------
Name: John A. Witham
Title: Executive Vice President and
Chief Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By: /s/ John A. Witham
--------------------------------------
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer

FINANCIAL SECURITY ASSURANCE INC.

By:
--------------------------------------
Authorized Officer

NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee

By: /s/ John C. Weidner
--------------------------------------
John C. Weidner
Corporate Trust Officer

NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent

By: /s/ John C. Weidner
--------------------------------------
John C. Weidner
Corporate Trust Officer

9
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Series 1998-B
Supplement as of the date set forth on the first page hereof.

ARCADIA FINANCIAL LTD.

By:
--------------------------------------
Name: John A. Witham
Title: Executive Vice President and
Chief Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By:
--------------------------------------
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer

FINANCIAL SECURITY ASSURANCE INC.

By: /s/ Raymond Galkowski
--------------------------------------
Authorized Officer

NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee

By:
--------------------------------------

NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent

By:
--------------------------------------

9
<PAGE>

SCHEDULE I

Determination Date* Cumulative Default Cumulative Net Loss
(month) (Column A) (Column B)
<S> <C> <C>
0 to 3 2.11% 1.05%
3 to 6 4.21% 2.11%
6 to 9 6.10% 3.05%
9 to 12 7.79% 3.90%
12 to 15 10.03% 5.02%
15 to 18 12.07% 6.04%
18 to 21 13.85% 6.93%
21 to 24 15.40% 7.70%
24 to 27 16.21% 8.10%
27 to 30 16.86% 8.43%
30 to 33 17.43% 8.71%
33 to 36 17.92% 8.96%
36 to 39 18.15% 9.08%
39 to 42 18.34% 9.17%
42 to 45 18.49% 9.25%
45 to 48 18.62% 9.31%
48 to 51 18.73% 9.36%
51 to 54 18.81% 9.41%
54 to 57 18.88% 9.44%
57 to 60 18.93% 9.46%
60 to 63 18.96% 9.48%
63 to 66 18.98% 9.49%
66 to 69 18.99% 9.50%
69 and higher 19.00% 9.50%

</TABLE>

__________________

* Such Determination Date occurring after the designated calendar months
succeeding the Series 1998-B Closing Date appearing first in the column
below, and prior to or during the designated calendar months succeeding the
Series 1998-B Distribution Date appearing second in the column below.

<PAGE>
- -------------------------------------------------------------------------------

INSURANCE AND INDEMNITY AGREEMENT

among

FINANCIAL SECURITY ASSURANCE INC.,

ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-B,

ARCADIA RECEIVABLES FINANCE CORP.

and

ARCADIA FINANCIAL LTD.

Dated as of June 23, 1998

- -------------------------------------------------------------------------------

Arcadia Automobile Receivables Trust, 1998-B

$ 59,500,000 -- 5.6275% Class A-1 Automobile Receivables-Backed Notes

$ 188,000,000 -- 5.789% Class A-2 Automobile Receivables-Backed Notes

$ 141,500,000 -- 5.950% Class A-3 Automobile Receivables-Backed Notes

$ 106,500,000 -- 6.000% Class A-4 Automobile Receivables-Backed Notes

$ 55,000,000 -- 6.060% Class A-5 Automobile Receivables-Backed Notes

- -------------------------------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

Page
<S> <C>

ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Section 1.01 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE II. REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . . . . . . . . . . . . 7

Section 2.01 Representations and Warranties of the Trust. . . . . . . . . . . . . . 7
Section 2.02 Affirmative Covenants of the Trust . . . . . . . . . . . . . . . . . . 10
Section 2.03 Negative Covenants of the Trust. . . . . . . . . . . . . . . . . . . . 15
Section 2.04 Representations and Warranties of Arcadia Financial and the Seller . . 17
Section 2.05 Affirmative Covenants of Arcadia Financial and the Seller. . . . . . . 21
Section 2.06 Negative Covenants of Arcadia Financial and the Seller . . . . . . . . 26
Section 2.07 Representations and Warranties of Arcadia Financial. . . . . . . . . . 28
Section 2.08 Affirmative Covenants of Arcadia Financial . . . . . . . . . . . . . . 30
Section 2.09 Negative Covenants of Arcadia Financial. . . . . . . . . . . . . . . . 33

ARTICLE III. THE NOTE POLICY; REIMBURSEMENT; INDEMNIFICATION . . . . . . . . . . . . . . . 35

Section 3.01 Conditions Precedent to Issuance of the Note Policy. . . . . . . . . . 35
Section 3.02 Payment of Fees and Premium. . . . . . . . . . . . . . . . . . . . . . 40
Section 3.03 Reimbursement and Additional Payment Obligation. . . . . . . . . . . . 41
Section 3.04 Certain Obligations Not Recourse to Arcadia Financial;
Recourse to Trust Property.. . . . . . . . . . . . . . . . . . . . . . 42
Section 3.05 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.06 Payment Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 3.07 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

ARTICLE IV. FURTHER AGREEMENTS; MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 45

Section 4.01 Effective Date: Term of Agreement. . . . . . . . . . . . . . . . . . . 45
Section 4.02 Further Assurances and Corrective Instruments . . . . . . . . . . . . 45
Section 4.03 Obligations Absolute.. . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 4.04 Assignments; Reinsurance; Third-Party Rights.. . . . . . . . . . . . . 46
Section 4.05 Liability of Financial Security. . . . . . . . . . . . . . . . . . . . 47

ARTICLE V. EVENTS OF DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Section 5.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.02 Remedies; Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 50

ARTICLE VI. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Section 6.01 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.03 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 6.04 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 6.05 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . 52
Section 6.06 Consent of Financial Security. . . . . . . . . . . . . . . . . . . . . 53
Section 6.07 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

i
<PAGE>

Section 6.08 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.09 Trial by Jury Waived . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.10 Limited Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.11 Limited Liability of Wilmington Trust Company. . . . . . . . . . . . . 54
Section 6.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>

SCHEDULE 1

<PAGE>

INSURANCE AND INDEMNITY AGREEMENT

INSURANCE AND INDEMNITY AGREEMENT dated as of June 23, 1998, among
FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company
("Financial Security"), ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-B, a
Delaware business trust (the "Trust"), ARCADIA RECEIVABLES FINANCE CORP., a
Delaware corporation (the "Seller"), and ARCADIA FINANCIAL LTD., a Minnesota
corporation (when referred to individually hereunder, "Arcadia Financial",
when referred to as servicer under the Sale and Servicing Agreement referred
to below, the "Servicer").

INTRODUCTORY STATEMENTS

1. The Seller is the owner of the Receivables. The Seller
proposes to sell to the Trust all of its right, title and interest in and to
the Receivables and certain other property pursuant to the Sale and Servicing
Agreement. The Trust will issue Notes pursuant to the Indenture.

2. Each Note will be secured by the Indenture Property. The
Trust has requested that Financial Security issue a financial guaranty
insurance policy guarantying respectively certain distributions of interest
and principal on the Notes on each Distribution Date (including any such
distributions subsequently avoided as a preference under applicable
bankruptcy law) upon the terms, and subject to the conditions, provided
herein.

3. Arcadia Financial and the Seller have previously entered into
and may in the future enter into one or more pooling and servicing agreements
or sale and servicing agreements with a trust and Seller has previously
entered into a Repurchase Agreement dated as of December 3, 1996, as amended,
among the Seller and Arcadia Receivables Conduit Corp., in each case,
pursuant to which the Seller sold or will sell all of its right, title and
interest in and to receivables and the other trust property and in connection
therewith Financial Security has and may in the future issue additional
policies with respect to certain guaranteed distributions on the
corresponding certificates, the corresponding notes or both.

4. The parties hereto desire to specify the conditions precedent
to the issuance of the Note Policy by Financial Security, the payment of
premium in respect of the Note Policy, the indemnity and reimbursement to be
provided to Financial Security in respect of amounts paid by Financial
Security under the Note Policy or otherwise and certain other matters.

In consideration of the premises and of the agreements herein
contained, Financial Security, the Trust, Arcadia Financial, individually and
as Servicer, and the Seller hereby agree as follows:

1
<PAGE>

ARTICLE I.

DEFINITIONS

Section 1.01 DEFINITIONS. All words and phrases defined in the
Trust Agreement, the Sale and Servicing Agreement or in the Spread Account
Agreement shall have the same meanings in this Agreement. Unless otherwise
specified, if a word or phrase defined in the Trust Agreement, the Sale and
Servicing Agreement or in the Spread Account Agreement can be applied with
respect to one or more Series, such a word or phrase shall be used herein as
applied to Series 1998-B. In addition, the following words and phrases shall
have the following respective meanings:

"ACCUMULATED FUNDING DEFICIENCY" shall have the meaning provided in
Section 412 of the Code and Section 302 of ERISA, whether or not waived.

"AGREEMENT" means this Insurance and Indemnity Agreement, as the same
may be amended, modified or supplemented from time to time.

"AUTHORIZED OFFICER" means, with respect to a corporation, the
president, the chief financial officer or any vice president.

"CODE" means the Internal Revenue Code of 1986, including, unless
the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.

"COMMISSION" means the Securities and Exchange Commission.

"COMMONLY CONTROLLED ENTITY" means with respect to the Trust, the
Seller or Arcadia Financial, as the case may be, each entity, whether or not
incorporated, which is affiliated with the Trust, the Seller or Arcadia
Financial, as the case may be, pursuant to Section 414(b), (c), (m) or (o) of
the Code.

"DEFAULT" means any event which results, or which with the giving
of notice or the lapse of time or both would result, in an Event of Default.

"ERISA" means the Employee Retirement Income Security Act of 1974,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

"EVENT OF DEFAULT" means any event of default specified in Section
5.01 of this Agreement.

"EXPIRATION DATE" means, with respect to the Note Policy, the final
date of the Term of such Note Policy, as specified therein.

"FINANCIAL SECURITY" means Financial Security Assurance Inc., a New
York stock insurance company, its successors and assigns.

2
<PAGE>

"FINANCIAL STATEMENTS" means with respect to Arcadia Financial the
audited consolidated balance sheets as of December 31, 1997, December 31,
1996, and December 31, 1995 and the related audited consolidated statements
of income, retained earnings and cash flows for the 12-month periods then
ended and the notes thereto.

"FISCAL AGENT" means the Fiscal Agent, if any, designated pursuant
to the terms of the Note Policy.

"INDENTURE COLLATERAL AGENT" means initially, Norwest Bank
Minnesota, National Association, in its capacity as collateral agent on
behalf of Financial Security and the Indenture Trustee on behalf of the
Noteholders pursuant to the Indenture, its successor in interest and any
successor Indenture Collateral Agent under the Indenture.

"INDENTURE PROPERTY" means the property pledged to the Indenture
Collateral Agent on behalf of Financial Security and the Indenture Trustee on
behalf of the Noteholders pursuant to the Indenture.

"INSURANCE AGREEMENT INDENTURE CROSS DEFAULT" means an Event of
Default specified in clause (a), (f), (g), (h) or (i) of Section 5.01.

"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

"IRS" means the Internal Revenue Service.

"LATE PAYMENT RATE" means the greater of (i) a per annum rate
equal to 3 percent in excess of Financial Security's cost of funds,
determined on a monthly basis, or (ii) a per annum rate equal to 3 percent
in excess of the arithmetic average of the prime or base lending rates
publicly announced by The Chase Manhattan Bank, N.A. (New York, New York) and
Citibank, N.A. (New York, New York), as in effect on the last day of the
month for which interest is being computed, but, in either case, in no event
greater than the maximum rate permitted by law.

"LIEN" means, as applied to the property or assets (or the income
or profits therefrom) of any Person, in each case whether the same is
consensual or nonconsensual or arises by contract, operation of law, legal
process or otherwise: (a) any mortgage, lien, pledge, attachment, charge,
lease, conditional sale or other title retention agreement, or other security
interest or encumbrance of any kind; or (b) any arrangement, express or
implied, under which such property or assets are transferred, sequestered or
otherwise identified for the purpose of subjecting or making available the
same for the payment of debt or performance of any other obligation in
priority to the payment of the general, unsecured creditors of such Person.

"MATERIAL ADVERSE CHANGE" means, in respect of any Person, a
material adverse change in (i) the business, financial condition, results of
operations, or properties of such Person and its Subsidiaries taken as a
whole, (ii) the ability of such Person to perform its obligations

3
<PAGE>

under any of the Transaction Documents to which it is a party or (iii) the
ability of Financial Security or the Trust to realize the benefits or
security afforded under the Transaction Documents.

"MULTIEMPLOYER PLAN" means a multiemployer plan (within the meaning
of Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled
Entity makes contributions or has liability.

"NOTE POLICY" means the financial guaranty insurance policy,
including any endorsements thereto, issued by Financial Security with respect
to the Notes, substantially in the form attached as Exhibit A hereto.

"NOTICE OF CLAIM" means the Notice of Claim and Certificate in the
form attached as Exhibit A to Endorsement No. 1 to the Note Policy.

"OTHER TRUST PROPERTY" means the property conveyed by the Seller to
the Trust pursuant to the Sale and Servicing Agreement and any Subsequent
Transfer Agreement.

"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency, corporation or instrumentality of the United States to
which the duties and powers of the Pension Benefit Guaranty Corporation are
transferred.

"PLAN" means any pension plan (other than a Multiemployer Plan)
covered by Title IV of ERISA, which is maintained by a Commonly Controlled
Entity or in respect of which a Commonly Controlled Entity has liability.

"PORTFOLIO PERFORMANCE EVENT OF DEFAULT" means an Event of Default
specified in clause (j), (k), or (1) of Section 5.01.

"PREMIUM" means the premium payable in accordance with Section 3.02
of this Agreement.

"PREMIUM LETTER" means the side letter between Financial Security
and Arcadia Financial dated the date hereof in respect of the premium payable
by Arcadia Financial in consideration of the issuance of the Note Policy.

"PREMIUM SUPPLEMENT" means a non-refundable premium, in addition to
the premium payable in accordance with Section 3.02 of this Agreement,
payable by Arcadia Financial to Financial Security in monthly installments
commencing on the first Distribution Date following the Premium Supplement
Commencement Date and on each Distribution Date thereafter, payable in
accordance with the terms of the Premium Letter.

"PREMIUM SUPPLEMENT COMMENCEMENT DATE" means the date of occurrence
of an Event of Default in respect of which the Premium Supplement shall have
been declared due and payable in accordance with Section 5.02 of this
Agreement.

4
<PAGE>

"PREVIOUS SERIES TRANSACTION DOCUMENTS" means the transaction
documents as defined in each of the insurance and indemnity agreements
related to Olympic Automobile Receivables Trust, 1993-A, Olympic Automobile
Receivables Trust, 1993-B, Olympic Automobile Receivables Trust, 1993-C,
Olympic Automobile Receivables Trust, 1993-D, Olympic Automobile Receivables
Trust, 1994-A, Olympic Automobile Receivables Trust, 1994-B, Olympic
Automobile Receivables Trust, 1995-A, Olympic Automobile Receivables Trust,
1995-B, Olympic Automobile Receivables Trust, 1995-C, Olympic Automobile
Receivables Trust, 1995-D, Olympic Automobile Receivables Trust, 1995-E,
Olympic Automobile Receivables Trust, 1996-A, Olympic Automobile Receivables
Trust, 1996-B, Olympic Automobile Receivables Trust, 1996-C, Olympic
Automobile Receivables Trust, 1996-D, Olympic Automobile Receivables Trust,
1997-A, Arcadia Automobile Receivables Trust, 1997-B, Arcadia Automobile
Receivables Trust 1997-C, Arcadia Automobile Receivables Trust, 1997-D,
Arcadia Automobile Receivables Trust, 1998-A and the Warehousing Notes.

"PROSPECTUS" has the meaning set forth in Section 2.04(o) of this
Agreement.

"RELATED DOCUMENTS" means the Transaction Documents except for the
Sale and Servicing Agreement.

"REGISTRATION STATEMENT" has the meaning set forth in Section
2.04(o) of this Agreement.

"REPORTABLE EVENT" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.

"RESTRICTIONS ON TRANSFERABILITY" means, as applied to the property
or assets (or the income or profits therefrom) of any Person, in each case
whether the same is consensual or nonconsensual or arises by contract,
operation of law, legal process or otherwise, any material condition to, or
restriction on, the ability of such Person or any transferee therefrom to
sell, assign, transfer or otherwise liquidate such property or assets in a
commercially reasonable time and manner or which would otherwise materially
deprive such Person or any transferee therefrom of the benefits of ownership
of such property or assets.

"SALE AND SERVICING AGREEMENT" means the Sale and Servicing
Agreement dated as of June 1, 1998 among the Seller, Arcadia Financial, in
its individual capacity and as Servicer, the Back-up Servicer and the Trust
pursuant to which the Initial Receivables are to be sold, serviced and
administered, as the same may be amended from time to time.

"SECURITIES ACT" means the Securities Act of 1933, including,
unless the context otherwise requires, the rules and regulations thereunder,
as amended from time to time.

"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.

5
<PAGE>

"SENIOR NOTE INDENTURE" means the Indenture dated as of March 12,
1997 between Arcadia Financial (f/k/a Olympic Financial Ltd.) and Norwest
Bank Minnesota, National Association, as amended or supplemented (including
that First Supplemental Indenture dated as of March 12, 1997 and that Second
Supplemental Indenture dated as of October 8, 1997 (each, a "Supplemental
Indenture")), relating to $375,000,000 principal amount of Arcadia
Financial's currently outstanding 11 1/2% Senior Notes due 2007.

"SERIES 1998-B" means the Series of Notes issued on the date hereof
pursuant to the Indenture.

"SERIES OF NOTES" or "SERIES" means Series 1998-B or any, or as the
context may require, all, additional series of notes issued as described in
paragraph 3 of the Introductory Statements hereto.

"SERVICER TERMINATION SIDE LETTER" means the letter from Financial
Security to the Servicer dated as of June 23, 1998, with regard to the
renewal of the term of the Servicer.

"SPREAD ACCOUNT AGREEMENT" means the Spread Account Agreement,
dated as of March 25, 1993, as amended and restated as of June 23, 1998 and
supplemented in accordance with the terms thereof, among Arcadia Financial,
the Seller, Financial Security, the Indenture Trustee and the Collateral
Agent.

"STOCK PLEDGE AGREEMENT" means the Third Amended and Restated Stock
Pledge Agreement, dated as of December 3, 1996, as amended and restated,
among Financial Security, Arcadia Financial, and the Collateral Agent, as the
same may be amended from time to time.

"SUBSIDIARY" means, with respect to any Person, any corporation of
which a majority of the outstanding shares of capital stock having ordinary
voting power for the election of directors is at the time owned by such
Person directly or through one or more Subsidiaries.

"TERM OF THE NOTE POLICY" means, with respect to the Note Policy,
the meaning provided therein.

"TERM OF THIS AGREEMENT" shall be determined as provided in Section
4.01 of this Agreement.

"TRANSACTION" means the transactions contemplated by the
Transaction Documents, including the transactions described in the
Registration Statement.

"TRANSACTION DOCUMENTS" means this Agreement, the Sale and
Servicing Agreement, the Trust Agreement, the Certificate of Trust, the
Indenture, the Underwriting Agreement, the Purchase Agreement, the Premium
Letter, the Stock Pledge Agreement, the Lockbox Agreement, the Depository
Agreements, the Custodian Agreement, the Servicer Termination Side Letter,
the Spread Account Agreement and the Administration Agreement.

6
<PAGE>

"TRUST AGREEMENT" means the Trust Agreement, dated as of June 1,
1998, among the Seller, Financial Security and Wilmington Trust Company, as
Owner Trustee.

"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

"UNDERFUNDED PLAN" means any Plan that has an Underfunding.

"UNDERFUNDING" means, with respect to any Plan, the excess, if any,
of (a) the present value of all benefits under the Plan (based on the
assumptions used to fund the Plan pursuant to Section 412 of the Code) as of
the most recent valuation date over (b) the fair market value of the assets
of such Plan as of such valuation date.

"UNDERWRITERS" means, J.P. Morgan Securities Inc., BancAmerica
Robertson Stephens, Chase Securities Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation.

"UNDERWRITING AGREEMENT" means the Pricing Agreement, dated June 10,
1998, among Arcadia Financial and the Seller and the Underwriters.

"WAREHOUSING NOTES" means the Variable Funding Note issued pursuant
to the Warehousing Series Indenture dated as of December 3, 1996, as amended
and supplemented, between Arcadia Receivables Conduit Corp., as the issuer,
and Norwest Bank Minnesota, National Association, as trustee.

ARTICLE II.

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 2.01 REPRESENTATIONS AND WARRANTIES OF THE TRUST. The
Trust represents, warrants and covenants, as of the date hereof and as of the
Closing Date, as follows:

(a) DUE ORGANIZATION AND QUALIFICATION. The Trust is duly formed
and validly existing as a Delaware statutory business trust and is in good
standing under the laws of the State of Delaware, with power and authority to
own its properties and to conduct its business. The Trust is duly qualified
to do business, is in good standing and has obtained all necessary licenses,
permits, charters, registrations and approvals (together, "approvals")
necessary for the conduct of its business as described in the Prospectus and
the performance of its obligations under the Transaction Documents, in each
jurisdiction in which the failure to be so qualified or to obtain such
approvals would render the Receivables in such jurisdiction or any
Transaction Document unenforceable in any respect or would otherwise have a
material adverse effect upon the Transaction.

(b) POWER AND AUTHORITY. The Trust has all necessary trust power and
authority to conduct its business as described in the Prospectus, to execute,
deliver and perform its obligations under this Agreement and each other
Transaction Document to which the Trust is a

7
<PAGE>

party and to carry out the terms of each such agreement, and has full power
and authority to issue the Notes and pledge and assign its assets pursuant to
the Indenture and has duly authorized the issuance of the Notes and the
assignment of its assets by all necessary trust proceedings.

(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and each other Transaction Document to which the Trust is a
party has been duly authorized by all necessary action on the part of the
Trust and does not require any additional approvals or consents or other
action by or any notice to or filing with any Person by or on behalf of the
Trust, including, without limitation, any governmental entity.

(d) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement and each other Transaction Document to which the Trust is a party,
the consummation of the Transaction nor the satisfaction of the terms and
conditions of this Agreement and each other Transaction Document to which the
Trust is a party,

(i) conflicts with or results in any breach or violation of any
provision of the Certificate of Trust or the Trust Agreement or any law,
rule, regulation, order, writ, judgment, injunction, decree, determination
or award currently in effect having applicability to the Trust or any of
its properties, including regulations issued by an administrative agency
or other governmental authority having supervisory powers over the Trust,

(ii) constitutes a default by the Trust under or a breach of any
provision of any loan agreement, mortgage, indenture or other agreement or
instrument to which the Trust is a party or by which it or any of its
properties is or may be bound or affected, or

(iii) results in or requires the creation of any Lien upon or in
respect of any of the Trust's assets except as otherwise expressly
contemplated by the Transaction Documents.

(e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action,
proceeding or investigation pending, or, to the Trust's best knowledge,
threatened, before any court, regulatory body, administrative agency,
arbitrator or governmental agency or instrumentality having jurisdiction over
the Trust or its properties: (A) asserting the invalidity of this Agreement
or any other Transaction Document to which the Trust is a party, (B) seeking
to prevent the issuance of the Notes or the consummation of the Transaction,
(C) seeking any determination or ruling that might materially and adversely
affect the validity or enforceability of this Agreement or any other
Transaction Document to which the Trust is a party, (D) which might result in
a Material Adverse Change with respect to the Trust or (E) which might
adversely affect the federal or state tax attributes of the Notes or the
Trust.

(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents
to which the Trust is a party, when executed and delivered by the Trust, and
assuming due authorization, execution and delivery by the other parties thereto,
will constitute the legal, valid and binding obligation of the Trust enforceable
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws

8
<PAGE>

affecting creditors' rights generally and general equitable principles. The
Notes, when executed, authenticated and delivered in accordance with the
Indenture, will be entitled to the benefits of the Indenture and will
constitute legal, valid and binding obligations of the Trust, enforceable in
accordance with their terms.

(g) NO CONSENTS. No consent, license, approval or authorization
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any
consent, approval, waiver or notification of any creditor, lessor or other
non-governmental person, is required in connection with the execution,
delivery and performance by the Trust of this Agreement or of any other
Transaction Document to which the Trust is a party, except (in each case)
such as have been obtained and are in full force and effect.

(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by the Trust in the conduct of its
business violates any law, regulation, judgment, agreement, order or decree
applicable to the Trust which, if enforced, would result in a Material
Adverse Change with respect to the Trust.

(i) ERISA. The Trust does not maintain or contribute to, or have
any obligation to maintain or contribute to, any Plan. The Trust is not
subject to any of the provisions of ERISA.

(j) COLLATERAL. On the Closing Date, and on each Subsequent
Transfer Date, the Trust will have good and marketable title to each item of
Other Trust Property conveyed on such date and will own each such item free
and clear of any Lien (other than Liens contemplated under the Indenture) or
any equity or participation interest of any other Person.

(k) PERFECTION OF LIENS AND SECURITY INTEREST. On the Closing
Date, the Lien and security interest in favor of the Indenture Collateral
Agent with respect to Indenture Property will be perfected by the filing of
financing statements on Form UCC-1 in each jurisdiction where such recording
or filing is necessary for the perfection thereof, the delivery of the
Receivable Files for the Receivables to the Custodian, and the establishment
of the Collection Account, the Subcollection Account, the Lockbox Account,
the Pre-Funding Account, the Reserve Account and the Note Distribution
Account in accordance with the provisions of the Transaction Documents, and
no other filings in any jurisdiction or any other actions (except as
expressly provided herein) are necessary to perfect the Collateral Agent's
Lien on and security interest in the Collateral as against any third parties.

(l) SECURITY INTEREST IN FUNDS AND INVESTMENTS. Assuming the
retention of funds in the Accounts and the acquisition of Eligible
Investments in accordance with the Transaction Documents, such funds and
Eligible Investments will be subject to a valid and perfected, first priority
security interest in favor of the Collateral Agent on behalf of the Indenture
Trustee (on behalf of the Noteholders) and Financial Security.

(m) COMPLIANCE WITH INVESTMENT COMPANY ACT. The Trust is not
required to be registered as an "investment company" under the Investment
Company Act.

9
<PAGE>

(n) INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Trust set forth in each Transaction
Document are (in each case) true and correct as if set forth herein.

(o) SPECIAL PURPOSE ENTITY.

(i) The capital of the Trust is adequate for the business and
undertakings of the Trust.

(ii) Except as contemplated by the Transaction Documents, the Trust
is not engaged in any business transactions with Arcadia Financial, the
Seller or any Affiliate of either of them.

(iii) The Trust's funds and assets are not, and will not be,
commingled with the funds of any other Person, except as provided in the
Transaction Documents.

(p) SOLVENCY; FRAUDULENT CONVEYANCE. The Trust is solvent and will
not be rendered insolvent by the Transaction or by the performance of its
obligations under the Transaction Documents and, after giving effect to such
Transaction, the Trust will not be left with an unreasonably small amount of
capital with which to engage in its business. The Trust does not intend to
incur, or believes that it has incurred, debts beyond its ability to pay such
debts as they mature. The Trust does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Trust or any of its assets.

Section 2.02 AFFIRMATIVE COVENANTS OF THE TRUST. The Trust hereby
agrees that during the Term of the Agreement, unless Financial Security shall
otherwise expressly consent in writing:

(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Trust will
comply with all terms and conditions of this Agreement and each other
Transaction Document to which it is a party and with all material
requirements of any law, rule or regulation applicable to it. The Trust will
not cause or permit to become effective any amendment to or modification of
any of the Transaction Documents to which it is a party unless (i) (so long
as no Insurer Default shall have occurred and be continuing) Financial
Security shall have previously approved in writing the form of such amendment
or modification or (ii) if an Insurer Default shall have occurred and be
continuing, such amendment would not adversely affect the interests of
Financial Security. The Trust shall not take any action or fail to take any
action that would interfere with the enforcement of any rights under this
Agreement or the other Transaction Documents.

(b) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
The Trust shall keep or cause to be kept in reasonable detail books and
records of account of the Trust's assets and business, which shall be
furnished to Financial Security upon request. The Trust shall furnish to
Financial Security, simultaneously with the delivery of such documents to the
Indenture Trustee or the Noteholders, as the case may be, copies of all
reports, certificates,

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statements, financial statements or notices furnished to the Indenture
Trustee or the Noteholders, as the case may be, pursuant to the Transaction
Documents.

(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within 90 days after the close of each fiscal year of the Trust,
the audited balance sheets of the Trust as of the end of such fiscal year
and the audited statements of income, changes in equityowners' equity and
cash flows of the Trust for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the corresponding
date and period in the preceding fiscal year, prepared in accordance with
generally accepted accounting principles, consistently applied, and
accompanied by the certificate of the Trust's independent accountants (who
shall be acceptable to Financial Security) and by the certificate
specified in Section 2.02(c) hereof.

(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in
any event within 45 days after the close of each of the first three
quarters of each fiscal year of the Trust, the unaudited balance sheets
of the Trust as of the end of such quarter and the unaudited statements
of income, changes in equityowners' equity and cash flows of the Trust
for the portion of the fiscal year then ended, all in reasonable detail
and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles consistently
applied (subject to normal year-end adjustments), and accompanied by the
certificate specified in Section 2.02(c) hereof.

(iii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies of
any reports or comment letters submitted to the Trust by its independent
accountants in connection with any examination of the financial
statements of the Trust.

(iv) CERTAIN INFORMATION. Not less than ten days prior to the date
of filing with the IRS of any tax return or amendment thereto, copies of
the proposed form of such return or amendment and, promptly after the
filing or sending thereof, (i) copies of each tax return and amendment
thereto that the Trust files with the IRS and (ii) copies of all
financial statements, reports, and registration statements which the
Trust files with, or delivers to, any federal government agency,
authority or body which supervises the issuance of securities by the
Trust.

(v) OTHER INFORMATION. Promptly upon the request of Financial
Security, copies of all schedules, financial statements or other similar
reports delivered to or by the Trust pursuant to the terms of this
Agreement and the other Transaction Documents and such other data as
Financial Security may reasonably request.

(c) COMPLIANCE CERTIFICATE. The Trust shall deliver to Financial
Security and, upon request, any Noteholder, concurrently with the
delivery of the financial statements required pursuant to Section
2.02(b)(i) and (ii) hereof, a certificate signed by an Authorized
Officer of the Administrator stating that:

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(i) a review of the Trust's performance under the Transaction
Documents during such period has been made under such officer's
supervision;

(ii) to the best of such individual's knowledge following reasonable
inquiry, no Default or Event of Default has occurred and is continuing
or, if a Default or Event of Default has occurred and is continuing,
specifying the nature thereof and, if the Trust has a right to cure
pursuant to Section 5.01, stating in reasonable detail the steps, if
any, being taken by the Trust to cure such Default or Event of Default
or to otherwise comply with the terms of the agreement or agreements to
which such Default or Event of Default relates; and

(iii) The financial reports submitted in accordance with Section
2.02(b)(i) or (ii) hereof, as applicable, are complete and correct in
all material respects and present fairly the financial condition and
results of operations of the Trust as of the dates and for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied (subject as to interim statements to normal
year-end adjustments).

(d) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS.
The Trust shall, upon the request of Financial Security, permit Financial
Security or its authorized agents (i) to inspect the books and records of
the Trust as they may relate to the Notes, the Receivables and the Other
Trust Property, the obligations of the Trust under the Transaction Documents,
the Trust's business and the Transaction and (ii) to discuss the affairs,
finances and accounts of the Trust with any of its personnel and
representatives, including its Independent Accountants. Such inspections and
discussions shall be conducted during normal business hours and shall not
unreasonably disrupt the business of the Trust. The books and records of the
Trust will be maintained at the address of the Trust designated herein for
receipt of notices, unless the Trust shall otherwise advise the parties
hereto in writing.

(e) NOTICE OF MATERIAL EVENTS. The Trust shall promptly inform
Financial Security in writing of the occurrence of any of the following:

(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against
the Trust involving potential damages or penalties in an uninsured
amount in excess of $100,000 in any one instance or $500,000 in the
aggregate;

(ii) any change in the location of Trust's principal office or any
change in the location of the Trust's books and records;

(iii) the occurrence of any Default or Event of Default;

(iv) the commencement or threat of any rule making or disciplinary
proceedings or any proceedings instituted by or against the Trust in any
federal, state or local court or before any governmental body or agency,
or before any arbitration board, or the promulgation of any proceeding
or any proposed or final rule which, if adversely determined, would
result in a Material Adverse Change with respect to the Trust;

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<PAGE>

(v) the commencement of any proceedings by or against the Trust
under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator,
conservator, trustee or similar official shall have been, or may be,
appointed or requested for the Trust or any of its assets;

(vi) the receipt of notice that (A) the Trust is being placed under
regulatory supervision, (B) any license, permit, charter, registration or
approval necessary for the conduct of the Trust's business is to be, or
may be, suspended or revoked, or (C) the Trust is to cease and desist any
practice, procedure or policy employed by the Trust in the conduct of its
business, and such cessation may result in a Material Adverse Change with
respect to the Trust; or

(vii) any other event, circumstance or condition that has resulted, or
has a material possibility of resulting, in a Material Adverse Change in
respect of the Trust.

(f) FURTHER ASSURANCES. The Trust will file all necessary
financing statements, assignments or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept and filed in
such manner and in such places as may be required by law to preserve and
protect fully the Lien and security interest in, and all rights of the
Indenture Collateral Agent with respect to the Indenture Property, under the
Indenture. In addition, the Trust shall, upon the request of Financial
Security (so long as no Insurer Default has occurred and is continuing), from
time to time, execute, acknowledge and deliver and, if necessary, file such
further instruments and take such further action as may be reasonably
necessary to effectuate the intention, performance and provisions of the
Transaction Documents to which the Trust is a party or to protect the
interest of the Indenture Collateral Agent in the Indenture Property under
the Indenture. The Trust agrees to cooperate with the Rating Agencies in
connection with any review of the Transaction which may be undertaken by the
Rating Agencies after the date hereof.

(g) MAINTENANCE OF LICENSES. The Trust shall maintain all
licenses, permits, charters and registrations which are material to the
performance by the Trust of its obligations under this Agreement and each
other Transaction Document to which the Trust is a party or by which the
Trust is bound.

(h) RETIREMENT OF NOTES. The Trust shall, upon retirement of the
Notes, furnish to Financial Security a notice of such retirement, and, upon
such retirement and the expiration of the term of the Note Policy, surrender
the Note Policy to Financial Security for cancellation.

(i) DISCLOSURE DOCUMENT. Each Prospectus delivered with respect to
the Notes shall clearly disclose that the Note Policy is not covered by the
property/casualty insurance security fund specified in Article 76 of the New
York Insurance Law. In addition, each Prospectus delivered with respect to
the Notes which include financial statements of Financial Security prepared
in accordance with generally accepted accounting principles (other than a
Prospectus that only incorporates such financial statements by reference)
shall include the following statement immediately preceding such financial
statements:

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The New York State Insurance Department recognizes only statutory
accounting practices for determining and reporting the financial
condition and results of operations of an insurance company, for
determining its solvency under the New York Insurance Law, and for
determining whether its financial condition warrants the payment of
a dividend to its stockholders. No consideration is given by the
New York State Insurance Department to financial statements prepared
in accordance with generally accepted accounting principles in making
such determinations.

(j) SPECIAL PURPOSE ENTITY.

(i) The Trust shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to mislead
others as to the identity of the entity with which those others are
concerned, and particularly will use its best efforts to avoid the
appearance of conducting business on behalf of Arcadia Financial, the
Seller, or any other Affiliates thereof or that the assets of the Trust
are available to pay the creditors of Arcadia Financial, the Seller, or
any other Affiliates thereof. Without limiting the generality of the
foregoing, all oral and written communications, including, without
limitation, letters, invoices, purchase orders, contracts, statements
and loan applications, will be made solely in the name of the Trust.

(ii) The Trust shall maintain trust records and books of account
separate from those of Arcadia Financial, the Seller and Affiliates of any
of them.

(iii) The Trust shall obtain proper authorization from its equity
owners of all trust action requiring such authorization, and copies of
each such authorization and the minutes or other written summary of each
such meeting shall be delivered to Financial Security within two weeks
of such authorization or meeting as the case may be.

(iv) Although the organizational expenses of the Trust have been
paid by Arcadia Financial, operating expenses and liabilities of the
Trust shall be paid from its own funds.

(v) The annual financial statements of the Trust shall disclose the
effects of the Trust's transactions in accordance with generally
accepted accounting principles and shall disclose that the assets of the
Trust are not available to pay creditors of Arcadia Financial, the
Seller or any Affiliate of any of them.

(vi) The resolutions, agreements and other instruments of the Trust
underlying the transactions described in this Agreement and in the other
Transaction Documents shall be continuously maintained by the Trust as
official records of the Trust separately identified and held apart from
the records of Arcadia Financial, the Seller and each Affiliate of any
of them.

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<PAGE>

(vii) The Trust shall maintain an arm's-length relationship with
Arcadia Financial, the Seller and each Affiliate of any of them and will
not hold itself out as being liable for the debts of any such Person.

(viii) The Trust shall keep its assets and its liabilities wholly
separate from those of all other entities, including, but not limited
to, Arcadia Financial, the Seller and each Affiliate of any of them
except, in each case, as contemplated by the Transaction Documents.

(k) CLOSING DOCUMENTS. The Trust shall provide or cause to be
provided to Financial Security an executed original copy of each document
executed in connection with the Transaction within 10 days after the Closing
Date, except that the Seller shall cause a copy of the Trust Agreement, the
Sale and Servicing Agreement, the Series 1998-B Supplement, the Indenture,
the Administration Agreement and each Transaction Document to which Financial
Security is a party to be provided to Financial Security on the Closing Date.

(l) TAX MATTERS. The Trust will take all actions necessary to
ensure that, for federal and state income tax purposes, the Trust is not
taxable as an association (or publicly traded partnership) or taxable as a
corporation.

(m) SECURITIES LAWS. The Trust shall comply in all material
respects with all applicable provisions of state and federal securities laws,
including blue sky laws and the Securities Act, the Exchange Act and the
Investment Company Act and all rules and regulations promulgated thereunder
for which non-compliance would result in a Material Adverse Change with
respect to the Trust.

(n) INCORPORATION OF COVENANTS. The Trust agrees to comply with
each of the covenants of the Trust set forth in the Transaction Documents and
hereby incorporates such covenants by reference as if each were set forth
herein.

Section 2.03 NEGATIVE COVENANTS OF THE TRUST . The Trust hereby
agrees that during the Term of this Agreement, unless Financial Security
shall otherwise give its prior express written consent:

(a) WAIVER; AMENDMENTS; ETC. The Trust shall not waive, modify,
amend, supplement or consent to any waiver, modification, amendment of or
supplement to, any of the provisions of the Certificate of Trust, the Trust
Agreement or any of the other Transaction Documents unless, if no Insurer
Default shall have occurred and be continuing, Financial Security shall have
consented thereto in writing.

(b) CREATION OF INDEBTEDNESS; GUARANTEES. The Trust shall not
create, incur, assume or suffer to exist any indebtedness or assume,
guarantee, endorse or otherwise be or become directly or contingently liable
for the obligations of any Person by, among other things, agreeing to
purchase any obligation of another Person, agreeing to advance funds to such
Person or causing or assisting such Person to maintain any amount of capital,
except as contemplated by the Transaction Documents.

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<PAGE>

(d) NO LIENS. The Trust shall not, except as contemplated by the
Transaction Documents create, incur, assume or suffer to exist any Lien of
any nature upon or with respect to any of its properties or assets, now owned
or hereafter acquired, or sign or file under the Uniform Commercial Code of
any jurisdiction any financing statement that names the Trust as debtor, or
sign any security agreement authorizing any secured party thereunder to file
such a financing statement.

(e) IMPAIRMENT OF RIGHTS. The Trust shall not take any action, or
fail to take any action, if such action or failure to take action may
interfere with the enforcement of any rights under the Transaction Documents
that are material to the rights, benefits or obligations of the Indenture
Trustee, the Noteholders or Financial Security.

(f) NO MERGERS. The Trust shall not consolidate with or merge into
any Person or transfer all or any material amount of its assets to any Person
(except as contemplated by the Transaction Documents) or liquidate or
dissolve.

(g) ERISA. The Trust shall not contribute or incur any obligation
to contribute to, or incur any liability in respect of, any Plan or
Multiemployer Plan.

(h) OTHER ACTIVITIES. The Trust shall not:

(i) sell, pledge, transfer, exchange or otherwise dispose of any of
its assets except as permitted under the Transaction Documents; or

(ii) engage in any business or activity except as contemplated by the
Transaction Documents and as permitted by its Certificate of Trust.

(i) INSOLVENCY. The Trust shall not commence any case, proceeding
or other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect
to it, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, consolidation or other relief with respect to it or
(B) seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets or make a
general assignment for the benefit of its creditors. The Trust shall not take
any action in furtherance of, or indicating the consent to, approval of, or
acquiescence in any of the acts set forth above. The Trust shall not admit
in writing its inability to pay its debts.

(j) SUCCESSOR PARTIES. The Trust will not remove or replace, or
cause to be removed or replaced, the Servicer, the Indenture Trustee, the
Owner Trustee or the Administrator.

<PAGE>

Section 2.04 REPRESENTATIONS AND WARRANTIES OF ARCADIA FINANCIAL
AND THE SELLER. Each of Arcadia Financial and the Seller represent and
warrant as of the date hereof and as of the Closing Date, as follows:

(a) DUE ORGANIZATION AND QUALIFICATION. The Seller is a
corporation duly organized and validly existing and in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business. The Seller is duly qualified to do
business, is in good standing and has obtained all necessary licenses,
permits, charters, registrations and approvals (together, "approvals")
necessary for the conduct of its business as currently conducted and as
described in the Prospectus and the performance of its obligations under the
Transaction Documents, in each jurisdiction in which the failure to be so
qualified or to obtain such approvals would render the Receivables in such
jurisdiction or any Transaction Document unenforceable in any respect or
would otherwise have a material adverse effect upon the Transaction.

(b) POWER AND AUTHORITY. The Seller has all necessary corporate
power and authority to conduct its business as currently conducted and as
described in the Prospectus, to execute, deliver and perform its obligations
under this Agreement and each other Transaction Document to which the Seller
is a party and to carry out the terms of each such agreement, and has full
power and authority to sell and assign the Receivables and the Other Trust
Property to the Trust and has duly authorized such sale and assignment to the
Trust by all necessary corporate action.

(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and each other Transaction Document to which the Seller is a
party has been duly authorized by all necessary corporate action on the part
of the Seller and does not require any additional approvals or consents or
other action by or any notice to or filing with any Person by or on behalf of
the Seller, including, without limitation, any governmental entity or the
Seller's stockholder.

(d) NONCONTRAVENTION. None of the execution and delivery of this
Agreement and each other Transaction Document to which the Seller is a party,
the consummation of the Transaction or the satisfaction of the terms and
conditions of this Agreement and each other Transaction Document to which the
Seller is a party,

(i) conflicts with or results in any breach or violation of any
provision of the charter or bylaws of the Seller or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award currently in effect having applicability to the Seller or any of
its properties, including regulations issued by an administrative agency
or other governmental authority having supervisory powers over the
Seller,

(ii) constitutes a default by the Seller under or a breach of any
provision of any loan agreement, mortgage, indenture or other agreement
or instrument to which the Seller is a party or by which it or any of
its properties is or may be bound or affected, or

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<PAGE>

(iii) results in or requires the creation of any Lien upon or in
respect of any of the Seller's assets except as otherwise expressly
contemplated by the Transaction Documents.

(e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action,
proceeding or investigation pending, or, to the Seller's or Arcadia
Financial's best knowledge, threatened, before any court, regulatory body,
administrative agency, arbitrator or governmental agency or instrumentality
having jurisdiction over the Seller or its properties: (A) asserting the
invalidity of this Agreement or any other Transaction Document to which the
Seller is a party, (B) seeking to prevent the issuance of the Notes or the
consummation of the Transaction, (C) seeking any determination or ruling that
might materially and adversely affect the validity or enforceability of this
Agreement or any other Transaction Document to which the Seller is a party,
(D) which might result in a Material Adverse Change with respect to the
Seller or (E) which might adversely affect the federal or state tax
attributes of the Notes or the Trust.

(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction
Documents to which the Seller is a party, when executed and delivered by the
Seller, and assuming due authorization, execution and delivery by the other
parties thereto, will constitute the legal, valid and binding obligation of
the Seller enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equitable principles. The Notes, when executed, authenticated and
delivered in accordance with the Indenture, will be entitled to the benefits
of the Indenture and will constitute legal, valid and binding obligations of
the Trust, enforceable in accordance with their terms.

(g) NO CONSENTS. No consent, license, approval or authorization
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any
consent, approval, waiver or notification of any creditor, lessor or other
non-governmental person, is required in connection with the execution,
delivery and performance by the Seller of this Agreement or of any other
Transaction Document to which the Seller is a party, except (in each case)
such as have been obtained and are in full force and effect.

(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by the Seller in the conduct of its
business violates any law, regulation, judgment, agreement, order or decree
applicable to the Seller which, if enforced, would result in a Material
Adverse Change with respect to the Seller.

(i) GOOD TITLE; VALID TRANSFER; ABSENCE OF LIENS; SECURITY
INTEREST. Immediately prior to the sale of the Initial Receivables and
related Other Trust Property to the Trust pursuant to the Sale and Servicing
Agreement, the Seller was the owner of, and had good and marketable title to,
such property free and clear of all Liens and Restrictions on
Transferability, and had full right, corporate power and lawful authority to
assign, transfer and pledge the Initial Receivables and the related Other
Trust Property. The Sale and Servicing Agreement constitutes a valid sale,
transfer and assignment of the Other Trust Property to the Trust enforceable
against creditors of

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<PAGE>

and purchasers of the Seller. In the event that, in contravention of the
intention of the parties, the transfer of the Other Trust Property by the
Seller to the Trust is characterized as other than a sale, such transfer
shall be characterized as a secured financing, and the Trust shall have a
valid and perfected first priority security interest in the Other Trust
Property free and clear of all Liens and Restrictions on Transferability.

(j) ACCURACY OF INFORMATION. Neither the Transaction Documents nor
any documents, agreements, instruments, schedules, certificates, statements,
cash flow schedules, number runs or other writings or data (collectively, the
"Documents") furnished to Financial Security by the Seller or Arcadia
Financial with respect to either of them, their Subsidiaries, the Receivables
or the Transaction contain any statement of a material fact which was untrue
or misleading in any material respect when made (except insofar as any
Document was corrected or superseded by a subsequent Document and Financial
Security has not detrimentally relied on the original Document). There is no
fact known to the Seller or Arcadia Financial which has a material
possibility of causing a Material Adverse Change with respect to the Seller
or Arcadia Financial, or which has a material possibility of impairing the
value or marketability of the Receivables, taken as a whole, or decreasing
the probability that amounts due in respect of the Receivables will be
collected as due. Since the furnishing of the Transaction Documents, there
has been no change or any development or event involving a prospective change
known to the Seller or Arcadia Financial which would render any
representation or warranty or other statement made by either of them in any
of the Transaction Documents untrue or misleading in a material respect.

(k) COMPLIANCE WITH INVESTMENT COMPANY ACT. The Seller is not
required to be registered as an "investment company" under the Investment
Company Act.

(l) INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Seller set forth in the Transaction
Documents are (in each case) true and correct as if set forth herein.

(m) SPECIAL PURPOSE ENTITY.

(i) The capital of the Seller is adequate for the business and
undertakings of the Seller.

(ii) Other than with respect to the ownership by Arcadia Financial
of the stock of the Seller and as provided in the Previous Series
Transaction Documents, the Purchase Agreement, the Sale and Servicing
Agreement, and the Spread Account Agreement, the Seller is not engaged
in any business transactions with Arcadia Financial or any Affiliate of
Arcadia Financial.

(iii) At least one director of the Seller shall be a person who is
not, and will not be, a director, officer, employee or holder of any
equity securities of Arcadia Financial or any of its Affiliates or
Subsidiaries.

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<PAGE>

(iv) The Seller's funds and assets are not, and will not be,
commingled with the funds of any other Person, except as provided in the
Transaction Documents.

(v) The by-laws of the Seller require it to maintain (A) correct
and complete minute books and records of account, and (B) minutes of the
meetings and other proceedings of its shareholders and board of
directors.

(n) SOLVENCY; FRAUDULENT CONVEYANCE. The Seller is solvent and
will not be rendered insolvent by the Transaction and, after giving effect to
such Transaction, the Seller will not be left with an unreasonably small
amount of capital with which to engage in its business. The Seller does not
intend to incur, or believe that it has incurred, debts beyond its ability to
pay such debts as they mature. The Seller does not contemplate the
commencement of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator, conservator,
trustee or similar official in respect of the Seller or any of its assets.
The amount of consideration being received by the Seller upon the sale of the
Initial Receivables and related Other Trust Property and contemplated to be
received upon the Sale of the Subsequent Receivables and related Other Trust
Property constitutes reasonably equivalent value and fair consideration for
interest in such Receivables and such Other Trust Property. The Seller is
not transferring the Other Trust Property to the Trust, as provided in the
Transaction Documents, with any intent to hinder, delay or defraud any of the
Seller's creditors.

(o) REGISTRATION STATEMENT; PROSPECTUS. The Seller has filed with
the Securities and Exchange Commission (the "Commission") a registration
statement on Form S-3 (No. 333-48141), including a preliminary prospectus and
prospectus supplement for the registration of the Notes under the Securities
Act, has filed such amendments thereto, and such amended preliminary
prospectuses and prospectus supplements as may have been required to the date
hereof, and will file such additional amendments thereto and such amended
prospectuses and prospectus supplements as may hereafter be required. Such
registration statement (as amended, if applicable) and the prospectus,
together with the prospectus supplement relating to the Notes, constituting a
part thereof (including in each case all documents, if any, incorporated by
reference therein and the information, if any, deemed to be part thereof
pursuant to the rules and regulations of the Commission under the Securities
Act (the "Rules and Regulations"), as from time to time amended or
supplemented pursuant to the Securities Act or otherwise) are hereinafter
referred to as the "Registration Statement" and the "Prospectus,"
respectively, except that if any revised prospectus or prospectus supplement
shall be provided by the Seller for use in connection with the offering of
the Notes which differs from the Prospectus filed with the Commission
pursuant to Rule 424 of the Rules and Regulations (whether or not such
revised prospectus is required to be filed by the Seller pursuant to Rule 424
of the Rules and Regulations), the term "Prospectus" shall refer to such
revised prospectus and prospectus supplement from and after the time it is
first provided to the Underwriters for such use. The Registration Statement
at the time they became effective complied, and at each time that the
Prospectus is provided to the Underwriters for use in connection with the
offering or sale of any Note will comply, in all material respects with the
requirements of the Securities Act and the Rules and Regulations. The
Registration Statement and the Prospectus at the time the Registration
Statement became effective did not and on the date hereof does not, contain
an

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<PAGE>

untrue staement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading and the Prospectus at the time it was first provided to the
Underwriters for use in connection with the offering of the Notes did not,
and on the date hereof does not, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein in light of the circumstances under which they were made not
misleading, except that the representations and warranties in this
subparagraph shall not apply to statements in or omissions from the
Registration Statement or the Prospectus or any preliminary prospectus made
in reliance upon information furnished to the Seller in writing by Financial
Security expressly for use therein or the financial statements (including the
related notes thereto) of Financial Security.

(p) ERISA. The Seller is in compliance with ERISA and has not
incurred and does not reasonably expect to incur any liabilities to the PBGC
under ERISA in connection with any Plan or Multiemployer Plan or to
contribute now or in the future in respect of any Plan or Multiemployer Plan.

(q) PLEDGE OF SHARES. The shares of stock of the Seller which have
been pledged pursuant to the Stock Pledge Agreement constitute all of the
issued and outstanding shares of the Seller.

(r) PERFECTION OF LIENS AND SECURITY INTEREST. On the Closing
Date, the Lien and security interest in favor of the Indenture Collateral
Agent with respect to Indenture Property will be perfected by the filing of
financing statements on Form UCC-1 in each jurisdiction where such recording
or filing is necessary for the perfection thereof, the delivery of the
Receivable Files for the Receivables to the Custodian, and the establishment
of the Collection Account, the Subcollection Account, the Lockbox Account,
the Pre-Funding Account, the Reserve Account and the Note Distribution
Account in accordance with the provisions of the Transaction Documents, and
no other filings in any jurisdiction or any other actions (except as
expressly provided herein) are necessary to perfect the Collateral Agent's
Lien on and security interest in the Collateral as against any third parties.

(s) SECURITY INTEREST IN FUNDS AND INVESTMENTS. Assuming the
retention of funds in the Accounts and the acquisition of Eligible
Investments in accordance with the Transaction Documents, such funds and
Eligible Investments will be subject to a valid and perfected, first priority
security interest in favor of the Collateral Agent on behalf of the Indenture
Trustee (on behalf of the Noteholders) and Financial Security.

Section 2.05 AFFIRMATIVE COVENANTS OF ARCADIA FINANCIAL AND THE
SELLER. Each of Arcadia Financial and the Seller hereby agree that during
the Term of the Agreement, unless Financial Security shall otherwise
expressly consent in writing:

(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Seller
will comply with all terms and conditions of this Agreement and each other
Transaction Document to which it is a party and with all material
requirements of any law, rule or regulation applicable to it. The Seller
will not cause or permit to become effective any amendment to or modification
of any of the Transaction Documents to which it is a party unless (i) (so
long as no Insurer Default shall

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have occurred and be continuing) Financial Security shall have previously
approved in writing the form of such amendment or modification or (ii) if an
Insurer Default shall have occurred and be continuing, such amendment would
not adversely affect the interests of Financial Security. The Seller shall
not take any action or fail to take any action that would interfere with the
enforcement of any rights under this Agreement or the other Transaction
Documents.

(b) CORPORATE EXISTENCE. The Seller shall maintain its corporate
existence and shall at all times continue to be duly organized under the laws
of Delaware and duly qualified and duly authorized (as described in Sections
2.04(a), (b) and (c) hereof) and shall conduct its business in accordance
with the terms of its corporate charter and bylaws.

(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
The Seller shall keep or cause to be kept in reasonable detail books and
records of account of the Seller's assets and business, and shall clearly
reflect therein the transfer of the Receivables and the Other Trust Property
to the Trust and the sale of the Receivables as a sale to the Trust of the
Seller's interest in the Receivables and the Other Trust Property. The
Seller shall furnish to Financial Security, simultaneously with the delivery
of such documents to the Trustee or the Noteholders, as the case may be,
copies of all reports, certificates, statements, financial statements or
notices furnished to the Trustee or the Noteholders, as the case may be,
pursuant to the Transaction Documents. The Seller shall furnish to Financial
Security as soon as available, and in any event within 90 days after the
close of each fiscal year of the Seller, the unaudited balance sheet of the
Seller as of the end of such fiscal year and the unaudited statements of
income, changes in shareholders' equity and cash flows of the Seller for such
fiscal year, all in reasonable detail and stating in comparative form the
respective figures for the preceding fiscal year, prepared in accordance with
generally accepted accounting principles, consistently applied.

(d) COMPLIANCE CERTIFICATE. The Seller shall deliver to Financial
Security, within 90 days after the close of each fiscal year of the Seller, a
certificate signed by an Authorized Officer of the Seller stating that:

(i) a review of the Seller's performance under the Transaction
Documents during such period has been made under such officer's
supervision; and

(ii) to the best of such individual's knowledge following
reasonable inquiry, no Default or Event of Default has occurred, or if a
Default or Event of Default has occurred, specifying the nature thereof
and, if the Seller has or had a right to cure pursuant to Section 5.01,
stating in reasonable detail the steps, if any, taken or being taken by
the Seller to cure such Default or Event of Default or to otherwise
comply with the terms of the Transaction Document to which such Default
or Event of Default relates.

(iii) the financial reports submitted in accordance with Section
2.05(c) hereof, are complete and correct in all material respects and
present fairly the financial condition and results of operations of the
Seller as of the dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied.

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(e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS.
The Seller shall, upon the request of Financial Security, permit Financial
Security or its authorized agents (i) to inspect the books and records of
the Seller as they may relate to the Notes, the Receivables and the Other
Trust Property, the obligations of the Seller under the Transaction
Documents, the Seller's business and the Transaction and (ii) to discuss the
affairs, finances and accounts of the Seller with any of its officers,
directors and representatives, including its Independent Accountants. Such
inspections and discussions shall be conducted during normal business hours
and shall not unreasonably disrupt the business of the Seller. The books and
records of the Seller will be maintained at the address of the Seller
designated herein for receipt of notices, unless the Seller shall otherwise
advise the parties hereto in writing.

(f) NOTICE OF MATERIAL EVENTS. The Seller shall promptly inform
Financial Security in writing of the occurrence of any of the following:

(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against
the Seller involving potential damages or penalties in an uninsured
amount in excess of $5,000 in any one instance or $25,000 in the
aggregate;

(ii) any change in the location of Seller's principal office or
any change in the location of the Seller's books and records;

(iii) the occurrence of any Default or Event of Default;

(iv) the commencement or threat of any rule making or disciplinary
proceedings or any proceedings instituted by or against the Seller in
any federal, state or local court or before any governmental body or
agency, or before any arbitration board, or the promulgation of any
proceeding or any proposed or final rule which, if adversely determined,
would result in a Material Adverse Change with respect to the Seller or
the Trust;

(v) the commencement of any proceedings by or against the Seller
under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator,
conservator, trustee or similar official shall have been, or may be,
appointed or requested for the Seller or any of its assets;

(vi) the receipt of notice that (A) the Seller is being placed
under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of the Seller's
business is to be, or may be, suspended or revoked, or (C) the Seller is
to cease and desist any practice, procedure or policy, employed by the
Seller in the conduct of its business, and such cessation may result in
a Material Adverse Change with respect to the Seller or the Trust; or

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<PAGE>

(vii) any other event, circumstance or condition that has resulted,
or has a material possibility of resulting, in a Material Adverse Change
in respect of the Seller, or the Trust.

(g) FURTHER ASSURANCES. The Seller will file all necessary
financing statements, assignments or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept and filed in
such manner and in such places as may be required by law to preserve and
protect fully the Lien and security interest in, and all rights of the Trust
with respect to Other Trust Property, under the Sale and Servicing Agreement.
In addition, the Seller shall, upon the request of Financial Security (so
long as no Insurer Default has occurred and is continuing), from time to
time, execute, acknowledge and deliver and, if necessary, file such further
instruments and take such further action as may be reasonably necessary to
effectuate the intention, performance and provisions of the Transaction
Documents to which the Seller is a party or to protect the interest of the
Trust in the Receivables under the Sale and Servicing Agreement. The Seller
agrees to cooperate with the Rating Agencies in connection with any review of
the Transaction which may be undertaken by the Rating Agencies after the date
hereof.

(h) MAINTENANCE OF LICENSES. The Seller shall maintain all
licenses, permits, charters and registrations which are material to the
performance by the Seller of its obligations under this Agreement and each
other Transaction Document to which the Seller is a party or by which the
Seller is bound.

(i) DISCLOSURE DOCUMENT. Each Prospectus delivered with respect to
the Notes shall clearly disclose that the Note Policy is not covered by the
property/casualty insurance security fund specified in Article 76 of the New
York Insurance Law. In addition, each Prospectus delivered with respect to
the Notes which includes financial statements of Financial Security prepared
in accordance with generally accepted accounting principles (other than a
Prospectus that only incorporates such financial statements by reference)
shall include the following statement immediately preceding such financial
statements:

The New York State Insurance Department recognizes only
statutory accounting practices for determining and
reporting the financial condition and results of
operations of an insurance company, for determining its
solvency under the New York Insurance Law, and for
determining whether its financial condition warrants the
payment of a dividend to its stockholders. No
consideration is given by the New York State Insurance
Department to financial statements prepared in accordance
with generally accepted accounting principles in making
such determinations.

(j) SPECIAL PURPOSE ENTITY.

(i) The Seller shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to mislead
others as to the identity of the entity with which those others are
concerned, and particularly will use its best efforts to

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<PAGE>

avoid the appearance of conducting business on behalf of Arcadia
Financial or any other Affiliate thereof or that the assets of the
Seller are available to pay the creditors of Arcadia Financial or any
Affiliate thereof. Without limiting the generality of the foregoing,
all oral and written communications, including, without limitation,
letters, invoices, purchase orders, contracts, statements and loan
applications, will be made solely in the name of the Seller.

(ii) The Seller shall maintain corporate records and books of
account separate from those of Arcadia Financial and the other
Affiliates thereof.

(iii) The Seller shall obtain proper authorization from its board
of directors of all corporate action requiring such authorization,
meetings of the board of directors of the Seller shall be held not less
frequently than three times per annum and copies of the minutes of each
such board meeting shall be delivered to Financial Security within two
weeks of such meeting.

(iv) The Seller shall obtain proper authorization from its
shareholders of all corporate action requiring shareholder approval,
meetings of the shareholders of the Seller shall be held not less
frequently than one time per annum and copies of each such authorization
and the minutes of each such shareholder meeting shall be delivered to
Financial Security within two weeks of such authorization or meeting, as
the case may be.

(v) Although the organizational expenses of the Seller have been
paid by Arcadia Financial, operating expenses and liabilities of the
Seller shall be paid from its own funds.

(vi) The annual financial statements of the Seller shall disclose
the effects of the Seller's transactions in accordance with generally
accepted accounting principles and shall disclose that the assets of the
Seller are not available to pay creditors of Arcadia Financial or any
other Affiliate thereof.

(vii) The resolutions, agreements and other instruments of the
Seller underlying the transactions described in this Agreement and in
the other Transaction Documents shall be continuously maintained by the
Seller as official records of the Seller separately identified and held
apart from the records of Arcadia Financial and each other Affiliate
thereof.

(viii) The Seller shall maintain an arm's-length relationship with
Arcadia Financial and the other Affiliates thereof and will not hold
itself out as being liable for the debts of Arcadia Financial or any
Affiliate thereof.

(ix) The Seller shall keep its assets and its liabilities wholly
separate from those of all other entities, including, but not limited to
Arcadia Financial and the other Affiliates thereof except, in each case,
as contemplated by the Transaction Documents.

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<PAGE>

(k) CLOSING DOCUMENTS. The Seller shall provide or cause to be
provided to Financial Security an executed original copy of each document
executed in connection with the Transaction within 10 days after the Closing
Date, except that the Seller shall cause a copy of the Trust Agreement, the
Sale and Servicing Agreement, the Series 1998-B Supplement, the Indenture,
the Administration Agreement and each Transaction Document to which Financial
Security is a party to be provided to Financial Security on the Closing Date.

(l) SUBSEQUENT RECEIVABLES; GOOD TITLE; VALID TRANSFER; ABSENCE OF
LIENS; SECURITY INTEREST. Immediately prior to the sale to the Trust
pursuant to a Subsequent Transfer Agreement, the Seller will be the owner of,
and shall have good and marketable title to, the Subsequent Receivables
transferred thereby and the related Other Trust Property free and clear of
all Liens and Restrictions on Transferability, and shall have full right,
corporate power and lawful authority to assign, transfer and pledge such
property.

(m) INCORPORATION OF COVENANTS. The Seller agrees to comply with
each of the Seller's covenants set forth in the Transaction Documents and
hereby incorporates such covenants by reference as if each were set forth
herein.

Section 2.06 NEGATIVE COVENANTS OF ARCADIA FINANCIAL AND THE
SELLER. Each of Arcadia Financial and the Seller hereby agrees that during
the Term of this Agreement, unless Financial Security shall otherwise give
its prior express written consent:

(a) WAIVER; AMENDMENTS, ETC. The Seller shall not waive, modify,
amend, supplement or consent to any waiver, modification, amendment of or
supplement to, any of the provisions of any of the Transaction Documents or
Previous Series Transaction Documents or of its certificate of incorporation
or by-laws (i) unless, if no Insurer Default shall have occurred and be
continuing, Financial Security shall have consented thereto in writing or
(ii) if an Insurer Default shall have occurred and be continuing, which would
adversely affect the interests of Financial Security.

(b) CREATION OF INDEBTEDNESS; GUARANTEES. The Seller shall not
create, incur, assume or suffer to exist any indebtedness or assume,
guarantee, endorse or otherwise be or become directly or contingently liable
for the obligations of any Person by, among other things, agreeing to
purchase any obligation of another Person, agreeing to advance funds to such
Person or causing or assisting such Person to maintain any amount of capital,
except as contemplated by the Transaction Documents or as contemplated by the
documents relating to a Series of Notes.

(d) NO LIENS. The Seller shall not, except as contemplated by the
Transaction Documents or as contemplated by the documents relating to a
Series of Notes, create, incur, assume or suffer to exist any Lien of any
nature upon or with respect to any of its properties or assets, now owned or
hereafter acquired, or sign or file under the Uniform Commercial Code of any
jurisdiction any financing statement that names the Seller as debtor, or sign
any security agreement authorizing any secured party thereunder to file such
a financing statement.

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<PAGE>

(e) ISSUANCE OF STOCK. The Seller shall not issue any shares of
capital stock or rights, warrants or options in respect of its capital stock
or securities convertible into or exchangeable for its capital stock, other
than the shares of common stock which have been pledged to Financial Security
under the Seller Stock Pledge Agreement.

(f) IMPAIRMENT OF RIGHTS. The Seller shall not take any action, or
fail to take any action, if such action or failure to take action may
interfere with the enforcement of any rights under the Transaction Documents
that are material to the rights, benefits or obligations of the Trust, the
Indenture Trustee, the Noteholders or Financial Security.

(g) NO MERGERS. The Seller shall not consolidate with or merge
into any Person or transfer all or any material amount of its assets to any
Person (except as contemplated by the Transaction Documents or the documents
relating to a Series of Notes).

(h) ERISA. The Seller shall not contribute or incur any obligation
to contribute to, or incur any liability in respect of, any Plan or
Multiemployer Plan.

(i) OTHER ACTIVITIES. The Seller shall not:

(i) sell, pledge, transfer, exchange or otherwise dispose of any of
its assets except as permitted under the Transaction Documents or the
documents relating to a Series of Notes; or

(ii) engage in any business or activity except as contemplated by the
Transaction Documents or as contemplated by the documents relating to a
Series of Notes and as permitted by its certificate of incorporation.

(j) INSOLVENCY. The Seller shall not commence any case, proceeding
or other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect
to it, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, consolidation or other relief with respect to it or
the Trust or (B) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for the Trust or for all or any substantial
part of its assets or the Collateral related to any or all Series, or make a
general assignment for the benefit of its creditors. The Seller shall not
take any action in furtherance of, or indicating the consent to, approval of,
or acquiescence in any of the acts set forth above. The Seller shall not
admit in writing its inability to pay its debts.

(k) DIVIDENDS. The Seller shall not declare or make payment of (i)
any dividend or other distribution on any shares of its capital stock, or
(ii) any payment on account of the purchase, redemption, retirement or
acquisition of any option, warrant or other right to acquire shares of its
capital stock, unless (in each case) at the time of such declaration or
payment (and after giving effect thereto) no amount payable by the Seller
under any Transaction Document with respect to any Series is then due and
owing but unpaid.

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<PAGE>

Section 2.07 REPRESENTATIONS AND WARRANTIES OF ARCADIA FINANCIAL.
Arcadia Financial represents and warrants, as of the date hereof and as of
the Closing Date, as follows:

(a) DUE ORGANIZATION AND QUALIFICATION. Arcadia Financial and each
of its Subsidiaries is a corporation, duly organized, validly existing and in
good standing under the laws of the State of its respective incorporation
with power and authority to own its properties and conduct its business.
Arcadia Financial and each of its Subsidiaries is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to
be so qualified would render any of the Receivables unenforceable in any
respect or would otherwise have a material adverse effect upon the
Transaction. Arcadia Financial and each of its Subsidiaries has obtained all
licenses, permits, charters, registrations and approvals necessary for the
conduct of its business as currently conducted and as described in the
Prospectus and for the performance of its obligations under the Transaction
Documents.

(b) POWER AND AUTHORITY. Arcadia Financial has all necessary
corporate power and authority to conduct its business as currently conducted
and as described in the Prospectus, to execute, deliver and perform its
obligations under this Agreement and each other Transaction Document to which
it is a party and to carry out the terms of each such agreement.

(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and each other Transaction Document to which Arcadia Financial
is a party has been duly authorized by all necessary corporate action and
does not require any additional approvals or consents or other action by or
any notice to or filing with any Person, including, without limitation, any
governmental entity or Arcadia Financial's stockholders.

(d) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement and each other Transaction Document to which Arcadia Financial is a
party, the consummation of the Transaction, nor the satisfaction of the terms
and conditions of this Agreement and each other Transaction Document to which
Arcadia Financial is a party,

(i) conflicts with or results in any breach or violation of any
provision of the corporate charter or bylaws of Arcadia Financial or any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to
Arcadia Financial or any of its properties, including regulations issued
by an administrative agency or other governmental authority having
supervisory powers over Arcadia Financial,

(ii) constitutes a default by Arcadia Financial under or a breach of
any provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which Arcadia Financial or any of its
Subsidiaries is a party or by which it or any of its or their properties
is or may be bound or affected, or

(iii) results in or requires the creation of any Lien upon or in
respect of any of Arcadia Financial's assets, except as otherwise
expressly contemplated by the Transaction Documents.

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<PAGE>

(e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action,
proceeding or investigation pending, or, to Arcadia Financial's best
knowledge, threatened, before any court, regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction over
Arcadia Financial or its properties: (A) asserting the invalidity of this
Agreement or any other Transaction Document to which Arcadia Financial is a
party, (B) seeking to prevent the issuance of the Notes, or the consummation
of the Transaction, (C) seeking any determination or ruling that might
materially and adversely affect the validity or enforceability of, this
Agreement or any other Transaction Document to which Arcadia Financial is a
party, (D) which might result in a Material Adverse Change with respect to
Arcadia Financial or (E) which might adversely affect the federal or state
tax attributes of the Notes or the Trust.

(f) VALID AND BINDING OBLIGATIONS. The Purchase Agreement
constitutes a valid sale, transfer, and assignment of the Receivables and
Other Trust Property to the Seller, enforceable against creditors of and
purchasers from Arcadia Financial. Each of the other Transaction Documents
to which Arcadia Financial is a party when executed and delivered by Arcadia
Financial, and assuming the due authorization, execution and delivery by the
other parties thereto, will constitute the legal, valid and binding
obligation of Arcadia Financial enforceable in accordance with its respective
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equitable principles.

(g) NO CONSENTS. No consent, license, approval or authorization
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any
consent, approval, waiver or notification of any creditor, lessor or other
non-governmental person, is required in connection with the execution,
delivery and performance by Arcadia Financial of this Agreement or of any
other Transaction Document to which Arcadia Financial is a party, except (in
each case) such as have been obtained and are in full force and effect.

(h) FINANCIAL STATEMENTS. The Financial Statements of Arcadia
Financial, copies of which have been furnished to Financial Security, (i)
are, as of the dates and for the periods referred to therein, complete and
correct in all material respects, (ii) present fairly the financial
condition and results of operations of Arcadia Financial as of the dates and
for the periods indicated and (iii) have been prepared in accordance with
generally accepted accounting principles consistently applied, except as
noted therein (subject as to interim statements to normal year-end
adjustments and the absence of notes). Since the date of the most recent
Financial Statements, there has been no material adverse change in such
financial condition or results of operations. Except as disclosed in the
Financial Statements, Arcadia Financial is not subject to any contingent
liabilities or commitments that, individually or in the aggregate, have a
reasonable likelihood of causing a Material Adverse Change in respect of
Arcadia Financial.

(i) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employee or proposed to be employed by Arcadia Financial in the conduct of
its business violates any law, regulation, judgment, agreement, order or
decree applicable to Arcadia Financial which, if enforced, would result in a
Material Adverse Change with respect to Arcadia Financial.

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<PAGE>

(j) TAXES. Arcadia Financial has, and each of its Subsidiaries
have, filed all federal and state tax returns and paid all taxes to the
extent that such taxes have become due. Any taxes, fees and other
governmental charges payable by Arcadia Financial in connection with the
Transaction, the execution and delivery of the Transaction Documents and the
issuance of the Notes have been paid or shall have been paid at or prior to
the Closing Date.

(k) ERISA. Arcadia Financial is in compliance with ERISA and has
not incurred and does not reasonably expect to incur any liabilities to the
PBGC under ERISA in connection with any Plan or Multiemployer Plan or to
contribute now or in the future in respect of any Plan or Multiemployer Plan
except in accordance with the provisions of Section 2.9(e) hereof.

(l) INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES.
Arcadia Financial represents and warrants to Financial Security that the
representations and warranties of Arcadia Financial set forth in the
Transaction Documents are (in each case) true and correct as if set forth
herein.

Section 2.08 AFFIRMATIVE COVENANTS OF ARCADIA FINANCIAL. Arcadia
Financial hereby agrees that during the Term of the Agreement, unless
Financial Security shall otherwise expressly consent in writing:

(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. Arcadia
Financial will comply with all terms and conditions of this Agreement and
each other Transaction Document to which it is a party and all material
requirements of any law, rule or regulation applicable to it. Arcadia
Financial will not cause or permit to become effective any amendment to or
modification of any Transaction Document to which it is a party (i) unless,
so long as no Insurer Default shall have occurred and be continuing,
Financial Security shall have previously approved in writing the form of such
amendment or modification or (ii) if an Insurer Default shall have occurred
and be continuing, such amendment would not adversely affect the interests of
Financial Security. Arcadia Financial shall not take any action or fail to
take any action that would interfere with the enforcement of any rights under
this Agreement or the other Transaction Documents.

(b) CORPORATE EXISTENCE. Arcadia Financial shall maintain its
corporate existence and shall at all times continue to be duly organized
under the laws of Minnesota and duly qualified and duly authorized (as
described in Sections 2.07(a), (b) and (c) hereof) and shall conduct its
business in accordance with the terms of its corporate charter and bylaws.

(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
Arcadia Financial shall keep or cause to be kept in reasonable detail books
and records of account of Arcadia Financial's assets and business. Arcadia
Financial, so long as it shall be the Servicer, shall furnish to Financial
Security, simultaneously with the delivery of such documents to the Owner
Trustee, Indenture Trustee or the Noteholders, as the case may be, copies of
all reports, certificates, statements or notices furnished to the Owner
Trustee, Indenture Trustee or the Noteholders, as the case may be, pursuant
to the Transaction Documents. Arcadia Financial shall also furnish or cause
to be furnished to Financial Security:

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<PAGE>

(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any
event within 90 days after the close of each fiscal year of Arcadia
Financial, the audited balance sheets of Arcadia Financial and its
subsidiaries as of the end of such fiscal year and the audited
consolidated statements of income, changes in shareholders' equity and
cash flows of Arcadia Financial for such fiscal year, all in reasonable
detail and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles, consistently
applied, and accompanied by the certificate of Arcadia Financial's
independent accountants (which, so long as no Insurer Default shall have
occurred and be continuing, shall be acceptable to Financial Security)
and by the certificate specified in Section 2.08(d) hereof.

(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in
any event within 45 days after the close of each of the first three
quarters of each fiscal year of Arcadia Financial, the unaudited
consolidated balance sheets of Arcadia Financial as of the end of such
quarter and the unaudited consolidated statements of income, changes in
shareholders' equity and cash flows of Arcadia Financial for the portion
of the fiscal year then ended, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and
period in the preceding fiscal year, prepared in accordance with
generally accepted accounting principles consistently applied (subject
to normal year-end adjustments), and accompanied by the certificate
specified in Section 2.08(d) hereof.

(iii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies of
any reports submitted to Arcadia Financial by its independent accountants
in connection with any examination of the financial statements of Arcadia
Financial.

(iv) CERTAIN INFORMATION. Promptly after the filing or sending
thereof, copies of all proxy statements, financial statements, reports
and registration statements which Arcadia Financial files, or delivers
to, the IRS, the Commission, or any other federal government agency,
authority or body which supervises the issuance of securities by Arcadia
Financial or any national securities exchange.

(d) COMPLIANCE CERTIFICATE. Arcadia Financial shall deliver to
Financial Security within 90 days after the close of each fiscal year of
Arcadia Financial, a certificate signed by an Authorized Officer of Arcadia
Financial stating that:

(i) a review of Arcadia Financial's performance under the
Transaction Documents during such period has been made under such
officer's supervision;

(ii) to the best of such individual's knowledge following reasonable
inquiry, no Default or Event of Default has occurred, or if a Default or
Event of Default has occurred, specifying the nature thereof and, if
Arcadia Financial has or had a right to cure pursuant to Section 5.01
hereof, stating in reasonable detail the steps, if any, taken or being
taken by Arcadia Financial to cure such Default or Event of Default or to
otherwise comply

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with the terms of the Transaction Document to which such Default or Event
of Default relates; and

(iii) the financial statements submitted in accordance with Section
2.08(c) hereof, as applicable, are complete and correct in all material
respects and present fairly the financial condition and results of
operations of Arcadia Financial as of the dates and for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied (subject as to interim statements to normal
year-end adjustments and the absence of notes).

(e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS.
Arcadia Financial shall, upon the request of Financial Security, permit
Financial Security or its authorized agents (i) to inspect the books and
records of Arcadia Financial as they may relate to the Notes, the
Receivables, the obligations of Arcadia Financial as Servicer under the
Transaction Documents, its business and the Transaction and (ii) to discuss
the affairs, finances and accounts of Arcadia Financial with any of its
officers, directors and representatives, including its Independent
Accountants. Such inspections and discussions shall be conducted during
normal business hours and shall not unreasonably disrupt the business of
Arcadia Financial. The books and records of Arcadia Financial will be
maintained at the address of Arcadia Financial designated herein for receipt
of notices, unless Arcadia Financial shall otherwise advise the parties
hereto in writing.

(f) NOTICE OF MATERIAL EVENTS. Arcadia Financial shall promptly
inform Financial Security in writing of the occurrence of any of the
following:

(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against
Arcadia Financial involving potential damages or penalties in an
uninsured amount in excess of $10,000 in any one instance or $25,000 in
the aggregate;

(ii) any change in the location of Arcadia Financial's principal
office or any change in the location of the Arcadia Financial's books
and records;

(iii) the occurrence of any Default or Event of Default;

(iv) the commencement or threat of any rule making or disciplinary
proceedings or any proceedings instituted by or against Arcadia
Financial in any federal, state or local court or before any
governmental body or agency, or before any arbitration board, or the
promulgation of any proceeding or any proposed or final rule which, if
adversely determined, would result in a Material Adverse Change with
respect to Arcadia Financial;

(v) the commencement of any proceedings by or against Arcadia
Financial under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver,

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liquidator, conservator, trustee or similar official shall have been, or
may be, appointed or requested for Arcadia Financial or any of its assets;

(vi) the receipt of notice that (A) Arcadia Financial is being
placed under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of Arcadia
Financial's business is to be, or may be, suspended or revoked, or (C)
Arcadia Financial is to cease and desist any practice, procedure or
policy employed by Arcadia Financial in the conduct of its business, and
such cessation may result in a Material Adverse Change with respect to
Arcadia Financial; or

(vii) any other event, circumstance or condition that has resulted, or
has a material possibility of resulting, in a Material Adverse Change in
respect of Arcadia Financial.

(g) MAINTENANCE OF LICENSES. Arcadia Financial shall maintain all
licenses, permits, charters and registrations which are material to the
performance by Arcadia Financial of its obligations under this Agreement and
each other Transaction Document to which Arcadia Financial is a party or by
which Arcadia Financial is bound.

(h) ERISA. Arcadia Financial shall give Financial Security prompt
notice of each of the following events (but in no event more than 30 days
after the occurrence of the event): (i) an Accumulated Funding Deficiency,
(ii) the failure to make a required contribution to a Plan or Multiemployer
Plan, (iii) a Reportable Event, (iv) any action by a Commonly Controlled
Entity to terminate any Plan or withdraw from any Multiemployer Plan, (v) any
action by the PBGC to terminate or appoint a trustee to administer a Plan,
(vi) the reorganization or insolvency of any Multiemployer Plan and (vii) an
aggregate Underfunding for all Underfunded Plans in excess of $100,000. In
addition, Arcadia Financial shall promptly (but in no case more than 30 days
following issuance or receipt by the Commonly Controlled Entity) provide to
Financial Security a copy of all correspondence between a Commonly Controlled
Entity and the PBGC, IRS, Department of Labor or the administrators of a
Multiemployer Plan relating to any of the events described in the preceding
sentence or the underfunded status, termination or possible termination of a
Plan or a Multiemployer Plan.

(i) THIRD-PARTY BENEFICIARY. Arcadia Financial agrees that
Financial Security shall have all rights of a third-party beneficiary in
respect of the Sale and Servicing Agreement, it being understood that the
remedies of Financial Security with respect to the representations and
warranties set forth in Section 2.4(b) thereof and the covenants set forth in
Section 3.6(a) thereof shall be limited to the remedies set forth in the Sale
and Servicing Agreement.

(j) INCORPORATION OF COVENANTS. Arcadia Financial agrees to comply
with each of Arcadia Financial's covenants set forth in the Transaction
Documents and hereby incorporates such covenants by reference as if each were
set forth herein.

Section 2.09 NEGATIVE COVENANTS OF ARCADIA FINANCIAL. Arcadia
Financial hereby agrees that during the Term of this Agreement, unless
Financial Security shall otherwise give its express written consent:

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(a) RESTRICTIONS ON LIENS. Arcadia Financial shall not create,
incur or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a contingency
or otherwise) the creation, incurrence or existence of any Lien or
Restriction on Transferability on the Receivables and the Other Trust
Property except for the Liens in favor of the Seller, the Trust and the
Indenture Collateral Agent for the benefit of the Indenture Trustee and
Financial Security contemplated by the Transaction Documents and the
Restrictions on Transferability imposed by the Purchase Agreement and the
Sale and Servicing Agreement.

(b) IMPAIRMENT OF RIGHTS. Arcadia Financial shall not take any
action, or fail to take any action, if such action or failure to take action
may interfere with the enforcement of any rights under the Transaction
Documents that are material to the rights, benefits or obligations of the
Seller, the Trust, the Indenture Trustee, the Noteholders or Financial
Security.

(c) LIMITATION ON MERGERS. Arcadia Financial shall not consolidate
with or merge with or into any Person or transfer all or any material part of
its assets to any Person (except as contemplated by the Transaction
Documents) or liquidate or dissolve, provided that Arcadia Financial may
consolidate with, merge with or into, or transfer all or a material part of
its assets to, another corporation if (i) the acquiror of its assets, or the
corporation surviving such merger or consolidation, shall be organized and
existing under the laws of any state and shall be qualified to transact
business in each jurisdiction in which failure to qualify would render any
Transaction Document unenforceable or would result in a Material Adverse
Change in respect of Arcadia Financial or the Trust Property; (ii) after
giving effect to such consolidation, merger or transfer of assets, no Default
or Event of Default shall have occurred or be continuing; (iii) such
acquiring or surviving entity can lawfully perform the obligations of Arcadia
Financial under the Transaction Documents and shall expressly assume in
writing all of the obligations of Arcadia Financial, including, without
limitation, its obligations under the Transaction Documents; and (iv) such
acquiring or surviving entity and the consolidated group of which it is a
part shall each have a net worth immediately subsequent to such
consolidation, merger or transfer of assets at least equal to the net worth
of Arcadia Financial immediately prior to such consolidation, merger or
transfer of assets; and Arcadia Financial shall give Financial Security
written notice of any such consolidation, merger or transfer of assets on the
earlier of: (A) the date upon which any publicly available filing or release
is made with respect to such action or (B) 10 Business Days prior to the date
of consummation of such action. Arcadia Financial shall furnish to Financial
Security all information requested by it that is reasonably necessary to
determine compliance with this paragraph.

(d) WAIVER; AMENDMENTS, ETC. Arcadia Financial shall not waive,
modify, amend, supplement or consent to any waiver, modification, amendment
of or supplement to, any of the provisions of any of the Transaction
Documents without the prior written consent of Financial Security (i) unless,
so long as no Insurer Default shall have occurred and be continuing,
Financial Security shall have consented thereto in writing or (ii) if an
Insurer Default shall have occurred and be continuing, which would adversely
affect the interests of Financial Security.

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<PAGE>

(e) ERISA. Arcadia Financial shall not contribute or incur any
obligation to contribute to, or incur any liability in respect of, any Plan
or Multiemployer Plan, except that Arcadia Financial may make such a
contribution or incur such a liability provided that neither Arcadia
Financial nor any Commonly Controlled Entity will:

(i) terminate any Plan so as to incur any material liability to the
PBGC;

(ii) knowingly participate in any "prohibited transaction" (as
defined in ERISA) involving any Plan or Multiemployer Plan or any trust
created thereunder which would subject any of them to a material tax or
penalty on prohibited transactions imposed under Section 4975 of the
Code or ERISA;

(iii) fail to pay to any Plan or Multiemployer Plan any contribution
which it is obligated to pay under the terms of such Plan or
Multiemployer Plan, if such failure would cause such Plan to have any
material Accumulated Funding Deficiency, whether or not waived; or

(iv) allow or suffer to exist any occurrence of a Reportable Event,
or any other event or condition, which presents a material risk of
termination by the PBGC of any Plan or Multiemployer Plan, to the extent
that the occurrence or nonoccurrence of such Reportable Event or other
event or condition is within the control of it or any Commonly
Controlled Entity.

(f) INSOLVENCY. Arcadia Financial shall not commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, consolidation or other
relief with respect to the Seller or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for the Seller. Arcadia
Financial shall not take any action in furtherance of, or indicating the
consent to, approval of, or acquiescence in any of the acts set forth above.

ARTICLE III.

THE NOTE POLICY; REIMBURSEMENT; INDEMNIFICATION

Section 3.01 CONDITIONS PRECEDENT TO ISSUANCE OF THE NOTE POLICY.
Financial Security agrees to issue the Note Policy subject to satisfaction of
the conditions set forth below.

(a) The obligation of Financial Security to issue the Note Policy is
subject to the following having occurred or being true (as the case may be):
(i) Financial Security shall have received evidence satisfactory to it that the
Seller shall have assigned, conveyed and transferred, or caused to be assigned,
conveyed and transferred, the Initial Receivables to the Trust, (ii) the Seller
shall have created a valid security interest in, and Lien on, the Receivables in
favor of the Trust, (iii) the Trust shall have created a valid security
interest in, and Lien on, the Indenture Property in favor of the Indenture
Collateral Agent on behalf of the Indenture Trustee (on behalf

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of the Noteholders) and Financial Security, (iv) the initial Premium shall
have been paid in accordance with Section 3.02 hereof, (v) the
representations and warranties of the Trust, the Seller and of Arcadia
Financial and the Servicer set forth or incorporated by reference in this
Agreement shall be true and correct on and as of the Closing Date, and (vi)
each Transaction Document shall be in full force and effect and no Default
thereunder shall have occurred and be continuing.

(b) The obligation of Financial Security to issue the Note Policy
is further subject to the condition precedent that Financial Security shall
have received on the Closing Date, or, in its sole and absolute discretion,
received the opportunity to review prior to and on the Closing Date, the
following, each dated the Closing Date and in full force and effect on such
date, except as otherwise provided herein, in form and substance satisfactory
to Financial Security and its counsel:

(i) a certificate of an Authorized Officer of each of the Seller
and Arcadia Financial stating that nothing has come to the attention of
such entity to indicate that the Registration Statement or the
Prospectus, on the date the Registration Statement became effective,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus on any date on
which it was forwarded to the Underwriter for use in connection with the
offering of the Notes contained, or on the Closing Date contains, any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading;

(ii) copies, certified to be true copies by an Authorized Officer of
the Owner Trustee, of (i) the resolutions of the board of directors of
the Owner Trustee authorizing the execution, delivery and performance by
the Owner Trustee of this Agreement and each other Transaction Document
to which the Owner Trustee is a party and all transactions and documents
contemplated hereby and thereby, and of all other documents evidencing
any other necessary action of the Owner Trustee (which certification
shall state that such resolutions have not been modified, are in full
force and effect and constitute the only resolutions adopted by the
Owner Trustee's board of directors or any committee thereof with respect
thereto and (ii) the Certificate of Trust, certified by the Secretary of
State or other appropriate official of the State of Delaware;

(iii) copies, certified to be true copies by an Authorized Officer of
the Seller, of (i) the resolutions of the board of directors of the
Seller authorizing the execution, delivery and performance of this
Agreement and each other Transaction Document to which the Seller is a
party and all transactions and documents contemplated hereby and
thereby, and of all other documents evidencing any other necessary
action of the Seller (which certification shall state that such
resolutions have not been modified, are in full force and effect and
constitute the only resolutions adopted by the Seller's board of
directors or any committee thereof with respect thereto), (ii) the
corporate charter of the Seller and (iii) the by-laws, as amended, of
the Seller;

<PAGE>

(iv) copies, certified to be true copies by an Authorized Officer
of Arcadia Financial, of (i) the resolutions of the board of directors
of Arcadia Financial authorizing the execution, delivery and performance
of this Agreement and each other Transaction Document to which Arcadia
Financial is a party and all other transactions and documents
contemplated hereby and thereby, and of all documents evidencing any
other necessary action of Arcadia Financial (which certification shall
state that such resolutions have not been modified, are in full force
and effect and constitute the only resolutions adopted by Arcadia
Financial's board of directors or any committee thereof with respect
thereto), (ii) the corporate charter of Arcadia Financial and (iii) the
by-laws, as amended, of Arcadia Financial;

(v) a certificate of an Authorized Officer of the Owner Trustee
stating that (i) all consents, licenses and approvals necessary for the
Owner Trustee to execute, deliver and perform this Agreement, the other
Transaction Documents to which the Owner Trustee is a party and all
other documents and instruments on the part of the Owner Trustee to be
delivered pursuant hereto or thereto have been obtained, and (ii) all
such consents, licenses and approvals are in full force and effect, the
Owner Trustee has not received any notice of any proceeding for the
revocation of any such license, charter, permit or approval, and, to the
Owner Trustee's knowledge, there is no threatened action or proceeding
or any basis therefor;

(vi) a certificate of an Authorized Officer of the Seller stating
that (i) all consents, licenses and approvals necessary for the Seller
to execute, deliver and perform this Agreement, the other Transaction
Documents to which the Seller is a party and all other documents and
instruments on the part of the Seller to be delivered pursuant hereto or
thereto have been obtained, and (ii) all such consents, licenses and
approvals are in full force and effect, the Seller has not received any
notice of any proceeding for the revocation of any such license,
charter, permit or approval, and, to the Seller's knowledge, there is no
threatened action or proceeding or any basis therefor;

(vii) a certificate of an Authorized Officer of Arcadia Financial
stating that (i) all consents, licenses and approvals necessary for
Arcadia Financial to execute, deliver and perform this Agreement, the
other Transaction Documents to which Arcadia Financial is a party and
all other documents and instruments on the part of Arcadia Financial to
be delivered pursuant hereto or thereto have been obtained, and (ii)
all such consents, licenses and approvals are in full force and effect,
Arcadia Financial has not received any notice of any proceeding for the
revocation of any such license, charter, permit or approval, and, to
Arcadia Financial's knowledge, there is no threatened action or
proceeding or any basis therefor;

(viii) a certificate of an Authorized Officer of the Owner Trustee
certifying (i) the names and true signatures of the officers of the
Owner Trustee executing and delivering this Agreement, the other
Transaction Documents to which the Owner Trustee is a party and the
other documents to be executed and delivered by the Owner Trustee
hereunder and thereunder, (ii) that approval by the Owner Trustee's
equity holders of the

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execution and delivery of this Agreement, the other Transaction
Documents and all other such documents to be executed and delivered, by
the Owner Trustee hereunder, has been obtained or is not required, and
(iii) that no action for the dissolution of the Owner Trustee has been
adopted or contemplated and that no such proceedings have been commenced
or are contemplated;

(ix) a certificate of an Authorized Officer of the Seller
certifying (i) the names and true signatures of the officers of the
Seller executing and delivering this Agreement, the other Transaction
Documents to which the Seller is a party and the other documents to be
executed and delivered by the Seller hereunder and thereunder, (ii)
that approval by the Seller's stockholder of the execution and delivery
of this Agreement, the other Transaction Documents and all other such
documents to be executed and delivered, by the Seller hereunder, has
been obtained or is not required, and (iii) that no resolution for the
dissolution of the Seller has been adopted or contemplated and that no
such proceedings have been commenced or are contemplated;

(x) a certificate of an Authorized Officer of Arcadia Financial
certifying (i) the names and true signatures of the officers of Arcadia
Financial executing and delivering this Agreement, the other Transaction
Documents to which Arcadia Financial is a party and the other documents
to be executed and delivered by Arcadia Financial hereunder and
thereunder, (ii) that approval by Arcadia Financial's stockholders of
the execution and delivery of this Agreement, the other Transaction
Documents and all other such documents to be executed and delivered, by
Arcadia Financial hereunder, has been obtained or is not required, and
(iii) that no resolution for the dissolution of Arcadia Financial has
been adopted or contemplated and that no such proceedings have been
commenced or are contemplated;

(xi) a certificate of an Authorized Officer of the Trust to the
effect that (x) the representations and warranties of the Trust set
forth or incorporated by reference in this Agreement are true and
correct on and as of the Closing Date and (y) confirming that the
conditions precedent set forth herein with respect to the Trust are
satisfied;

(xii) a certificate of an Authorized Officer of the Seller to the
effect that (x) the representations and warranties of the Seller set
forth or incorporated by reference in this Agreement are true and
correct on and as of the Closing Date and (y) confirming that the
conditions precedent set forth herein with respect to the Seller are
satisfied;

(xiii) a certificate of an Authorized Officer of Arcadia Financial
to the effect that (x) the representations and warranties of Arcadia
Financial set forth or incorporated by reference in this Agreement are
true and correct on and as of the Closing Date, and (y) confirming that
the conditions precedent set forth herein with respect to Arcadia
Financial are satisfied;

(xiv) favorable opinions of counsel and special Texas counsel to
the Seller and Arcadia Financial in form and substance satisfactory to
Financial Security and its counsel;

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<PAGE>

(xv) a favorable opinion of counsel to each of the Trust, the
Owner Trustee, the Indenture Trustee and the Collateral Agent and the
Indenture Collateral Agent, in form and substance satisfactory to
Financial Security and its counsel;

(xvi) evidence that amounts due and payable Financial Security
under Section 3.02 of this Agreement have been paid or that acceptable
provisions therefor have been made;

(xvii) a fully executed copy of each of the Transaction Documents;

(xviii) evidence that all actions necessary or, in the opinion of
Financial Security, desirable to perfect and protect the interests
transferred by the Sale and Servicing Agreement, the liens and security
interests created with respect to the Spread Account, the Liens and
security interest created in favor of the Indenture Collateral Agent
with respect to the Indenture Property pursuant to the Indenture,
including, without limitation, the filing of any financing statements
required by Financial Security or its counsel, have been taken;

(xix) a certificate or opinion of Independent Accountants addressed
to Financial Security in form and substance satisfactory to Financial
Security;

(xx) evidence that the Seller shall have deposited, or caused to
have been deposited, the deposits required under the Sale and Servicing
Agreement and the Spread Account Agreement, and any other deposits
required to be made on the Closing Date under the Transaction Documents
to which the Seller is a party; and

(xxi) such other documents, instruments, approvals (and, if
requested by Financial Security, certified duplicates of executed copies
thereof) or opinions as Financial Security may reasonably request.

(c) ISSUANCE OF RATINGS. Financial Security shall have received
confirmation that the risk secured by the Note Policy constitutes an
investment grade risk by Standard and Poor's Corporation ("S&P") and an
insurable risk by Moody's Investors Service, Inc. ("Moody's") and that the
Class A-1 Notes, when issued, will be rated "A-1+" by S&P and "P-1" by
Moody's, and that the Class A-2 Notes, the Class A-3 Notes, the Class A-4
Notes, and the Class A-5 Notes, when issued, will be rated "AAA" by S&P and
"Aaa" by Moody's.

(d) DELIVERY OF DOCUMENTS. Financial Security shall have received
evidence satisfactory to it that delivery has been made to the Trust or to a
Custodian of the Receivable Files required to be so delivered pursuant to
Section 2.2 of the Sale and Servicing Agreement.

(e) NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing.

(f) NO LITIGATION, ETC. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto, shall be
pending or threatened before any court or

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<PAGE>

governmental agency in which it is sought to restrain or prohibit or to
obtain damages or other relief in connection with any of the Transaction
Documents or the consummation of the Transaction.

(g) LEGALITY. No statute, rule, regulation or order shall have
been enacted, entered or deemed applicable by any government or governmental
or administrative agency or court which would make the transactions
contemplated by any of the Transaction Documents illegal or otherwise prevent
the consummation thereof.

(h) SATISFACTION OF CONDITIONS OF UNDERWRITING AGREEMENT. All
conditions in the Underwriting Agreement to the Underwriters' obligation to
purchase the Notes (other than the issuance of the Note Policy) shall have
been concurrently satisfied.

Section 3.02 PAYMENT OF FEES AND PREMIUM.

(a) LEGAL FEES. On the Closing Date, Arcadia Financial shall pay
or cause to be paid legal fees and disbursements incurred by Financial
Security in connection with the issuance of the Note Policy up to an amount
not to exceed $20,000.00, plus disbursements.

(b) RATING AGENCY FEES. The initial fees of S&P and Moody's with
respect to the Notes and the Transaction shall be paid by Arcadia Financial
in full on the Closing Date. All periodic and subsequent fees of S&P or
Moody's with respect to, and directly allocable to, the Notes shall be for
the account of, shall be billed to, and shall be paid by Arcadia Financial.
The fees for any other rating agency shall be paid by the party requesting
such other agency's rating, unless such other agency is a substitute for S&P
or Moody's in the event that S&P or Moody's is no longer rating the Notes, in
which case the cost for such agency shall be paid by Arcadia Financial.

(c) AUDITORS' FEES. In the event that Financial Security's
auditors are required to provide information or any consent in connection
with the Registration Statement fees therefor shall be paid by Arcadia
Financial. Any additional fees incurred by Financial Security after the
Closing Date in respect of any additional consents shall be paid by Arcadia
Financial on demand.

(d) PREMIUM. In consideration of the issuance by Financial
Security of the Note Policy, Arcadia Financial shall pay Financial Security
the Premium and Premium Supplement, if any, as and when due in accordance
with the terms of the Premium Letter. The Premium and Premium Supplement, if
any, paid hereunder or under the Sale and Servicing Agreement shall be
nonrefundable without regard to whether Financial Security makes any payment
under the Note Policy or any other circumstances relating to the Notes or
provision being made for payment of the Notes prior to maturity. Although
the Premium is fully earned by Financial Security as of the Closing Date, the
Premium shall be payable in periodic installments as provided in the Premium
Letter. Anything herein or in any of the Transaction Documents
notwithstanding, upon the occurrence of an Event of Default, the entire
outstanding balance of further installments of the Premium and Premium
Supplement shall be immediately due and payable. All payments of Premium and
Premium Supplement, if any, shall be made by wire transfer to an account

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designated from time to time by Financial Security by written notice to the
Seller and Arcadia Financial.

Section 3.03 REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION. Each
of Arcadia Financial and the Trust agrees to pay to Financial Security as
follows:

(a) a sum equal to the total of all amounts paid by Financial
Security under the Note Policy;

(b) any and all charges, fees, costs and expenses which Financial
Security may reasonably pay or incur, including, but not limited to,
attorneys' and accountants' fees and expenses, in connection with (i) any
accounts established to facilitate payments under the Note Policy to the
extent Financial Security has not been immediately reimbursed on the date
that any amount is paid by Financial Security under the Note Policy, (ii) the
administration, enforcement, defense or preservation of any rights in respect
of any of the Transaction Documents, including defending, monitoring or
participating in any litigation, proceeding (including any insolvency or
bankruptcy proceeding in respect of any Transaction participant or any
Affiliate thereof), restructuring or engaging in any protective measures or
monitoring activities relating to any of the Transaction Documents, any party
to any of the Transaction Documents or the Transaction, (iii) the foreclosure
against, sale or other disposition of any collateral securing any obligations
under any of the Transaction Documents or otherwise in the discretion of
Financial Security, or pursuit of any other remedies under any of the
Transaction Documents, to the extent such costs and expenses are not
recovered from such foreclosure, sale or other disposition, (iv) any
amendment, waiver or other action with respect to, or related to, any
Transaction Document whether or not executed or completed, (v) preparation of
bound volumes of the Transaction Documents, (vi) any review or investigation
made by Financial Security in those circumstances where its approval or
consent is sought under any of the Transaction Documents, (vii) any federal,
state or local tax (other than taxes payable in respect of the gross income
of Financial Security) or other governmental charge imposed in connection
with the issuance of the Note Policy, and (viii) Financial Security reserves
the right to charge a reasonable fee as a condition to executing any
amendment, waiver or consent proposed in respect of any of the Transaction
Documents (for the purpose of this paragraph (b), costs and expenses shall
include a reasonable allocation of compensation and overhead attributable to
time of employees of Financial Security spent in connection with the actions
described in the foregoing clauses (ii) and (iii));

(c) interest on any and all amounts described in this Section 3.03
from the date payable to or paid by Financial Security until payment thereof
in full, and interest on any and all amounts described in Section 3.02, in
each case payable to Financial Security at the Late Payment Rate per annum;
and

(d) any payments made by Financial Security on behalf of, or
advanced to, the Seller, Arcadia Financial, the Indenture Trustee, the Owner
Trustee or the Trust including, without limitation, any amounts payable by
Arcadia Financial in its capacity as Servicer or by the Trust, in respect of
the Notes and any other amounts owed pursuant to any Transaction Documents;
and any payments made by Financial Security as, or in lieu of, any servicing,

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administration, management, trustee, custodial, collateral agency or
administrative fees payable, in the sole discretion of Financial Security to
third parties in connection with the Transaction.

All such amounts are to be immediately due and payable without
demand. Financial Security shall notify Arcadia Financial of amounts due
hereunder.

Section 3.04 CERTAIN OBLIGATIONS NOT RECOURSE TO ARCADIA FINANCIAL;
RECOURSE TO TRUST PROPERTY.

(a) Notwithstanding any provision of Section 3.03 to the contrary,
the payment obligations provided in Section 3.03(a), b(iii) and (d) (to the
extent of advances to the Trust or to the Indenture Trustee in respect of
payments on the Notes), in each case, to the extent that such payment
obligations do not arise from any failure or default in the performance by
Arcadia Financial or the Seller of any of its obligations under the
Transaction Documents, and any interest on the foregoing in accordance with
Section 3.03(c), shall not be recourse to Arcadia Financial, but shall be
payable in the manner and in accordance with priorities provided in the Sale
and Servicing Agreement.

(b) Financial Security covenants and agrees that it shall not be
entitled to any payment from the Trust Property with respect to amounts owed
under this Agreement other than as set forth in Section 4.6 and Section 9.1
of the Sale and Servicing Agreement and Section 5.06 of the Indenture.

Section 3.05 INDEMNIFICATION.

(a) INDEMNIFICATION BY ARCADIA FINANCIAL. In addition to any and
all rights of reimbursement, indemnification, subrogation and any other
rights pursuant hereto or under law or in equity, Arcadia Financial agrees to
pay, and to protect, indemnify and save harmless, Financial Security and its
officers, directors, shareholders, employees, agents and each Person, if any,
who controls Financial Security within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act from and against any and
all claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including, without
limitation, fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or relating
to the Transaction by reason of:

(i) any statement, omission or action (other than of or by
Financial Security) in connection with the offering, issuance, sale or
delivery of the Notes;

(ii) the negligence, bad faith, willful misconduct, misfeasance
malfeasance or theft committed by any director, officer, employee or
agent of the Trust the Seller or Arcadia Financial in connection with
the Transaction;

(iii) the violation by the Trust, the Seller or Arcadia Financial
of an, federal, state or foreign law, rule or regulation, or any
judgment, order or decree applicable to it;

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(iv) the breach by the Trust, the Seller or Arcadia Financial of
any representation, warranty or covenant under any of the Transaction
Documents or the occurrence, in respect of the Trust, the Seller or
Arcadia Financial, under any of the Transaction Documents of any event
of default or any event which, with the giving of notice or the lapse of
time or both, would constitute any event of default; or

(v) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus
or in any amendment or supplement thereto or any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except
insofar as such claims arise out of or are based upon any untrue
statement or omission (A) included in the Registration Statement or the
Prospectus and furnished by Financial Security in writing expressly for
use therein (all such information so furnished being referred to herein
as "Financial Security Information"), it being understood that the
Financial Security Information is limited to the information included
under the caption "Financial Security Assurance Inc.," and the financial
statements of Financial Security included in the Registration Statements
or the Prospectus or (B) included in the information set forth under the
caption "Underwriting" in the Prospectus.

(b) CONDUCT OF ACTIONS OR PROCEEDINGS. If any action or proceeding
(including any governmental investigation) shall be brought or asserted
against Financial Security, any officer, director, shareholder, employee or
agent of Financial Security or any Person controlling Financial Security
(individually, an "Indemnified Party" and, collectively, the "Indemnified
Parties") in respect of which indemnity may be sought from Arcadia Financial
hereunder, Financial Security shall promptly notify Arcadia Financial in
writing, and Arcadia Financial shall assume the defense thereof, including
the employment of counsel satisfactory to Financial Security and the payment
of all expenses. The Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof
at the expense of the Indemnified Party; PROVIDED, HOWEVER, that the fees and
expenses of such separate counsel shall be at the expense of Arcadia
Financial if (i) Arcadia Financial has agreed to pay such fees and expenses,
(ii) Arcadia Financial shall have failed to assume the defense of such action
or proceeding and employ counsel satisfactory to Financial Security in any
such action or proceeding or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both the Indemnified
Party and the Trust, the Seller or Arcadia Financial, and the Indemnified
Party shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Trust, the Seller or Arcadia Financial (in which case, if
the Indemnified Party notifies Arcadia Financial in writing that it elects to
employ separate counsel at the expense of Arcadia Financial, Arcadia
Financial shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, it being understood, however,
that Arcadia Financial shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate form of attorneys at any time for the Indemnified
Parties, which firm shall be designated in writing by Financial Security).
Arcadia Financial shall not be liable for any settlement of any such action or

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proceeding effected without its written consent to the extent that any such
settlement shall be prejudicial to it, but, if settled with its written
consent, or if there be a final judgment for the plaintiff in any such action
or proceeding with respect to which Arcadia Financial shall have received
notice in accordance with this subsection (c) Arcadia Financial agrees to
indemnify and hold the Indemnified Parties harmless from and against any loss
or liability by reason of such settlement or judgment.

(c) CONTRIBUTION. To provide for just and equitable contribution
if the indemnification provided by Arcadia Financial is determined to be
unavailable for any Indemnified Party (other than due to application of this
Section), Arcadia Financial shall contribute to the losses incurred by the
Indemnified Party on the basis of the relative fault of Arcadia Financial, on
the one hand, and the Indemnified Party, on the other hand.

Section 3.06 PAYMENT PROCEDURE. In the event of the incurrence by
Financial Security of any cost or expense or any payment by Financial
Security for which it is entitled to be reimbursed or indemnified as provided
above Arcadia Financial agrees to accept the voucher or other evidence of
payment as prima facie evidence of the propriety thereof and the liability
therefor to Financial Security. All payments to be made to Financial
Security under this Agreement shall be made to Financial Security in lawful
currency of the United States of America in immediately available funds to
the account number provided in the Premium Letter before 1:00 p.m. (New York,
New York time) on the date when due or as Financial Security shall otherwise
direct by written notice to Arcadia Financial. In the event that the date of
any payment to Financial Security or the expiration of any time period
hereunder occurs on a day which is not a Business Day, then such payment or
expiration of time period shall be made or occur on the next succeeding
Business Day with the same force and effect as if such payment was made or
time period expired on the scheduled date of payment or expiration date.
Payments to be made to Financial Security under this Agreement shall bear
interest at the Late Payment Rate from the date when due to the date paid.

Section 3.07 SUBROGATION. Subject only to the priority of payment
provisions of the Sale and Servicing Agreement, each of the Trust, the
Indenture Trustee, the Seller and Arcadia Financial acknowledges that, to the
extent of any payment made by Financial Security pursuant to the Note Policy,
Financial Security is to be fully subrogated to the extent of such payment
and any additional interest due on any late payment, to the rights of the
Noteholders to any moneys paid or payable in respect of the Notes under the
Transaction Documents or otherwise. Each of the Trust, the Indenture
Trustee, the Seller and Arcadia Financial agrees to such subrogation and,
further, agrees to execute such instruments and to take such actions as, in
the sole judgment of Financial Security, are necessary to evidence such
subrogation and to perfect the rights of Financial Security to receive any
such moneys paid or payable in respect of the Notes under the Transaction
Documents or otherwise.

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ARTICLE IV.

FURTHER AGREEMENTS; MISCELLANEOUS

Section 4.01 EFFECTIVE DATE: TERM OF AGREEMENT. This Agreement
shall take effect on the Closing Date and shall remain in effect until the
later of (a) such time as Financial Security is no longer subject to a claim
under the Note Policy and the Note Policy shall have been surrendered to
Financial Security for cancellation and (b) all amounts payable to Financial
Security and the Noteholders under the Transaction Documents and under the
Notes have been paid in full; PROVIDED, HOWEVER, that the provisions of
Sections 3.02, 3.03, 3.04, 3.05, 3.06 and 4.03 hereof shall survive any
termination of this Agreement.

Section 4.02 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. To
the extent permitted by law, each of the Trust, the Seller and Arcadia
Financial agree that it will, from time to time, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such
supplements hereto and such further instruments as Financial Security may
request and as may be required in Financial Security's judgment to effectuate
the intention of or facilitate the performance of this Agreement.

Section 4.03 OBLIGATIONS ABSOLUTE.

(a) The obligations of the Trust, the Seller and Arcadia Financial
hereunder shall be absolute and unconditional, and shall be paid or performed
strictly in accordance with this Agreement under all circumstances
irrespective of:

(i) any lack of validity or enforceability of, or any amendment
or other modifications of, or waiver with respect to any of the
Transaction Documents, the Notes or the Note Policy; PROVIDED, that
Financial Security shall not have consented to any such amendment,
modification or waiver;

(ii) any exchange or release of any other obligations hereunder;

(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right which the Trust, the Seller or Arcadia
Financial may have at any time against Financial Security or any other
Person;

(iv) any document presented in connection with the Note Policy
proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;

(v) any payment by Financial Security under the Note Policy
against presentation of a certificate or other document which does not
strictly comply with terms of the Note Policy;

(vi) any failure of the Seller or the Trust to receive the
proceeds from the Sale of the Notes;

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(vii) any breach by the Trust, the Seller or Arcadia Financial of any
representation, warranty or covenant contained in any of the Transaction
Documents; or

(viii) any other circumstances, other than payment in full, which might
otherwise constitute a defense available to, or discharge of, the Trust,
the Seller or Arcadia Financial in respect of any Transaction Document.

(b) The Trust, the Seller and Arcadia Financial and any and all
others who are now or may become liable for all or part of the obligations of
any of them under this Agreement agree to be bound by this Agreement and (i)
to the extent permitted by law, waive and renounce any and all redemption and
exemption rights and the benefit of all valuation and appraisement privileges
against the indebtedness and obligations evidenced by any Transaction
Document or by any extension or renewal thereof; (ii) waive presentment and
demand for payment, notices of nonpayment and of dishonor, protest of
dishonor and notice of protest; (iii) waive all notices in connection with
the delivery and acceptance hereof and all other notices in connection with
the performance, default or enforcement of any payment hereunder except as
required by the Transaction Documents other than this Agreement; (iv) waive
all rights of abatement, diminution, postponement or deduction, or to any
defense other than payment, or to any right of setoff or recoupment arising
out of any breach under any of the Transaction Documents, by any party
thereto or any beneficiary thereof, or out of any obligation at any time
owing to the Trust, the Seller or Arcadia Financial; (v) agree that its
liabilities hereunder shall, except as otherwise expressly provided in this
Section 4.03, be unconditional and without regard to any setoff, counterclaim
or the liability of any other Person for the payment hereof; (vi) agree that
any consent, waiver or forbearance hereunder with respect to an event shall
operate only for such event and not for any subsequent event; (vii) consent
to any and all extensions of time that may be granted by Financial Security
with respect to any payment hereunder or other provisions hereof and to the
release of any security at any time given for any payment hereunder, or any
part thereof, with or without substitution, and to the release of any Person
or entity liable for any such payment; and (viii) consent to the addition of
any and all other makers, endorsers, guarantors and other obligors for any
payment hereunder, and to the acceptance of any and all other security for
any payment hereunder, and agree that the addition of any such obligors or
security shall not affect the liability of the parties hereto for any payment
hereunder.

(c) Nothing herein shall be construed as prohibiting the Trust,
Seller or Arcadia Financial from pursuing any rights or remedies it may have
against any other Person in a separate legal proceeding.

Section 4.04 ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS.

(a) This Agreement shall be a continuing obligation of the parties
hereto and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither the
Trust, the Seller nor Arcadia Financial may assign its rights under this
Agreement, or delegate any of its duties hereunder, without the prior written
consent of Financial Security. Any assignment made in violation of this
Agreement shall be null and void.

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(b) Financial Security shall have the right to give participations
in its rights under this Agreement and to enter into contracts of reinsurance
with respect to the Note Policy upon such terms and conditions as Financial
Security may in its discretion determine; PROVIDED, HOWEVER, that no such
participation or reinsurance agreement or arrangement shall relieve Financial
Security of any of its obligations hereunder or under the Note Policy.

(c) In addition, Financial Security shall be entitled to assign or
pledge to any bank or other lender providing liquidity or credit with respect
to the Transaction or the obligations of Financial Security in connection
therewith any rights of Financial Security under the Transaction Documents or
with respect to any real or personal property or other interests pledged to
Financial Security, or in which Financial Security has a security interest,
in connection with the Transaction.

(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any
Noteholder (except to the extent provided herein and without limitation of
their rights to receive payments with respect to the Trust Property,
including without limitation payments under the Note Policy), other than
Financial Security, against the Trust, the Seller, Arcadia Financial or the
Servicer, and all the terms, covenants, conditions, promises and agreements
contained herein shall be for the sole and exclusive benefit of the parties
hereto and their successors and permitted assigns. Neither the Trustee, the
Owner Trustee nor any Noteholder shall have any right to payment from any
premiums paid or payable hereunder or from any other amounts paid by the
Seller or Arcadia Financial pursuant to Section 3.02, 3.03 or 3.04 hereof
(without limitation to the rights of the Noteholders to receive payments with
respect to the Trust Property, as provided in the Indenture and the Trust
Agreement).

Section 4.05 LIABILITY OF FINANCIAL SECURITY. Neither Financial
Security nor any of its officers, directors or employees shall be liable or
responsible for: (a) the use which may be made of the Note Policy by the
Owner Trustee or the Indenture Trustee or for any acts or omissions of the
Owner Trustee or the Indenture Trustee in connection therewith; or (b) the
validity, sufficiency, accuracy or genuineness of documents delivered to
Financial Security (or its Fiscal Agent) in connection with any claim under
the Note Policy, or of any signatures thereon, even if such documents or
signatures should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged (unless Financial Security shall have
actual knowledge thereof). In furtherance and not in limitation of the
foregoing, Financial Security (or its Fiscal Agent) may accept documents that
appear on their face to be in order, without responsibility for further
investigation.

ARTICLE V.

EVENTS OF DEFAULT; REMEDIES

Section 5.01 EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an Event of Default hereunder:

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(a) any demand for payment shall be made under the Note Policy;

(b) any representation or warranty made by the Trust, the Seller,
Arcadia Financial or the Servicer under any of the Related Documents, or in
any certificate or report furnished under any of the Related Documents, shall
prove to be untrue or incorrect in any material respect;

(c) (i) the Trust, the Seller, Arcadia Financial or the Servicer
shall fail to pay, when due, any amount payable by the Seller, Arcadia
Financial or the Servicer under any of the Related Documents (other than
payments of principal and interest on the Notes); (ii) the Trust, the Seller,
Arcadia Financial or the Servicer shall have asserted that any of the
Transaction Documents to which it is a party is not valid and binding on the
parties thereto; or (iii) any court, governmental authority or agency having
jurisdiction over any of the parties to any of the Transaction Documents or
property thereof shall find or rule that any material provision of any of the
Transaction Documents is not valid and binding on the parties thereto;

(d) the Trust, the Seller, Arcadia Financial or the Servicer shall
fail to perform or observe any other covenant or agreement contained in any
of the Related Documents (except for the obligations described under clause
(b) or (c) above) and such failure shall continue for a period of 30 days
after written notice given to the Trust, the Seller, Arcadia Financial or the
Servicer (as applicable); PROVIDED that, if such failure shall be of a nature
that it cannot be cured within 30 days, such failure shall not constitute an
Event of Default hereunder if within such 30 day period such party shall have
given notice to Financial Security of corrective action it proposes to take,
which corrective action is agreed in writing by Financial Security to be
satisfactory and such party shall thereafter pursue such corrective action
diligently until such default is cured;

(e) there shall have occurred an "Event of Default" as specified in
Section 701(i) or 701(ii) of the Senior Note Indenture or any Supplemental
Indenture thereto or the unpaid principal amount of, premium, if any, and
accrued and unpaid interest on the Securities (as defined in the Senior Note
Indenture) shall have, upon the declaration of the holders of the Securities,
as specified in Section 702 of the Senior Note Indenture, become immediately
due and payable;

(f) the Trust shall adopt a voluntary plan of liquidation or shall
fail to pay its debts generally as they come due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors, or shall institute any proceeding seeking to
adjudicate the Trust insolvent or seeking a liquidation, or shall take
advantage of any insolvency act, or shall commence a case or other proceeding
naming the Trust as debtor under the United States Bankruptcy Code or similar
law, domestic or foreign, or a case or other proceeding shall be commenced
against the Trust under the United States Bankruptcy Code or similar law,
domestic or foreign, or any proceeding shall be instituted against the Trust
seeking liquidation of its assets and the Trust shall fail to take
appropriate action resulting in the withdrawal or dismissal of such
proceeding within 30 days or there shall be appointed or the Trust consent
to, or acquiesce in, the appointment of a receiver, liquidator, conservator,
trustee or

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similar official in respect of the Trust or the whole or any substantial part
of its properties or assets, or the Trust shall take any corporate action in
furtherance of any of the foregoing or the Trust terminates pursuant to
Section 9.1 of the Trust Agreement;

(g) the Trust becomes taxable as an association (or publicly traded
partnership) taxable as a corporation for federal or state income tax
purposes;

(h) on any Distribution Date, the sum of Available Funds with
respect to such Distribution Date and the amounts available in the Series
1998-B Spread Account (prior to any deposits into such Spread Account from
Spread Accounts related to any other Series) and the amount that may be
withdrawn from the Reserve Account pursuant to Section 5.1 of the Sale and
Servicing Agreement is less than the sum of the amounts payable on such
Distribution Date pursuant to clauses (i) through (viii) of Section 4.6 of
the Sale and Servicing Agreement;

(i) any default in the observance or performance of any covenant or
agreement of the Trust made in the Indenture (other than a default in the
payment of the interest or principal on any Note when due) or any
representation or warranty of the Trust made in the Indenture or in any
certificate or other writing delivered pursuant thereto or in connection
therewith proving to have been incorrect in any material respect as of the
time when the same shall have been made, and such default shall continue or
not be cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been eliminated or
otherwise cured, for a period of 30 days after there shall have been given,
by registered or certified mail, to the Trust and the Indenture Trustee by
Financial Security, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied;

(j) the Average Delinquency Ratio with respect to any Determination
Date shall have been equal to or greater than 9.20%;

(k) with respect to any Determination Date, the Cumulative Default
Rate shall be equal to or greater than the percentage set forth in Column A
of Schedule I attached hereto corresponding to such Determination Date;

(l) with respect to any Determination Date, the Cumulative Net Loss
Rate shall be equal to or greater than the percentage set forth in Column B
of Schedule I attached hereto corresponding to such Determination Date;

(m) the occurrence of an Event of Servicing Termination under the
Sale and Servicing Agreement; or

(n) the occurrence of an "Event of Default" under and as defined in
any Insurance and Indemnity Agreement among Financial Security, Arcadia
Financial, the Seller and any other parties thereto, which "Event of Default"
is not defined as a "Portfolio Performance Event of Default" in such
Insurance and Indemnity Agreement.

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Section 5.02 REMEDIES; WAIVERS.

(a) Upon the occurrence of an Event of Default, Financial Security
may exercise any one or more of the rights and remedies set forth below:

(i) declare the Premium Supplement to be immediately due and
payable, and the same shall thereupon be immediately due and payable,
whether or not Financial Security shall have declared an "Event of
Default" or shall have exercised, or be entitled to exercise, any other
rights or remedies hereunder;

(ii) exercise any rights and remedies available under the
Transaction Documents in its own capacity or in its capacity as the
Person entitled to exercise the rights of Controlling Party under the
Transaction Documents; or

(iii) take whatever action at law or in equity as may appear
necessary or desirable in its judgment to enforce performance of any
obligation of the Trust, the Seller or Arcadia Financial under the
Transaction Documents; PROVIDED, HOWEVER, that Financial Security shall
not be entitled hereunder to file any petition with respect to the Trust
or the Trust Property under any bankruptcy or insolvency law.

(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved is intended to be exclusive of any other available remedy,
but each remedy shall be cumulative and shall be in addition to other
remedies given under the Transaction Documents or existing at law or in
equity. No delay or failure to exercise any right or power accruing under
any Transaction Document upon the occurrence of any Event of Default or
otherwise shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to
time and as often as may be deemed expedient. In order to entitle Financial
Security to exercise any remedy reserved to Financial Security in this
Article, it shall not be necessary to give any notice.

(c) If any proceeding has been commenced to enforce any right or
remedy under this Agreement, and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to Financial
Security, then and in every such case the parties hereto shall, subject to
any determination in such proceeding, be restored to their respective former
positions hereunder, and, thereafter, all rights and remedies of Financial
Security shall continue as though no such proceeding had been instituted.

(d) Financial Security shall have the right, to be exercised in its
complete discretion, to waive any covenant, Default or Event of Default by a
writing setting forth the terms, conditions and extent of such waiver signed
by Financial Security and delivered to the Seller and Arcadia Financial. Any
such waiver may only be effected in writing duly executed by Financial
Security, and no other course of conduct shall constitute a waiver of any
provision hereof. Unless such writing expressly provides to the contrary, any
waiver so granted shall extend only to the specific event or occurrence so
waived and not to any other similar event or occurrence which occurs
subsequent to the date of such waiver.

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ARTICLE VI.

MISCELLANEOUS

Section 6.01 AMENDMENTS, ETC.. This Agreement may be amended,
modified or terminated only by written instrument or written instruments
signed by the parties hereto. No act or course of dealing shall be deemed to
constitute an amendment, modification or termination hereof.

Section 6.02 NOTICES. All demands, notices and other
communications to be given hereunder shall be in writing (except as otherwise
specifically provided herein) and shall be mailed by registered mail or
overnight carrier, personally delivered or telecopied (with confirmation by
registered mail) to the recipient as follows:

(a) To Financial Security:

Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518
(212) 339-3529

(in each case in which notice or other communication to
Financial Security refers to an Event of Default, a claim on
the Note Policy or with respect to which failure on the part of
Financial Security to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of each of
the General Counsel and the Head--Financial Guaranty Group and
shall be marked to indicate "URGENT MATERIAL ENCLOSED").

(b) To the Seller:

Arcadia Receivables Finance Corp.
7825 Washington Avenue South, Suite 410
Minneapolis, Minnesota 55439-2435
Telephone: (612) 942-9888
Telecopier: (612) 942-6730

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Arcadia Financial Ltd.
7825 Washington Avenue South
Minneapolis, Minnesota 55439-2435
Telephone: (612) 942-9880
Telecopier: (612) 942-6730

(d) To the Trust:

Arcadia Automobile Receivables Trust, 1998-B
c/o Wilmington Trust Company,
as Owner Trustee
Rodney Square North, 1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telephone: (302) 651-1000
Telecopier: (302) 651-8882

with a copy to:

Wilmington Trust Company, as Owner Trustee
Rodney Square North, 1100 North Market Street
Wilmington, Delaware 19890

A party may specify an additional or different address or addresses
by writing mailed or delivered to the other party as aforesaid. All such
notices and other communications shall be effective upon receipt.

Section 6.03 SEVERABILITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate
or render unenforceable any other provision hereof. The parties hereto
further agree that the holding by any court of competent jurisdiction that
any remedy pursued by any party hereto is unavailable or unenforceable shall
not affect in any way the ability of such party to pursue any other remedy
available to it.

Section 6.04 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 6.05 CONSENT TO JURISDICTION.

(a) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
THERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE
STATE OF NEW YORK LOCATED IN THE CITY AND

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COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE
TRANSACTION DOCUMENTS OR THE TRANSACTION OR FOR RECOGNITION OR ENFORCEMENT OF
ANY JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE
HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR IN SUCH FEDERAL COURT.
THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO
ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION
OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER OR THAT THE RELATED DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT
BE LITIGATED IN OR BY SUCH COURTS.

(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of
any such court by any court of any other nation or jurisdiction which may be
called upon to grant an enforcement of such judgment.

(c) Arcadia Financial and the Seller hereby irrevocably appoints
and designates CT Corporation System, whose address is 1633 Broadway, New
York, New York 10019, as its true and lawful attorney and duly authorized
agent for acceptance of service of legal process. The Seller and Arcadia
Financial agrees that service of such process upon such Person shall
constitute personal service of such process upon it.

(d) Nothing contained in the Agreement shall limit or affect
Financial Security's right to serve process in any other manner permitted by
law or to start legal proceedings relating to any of the Transaction
Documents against the Seller or Arcadia Financial or its property in the
courts of any jurisdiction.

Section 6.06 CONSENT OF FINANCIAL SECURITY. In the event that
Financial Security's consent is required under any of the Transaction
Documents, the determination whether to grant or withhold such consent shall
be made by Financial Security in its sole discretion without any implied duty
towards any other Person, except as otherwise expressly provided therein.

Section 6.07 COUNTERPARTS. This Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall
constitute one and the same instrument.

Section 6.08 HEADINGS. The headings of articles and sections and
the table of contents contained in this Agreement are provided for
convenience only. They form no part of

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this Agreement and shall not affect its construction or interpretation.
Unless otherwise indicated, all references to articles and sections in this
Agreement refer to the corresponding articles and sections of this Agreement.

Section 6.09 TRIAL BY JURY WAIVED. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR
IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTION. EACH
PARTY HERETO (A) CERTIFIES THAI NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION DOCUMENTS
TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER.

Section 6.10 LIMITED LIABILITY. No recourse under any Transaction
Document shall be had against, and no personal liability shall attach to, any
officer, employee, director, affiliate or shareholder of any party hereto, as
such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise in respect of any of the
Transaction Documents, the Notes or the Note Policy, it being expressly
agreed and understood that each Transaction Document is solely a corporate
obligation of each party hereto, and that any and all personal liability,
either at common law or in equity, or by statute or constitution, of every
such officer, employee, director, affiliate or shareholder for breaches by
any party hereto of any obligations under any Transaction Document is hereby
expressly waived as a condition of and in consideration for the execution and
delivery of this Agreement.

Section 6.11 LIMITED LIABILITY OF WILMINGTON TRUST COMPANY. It is
expressly understood and agreed by the parties hereto that (a) this Agreement
is executed and delivered by Wilmington Trust Company, not individually or
personally but solely as Owner Trustee on behalf of the Trust, (b) each of
the representations, undertakings and agreements herein made on the part of
the Trust is made and intended not as personal representations, undertakings
and agreements by Wilmington Trust Company, but are made and intended for the
purpose of binding only the Trust Estate, (c) nothing herein contained shall
be construed as creating any liability on Wilmington Trust Company,
individually or personally, to perform any covenant of the Trust either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any person claiming by, through
or under such parties and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses
of the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under
this Agreement.

Section 6.12 ENTIRE AGREEMENT. This Agreement and the Note Policy
set forth the entire agreement between the parties with respect to the
subject matter thereof, and this

54
<PAGE>

Agreement supersedes and replaces any agreement or understanding that may
have existed between the parties prior to the date hereof in respect of such
subject matter.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Insurance and Indemnity Agreement, all as of the day and year
first above written.

FINANCIAL SECURITY ASSURANCE INC.

By: /s/ Raymond Galkowski
--------------------------------------
Authorized Officer

ARCADIA AUTOMOBILE RECEIVABLES TRUST,
1998-B

By: Wilmington Trust Company, as Owner
Trustee under the Trust Agreement

By:
---------------------------------

ARCADIA FINANCIAL LTD.

By:
--------------------------------------
John A. Witham
Executive Vice President and
Chief Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By:
--------------------------------------
John A. Witham
Senior Vice President and
Chief Financial Officer

56
<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Insurance and Indemnity Agreement, all as of the day and year
first above written.

FINANCIAL SECURITY ASSURANCE INC.

By:
--------------------------------------
Authorized Officer

ARCADIA AUTOMOBILE RECEIVABLES TRUST,
1998-B

By: Wilmington Trust Company, as Owner
Trustee under the Trust Agreement

By: /s/ Denise Geran
---------------------------------

ARCADIA FINANCIAL LTD.

By:
--------------------------------------
John A. Witham
Executive Vice President and
Chief Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By:
--------------------------------------
John A. Witham
Senior Vice President and
Chief Financial Officer

57
<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Insurance and Indemnity Agreement, all as of the day and year
first above written.

FINANCIAL SECURITY ASSURANCE INC.

By:
--------------------------------------
Authorized Officer

ARCADIA AUTOMOBILE RECEIVABLES TRUST,
1998-B

By: Wilmington Trust Company, as Owner
Trustee under the Trust Agreement

By:
---------------------------------

ARCADIA FINANCIAL LTD.

By: /s/ John A. Witham
--------------------------------------
John A. Witham
Executive Vice President and
Chief Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By: /s/ John A. Witham
--------------------------------------
John A. Witham
Senior Vice President and
Chief Financial Officer

58
<PAGE>

SCHEDULE I

Determination Date* Cumulative Default Rate Cumulative Net Loss Rate
(month) (Column A) (Column B)
<S> <C> <C>
0 to 3 2.66% 1.33%
3 to 6 5.32% 2.66%
6 to 9 7.71% 3.85%
9 to 12 9.84% 4.92%
12 to 15 12.68% 6.34%
15 to 18 15.25% 7.63%
18 to 21 17.50% 8.75%
21 to 24 19.45% 9.73%
24 to 27 20.47% 10.24%
27 to 30 21.29% 10.65%
30 to 33 22.01% 11.01%
33 to 36 22.63% 11.32%
36 to 39 22.93% 11.47%
39 to 42 23.16% 11.58%
42 to 45 23.36% 11.68%
45 to 48 23.52% 11.76%
48 to 51 23.65% 11.83%
51 to 54 23.76% 11.88%
54 to 57 23.84% 11.92%
57 to 60 23.91% 11.95%
60 to 63 23.95% 11.97%
63 to 66 23.98% 11.99%
66 to 69 23.99% 12.00%
69 and higher 24.00% 12.00%

</TABLE>

__________________

<PAGE>

AMENDMENT
AGREEMENT NO. 1

AMENDMENT AGREEMENT, dated as of June 9, 1998 (this "AMENDMENT"),
to (i) the RECEIVABLES FUNDING AND SERVICING AGREEMENT (the "RECEIVABLES
AGREEMENT"), dated as of October 17, 1997, among Arcadia Receivables Finance
Corp. III, a Delaware corporation (the "BORROWER"), Arcadia Financial Ltd., a
Minnesota corporation, as servicer and custodian ("ARCADIA"); DLJ Mortgage
Capital, Inc., a Delaware corporation, as agent and a lender ("DLJ"), and
Norwest Bank Minnesota, National Association, a national banking association,
as backup servicer and collateral agent ("NORWEST"), (ii) that certain
COLLATERAL AGENT AGREEMENT (the "COLLATERAL AGENT AGREEMENT"), dated as of
October 17, 1997, among DLJ, Norwest, Arcadia and the Borrower; and (iii)
that certain FEE LETTER (the "FEE LETTER" and together with the Receivables
Agreement and the Collateral Agent Agreement, the "AGREEMENTS"), dated as of
October 17, 1997 among the Borrower, Arcadia, DLJ and Norwest. Capitalized
terms not otherwise defined herein shall have the meanings attributed to them
in the Agreement.

WHEREAS, each of the Borrower, Arcadia, DLJ and Norwest desire to
amend the Agreements;

NOW THEREFORE, the parties hereto agree as follows:

SECTION 1. AMENDMENT TO RECEIVABLES AGREEMENT. (a) The term
"Borrowing Base" in Section 1.1 of the Receivables Agreement is hereby
amended by deleting the parenthetical appearing in clause (b)(ii)(y) thereof
and replacing such parenthetical with the following:

"(excluding any Pledged Receivables with respect to which an
amount not greater than $10 is 60 days past due)."

(b) The term "Eligible Account" in Section 1.1 of the Receivables
Agreement is hereby deleted in its entirety and replaced with the following:

""ELIGIBLE ACCOUNT" means (a) a segregated trust account
established in the corporate trust department or (b) a segregated direct
deposit account, in each case maintained with a depository institution or
trust company organized under the laws of the United States of America, or
any of the States thereof, or the District of Columbia, having a
certificate of deposit, short term deposit or commercial paper rating of at
least A-1+ by Standard & Poor's and P-1 by Moody's. In either case, such
depository institution or trust company shall either (x) be Norwest or (y)
have been approved by the Agent, acting in its discretion, by written
notice to the Collateral Agent provided such depository institution meets
the requirements set forth in the preceding sentence."

<PAGE>

(c) The term "Eligible Receivable" in Section 1.1 of the
Receivables Agreement is hereby amended by adding the words "or Defaulted
Receivable" after the words Delinquent Receivable in clause (z) thereof.

(d) The term "INTEREST PERIOD" in Section 1.1 of the Receivables
Agreement is hereby deleted and replaced in its entirety with the following:

""INTEREST PERIOD" means, with respect to an Advance, the period
commencing on the day following the last day of the preceding Interest
Period (or the day commencing on the Advance Date, in the case of the first
Interest Period) and ending on the 30th day following such day; PROVIDED,
HOWEVER, upon the occurrence of the Facility Termination Date, the Interest
Period in respect of each outstanding Advance shall end on the day such
Advance is paid in full. Notwithstanding the foregoing, if any Interest
Period begins during the 30-day period preceding the date for which the
Borrower has notified the Agent that a Take-Out Securitization is scheduled
to occur, such Interest Period for such Advance shall be the period
commencing on the date of the related Advance or the day following the last
day of the preceding Interest Period for the related Advance and ending on
the scheduled date of the scheduled Take-Out Securitization; PROVIDED,
HOWEVER, that if the Take-Out Securitization does not take place on the
scheduled date therefor, a new Interest Period shall commence on such date
and end on the earlier of (x) the new scheduled date for such Take-Out
Securitization as notified to the Agent in writing by the Borrower and (y)
the date which is 30 days after such date."

(e) The terms "Net Pledged Receivable Losses" and "Portfolio Net
Losses" in Section 1.1 of the Receivables Agreement are hereby amended by
adding the following phrase at the end of each such term:

"(without reference to any of the specific numerical information
contained in such calculations), which calculation shall be made using the
actual numerical information with respect to the relevant Settlement
Period."

(f) The term "Spread Percentage" in Section 1.1 of the Receivables
Agreement is hereby deleted and replaced in its entirety with the following:

""SPREAD PERCENTAGE" means with respect to any Determination Date
and any Settlement Period immediately preceding such date during which
Advances were outstanding, (a) the weighted average Annual Percentage Rate
of the Pledged Receivables as of the last day of such Settlement Period
MINUS (b) the sum of (i) the product, expressed as a percentage, of (A) a
fraction, the numerator of which is the Distributable Excess Spread Amount
for such Determination Date and the denominator of which is the weighted
average Aggregate Outstanding Principal Balance of the Pledged Receivables
during such Settlement Period and (B) a fraction, the numerator of which is
the number of days in the year and the denominator of which is the number
of days in such preceding

<PAGE>

Settlement Period and (ii) 1.00%."

(g) Section 9.4 of the Receivables Agreement is hereby amended by
adding the following paragraph (f) to such Section:

"(f) Each Pledged Receivable shall be stamped on both the first
page and the signature page (if different) in a manner satisfactory to the
Agent to evidence the interests of the Collateral Agent therein and the
assignment and security interest granted by Section 9.1."

(h) Section 11.7 of the Receivables Agreement is hereby amended by
adding the following after clause (iv) in the second paragraph thereof:

"and (v) the stamp required by subsection 9.4(f)."

(i) The following Section 11.8 is added following Section 11.7:

"SECTION 11.8. INDEBTEDNESS. The Borrower shall not incur any
Indebtedness except as contemplated by the Transaction Documents."

(j) Section 12.4 of the Receivables Agreement is hereby amended by
adding the following at the end of the paragraph thereof:

"In the event the Backup Servicer is the Servicer, the Backup
Servicer shall only be entitled to the Servicing Fee, and if agreed upon in
the manner set forth in Section 13.3(c), the fee so designated within Section
13.3(c), any costs and expenses of any sub-servicer shall solely be the
obligations of the Servicer and not of the Borrower."

(k) Section 14.2 of the Receivables Agreement is hereby amended by
adding the following at the end of paragraph (a) thereof:

"The Custodian will hold the Receivable Files (other than Lien
Certificates) in such office on behalf of the Agent, clearly segregated
from any other instruments and files on its records, including other
instruments and files held by the Custodian with respect to trusts
established by Arcadia."

(l) Section 15.1 of the Receivables Agreement is hereby amended by:

(i) deleting the period appearing at the end of paragraph
(o) thereof and adding a semicolon in place thereof followed by the word
"or"; and

(ii) adding the following after such paragraph:

<PAGE>

"(p) On any date, the amount on deposit in the Reserve
Account shall have been less than an amount equal to the product of 1%
and the aggregate principal amount of all outstanding Advances for one
Business Day."

SECTION 4. AMENDMENT TO COLLATERAL AGENT AGREEMENT. (a)
Section 4 of the Collateral Agent Agreement is hereby amended by adding the
phrase ", within 10 days," after the word "shall" in paragraph (d) of such
Section the first time such word appears in such Section.

(b) Section 19 of the Collateral Agent Agreement is hereby amended
by changing the references to "clause (y) and (z)" in paragraph (d) of such
Section to references to "clause (ii) and (iii)."

SECTION 5. AMENDMENT TO FEE LETTER. The Fee Letter is hereby
amended by deleting paragraph 2 thereof in its entirety.

SECTION 6. REFERENCE TO AND EFFECT ON THE DOCUMENTS.

(a) On and after the date hereof, (i) each reference in the
Agreements to an Agreement shall refer to such Agreement as amended hereby
and each reference in the Agreements to "hereunder", "hereof", "herein", or
words of like import shall mean and be a reference to such Agreement as
amended hereby.

(b) Except as specifically amended above, the Agreements shall
remain in full force and effect and is hereby ratified and confirmed.

SECTION 7. REPRESENTATIONS AND WARRANTIES. Each of the parties
hereto represents and warrants that all of their representations and
warranties contained in the Transaction Documents are true and correct in all
material respects on the date hereof and with the same force and effect as
though such representations and warranties had been made on the date hereof,
except to the extent any such representations and warranties relate solely to
an earlier date.

SECTION 8. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE
STATE OF NEW YORK.

SECTION 9. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed an
original and all of which when taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page to
this Amendment by telecopier shall be effective as delivery of a manually
executed counterpart of this Amendment.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.

ARCADIA RECEIVABLES FINANCE CORP. III

By:
-----------------------------------------
Name:
Title:

ARCADIA FINANCIAL LTD.

By:
-----------------------------------------
Name:
Title:

DLJ MORTGAGE CAPITAL, INC., as Agent and as a Lender

By:
-----------------------------------------
Name: Dominic A. Capolongo
Title: Senior Vice President

NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Backup Servicer and
Collateral Agent

By:
-----------------------------------------
Name: John Weidner
Title: Account Manager

<PAGE>

AMENDMENT
AGREEMENT NO. 2

AMENDMENT AGREEMENT NO. 2, dated as of July 17, 1998 (this
"AMENDMENT"), to the RECEIVABLES FUNDING AND SERVICING AGREEMENT (as amended
to the date hereof, the "RECEIVABLES AGREEMENT"), dated as of October 17,
1997, among Arcadia Receivables Finance Corp. III, a Delaware corporation
(the "BORROWER"), Arcadia Financial Ltd., a Minnesota corporation, as
servicer and custodian ("ARCADIA"); DLJ Mortgage Capital, Inc., a Delaware
corporation, as agent and a lender ("DLJ"), and Norwest Bank Minnesota,
National Association, a national banking association, as backup servicer and
collateral agent ("NORWEST"). Capitalized terms not otherwise defined herein
shall have the meanings attributed to them in the Receivables Agreement.

WHEREAS, each of the Borrower, Arcadia, DLJ and Norwest desire to
amend the Receivables Agreement;

NOW THEREFORE, the parties hereto agree as follows:

SECTION 11. AMENDMENTS. (a) Section 1.1 of the Receivables
Agreement is hereby amended by:

(i) deleting the term "Advance Rate" in its entirety
and replacing such term with the following:

"ADVANCE RATE" means, with respect to any Advance, the
lesser of:

(1) the Flat Advance Rate; and

(2) the sum of:

(a) 100% MINUS the Weighted Average Portfolio Loss Ratio
multiplied by 4; PLUS

(b) 2.0%; PLUS

(c) two times the percentage determined as follows: (i) the
Weighted Average APR MINUS the sum of (x) LIBOR as of the date of
such advance thereof plus (y) 2.85%; MINUS (ii) the Weighted
Average APR multiplied by the Weighted Average Portfolio Loss
Ratio multiplied by 2 and MINUS (iii) the Weighted Average APR
multiplied by 9.6%.";

<PAGE>

(ii) deleting the date "October 20, 1999" appearing in
the definition of "Stated Maturity Date" therein and replacing such
date with the date "October 31, 1998."; and

(iii) deleting the definition of "Weighted Average
Advance Rate" in its entirety and replacing such term with the
following:

""WEIGHTED AVERAGE ADVANCE RATE" means, with respect to the
calculation of the Borrowing Base on any date of determination,
the average of the Advance Rates applicable to the Pledged
Receivables which are Eligible Receivables as of the last day of
the preceding Settlement Period, if such date of determination is
a Determination Date, and on such day, in any other case, and in
each case weighted based on the outstanding principal balances of
such Advances."

(iv) adding the following defined terms to such Section
in correct alphabetical order:

"FLAT ADVANCE RATE" means, with respect to an Advance, the
weighted average rate obtained by multiplying the Aggregate
Outstanding Principal Balance of Receivables of each Type subject
of such Advance by the applicable percentage set forth below,
summing the results, and dividing such result by the Aggregate
Outstanding Principal Balance of Receivables subject to such
Advance.

(a) with respect to Premier Receivables; 95%;

(b) with respect to Classic Receivables (other than
Financed Repo Receivables), 93%; and

"TYPE" shall mean, with respect to a Receivable, whether
such Receivable is a Classic Receivable which is not a Financed
Repo Receivable, a Premier Receivable, or a Classic Receivable
which is a Financed Repo Receivable.

"WEIGHTED AVERAGE APR" means, with respect to any Advance,
the average of the APRs applicable to the Receivables subject to
such Advance as of the date of such Advance; weighted based on
the aggregate Principal Balance of such Receivables.

"WEIGHTED AVERAGE PORTFOLIO LOSS RATIO" means, with respect
to

<PAGE>

any Advance and the calculation of the Advance Rate therefor,
the average of the Portfolio Net Loss Ratios calculated for each
Type of Receivable as of the preceding Determination Date
weighted based on the Aggregate Outstanding Principal Balances of
such Receivables of each Type.

(b) Article XI of the Receivables Agreement is hereby amended by
adding the following SECTION 11.8:

"SECTION 11.9. INTEREST RATE CAP. In the event that either (a)
(i) on any day, LIBOR with respect to any Interest Period exceeds 6.5%
and (ii) either (x) the Average Excess Spread Percentage for the most
recent Determination Date was less than or equal to 6% or (y) a Take
Out Securitization has not occurred within 90 days of such day or (b)
LIBOR for any Interest Period with respect to any outstanding Advance
exceeds LIBOR for the prior Interest Period with respect to such
Advance by .80% or more and the Borrower has not given the Agent an
Advance Request with respect to an Advance to be made on or after such
date, the Borrower shall, within five Business Days of the occurrence
of such event, obtain and keep in effect at all times until the
termination of this Agreement an interest rate cap agreement
acceptable to the Agent with a notional amount at least equal to the
outstanding principal balance of all Advances and which provides that
the counterparty thereunder shall make payments to the Collection
Account no less frequently than monthly at a rate equal to the amount
by which LIBOR exceeds 6.5%. "

(c) Section 13.1 of the Receivables Agreement is hereby amended by
deleting the amount "$325,000,000" appearing in paragraph (g) thereof and
replacing such amount with the amount "$250,000,000."

(d) Section 14.2 of the Receivables Agreement is hereby amended by
adding the following sentence at the end of paragraph (a) of such Section:

"New Receivables Files (other than Lien Certificates) shall be so
segregated on a weekly basis."

(e) Section 15.1 of the Receivables Agreement is hereby amended by:

(i) adding the phrase "or SECTION 11.9" after the
phrase "SECTION 11.6" in paragraph (b) of such Section;

(ii) deleting the number "4.25%" in paragraph (m) of
such Section and replacing such number with the number "6.00%"; and

<PAGE>

(iii) deleting paragraph (o) thereof in its entirety and
replacing such paragraph with the following:

"(o) the Average Excess Spread Percentage for any
Determination Date on which the Portfolio Net Loss Rate is less
than or equal to 4% is 5.5% or, for any Determination Date on
which the Portfolio Net Loss Rate is greater than 4.0%, the
Average Excess Spread Percentage is less than (x) 5.5% plus (y)
for every increase of .25% in the Portfolio Net Loss Rate over
4.0%, .25%;"

(f) Exhibit A to the Receivables Agreement will be replaced with
an Exhibit A with such changes as are necessary to reflect the changes
effected by this Amendment and as shall be mutually agreed to by DLJ, Arcadia
and the Borrower.

SECTION 3. CONDITION TO EFFECTIVENESS. It shall be condition
to the effectiveness of this Amendment that:

(a) Arcadia shall pay to the Agent all legal and other expenses of
the Agent in connection with this Amendment and the administration of the
Agreement incurred to date (including rating agency fees, if any, incurred in
connection with DLJ's refinancing of its commitment under the Agreement).

(b) The following representation and warranty shall be true and
correct: Arcadia or an Affiliate thereof shall be a party to a warehouse
credit facility pursuant to which Arcadia or such Affiliate can borrow funds
to and including November 10, 1998 to finance the purchase or origination of
retail automobile installment sales contracts of the same type as the
Receivables permitted to be financed under the Agreement.

SECTION 4. OTHER AGREEMENTS. Arcadia, DLJ and the Borrower
further agree that:

(a) Any Advance made pursuant to the Agreement as amended by this
Amendment on or prior to July 23, 1998 shall be repaid in full (together with
all accrued and unpaid Yield thereon) on or prior to July 24, 1998.

(b) From and after July 24, 1998, the Borrower shall not request
an Advance pursuant to the Agreement unless (x) the Borrower or any Affiliate
thereof is at such time a party to one or more other credit facilities
pursuant to which the Borrower or such Affiliate can borrow funds for the
purpose of financing the purchase or origination of retail automobile
installment contracts of the same type as the Receivables permitted to be
financed under the Agreement and (y) the Borrower or such Affiliate is unable
to borrow under any such credit facility and such inability is due solely (i)
to the fact that any applicable limits on borrowings (including any limits
applicable to certain designated types of such contracts) has been reached or
exceeded; (ii) the

<PAGE>

lenders or purchasers under such facilities are unable to provide funding
because of events unrelated to Arcadia or any of its subsidiaries (other than
an event related to the cancellation of any guaranty or insurance policy
related to such facility) or (iii) willful misconduct by a lender or
purchaser under such facility.

SECTION 5. REFERENCE TO AND EFFECT ON THE DOCUMENTS.

(a) On and after the date hereof, (i) each reference in the
Receivables Agreement to the Receivables Agreement shall refer to the
Receivables Agreement as amended hereby and each reference in the Receivables
Agreement to "hereunder", "hereof", "herein", or words of like import shall
mean and be a reference to such Agreement as amended hereby.

(b) Except as specifically amended above, the Receivables
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.

SECTION 6. REPRESENTATIONS AND WARRANTIES. Each of the parties
hereto represents and warrants that all of their representations and
warranties contained in the Transaction Documents are true and correct in all
material respects on the date hereof and with the same force and effect as
though such representations and warranties had been made on the date hereof,
except to the extent any such representations and warranties relate solely to
an earlier date.

SECTION 7. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE
STATE OF NEW YORK.

SECTION 8. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed an
original and all of which when taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page to
this Amendment by telecopier shall be effective as delivery of a manually
executed counterpart of this Amendment.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.

ARCADIA RECEIVABLES FINANCE CORP. III

By:
--------------------------------------------
Name:
Title:

ARCADIA FINANCIAL LTD.

By:
--------------------------------------------
Name:
Title:

DLJ MORTGAGE CAPITAL, INC., as Agent and as a Lender

By:
--------------------------------------------
Name:
Title:

NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Backup Servicer and
Collateral Agent

By:
--------------------------------------------
Name: John Weidner
Title: Account Manager

<PAGE>

EXHIBIT A

DLJ Mortgage Capital, Inc.
277 Park Avenue
New York, NY 10172
Attention:
Fax #: (212) 892-5434
Phone #: (212) 325-9070/9086

Norwest Bank Minnesota, National Association
Norwest Center
Sixth Street & Marquette Avenue
Minneapolis, MN 55479-0070
Attention: Corporate Trust Services -
Asset Backed Administration
Fax #: (612) 667-3539
Phone #: (612) 667-1117

RE: Advance Request: $
-----------

[ ]
--------------
Gentlemen and Ladies:

This Advance Request confirms our request for an Advance against the
Pledged Receivables listed in SCHEDULE A hereto, pursuant to the Receivables
Funding and Servicing Agreement dated as of October 17, 1997 (as amended from
time to time, the "Agreement"), as follows:

Advance Date: , 199
------------ --
Pledged Receivables: See SCHEDULE A hereto

Advance Amount:

A. Flat Advance Rate

11) Product of 0.95 and the Aggregate Outstanding Principal Balance of
Pledged Receivables that are Premier Receivables:

a. Aggregate Outstanding Principal Balance: $
----

b. Advance Rate: 0.95

A-1

<PAGE>

c. Advance Amount Against Premier Receivables (a x b): $
----

2) Product of 0.93 and the Aggregate Principal Balance of Pledged
Receivables that are Classic Receivables that are not Financed
Repossessions:

a. Aggregate Outstanding Principal Balance: $
----

b. Advance Rate: 0.93

c. Advance Amount Against Classic Receivables
that are not Financed Repossessions (a x b): $
----

3) Product of 0.85 and the Aggregate Principal Balance of Pledged
Receivables that are Classic Receivables that are Financed
Repossessions:

a. Aggregate Outstanding Principal Balance: $
----

b. Advance Rate: 0.85

c. Advance Amount Against Classic Receivables
that are Financed Repossessions (a x b): $
----

4) Weighted Average of 1, 2 and 3

B. Required Credit Enhancement:

1) a. Product of 4 and the Weighted
Average Portfolio Loss Ratio -------------------

b. 100% minus 1.a. -------------------

2) 2%

3) a. Weighted Average APR -------------------

b. Sum of LIBOR plus 2.85% -------------------

c. Product of Weighted Average APR,
Weighted Average Portfolio
Loss Ratio and 2 -------------------

A-2

<PAGE>

d. Product of Weighted Average
APR and 9.6% -------------------

e. Product of 2 and (3.a. MINUS
3.b. MINUS 3.c. and MINUS 3.d.) -------------------

4) Sum of 1b, 2 and 3e. -------------------%

5) Advance Rate (lesser of A.4 and B.4) -------------------

6) Gross Advance Amount: $
------

7) Reserve Account Deposit (1% of 4): $
------

8) Net Advance Amount to Borrower (4 - 5): $
------

The Borrower hereby acknowledges that, pursuant to SECTION 2.4 of the
Receivables Funding and Servicing Agreement, the delivery of this Advance
Request and the acceptance by the Borrower of the proceeds of the Advance
requested hereby constitutes a representation and warranty by the Borrower
that, on the date of such Advance, and before and after giving effect thereto
and to the application of the proceeds therefrom in accordance with the
Transaction Documents, all applicable statements set forth in SECTION 2.4 are
true and correct in all material respects.

The Borrower agrees that if prior to the time of the Advance requested
hereby any matter certified to herein by it will not be true and correct at
such time as if then made, it will immediately so notify the Agent. Except
to the extent, if any, that prior to the time of the Advance requested hereby
the Agent shall receive written notice to the contrary from the Borrower,
each matter certified to herein shall be deemed once again to be certified as
true and correct at the date of such Advance as if then made.

A-3

<PAGE>

The Borrower has caused this Advance Request to be executed and
delivered, and the certification and warranties contained herein to be made,
by its duly authorized officer this __day of __________, 19__.

ARCADIA RECEIVABLES FINANCE CORP. III

By:
--------------------------------------------
Name:
Title:

ARCADIA FINANCIAL LTD.,
as Servicer

By:
--------------------------------------------
Responsible Officer

A-4

<PAGE>

WIRE INSTRUCTIONS:

Norwest Bank
ABA #091 0000 19
Acct # 10-38-377

Corporate Trust FFC
(A) Liquidity Acct # 133-302-02 XXXXXXX
(B) TO BE INCLUDED AT A LATER DATE

A-5

<PAGE>

EXECUTION COPY

TRUST AGREEMENT

Dated as of July 21, 1998

between

ARCADIA RECEIVABLES FINANCE CORP.

and

WILMINGTON TRUST COMPANY
Owner Trustee

ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. Section References . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II CREATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1. Creation of Trust. . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2. Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3. Purposes and Powers. . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.4. Appointment of Owner Trustee . . . . . . . . . . . . . . . . . . 4
Section 2.5. Initial Capital Contribution of Trust Property . . . . . . . . . 4
Section 2.6. Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.7. Title to Trust Property. . . . . . . . . . . . . . . . . . . . . 4
Section 2.8. Situs of Trust . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.9. Representations and Warranties of the Depositor and the Owner. . 5
ARTICLE III THE CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1. Initial Ownership. . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2. The Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.3. Authentication of Certificates . . . . . . . . . . . . . . . . . 6
ARTICLE IV ACTIONS BY OWNER TRUSTEE. . . . . . . . . . . . . . . . . . . . . . 7
Section 4.1. Prior Notice to Owner with Respect to Certain Matters. . . . . . 7
Section 4.2. Action by Owner with Respect to Bankruptcy . . . . . . . . . . . 7
Section 4.3. Restrictions on Power. . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V AUTHORITY AND DUTIES OF OWNER TRUSTEE . . . . . . . . . . . . . . . 8
Section 5.1. General Authority. . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.2. General Duties . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.3. Action upon Instruction. . . . . . . . . . . . . . . . . . . . . 8
Section 5.4. No Duties Except as Specified in this Agreement or in
Instructions. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.5. No Action Except under Specified Documents or Instructions . . . 10
Section 5.6. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.7. Administration Agreement . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI CONCERNING THE OWNER TRUSTEE. . . . . . . . . . . . . . . . . . . . 11
Section 6.1. Acceptance of Trustee and Duties . . . . . . . . . . . . . . . . 11
</TABLE>

-i-
<PAGE>

TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 6.2. Furnishing of Documents. . . . . . . . . . . . . . . . . . . . . 12
Section 6.3. Representations and Warranties . . . . . . . . . . . . . . . . . 12
Section 6.4. Reliance; Advice of Counsel. . . . . . . . . . . . . . . . . . . 13
Section 6.5. Not Acting in Individual Capacity. . . . . . . . . . . . . . . . 13
Section 6.6. Owner Trustee Not Liable for Certificate, Notes or
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.7. Owner Trustee May Own Notes. . . . . . . . . . . . . . . . . . . 14
ARTICLE VII COMPENSATION OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . 14
Section 7.1. Owner Trustee's Fees and Expenses. . . . . . . . . . . . . . . . 14
Section 7.2. Non-Recourse Obligations . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.1. Termination of the Trust . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES. . . . . . . 15
Section 9.1. Eligibility Requirements for Owner Trustee . . . . . . . . . . . 15
Section 9.2. Resignation or Removal of Owner Trustee. . . . . . . . . . . . . 16
Section 9.3. Successor Owner Trustee. . . . . . . . . . . . . . . . . . . . . 16
Section 9.4. Merger or Consolidation of Owner Trustee . . . . . . . . . . . . 17
Section 9.5. Appointment of Co-Trustee or Separate Trustee. . . . . . . . . . 17
ARTICLE X MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 18
Section 10.1. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 10.2. No Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 10.3. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.4. Severability of Provisions . . . . . . . . . . . . . . . . . . . 20
Section 10.5. Certificate Nonassessable and Fully Paid . . . . . . . . . . . . 20
Section 10.6. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.7. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.8. Limitations on Rights of Others. . . . . . . . . . . . . . . . . 20
Section 10.9. No Petition. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 10.10. Certificate Transfer Restrictions. . . . . . . . . . . . . . . . 21
</TABLE>

-ii-
<PAGE>

THIS TRUST AGREEMENT, dated as of July 21, 1998 (the "Trust Agreement"),
is made between Arcadia Receivables Finance Corp., a Delaware corporation
(the "Seller") and Wilmington Trust Company, a Delaware corporation, as Owner
Trustee (in such capacity, the "Owner Trustee").

In consideration of the mutual agreements herein contained, and of other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1. DEFINITIONS. All terms defined in the Sale and Servicing
Agreement (as defined below) shall have the same meaning in this Agreement.
Whenever capitalized and used in this Agreement, the following words and
phrases, unless otherwise specified, shall have the following meanings:

ADMINISTRATION AGREEMENT: The Administration Agreement, dated as of
July __, 1998, between the Administrator and the Trust, as the same may be
amended and supplemented from time to time.

ADMINISTRATOR: Wilmington Trust Company, a Delaware corporation, or any
successor Administrator under the Administration Agreement.

AFL: Arcadia Financial Ltd., a Minnesota corporation, and its
successors in interest.

AGREEMENT OR "THIS AGREEMENT": This Trust Agreement, all amendments and
supplements thereto and all exhibits and schedules to any of the foregoing.

AUTHENTICATION AGENT: Wilmington Trust Company, or its successor in
interest, and any successor authentication agent appointed as provided in
this Agreement.

BUSINESS TRUST STATUTE: Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code Section 3801 et seq., as the same may be amended from time to time.

CERTIFICATE OR CERTIFICATE OF THE OWNER: A certificate executed by the
Owner Trustee evidencing the beneficial ownership interest in the Trust,
substantially in the form of Exhibit B.

CERTIFICATE OF TRUST: The Certificate of Trust in the form of Exhibit A
hereto filed for the Trust pursuant to Section 3810(a) of the Business Trust
Statute.

CORPORATE TRUST OFFICE: The principal office of the Owner Trustee at
which at any particular time its corporate trust business shall be
administered, which office at the Effective Date is located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware

1
<PAGE>

19890-0001, Attention: Corporate Trust Administration; the telecopy number
for the Corporate Trust Office on the date of the execution of this Agreement
is (302) 651-8882.

DEPOSITOR: The Seller in its capacity as depositor hereunder.

EFFECTIVE DATE: July 21, 1998

NOTEHOLDER or HOLDER: The meaning assigned to such term in the
Indenture.

OWNER. The Seller

OWNER TRUSTEE: Wilmington Trust Company, or its successor in interest,
acting not individually but solely as trustee, and any successor trustee
appointed as provided in this Agreement.

SALE AND SERVICING AGREEMENT: The Amended and Restated Sale and
Servicing Agreement dated as of July 21, 1998, among the Trust, Arcadia
Receivables Conduit Corp., as Original Issuer, the Seller, AFL, in its
individual capacity and as Servicer, Bank of America National Trust and
Savings Association, as Administrative Agent and as RCC Agent, Morgan
Guaranty Trust Company of New York, as DFC Agent, and Norwest Bank
Minnesota, National Association, as Backup Servicer, Collateral Agent and
Indenture Trustee, as the same may be amended and supplemented from time to
time.

SECRETARY OF STATE: The Secretary of State of the State of Delaware.

SELLER: Arcadia Receivables Finance Corp., a Delaware corporation, or
its successor in interest.

TRUST: The trust created by this Agreement, the estate of which
consists of the Trust Property.

TRUST PROPERTY: The property and proceeds of every description conveyed
pursuant to Section 2.5 hereof and Sections 1.8 and 2.1 of the Sale and
Servicing Agreement, together with the Secured Accounts (including all
Eligible Investments therein and all proceeds therefrom).

Section 1.2. USAGE OF TERMS (a) With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other genders; references to "writing"
include printing, typing, lithography, and other means of reproducing words
in a visible form; references to agreements and other contractual instruments
include all subsequent amendments thereto or changes therein entered into in
accordance with their respective terms and not prohibited by this Agreement;
references to Persons include their permitted successors and assigns; and the
terms "include" or "including" mean "include without limitation" or
"including without limitation." To the extent that definitions are contained
in this Agreement, or in any such certificate or other document, such
definitions shall control.

2
<PAGE>

(b) The references to the Related Documents entered into in
connection with this Agreement shall be read to include, where appropriate,
the original (as amended and supplemented) agreement related to each such
amended and restated document.

Section 1.3. SECTION REFERENCES. All references to Articles, Sections,
paragraphs, subsections, exhibits and schedules shall be to such portions of
this Agreement unless otherwise specified.

ARTICLE II
CREATION OF TRUST

Section 2.1. CREATION OF TRUST The Trust created by this Trust
Agreement shall be known as "Arcadia Automobile Receivables Warehouse Trust,"
in which name the Trust may conduct business, make and execute contracts and
other instruments and sue and be sued.

Section 2.2. OFFICE. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the
Depositor and the Owner.

Section 2.3. PURPOSES AND POWERS. The purpose of the Trust has been
and is, and the Trust shall have the power and authority, to engage in the
following activities:

(i) to issue the Notes pursuant to the Indenture and to sell
the Notes; to redeem Notes in accordance with the terms and conditions
set forth in the Indenture;

(ii) to issue $1.00 aggregate principal amount of the Certificate
to the Owner upon the written order of the Depositor;

(iii) with the proceeds of the sale of the Notes to pay to the
Seller from time to time pursuant to the Sale and Servicing Agreement;

(iv) to assign, grant, transfer, pledge, mortgage and convey the
Trust Property to the Collateral Agent pursuant to the Security
Agreement for the benefit of the Indenture Trustee and the Security
Insurer and to hold, manage and distribute to the Owner pursuant to the
terms of the Sale and Servicing Agreement any portion of the Trust
Property released from the Lien of, and remitted to the Trust pursuant
to, the Security Agreement; and, in connection with a sale by the Trust
of the Trust Property, to assign, grant, transfer, pledge, mortgage and
convey the Trust Property to such purchaser or purchasers and upon
receipt of proceeds from such sale release the Lien granted pursuant to
the Security Agreement;

(v) to enter into and perform its obligations under the Related
Documents to which it is to be a party;

(vi) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and

3
<PAGE>

(vii) subject to compliance with the Related Documents, to engage
in such other activities as may be required in connection with
conservation of the Trust Property and the making of distributions to
the Noteholders.

The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or expressly authorized by the terms of
this Agreement or the Related Documents.

Section 2.4. APPOINTMENT OF OWNER TRUSTEE. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein, and the
Owner Trustee hereby accepts such appointment.

Section 2.5. INITIAL CAPITAL CONTRIBUTION OF TRUST PROPERTY. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the
Owner Trustee, as of the date hereof, the sum of $1. The Owner Trustee
acknowledged receipt in trust from the Depositor, as of the date hereof, of
the foregoing contribution, which shall constitute the initial Trust Property
and shall be held by the Owner Trustee. The Depositor shall pay
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee.

Section 2.6. DECLARATION OF TRUST. The Owner Trustee hereby declares
that it will hold the Trust Property in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owner, subject to
the interests and rights in the Trust Property granted to other Persons by
the Related Documents. It is the intention and agreement of the parties
hereto that the Trust constitute a business trust under the Business Trust
Statute and that this Agreement constitute the governing instrument of such
business trust. It is the intention and agreement of the parties hereto
that, solely for income and franchise tax purposes, the Trust shall be
disregarded as an entity, and the assets of the Trust treated as owned in
whole by the Depositor. The parties hereto agree to take no action contrary
to the foregoing intention. Effective as of the date hereof, the Owner
Trustee shall have all rights, powers and duties set forth herein and in the
Business Trust Statute with respect to accomplishing the purposes of the Trust

Section 2.7. TITLE TO TRUST PROPERTY.

(a) Legal title to all the Trust Property shall be vested at all
times in the Trust as a separate legal entity except where applicable
law in any jurisdiction requires title to any part of the Trust Property
to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee, a co-trustee and/or a separate
trustee, as the case may be.

(b) The Owner shall not have legal title to any part of the Trust
Property. No transfer, by operation of law or otherwise, of any right,
title or interest by the Owner of its ownership interest in the Trust
Property shall operate to terminate this Agreement or the trusts
hereunder or entitle any transferee to an accounting or to the transfer
to it of legal title to any part of the Trust Property.

4
<PAGE>

Section 2.8. SITUS OF TRUST. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of
Delaware. The Trust shall not have any employees in any state other than
Delaware; PROVIDED, HOWEVER, that nothing herein shall restrict or prohibit
the Owner Trustee, the Servicer or any agent of the Trust from having
employees within or without the State of Delaware. Payments will be received
by the Trust only in Delaware, and payments will be made by the Trust only
from Delaware. The only office of the Trust will be at the Corporate Trust
Office in Delaware.

Section 2.9. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND THE
OWNER. On the date hereof, the Seller, as the Depositor and the Owner, makes
the following representations and warranties with respect to itself on which
the Owner Trustee relied and relies in accepting the Trust Property in trust
and issuing the Certificates:

(a) ORGANIZATION AND GOOD STANDING. It has been duly organized
and is validly existing as a corporation in good standing under the laws
of the State of Delaware, with power and authority to own its properties
and to conduct its business as such properties are currently owned and
as such business is currently conducted and is proposed to be conducted
pursuant to this Agreement and the Related Documents.

(b) DUE QUALIFICATION. It is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property, the conduct of its business and the performance
of its obligations under the Related Documents requires such
qualification.

(c) POWER AND AUTHORITY. It has the power and authority to
execute and deliver this Agreement and its Related Documents and to
perform its obligations pursuant thereto; and the execution, delivery
and performance of its Related Documents have been duly authorized by
all necessary corporate action.

(d) NO CONSENT REQUIRED. No consent, license, approval or
authorization or registration or declaration with, any Person or with
any governmental authority, bureau or agency is required in connection
with the execution, delivery or performance of the Related Documents,
except for such as have been obtained, effected or made.

(e) NO VIOLATION. The consummation of the transactions
contemplated by its Related Documents and the fulfillment of its
obligations under its Related Documents shall not conflict with, result
in any breach of any of the terms and provisions of or constitute (with
or without notice, lapse of time or both) a default under, its
certificate of incorporation or by-laws, or any indenture, agreement,
mortgage, deed of trust or other instrument to which it is a party or by
which it is bound, or result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, or violate any
law, order, rule or regulation applicable to it of any court or of any
federal or state regulatory

5
<PAGE>

body, administrative agency or other governmental instrumentality having
jurisdiction over it or any of its properties.

(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to its knowledge threatened against it before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over it or its properties (A)
asserting the invalidity of any of the Related Documents, (B) seeking to
prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by any of the Related Documents, or (C)
seeking any determination or ruling that might materially and adversely
affect its performance of its obligations under, or the validity or
enforceability of, any of the Related Documents

ARTICLE III
THE CERTIFICATE

Section 3.1. INITIAL OWNERSHIP. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance
of the Certificate, the Depositor was the sole beneficiary of the Trust.

Section 3.2. THE CERTIFICATE.

The Certificate shall be executed on behalf of the Owner Trustee by
manual or facsimile signature of any authorized signatory of the Owner
Trustee having such authority under the Owner Trustee's seal imprinted or
otherwise affixed thereon and attested on behalf of the Owner Trustee by the
manual or facsimile signature of any authorized signatory of the Owner
Trustee. The Certificate bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures were affixed,
authorized to sign on behalf of the Owner Trustee shall be validly issued and
entitled to the benefits of this Agreement, notwithstanding that such
individuals or any of them have ceased to be so authorized prior to the
authentication and delivery of the Certificate.

Section 3.3. AUTHENTICATION OF CERTIFICATES. Simultaneously with the
initial sale, assignment and transfer to the Trust of the Receivables
(including the interest of the Original Issuer therein) pursuant to the Sale
and Servicing Agreement, upon Depositor's order (with no less than five
Business Days prior notice) the Owner Trustee shall cause the Certificate to
be executed on behalf of the Trust, authenticated and delivered to or upon
the order of the Depositor. The Certificate shall not entitle its holder to
any benefit under this Agreement, or be valid for any purpose, unless there
shall appear on such Certificate a certificate of authentication
substantially in the form set forth in Exhibit B executed by the Owner
Trustee or the Authentication Agent, by manual or facsimile signature; such
authentication shall constitute conclusive evidence that such Certificate
shall have been duly authenticated and delivered hereunder. Wilmington Trust
Company is hereby initially appointed Authentication Agent. The Certificate
shall be dated the date of its authentication.

6
<PAGE>

ARTICLE IV
ACTIONS BY OWNER TRUSTEE

Section 4.1. PRIOR NOTICE TO OWNER WITH RESPECT TO CERTAIN MATTERS.The
Owner Trustee shall not take any of the following actions unless, at least 30
days before the taking of such action, the Owner Trustee shall have notified
the Owner in writing of the proposed action and the Owner shall not have
notified the Owner Trustee in writing prior to the 30th day after such notice
is given that the Owner has withheld consent or provided alternative
direction:

(a) the election by the Trust to file an amendment to the
Certificate of Trust unless such amendment is required to be filed under
the Business Trust Statute or unless such amendment would not materially
and adversely affect the interests of the Owner;

(b) the amendment of the Indenture or the Security Agreement by a
supplemental indenture or agreement in circumstances where the consent
of the Indenture Trustee or any Noteholder is required unless (i) such
amendment would not materially and adversely affect the interests of the
Owner or (ii) such amendment is made in connection with a Securitized
Offering in accordance with the final sentence of Section 10.1 (a); or

(c) the amendment, change or modification of the Administration
Agreement, unless (i) such amendment would not materially and adversely
affect the interests of the Owner or (ii) such amendment is made in
connection with a Securitized Offering in accordance with the final
sentence of Section 10.1(a).

Section 4.2. ACTION BY OWNER WITH RESPECT TO BANKRUPTCY. The Owner
Trustee shall not have the power, except at the written direction of the
Owner, to commence a voluntary proceeding in bankruptcy relating to the Trust.

Section 4.3. RESTRICTIONS ON POWER. Neither the Owner nor the
Depositor shall have the right by virtue or by availing itself of any
provisions of this Agreement to institute any suit, action, or proceeding in
equity or at law upon or under or with respect to this Agreement or any other
Related Document, unless such Person previously shall have given to the Owner
Trustee a written notice of default and of the continuance thereof, as
provided in this Agreement and such Person shall have made written request
upon the Owner Trustee to institute such action, suit or proceeding in its
own name as Owner Trustee under this Agreement and shall have offered to the
Owner Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the Owner
Trustee, for 30 days after its receipt of such notice, request, and offer of
indemnity, shall have neglected or refused to institute any such action,
suit, or proceeding, and during such 30-day period no request or waiver
inconsistent with such written request has been given to the Owner Trustee
pursuant to and in compliance with this Section or Section 5.3.

7
<PAGE>

ARTICLE V
AUTHORITY AND DUTIES OF OWNER TRUSTEE

Section 5.1. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver the Related Documents to which the Trust is
to be a party and each certificate or other document attached as an exhibit
to or contemplated by the Related Documents to which the Trust is to be a
party and any amendment thereto (including any amendment entered into in
connection with a Securitized Offering in accordance with the final sentence
of Section 10.1(a) hereof and any additional agreements called for by each
such amendment), and on behalf of the Trust, to direct the Indenture Trustee
to authenticate and deliver the Notes in the aggregate amount of authorized
by the Indenture. In addition to the foregoing, the Owner Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Related Documents. The Owner Trustee is further
authorized, on behalf of the Trust, to enter into the Administration
Agreement, to appoint, with the consent of the Administrative Agent, a
successor Administrator and to take from time to time such action as the
Administrative Agent recommends with respect to the Related Documents so long
as such actions are consistent with the terms of the Related Documents.

Section 5.2. GENERAL DUTIES. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged through the Administrator or such
agents as shall be appointed with the consent of the Administrative Agent)
all of its responsibilities pursuant to the terms of this Agreement and the
Related Documents and to administer the Trust in the interest of the Owner,
subject to the Related Documents and in accordance with the provisions of
this Agreement. Notwithstanding the foregoing, the Owner Trustee shall be
deemed to have discharged its duties and responsibilities hereunder and under
the Related Documents to the extent the Administrator has agreed in the
Administration Agreement to perform any act or to discharge any duty of the
Owner Trustee hereunder or under any Related Document, and the Owner Trustee
shall not be liable for the default or failure of the Administrator to carry
out its obligations under the Administration Agreement.

Section 5.3. ACTION UPON INSTRUCTION.

(a) Subject to Article IV, the Owner shall have the exclusive
right to direct the actions of the Owner Trustee in the management of
the Trust, so long as such instructions are not inconsistent with the
express terms set forth herein or in any Related Document. The Owner
shall not instruct the Owner Trustee in a manner inconsistent with this
Agreement or the other Related Documents.

(b) The Owner Trustee shall not be required to take any action
hereunder or under any other Related Document if the Owner Trustee shall
have reasonably determined, or shall have been advised by counsel, that
such action is contrary to the terms hereof or of any other Related
Document or is otherwise contrary to law.

(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any other Related Document, the Owner Trustee shall
promptly give notice (in such form as shall be

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appropriate under the circumstances) to the Owner requesting instruction
as to the course of action to be adopted, and to the extent the Owner
Trustee acts in good faith in accordance with any written instruction
received from the Owner, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten days of such notice (or
within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances) it may, but
shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the other Related Documents, as it
shall deem to be in the best interests of the Owner, and shall have no
liability to any Person for such action or inaction.

(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any other Related
Document or any such provision is ambiguous as to its application, or
is, or appears to be, in conflict with any other applicable provision,
or in the event that this Agreement permits any determination by the
Owner Trustee or is silent or is incomplete as to the course of action
that the Owner Trustee is required to take with respect to a particular
set of facts, the Owner Trustee may give notice (in such form as shall
be appropriate under the circumstances) to the Owner requesting
instruction and, to the extent that the Owner Trustee acts or refrains
from acting in good faith in accordance with any such instruction
received from the Owner, the Owner Trustee shall not be liable, on
account of such action or inaction, to any Person. If the Owner Trustee
shall not have received appropriate instruction within 10 days of such
notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it
may, but shall be under no duty to, take or refrain from taking such
action, not inconsistent with this Agreement or the other Related
Documents, as it shall deem to be in the best interests of the Owner,
and shall have no liability to any Person for such action or inaction.

Section 5.4. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN
INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of,
or otherwise deal with the Trust Property, or to otherwise take or refrain
from taking any action under, or in connection with, any document
contemplated hereby to which the Trust is a party, except as expressly
provided by the terms of this Agreement (including as provided in Section
5.2) or in any written instruction received by the Owner Trustee pursuant to
Section 5.3; and no implied duties or obligations shall be read into this
Agreement or any Related Document against the Owner Trustee. The Owner
Trustee shall have no responsibility for preparing, monitoring or filing any
financing or continuation statements in any public office at any time or
otherwise to perfect or maintain the perfection of any security interest or
lien granted to it hereunder or to record this Agreement or any other Related
Document; however, the Owner Trustee will from time to time execute and
deliver such financing or continuation statements as are prepared by the
Servicer or the Administrator and delivered to the Owner Trustee for its
execution on behalf of the Trust for the purpose of perfecting or maintaining
the perfection of such a security interest or lien or effecting such a
recording. The Owner Trustee nevertheless agrees that it will, at its own
cost and expense (and not at the expense of the Trust), promptly take all
action as may be necessary to discharge any liens on any part of the Trust
Property that are attributable to claims against the Owner Trustee in

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its individual capacity that are not related to the ownership or the
administration of the Trust Property.

Section 5.5. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell,
dispose of or otherwise deal with any part of, the Trust Property except (i)
in accordance with the powers granted to and the authority conferred upon the
Owner Trustee pursuant to this Agreement, (ii) in accordance with the other
Related Documents and (iii) in accordance with any document or instruction
delivered to the Owner Trustee pursuant to Section 5.3.

Section 5.6. RESTRICTIONS. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section
2.3 or (b) that, to the actual knowledge of the Owner Trustee, would result
in the Trust's becoming taxable as a corporation for Federal income tax
purposes. The Owner shall not direct the Owner Trustee to take action that
would violate the provisions of this Section.

Section 5.7. ADMINISTRATION AGREEMENT.

(a) The Administrator is authorized to execute on behalf of the
Trust all documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Trust to prepare, file or
deliver pursuant to the Related Documents. Upon written request, the
Owner Trustee shall execute and deliver to the Administrator a power of
attorney appointing the Administrator its agent and attorney-in-fact to
execute all such documents, reports, filings, instruments, certificates
and opinions.

(b) If the Administrator shall resign or be removed pursuant to
the terms of the Administration Agreement, the Owner Trustee may, and is
hereby authorized and empowered to, subject to obtaining the prior
written consent of the Administrative Agent and the Security Insurer (as
long as no Insurer Default shall have occurred), appoint or consent to
the appointment of a successor Administrator pursuant to the
Administration Agreement.

(c) If the Administration Agreement is terminated, the Owner
Trustee may, and is hereby authorized and empowered to, subject to
obtaining the prior written consent of the Administrative Agent (as long
as no Insurer Default shall have occurred), appoint or consent to the
appointment of a Person to perform substantially the same duties as are
assigned to the Administrator in the Administration Agreement pursuant
to an agreement containing substantially the same provisions as are
contained in the Administration Agreement.

(d) The Owner Trustee shall promptly notify the Owner, the
Depositor and the Security Insurer of any default by or misconduct of
the Administrator under the Administration Agreement of which the Owner
Trustee has received written notice or of which a Responsible Officer
has actual knowledge.

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ARTICLE VI
CONCERNING THE OWNER TRUSTEE

Section 6.1. ACCEPTANCE OF TRUSTEE AND DUTIES. The Owner Trustee
accepts the trusts created by this Agreement and hereby agrees to perform its
duties hereunder with respect to such trusts but only upon the terms of this
Agreement. The Owner Trustee also agrees to disburse all monies actually
received by it constituting part of the Trust Property upon the terms of this
Agreement and any other of the Related Documents. The Owner Trustee shall
not be answerable or accountable hereunder or under any other Related
Document under any circumstances, except (i) for its own willful misconduct
or gross negligence, (ii) in the case of the inaccuracy of any representation
or warranty contained in Section 6.3, (iii) for liabilities arising from the
failure of the Owner Trustee to perform obligations expressly undertaken by
it in the last sentence of Section 5.4 hereof, (iv) for any investments
issued by the Owner Trustee or any branch or affiliate thereof in its
commercial capacity or (v) for taxes, fees or other charges on, based on or
measured by, any fees, commissions or compensation received by the Owner
Trustee in connection with any of the transactions contemplated by this
Agreement or any other Related Document. In particular, but not by way of
limitation (and subject to the exceptions set forth in the preceding
sentence):

(a) the Owner Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Owner
Trustee;

(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the instructions of the Owner;

(c) no provision of this Agreement or any other Related Document
shall require the Owner Trustee to expend or risk funds or otherwise
incur any financial liability in the performance of any of its rights or
powers hereunder or under any other Related Document if the Owner
Trustee shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;

(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under this Agreement or any of the
other Related Documents, including the principal of and interest on the
Notes or payments under the Policy;

(e) the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or the Owner or for the form,
character, genuineness, sufficiency, value or validity of any of the
Trust Property or for or in respect of the validity or sufficiency of
the other Related Documents, other than the certificate of
authentication on the Certificate, and the Owner Trustee shall in no
event assume or incur any liability, duty, or obligation to the
Custodian, the Indenture Trustee, any Noteholder, the Collateral Agent
or to the Owner other than as expressly provided for herein and in the
other Related Documents;

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(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Custodian, the Indenture Trustee,
the Collateral Agent or the Servicer under any of the Related Documents
or otherwise and the Owner Trustee shall have no obligation or liability
to perform the obligations of the Trust under this Agreement or the
Related Documents that are required to be performed by the Administrator
under the Administration Agreement, the Custodian under the Custodian
Agreement, the Indenture Trustee under the Indenture, the Collateral
Agent under the Security Agreement or the Servicer under the Sale and
Servicing Agreement; and

(g) the Owner Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation to this Agreement or any Related Document, at the request,
order or direction of the Owner, unless the Owner has offered to the
Owner Trustee security or indemnity reasonably satisfactory to it
against the costs, expenses and liabilities that may be incurred by the
Owner Trustee therein or thereby. The right of the Owner Trustee to
perform any discretionary act enumerated in this Agreement or in any
other Related Document shall not be construed as a duty, and the Owner
Trustee shall not be answerable for other than its gross negligence or
willful misconduct in the performance of any such act.

Section 6.2. FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish
to the Owner, the Indenture Trustee, the Collateral Agent and the Security
Insurer promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Related Documents unless any such Person shall have previously received such
items.

Section 6.3. REPRESENTATIONS AND WARRANTIES. The Owner Trustee hereby
represents and warrants to the Depositor and the Owner that:

(a) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of Delaware. It
has all requisite corporate power and authority and all franchises,
grants, authorizations, consents, orders and approvals from all
governmental authorities necessary to execute, deliver and perform its
obligations under each Related Document to which the Trust is a party.

(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of each Related Document to which the Trust
is a party, and each Related Document will be executed and delivered by
one of its officers who is duly authorized to execute and deliver this
Agreement on its behalf.

(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any Federal or Delaware law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee or
any judgment or order binding on it, or constitute any default under its
charter

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documents or by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may
be bound or result in the creation or imposition of any lien, charge or
encumbrance on the Trust Property resulting from actions by or claims
against the Owner Trustee individually which are unrelated to the
Related Documents.

Section 6.4. RELIANCE; ADVICE OF COUNSEL.

(a) The Owner Trustee shall incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond, or other document or paper
believed by it in good faith to be genuine and to be signed by the
proper party or parties. The Owner Trustee may accept a certified copy
of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been
duly adopted by such body and that the same is in full force and effect.
As to any fact or matter the method of the determination of which is
not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any
vice president or by the treasurer or other authorized officers of the
relevant party, as to such fact or matter, and such certificate shall
constitute full protection to the Owner Trustee for any action taken or
omitted to be taken by it in good faith in reliance thereon.

(b) In the exercise or administration of the trusts hereunder and
in the performance of its duties and obligations under this Agreement or
the other Related Documents, the Owner Trustee (i) may act directly or
through its agents or attorneys pursuant to agreements entered into with
any of them, and the Owner Trustee shall not be liable for the conduct
or misconduct of such agents or attorneys if such agents or attorneys
shall have been selected by the Owner Trustee with reasonable care, and
(ii) may consult with counsel, accountants and other skilled persons to
be selected with reasonable care and employed by it. The Owner Trustee
shall not be liable for anything done, suffered or omitted in good faith
by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this
Agreement or any other Related Document.

Section 6.5. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in
this Article VI, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason
of the transactions contemplated by this Agreement or any other Related
Document shall look only to the Trust Property for payment or satisfaction
thereof.

Section 6.6. OWNER TRUSTEE NOT LIABLE FOR CERTIFICATE, NOTES OR
RECEIVABLES. The recitals contained herein and in the Certificate (other
than the signature and counter-signature of the Owner Trustee on the
Certificate) shall be taken as the statements of the Depositor (other than
the signature or countersignature of the Owner Trustee on the Notes), and the
Owner Trustee assumes no responsibility for the correctness thereof. The
Owner Trustee makes no representations as to the validity or sufficiency of
this Agreement, of any other Related Document or of the Certificate (other
than the signature and counter-signature of the Owner

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Trustee on the Certificate) or the Notes (other than the signature or
counter-signature of the Owner Trustee on the Notes), or of any Receivable or
related documents. The Owner Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Receivable, or the perfection and priority of any
security interest created by any Receivable in any Financed Vehicle or the
maintenance of any such perfection and priority of any security interest
created by any Receivable in any Financed Vehicle or the maintenance of any
such perfection and priority, or for or with respect to the sufficiency of
the Trust Property or its ability to generate the payments to be distributed
to or the Noteholders under the Indenture, including, without limitation:
the existence, condition and ownership of any Financed Vehicle; the existence
and enforceability of any insurance thereon; the existence and contents of
any Receivable or any computer or other record thereof; the validity of the
assignment of any Receivable to the Trust or of any intervening assignment;
the completeness of any Receivable; the performance or enforcement of any
Receivable; the performance by the Security Insurer under the Note Policy;
the compliance by the Seller or the Servicer with any warranty or
representation made under any Related Document or in any related document or
the accuracy of any such warranty or representation or any action of the
Indenture Trustee, the Custodian, the Collateral Agent or the Servicer taken
in the name of the Owner Trustee.

Section 6.7. OWNER TRUSTEE MAY OWN NOTES. The Owner Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may deal with the Depositor, the Seller, the Indenture Trustee, the
Collateral Agent and the Servicer in banking or other transactions with the
same rights as it would have if it were not Owner Trustee.

ARTICLE VII
COMPENSATION OF OWNER TRUSTEE

Section 7.1. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have
been separately agreed upon before the date hereof between AFL and the Owner
Trustee, and the Owner Trustee shall be entitled to be reimbursed by AFL for
its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder; PROVIDED,
HOWEVER, that the Owner Trustee shall only be entitled to reimbursement for
expenses hereunder to the extent such expenses are fees of outside counsel
engaged by the Owner Trustee in respect of the performance of its obligations
hereunder.

Section 7.2. NON-RECOURSE OBLIGATIONS. Notwithstanding anything in
this Agreement or any Related Document, the Owner Trustee agrees in its
individual capacity and in its capacity as Owner Trustee for the Trust that
all obligations of the Trust to the Owner Trustee individually or as Owner
Trustee for the Trust shall be recourse to the Trust Property only.

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ARTICLE VIII
TERMINATION

Section 8.1. TERMINATION OF THE TRUST.

(a) The respective obligations and responsibilities of the
Depositor, the Owner and the Owner Trustee created by this Agreement and
the Trust created by this Agreement shall terminate upon the maturity or
other liquidation of the last Receivable and the subsequent distribution
of amounts in respect of such Receivables as provided in the Related
Documents; PROVIDED, HOWEVER, that in no event shall the trust created
by this Agreement continue beyond the expiration of 21 years from the
death of the last survivor of the descendants living on the date of this
Agreement of Rose Kennedy of the Commonwealth of Massachusetts; and
PROVIDED, FURTHER, that any rights to indemnification that the Owner
Trustee or its successors, assigns and agents may have shall survive the
termination of the Trust. The Servicer shall promptly notify the Owner
Trustee of any prospective termination pursuant to this Section 8.1.
The bankruptcy, liquidation, dissolution, termination, resignation,
expulsion, withdrawal, death or incapacity of Owner, shall not (x)
operate to terminate this Agreement or the Trust, nor (y) entitle the
Owner's legal representatives or heirs to claim an accounting or to take
any action or proceeding in any court for a partition or winding up of
all or any part of the Trust or Trust Property nor (z) otherwise affect
the rights, obligations and liabilities of the parties hereto.

(b) Except as provided in Section 8.1(a), neither the Depositor
nor the Owner shall be entitled to revoke or terminate the Trust.

(c) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by
filing a certificate of cancellation with the Secretary of State in
accordance with the provisions of Section 3810 of the Business Trust
Statute.

ARTICLE IX
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

Section 9.1. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation (i) satisfying the provisions of
Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by Federal or
State authorities; and (iv) having (or having a parent which has) a rating of
at least Baa3 by Moody's or BBB by Standard & Poor's. If such corporation
shall publish reports of condition at least annually, pursuant to law or to
the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. In case at any
time the Owner Trustee shall cease to be eligible

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in accordance with the provisions of this Section, the Owner Trustee shall
resign immediately in the manner and with the effect specified in Section 9.2.

Section 9.2. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner
Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Owner and the Servicer at
least 30 days before the date specified in such instrument. Upon receiving
such notice of resignation, the Owner shall promptly appoint a successor
Owner Trustee meeting the qualifications set forth in Section 9.1 by written
instrument, in duplicate, one copy of which instrument shall be delivered to
the resigning Owner Trustee and one copy to the successor Owner Trustee. If
no successor Owner Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation,
the resigning Owner Trustee may petition any court of competent jurisdiction
for the appointment of a successor Owner Trustee.

If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 9.1 and shall fail to resign after
written request therefor by the Owner or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent,
or a receiver of the Owner Trustee or of its property shall be appointed, or
any public officer shall take charge or control of the Owner Trustee or of
its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Owner, with the consent of the Administrative Agent may
remove the Owner Trustee. If the Owner shall remove the Owner Trustee under
the authority of the immediately preceding sentence, the Owner shall promptly
appoint a successor Owner Trustee meeting the qualification requirements of
Section 9.1 by written instrument, in duplicate, one copy of which instrument
shall be delivered to the outgoing Owner Trustee so removed and one copy to
the successor Owner Trustee and payment of all fees owed to the outgoing
Owner Trustee.

Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section
shall not become effective until all fees and expenses, including any
indemnity payments, due to the outgoing Owner Trustee have been paid and
until acceptance of appointment by the successor Owner Trustee pursuant to
Section 9.3. The Owner shall provide notice of such resignation or removal
of the Owner Trustee to each of the Rating Agencies.

Section 9.3. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 9.2 shall execute, acknowledge and deliver to
the Owner and to its predecessor Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Owner Trustee shall become effective and such successor Owner
Trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties, and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall deliver to the successor
Owner Trustee all documents and statements and monies held by it under this
Agreement; and the Owner and the predecessor Owner Trustee shall execute and
deliver such instruments and do such other things as may reasonably be
required for fully and certainly vesting and confirming in the successor
Owner Trustee all such rights, powers, duties, and obligations.

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No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 9.1.

Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Owner shall mail notice of the successor of such Owner
Trustee to the Indenture Trustee, the Servicer, the Collateral Agent, the
Security Insurer, the Noteholders and the Rating Agencies. If the Owner
shall fail to mail such notice within 10 days after acceptance of appointment
by the successor Owner Trustee, the successor Owner Trustee shall cause such
notice to be mailed at the expense of the Owner.

Section 9.4. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any corporation
into which the Owner Trustee may be merged or converted or with which it may
be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder,
provided such corporation shall be eligible pursuant to Section 9.1, without
the execution or filing of any instrument or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding,
and provided further that the Owner Trustee shall mail notice of such merger
or consolidation to the Rating Agencies.

Section 9.5. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Property or any Financed Vehicle may at the time be
located, the Administrator and the Owner Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Owner Trustee to act as co-trustee, jointly with
the Owner Trustee, or separate trustee or separate trustees, of all or any
part of the Trust Property, and to vest in such Person, in such capacity,
such title to the Trust, or any part thereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and
trusts as the Administrator and the Owner Trustee may consider necessary or
desirable. If the Administrator shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, the Owner
Trustee shall have the power to make such appointment. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 9.1 and no notice of
the appointment of any co-trustee or separate trustee shall be required
pursuant to Section 9.1.

Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

(i) all rights, powers, duties, and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Owner Trustee joining in
such act), except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed the Owner
Trustee shall be incompetent or

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unqualified to perform such act or acts, in which event such rights,
powers, duties, and obligations (including the holding of title to the
Trust Property or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Owner Trustee;

(ii) no trustee under this Agreement shall be personally liable
by reason of any act or omission of any other trustee under this
Agreement; and

(iii) the Administrator and the Owner Trustee acting jointly may
at any time accept the resignation of or remove any separate trustee or
co-trustee.

Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Owner Trustee or separately, as may be provided therein, subject to all
the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Owner Trustee. Each such instrument shall be
filed with the Owner Trustee and a copy thereof given to the Administrator.

Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

ARTICLE X
MISCELLANEOUS PROVISIONS

Section 10.1. AMENDMENT.

(a) This Agreement may be amended by the Depositor, the Owner and
the Owner Trustee, with the consent of the Security Insurer (as long as
no Insurer Default shall have occurred and be continuing) but without
the consent of the Noteholders, (i) to cure any ambiguity, or (ii) to
correct, supplement or modify any provisions in this Agreement;
PROVIDED, HOWEVER, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the
interests of any Noteholder. In addition, this Agreement and any Related
Document may be amended by the Depositor, the Owner and the Owner
Trustee (or, in the case of a Related Document, the parties thereto), in
connection with any Securitized Offering, so long as it is a condition
precedent to the effectiveness of such amendment that any commitment to
fund increases in the

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outstanding principal balance of the Notes under the Note Purchase
Agreement, has been terminated.

(b) This Agreement may also be amended from time to time by the
Depositor, the Owner and the Owner Trustee, with the consent of the
Security Insurer so long as no Insurer Default shall have occurred and
be continuing, and if such amendment materially and adversely affects
the interests of Noteholders, the consent of a Note Majority (which
consent of any Holder of a Note given pursuant to this Section or
pursuant to any other provision of this Agreement shall be conclusive
and binding on such Holder and on all future Holders of such Note and of
any Note issued upon the transfer thereof or in exchange thereof or in
lieu thereof whether or not notation of such consent is made upon the
Note) for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of the Notes; PROVIDED, HOWEVER,
that, no such amendment shall directly or indirectly (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing
of, collections of payments on Receivables or distributions that shall
be required to be made on any Note or the Note Interest Rate (as defined
in the Indenture) or (b) reduce the aforesaid percentage required to
consent to any such amendment or any waiver hereunder, without the
consent of the Holders of all Notes then outstanding.

(c) Prior to the execution of any such amendment or consent (other
than an amendment described in the final sentence of Section 10.1(a)),
the Owner shall furnish written notification of the substance of such
amendment or consent to each Rating Agency.

(d) Promptly after the execution of any such amendment or consent
(other than an amendment described in the final sentence of Section
10.1(a)), the Owner Trustee shall furnish written notification of the
substance of such amendment or consent to the Indenture Trustee and the
Collateral Agent unless such parties have previously received such
notification.

(e) It shall not be necessary for the consent of the Owner
pursuant to Section 10.1(b) to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Noteholders provided for in
this Agreement) and of evidencing the authorization of the execution
thereof by Noteholders shall be subject to such reasonable requirements
as the Owner Trustee may prescribe, including the establishment of
record dates.

(f) Prior to the execution of any amendment to this Agreement
(other than an amendment described in the final sentence of Section
10.1(a)), the Owner Trustee shall be entitled to receive and rely upon
an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions
precedent to the execution and delivery of such amendment have been
satisfied. The Owner Trustee may, but shall not be obligated to, enter
into any such amendment which

19
<PAGE>

affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.

Section 10.2. NO RECOURSE. The Owner by accepting the Certificate
acknowledges that the Certificate represents beneficial ownership interests
in the Trust only and does not represent interest in or obligations of the
Seller, the Owner, the Servicer, the Owner Trustee, the Indenture Trustee,
the Collateral Agent, the Security Insurer or any Affiliate of any of the
foregoing and no recourse may be had against such parties or their assets,
except as may be expressly set forth or contemplated in this Agreement, or
the Related Documents.

Section 10.3. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to the principles of conflicts of laws thereof and the obligations, rights
and remedies of the parties under this Agreement shall be determined in
accordance with such laws.

Section 10.4. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the
Certificate or the rights of the Owner.

Section 10.5. CERTIFICATE NONASSESSABLE AND FULLY PAID. The Owner
shall not be personally liable for obligations of the Trust, the Owner's
beneficial ownership interest in the Trust represented by the Certificate
shall be nonassessable for any losses or expenses of the Trust or for any
reason whatsoever, and the Certificate upon execution thereof by the Owner
Trustee pursuant to Section 3.3 are and shall be deemed fully paid.

Section 10.6. COUNTERPARTS. For the purpose of facilitating its
execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.

Section 10.7. NOTICES. All demands, notices and communications under
this Agreement shall be in writing, personally delivered or mailed by
certified mail-return receipt requested, and shall be deemed to have been
duly given upon receipt (a) in the case of the Owner or the Depositor, at the
following address: 7825 Washington Avenue South, Minneapolis, Suite 900
Minnesota, 55439-2435, Attention: Treasurer, with copies to: Arcadia
Financial Ltd., 7825 Washington Avenue South, Suite 500, Minneapolis,
Minnesota 55439-2435, Attention: Chief Financial Officer, (b) in the case
of the Owner Trustee, at the Corporate Trust Office (c) in the case of the
Administrative Agent or the RCC Agent, at the following address: 231 South
LaSalle Street, Chicago, Illinois 60697, Attention: Asset Securitization
Group; and (d) in the case of the DFC Agent, at the following address: 500
Stanton Christiana Road, Newark, Delaware 19713-2107, Attention: Asset
Finance Group, or at such other address as shall be designated by any such
party in a written notice to the other parties.

20
<PAGE>

Section 10.8. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of (i) the Owner Trustee, the Depositor,
the Administrator, (ii) to the extent expressly provided herein, the
Indenture Trustee, the Collateral Agent and the Noteholders and (iii) the
Security Insurer, as an intended third-party beneficiary hereunder. Nothing
in this Agreement, whether express or implied, shall be construed to give to
any other Person any legal or equitable right, remedy or claim against the
Owner or the Trust Property or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.

Section 10.9. NO PETITION. The Owner Trustee, by entering into this
Agreement, the Owner, by accepting the Certificate, and the Indenture
Trustee, each Noteholder, the Security Insurer and the Collateral Agent by
accepting the benefits of this Agreement, hereby covenant and agree that they
will not at any time institute against the Trust or the Owner, or join in any
institution against the Trust or the Owner of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar
law in connection with any obligations relating to the Certificate, the
Notes, this Agreement or any of the other Related Documents.

Section 10.10. CERTIFICATE TRANSFER RESTRICTIONS. To the fullest
extent permitted by applicable law, the Certificate (or any interest therein)
may not be transferred by the Owner to any Person.

21
<PAGE>

IN WITNESS WHEREOF, the Depositor, the Owner and the Owner Trustee have
caused this Trust Agreement to be duly executed by their respective officers as
of the day and year first above written.

ARCADIA RECEIVABLES FINANCE CORP.

By
------------------------------------
Name:
Title:

WILMINGTON TRUST COMPANY

By
------------------------------------
Name:
Title:

Consented and Agreed:

ARCADIA FINANCIAL LTD.

By:
--------------------------------
Name:
Title:

[Signature page to Trust Agreement]

<PAGE>

EXHIBIT A

ARCADIA CERTIFICATE OF TRUST OF
ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST

THIS Certificate of Trust of ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE
TRUST (the "Trust"), dated as of July 21, 1998, is being duly executed and
filed by Wilmington Trust Company, a Delaware corporation, as trustee, to
form a business trust under the Delaware Business Trust Act (12 DEL. CODE,
Section 3801 ET SEQ.).

1. NAME. The name of the business trust formed hereby is ARCADIA
AUTOMOBILE RECEIVABLES WAREHOUSE TRUST.

2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.

3. This Certificate of Trust will be effective July 21, 1998.

IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.

Wilmington Trust Company, not in its
individual capacity but solely as
owner trustee under a Trust Agreement
dated as of July 21, 1998.

By
-----------------------------------
Name:
Title:

A-1
<PAGE>

EXHIBIT B
[FORM OF OWNER CERTIFICATE]

ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST

OWNER CERTIFICATE

THIS CERTIFICATE MAY NOT BE TRANSFERRED.

This Certificate evidences a beneficial ownership interest in the Trust,
as defined below, the property of which includes certain retail installment
sale contracts and promissory notes secured by new and used automobiles and
light trucks and sold to the Trust by Arcadia Receivables Finance Corp.

(This Certificate does not represent an obligation of, or an interest
in, Arcadia Receivables Finance Corp., Arcadia Financial Ltd. or any
affiliate of either of them.)

B-1
<PAGE>

OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION

This is one of the Certificates referred to in the within-mentioned
Trust Agreement.

WILMINGTON TRUST COMPANY, WILMINGTON TRUST COMPANY,
not in its individual capacity but not in its individual capacity but
solely as Owner Trustee or solely as Owner Trustee

By Wilmington Trust Company,
Authenticating Agent

by by
--------------------------------- ------------------------------------

<PAGE>

THIS CERTIFIES THAT Arcadia Receivables Finance Corp. is the registered
owner of interest in the Arcadia Automobile Receivables Warehouse Trust (the
"Trust"). The Trust was created pursuant to a Trust Agreement, dated as of
July 21, 1998 (the "Trust Agreement"), between Arcadia Receivables Finance
Corp. and Wilmington Trust Company, not in its individual capacity but solely
as owner trustee (the "Owner Trustee"). To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings assigned to them
in the Trust Agreement or the Amended and Restated Sale and Servicing
Agreement, dated as of July 21, 1998 (the "Sale and Servicing Agreement"),
among the Trust, Arcadia Receivables Finance Corp., Arcadia Receivables
Conduit Corp., Arcadia Financial Ltd., in its individual capacity and as
servicer ("AFL" or the "Servicer"), Bank of America National Trust and
Savings Association, Morgan Guaranty Trust Company of New York, and Norwest
Bank Minnesota, National Association, as Backup Servicer, Collateral Agent
and Indenture Trustee, as applicable.

This Certificate is the duly authorized Certificate (herein called the
"Certificate") provided for in the Trust Agreement. The Trust has also
issued under the Amended and Restated Indenture dated as of July 21, 1998,
between the Trust and Norwest Bank Minnesota, National Association, as
trustee and collateral agent, Notes designated as Floating Rate Variable
Funding Automobile Receivables-Backed Notes (the "Notes"). This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Trust Agreement, to which Trust Agreement the owner by virtue of the
acceptance hereof assents and by which Owner is bound.

The recitals contained herein shall be taken as the statements of the
Depositor, the Owner or the Servicer, as the case may be, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner
Trustee makes no representations as to the validity or sufficiency of this
Certificate or of any Purchased Receivable or related document.

Unless the certificate of authentication hereon shall have been executed
by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any
benefit under the Trust Agreement or the Sale and Servicing Agreement or be
valid for any purpose.

<PAGE>

IN WITNESS WHEREOF, the Owner Trustee on behalf of the Trust and not
in its individual capacity has caused this Certificate to be duly executed.

Dated: July 21, 1998 ARCADIA AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST

By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee

By:
-----------------------------------
Name:
Title:

Attest:

- --------------------------------
Name:
Title:

<PAGE>

EXECUTION COPY

AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT AND
ASSIGNMENT

(Amending and Restating the Receivables Purchase Agreement
and Assignment Dated as of December 3, 1996)

between

ARCADIA RECEIVABLES FINANCE CORP.

Purchaser

and

ARCADIA FINANCIAL LTD.

Seller

dated as of

July 21, 1998

<PAGE>

TABLE OF CONTENTS

PAGE
ARTICLE I

DEFINITIONS

<S> <C> <C>
Section 1.01. General . . . . . . . . . . . . . . . . . . . . . . . . 1

Section 1.02. Specific Terms. . . . . . . . . . . . . . . . . . . . . 1

Section 1.03. Usage of Terms. . . . . . . . . . . . . . . . . . . . . 6

Section 1.04. Certain References. . . . . . . . . . . . . . . . . . . 6

Section 1.05. No Recourse . . . . . . . . . . . . . . . . . . . . . . 7

Section 1.06. Action by or Consent of Holders . . . . . . . . . . . . 7

Section 1.07. Material Adverse Effect . . . . . . . . . . . . . . . . 7

ARTICLE II

CONVEYANCE OF THE RECEIVABLES

AND THE OTHER CONVEYED PROPERTY

Section 2.01. Purchase Price. . . . . . . . . . . . . . . . . . . . . 7

Section 2.02. Conveyance of Receivables . . . . . . . . . . . . . . . 8

Section 2.03. Delivery of Receivable Files. . . . . . . . . . . . . . 8

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.01. Representations and Warranties of AFL . . . . . . . . . 9

Section 3.02. Representations and Warranties of ARFC. . . . . . . . 11

ARTICLE IV

COVENANTS OF AFL

Section 4.01. Protection of Title of ARFC . . . . . . . . . . . . . 12

Section 4.02. Other Liens or Interests. . . . . . . . . . . . . . . 14

Section 4.03. Costs and Expenses. . . . . . . . . . . . . . . . . . 14

Section 4.04. Indemnification . . . . . . . . . . . . . . . . . . . 14
</TABLE>

-i-

<PAGE>

TABLE OF CONTENTS
(CONTINUED)

PAGE
ARTICLE V

REPURCHASES

<S> <C> <C>
Section 5.01. Repurchase of Receivables Upon Breach of Warranty . . 16

Section 5.02. Reassignment of Purchased Receivables . . . . . . . . 16

Section 5.03. Waivers . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE VII

MISCELLANEOUS

Section 6.01. Liability of AFL. . . . . . . . . . . . . . . . . . . 17

Section 6.02. Merger or Consolidation of AFL or ARFC. . . . . . . . 17

Section 6.03. Limitation on Liability of AFL and Others . . . . . . 18

Section 6.04. Amendment . . . . . . . . . . . . . . . . . . . . . . 18

Section 6.05. Notices . . . . . . . . . . . . . . . . . . . . . . . 18

Section 6.06. Merger and Integration. . . . . . . . . . . . . . . . 19

Section 6.07. Severability of Provisions. . . . . . . . . . . . . . 19

Section 6.08. Intention of the Parties. . . . . . . . . . . . . . . 19

Section 6.09. Governing Law . . . . . . . . . . . . . . . . . . . . 19

Section 6.10. Counterparts. . . . . . . . . . . . . . . . . . . . . 19

Section 6.11. Conveyance of the Receivables and the Other Conveyed
Property to an Assignee . . . . . . . . . . . . . . . 19

Section 6.12. Nonpetition Covenant. . . . . . . . . . . . . . . . . 20

SCHEDULE
- --------

SCHEDULE A SCHEDULE OF RECEIVABLES
SCHEDULE B REPRESENTATIONS AND WARRANTIES OF SELLER

EXHIBIT
- -------

EXHIBIT A FORM OF ASSIGNMENT AGREEMENT
</TABLE>

-ii-

<PAGE>

AMENDED AND RESTATED RECEIVABLES PURCHASE
AGREEMENT AND ASSIGNMENT

THIS AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT AND
ASSIGNMENT, dated as of July 21, 1998, executed between Arcadia Receivables
Finance Corp., a Delaware corporation, as purchaser ("ARFC"), and Arcadia
Financial Ltd., a Minnesota corporation, as seller ("AFL").

W I T N E S S E T H :

WHEREAS, pursuant to the Receivables Purchase Agreement dated as of
December 3, 1996 (the "Original Purchase Agreement") ARFC has agreed from
time to time to purchase from AFL and AFL, pursuant to this Agreement, has
agreed from time to time to sell and assign to ARFC the Receivables and Other
Conveyed Property;

WHEREAS, AFL and ARFC desire to amend and restate the Original
Purchase Agreement as herein provided;

NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, ARFC and AFL,
intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. GENERAL. The specific terms defined in this Article
include the plural as well as the singular. The words, "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement as
a whole and not to any particular Article, Section or other subdivision, and
Article, Section, Schedule and Exhibit references, unless otherwise
specified, refer to Articles and Sections of and Schedules and Exhibits to
this Agreement.

SECTION 1.02. SPECIFIC TERMS. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:

"ACCOUNTING DATE" means with respect to any Receivables the date
specified, if applicable, in the related Servicing Agreement.

"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person, means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

<PAGE>

"AGREEMENT" shall mean this Amended and Restated Receivables
Purchase Agreement and Assignment and all amendments hereof and supplements
hereto.

"AMOUNT FINANCED" has the meaning specified, with respect to any
Receivable, in the related Servicing Agreement.

"ASSIGNEE" means, collectively, each Person specified in the
relevant Securitization Document or Warehousing Document to whom ARFC assigns
or otherwise transfers specified Receivables and the related Other Conveyed
Property.

"ASSIGNMENT AGREEMENT" means, with respect to any Receivables, the
assignment agreement between AFL and ARFC pursuant to which AFL sells and
assigns Receivables to ARFC, the form of which is attached hereto as Exhibit
A.

"ASSIGNMENT DATE" means any date on which Receivables are sold and
assigned to ARFC pursuant to Section 2.02.

"BACKUP SERVICER" means, if applicable, any backup servicer or its
successor in interest, or such Person as shall have been appointed as Backup
Servicer or successor Servicer pursuant to any Servicing Agreement.

"BUSINESS DAY" means any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in Minneapolis,
Minnesota, New York, New York or any other location of any successor
Servicer, any Trustee or Collateral Agent are obligated by law, executive
order or governmental decree to be closed.

"CLOSING DATE" means December 3, 1996.

"COLLECTION ACCOUNT" has the meaning specified, with respect to any
Receivable, in the related Servicing Agreement.

"COLLATERAL AGENT" has the meaning specified, if applicable, in any
Servicing Agreement.

"COMPUTER TAPE" means the computer tape generated on behalf of ARFC
that provides information relating to Receivables and that was used by AFL
and ARFC in selecting the Receivables conveyed hereunder and under any
Related Document.

"CRAM DOWN LOSS" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an
order reducing the Principal Balance of such Receivable, the amount of such
reduction. A "Cram Down Loss" shall be deemed to have occurred on the date
of issuance of such order.

"CUSTODIAN" means, collectively, each Custodian specified in a
Servicing Agreement or other Related Document.

"CUT-OFF DATE" means, with respect to any Receivables, the date
specified in the related Warehousing Documents or Securitization Documents.

<PAGE>

"DEALER" means a seller of new or used automobiles or light trucks
that originated one or more of the Receivables and sold the respective
Receivable, directly or indirectly, to AFL under an existing agreement
between such seller and AFL.

"DEALER AGREEMENT" means an agreement between AFL and a Dealer
relating to the sale of retail installment sales contracts and installment
notes to AFL and all documents and instruments relating thereto.

"DEALER ASSIGNMENT" means, with respect to a Receivable, the
executed assignment executed by a Dealer conveying such Receivable to AFL.

"DEPOSIT DATE" means that date specified, with respect to a
Receivable, in the related Servicing Agreement.

"EFFECTIVE DATE" means July 21, 1998

"FINANCED VEHICLE" means a new or used automobile or light truck,
together with all accessories thereto, securing or purporting to secure an
Obligor's indebtedness under a Receivable.

"FORCE-PLACED INSURANCE" means insurance that the Servicer may, if
an Obligor fails to obtain or maintain a comprehensive and collision
insurance policy, obtain with respect to the related Financed Vehicle.

"HOLDERS" means any "Holder" of a Security as defined in any
applicable Related Document.

"INSURANCE AGREEMENT" means collectively, each insurance agreement
dated as of a date on or after the date hereof, executed and delivered by
among others, a Security Insurer, an Assignee, ARFC and AFL.

"INSURANCE POLICY" means, with respect to a Receivable, any
insurance policy benefiting the holder of the Receivable providing loss or
physical damage, credit life, credit disability, theft, mechanical breakdown
or similar coverage with respect to the Financed Vehicle or the Obligor.

"INSURER DEFAULT" with respect to any Security Insurer has the
meaning specified in any Servicing Agreement(s) covering Receivables backing
a Security insured by such Security Insurer.

"LIEN" means any security interest, lien, charge, pledge,
preference, equity or encumbrance of any kind, including tax liens,
mechanics' liens and any liens that attach by operation of law.

"LIEN CERTIFICATE" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification
issued by the Registrar of Titles of the applicable state to a secured party
which indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which
the

<PAGE>

original certificate of title is required to be given to the Obligor, the
term "Lien Certificate" shall mean only a certificate or notification issued
to a secured party.

"LIQUIDATED RECEIVABLE" has the meaning specified, with respect to
a Receivable, in the related Servicing Agreement.

"LIQUIDATION PROCEEDS" means, with respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable (other than
amounts withdrawn from a spread account or other like account and drawings
under a Security Policy) net of (i) reasonable expenses incurred by the
Servicer in connection with the collection of such Receivable and the
repossession and disposition of the Financed Vehicle and (ii) amounts that
are required to be refunded to the Obligor on such Receivable; PROVIDED,
HOWEVER, that the Liquidation Proceeds with respect to any Receivable shall
in no event be less than zero.

"OBLIGOR" means the purchaser or the co-purchasers of the Financed
Vehicle and any other Person or Persons who are primarily or secondarily
obligated to make payments under a Receivable.

"OTHER CONVEYED PROPERTY" means all monies at any time paid or
payable on the Receivables or in respect thereof after the applicable Cut-Off
Date (including amounts due on or before the applicable Cut-Off Date but
received by AFL after such Cut-Off Date), the security interests of AFL in
the Financed Vehicles, the Insurance Policies and any proceeds from any
Insurance Policies relating to the Receivables, the Obligors or the Financed
Vehicles, including rebates of premiums, and any Force-Placed Insurance
relating to the Receivables, rights of AFL against Dealers with respect to
the Receivables under the Dealer Agreements and the Dealer Assignments, all
items contained in the Receivable Files, any and all other documents or
electronic records that AFL keeps on file in accordance with its customary
procedures relating to the Receivables, the Obligors or the Financed
Vehicles, property (including the right to receive future Liquidation
Proceeds) that secures a Receivable and that has been acquired by or on
behalf of AFL pursuant to liquidation of such Receivable, all present and
future claims, demands, causes and choses in action in respect of the
Receivables and any or all of the foregoing and all payments on or under and
all proceeds of every kind and nature whatsoever in respect of the
Receivables and any and all of the foregoing, including all proceeds of the
conversion, voluntary or involuntary, into cash or other liquid property, all
cash proceeds, accounts, accounts receivables, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of the Receivables
and any of the foregoing.

"PERSON" means any legal person, including any individual,
corporation, partnership, joint venture, estate, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof, or any other entity.

"PRINCIPAL BALANCE" means, with respect to any Receivable, as of
any date, the Amount Financed minus (i) that portion of all amounts received
on or prior to such date and

<PAGE>

allocable to principal in accordance with the terms of the Receivable, and
(ii) any Cram Down Loss in respect of such Receivable.

"PURCHASE AMOUNT" with respect to a Receivable has the meaning
specified, if applicable, in the Servicing Agreement related to such
Receivable.

"PURCHASED RECEIVABLE" has the meaning specified, if applicable, in
the related Servicing Agreement.

"RATING AGENCY" means any nationally recognized statistical rating
organization selected by AFL or ARFC to rate any of the Securities or that
determines a capital charge with respect to the issuance of a Security Policy
by a Security Insurer or any other party specified as such in the Servicing
Agreement or other Related Document.

"RECEIVABLE" means a retail installment sales contract or
promissory note (and related security agreement) for a new or used automobile
or light truck (and all accessories thereto) that is included in the Schedule
of Receivables, and all rights and obligations under such a contract.

"RECEIVABLE FILES" means the documents, electronic entries,
instruments and writings with respect to a Receivable required to be
transferred to, and held by, the Custodian pursuant to a Warehousing Document
or Securitization Document relating to such Receivable.

"REGISTRAR OF TITLES" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens
thereon.

"RELATED DOCUMENTS" has the meaning specified in each Servicing
Agreement. The Related Documents to be executed by any party are referred to
herein as "such party's Related Documents," "its Related Documents" or by a
similar expression.

"REPURCHASE DATE" means the date specified, if applicable, in the
relevant Warehousing Document.

"REPURCHASE EVENT" means the occurrence of a breach of any of AFL's
representations and warranties contained in Section 3.01(a) hereof that
materially and adversely affects the interests of ARFC or any assignee in the
related Receivables or any other event which requires the repurchase of a
Receivable by AFL under a Servicing Agreement or this Agreement.

"REPURCHASED RECEIVABLES" has the meaning specified, if applicable,
in the relevant Warehousing Document.

"SCHEDULE OF RECEIVABLES" means the schedule of all automobile
retail installment loan contracts and promissory notes sold and transferred
pursuant to this Agreement which is attached hereto as Schedule A, as such
Schedule shall be supplemented from time to time (a) by each Schedule of
Receivables with respect to each Assignment Agreement, which Schedules of
Receivables shall be deemed incorporated and made a part of Schedule A hereto
and (b) to reflect the repurchase from ARFC of Receivables repurchased by AFL
hereunder or purchased

<PAGE>

by a Servicer under any Servicing Agreement. AFL shall maintain a Master
Schedule A reflecting all such sales, transfers, repurchases and purchases.
With respect to an Assignment Agreement, "Schedule of Receivables" shall mean
the Schedule attached to such Assignment Agreement as Exhibit A thereto.

"SCHEDULE OF REPRESENTATIONS" means the Schedule of Representations
and Warranties attached hereto as Schedule B.

"SECURITIZATION DOCUMENT" means each Servicing Agreement and
Related Document related to a transfer of Receivables in connection with the
public sale or private placement of term securities backed by such
Receivables.

"SECURITY" means any note, certificate or other security backed by
Receivables that is issued pursuant to a Warehousing Document or a
Securitization Document.

"SECURITY INSURER" means each financial guaranty insurance company
issuing a Security Policy, as specified in any Servicing Agreement.

"SECURITY POLICY" means any "Note Policy," "Certificate Policy" or
other policy of financial guaranty insurance with respect to a Security
defined as such in the relevant Servicing Agreement.

"SERVICER" means AFL and any successor in interest, as applicable,
pursuant to the related Servicing Agreement.

"SERVICING AGREEMENT" means, collectively, each servicing agreement
or sale and servicing agreement dated as of a date on or after the date
hereof relating to the Receivables assigned hereunder.

"TRUSTEE" means any indenture trustee, owner trustee or other
trustee specified as such in a Securitization Document or Warehousing
Document.

"UCC" means The Uniform Commercial Code as in effect in the
relevant jurisdiction.

"WAREHOUSING DOCUMENT" means each Servicing Agreement and Related
Document related to a transfer of Receivables in connection with a
warehousing facility for the financing of such Receivables in anticipation of
the later repurchase, sale or term resecuritization of such Receivables.

SECTION 1.03. USAGE OF TERMS. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other gender; REFERENCES to "writing"
include printing, typing, lithography, and other means of reproducing words
in a visible form; references to agreements and other contractual instruments
include all subsequent amendments thereto or changes therein entered into in
accordance with their respective terms and not prohibited by this Agreement,
a Warehousing Document or a Securitization Document or a Servicing Agreement;
references to

<PAGE>

Persons include their permitted successors and assigns; and the terms
"include" or "including" mean "include without limitation" or "including
without limitation."

SECTION 1.04. CERTAIN REFERENCES. All references to the Principal
Balance of a Receivable as of an Accounting Date shall refer to the close of
business on such day, or as of the first day of a calendar month shall refer
to the opening of business on such day. All references to the last day of a
calendar month shall refer to the close of business on such day.

SECTION 1.05. NO RECOURSE. Without limiting the obligations of
AFL hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection
herewith or therewith, against any stockholder, officer or director, as such,
of AFL, or any stockholder, officer or director, as such, of any predecessor
or successor of AFL.

SECTION 1.06. ACTION BY OR CONSENT OF HOLDERS. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Holders, such provision shall be deemed to refer to Holders of record as of
the applicable record date immediately preceding the date on which such
action is to be taken, or consent given, by Holders. Solely for the purposes
of any action to be taken, or consented to, by Holders, any Security
registered in the name of ARFC, AFL or any Affiliate thereof shall be deemed
not to be outstanding and the principal amount evidenced thereby shall not be
taken into account in determining whether the requisite principal amount
necessary to effect any such action or consent has been obtained; PROVIDED,
HOWEVER, that solely for the purpose of determining whether a Trustee is
entitled to rely upon any such action or consent, only Securities which the
related Trustee knows to be so owned shall be so disregarded.

SECTION 1.07. MATERIAL ADVERSE EFFECT. Whenever a determination
is to be made under this Agreement as to whether a given event, action,
course of conduct or set of facts or circumstances could or would have a
material adverse effect on any Securities and the interests of the Holders
therein (or any similar or analogous determination), such determination shall
be made without taking into account the funds available from claims under any
Security Policy or withdrawals from any reserve accounts.

SECTION 1.08. CONDITIONS TO EFFECTIVENESS. This Agreement shall
amend and restate the Original Purchase Agreement and shall become effective
as of the Effective Date upon receipt by each of the parties hereto of this
Agreement duly executed and delivered by the other party hereto.

ARTICLE II

CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY

SECTION 2.01. PURCHASE PRICE. In consideration of the conveyance
of the Receivables and the related Other Conveyed Property to ARFC on each
Assignment Date, ARFC shall pay or cause to be paid to AFL an amount equal to
the product of (x) the outstanding

<PAGE>

Principal Balance of each Receivable and (y) 100%. Such amount shall be paid
to AFL, by wire transfer of immediately available funds on the date of such
conveyance, to the extent of the net proceeds received by ARFC upon its
contemporaneous conveyance of such Receivables to an Assignee pursuant to a
Warehousing Document or Securitization Document. The balance shall be
payable (a) with respect to any Receivable transferred pursuant to a
Warehousing Document, upon the subsequent transfer of such Receivable
pursuant to a Securitization Document, to the extent the net proceeds
received by ARFC upon such subsequent transfer exceeds the amount paid by
ARFC to effect the retransfer of such Receivable to ARFC pursuant to such
Warehousing Document, and (b) with respect to any Receivable transferred
pursuant to a Securitization Document, within ninety days after such transfer.

SECTION 2.02. CONVEYANCE OF RECEIVABLES.

(a) Subject to the conditions set forth in paragraph (b) below,
AFL, pursuant to the mutually agreed upon terms contained herein and pursuant
to one or more Assignment Agreements, shall sell, transfer, assign and
otherwise convey to ARFC without recourse (but without limitation of its
obligations in this Agreement or its obligations as Servicer under any
Servicing Agreement, all of the right, title and interest of AFL, whether
then existing or thereafter acquired, in and to all accounts, contract
rights, general intangibles, chattel paper, instruments, documents, money,
deposit accounts, certificates of deposit, goods, letters of credit, advices
of credit and uncertificated securities consisting of, arising from or
relating to the Receivables listed on the Schedule of Receivables and the
related Other Conveyed Property. It is the intention of ARFC and AFL that
the transfers and assignments contemplated by this Agreement and each
Assignment Agreement shall constitute a sale of the Receivables and the Other
Conveyed Property from AFL to ARFC, conveying good title thereto free and
clear of any Liens, and the Receivables and Other Conveyed Property shall not
be a part of AFL's estate in the event of the filing of a bankruptcy petition
by or against AFL under any bankruptcy or similar law.

(b) AFL shall transfer to ARFC the Receivables and the related
Other Conveyed Property as described in paragraph (a) above only upon the
satisfaction of each of the following conditions on or prior to the related
Assignment Date:

(i) AFL shall have delivered to ARFC and the related Assignee a duly
executed Assignment Agreement (including an acceptance by ARFC), which
shall include a Schedule of Receivables listing the Receivables being
transferred on such Assignment Date;

(ii) as of such Assignment Date, AFL shall not have been insolvent
nor shall AFL have been rendered insolvent by such sale and assignment nor
shall AFL be aware of any pending insolvency;

(iii) AFL shall have taken any action necessary or, if requested by
any Security Insurer, advisable, to obtain or maintain the first priority
perfected ownership interest of ARFC in the Receivables and Other Conveyed
Property; and

<PAGE>

(iv) no selection procedures believed by AFL to be adverse to the
interests of ARFC, any Assignee or any Holders shall have been utilized by
AFL or ARFC in selecting the Receivables.

SECTION 2.13. DELIVERY OF RECEIVABLE FILES. AFL shall deliver to
the Custodian on each Assignment Date the following documents:

(i) The fully executed original of the Receivable (together with
the original of any agreements modifying the Receivable, including without
limitation any extension agreements);

(ii) A certificate of insurance, application form for insurance
signed by the Obligor or a signed representation letter from the Obligor
named in the Receivable pursuant to which the Obligor has agreed to obtain
physical damage insurance for the related Financed Vehicle, or a documented
verbal confirmation by the insurance agent for the Obligor of a policy number
for an insurance policy for the Financed Vehicle;

(iii) The original credit application, or a copy thereof, of
each Obligor, on AFL's customary form, or on a form approved by AFL, for such
application; and

(iv) The original certificate of title (when received) and
otherwise such documents, if any, that AFL keeps on file in accordance with
its customary procedures indicating that the Financed Vehicle is owned by the
Obligor and subject to the interest of AFL as first lienholder or secured
party (including any Lien Certificate received by AFL), or if such original
certificate of title has not yet been received, a copy of the application
therefor, showing AFL as secured party, or a letter from the applicable
Dealer agreeing unconditionally to repurchase the related Receivable if the
certificate of title is not received by AFL within 180 days.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF AFL. AFL makes the
following representations and warranties, on which ARFC relies in purchasing
the Receivables and the Other Conveyed Property. Such representations are
made as of the execution and delivery of this Agreement and on each
Assignment Date, and shall survive the sale, transfer and assignment of the
Receivables and the Other Conveyed Property under such Assignment Agreements,
and the sale, transfer and assignment thereof by ARFC under any
Securitization Document or Warehousing Document. AFL and ARFC agree that
pursuant to the relevant Securitization Document or Warehousing Document ARFC
will assign to the relevant Assignee all of ARFC's rights under this
Agreement with respect to Receivables sold, transferred or assigned pursuant
to any Securitization Document or Warehousing Document and not repurchased by
ARFC, and the related Other Conveyed Party, and that such Assignee will
thereafter be entitled to enforce this Agreement against AFL in such
Assignee's own name.

<PAGE>

(a) SCHEDULE OF REPRESENTATIONS. The representations and
warranties set forth on the Schedule of Representations are true and correct
with respect to each Receivable on the date it is sold by AFL to ARFC
hereunder.

(b) ORGANIZATION AND GOOD STANDING. AFL has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of Minnesota, with power and authority to own its properties and to
CONDUCT its business as such properties are currently owned and such business
is currently conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Receivables and the
Other Conveyed Property transferred to ARFC.

(c) DUE QUALIFICATION. AFL is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business requires such qualification.

(d) POWER AND AUTHORITY. AFL has the power and AUTHORITY to
execute and deliver this Agreement, each Assignment Agreement and its Related
Documents and to carry out its terms and their terms, respectively; AFL has
full power and authority to sell and assign the Receivables and the Other
Conveyed Property to be sold and assigned to and deposited with ARFC under
each Assignment Agreement and has duly authorized such sale and assignment to
ARFC by all necessary corporate action; and the execution, delivery and
performance of this Agreement, each Assignment Agreement and AFL's Related
Documents have been duly authorized by AFL by all necessary corporate action.

(e) VALID SALE; BINDING OBLIGATIONS. This Agreement and each
Assignment Agreement have been duly executed and delivered and shall effect a
valid sale, transfer and assignment of the Receivables and the Other Conveyed
Property, enforceable against AFL and creditors of and purchasers from AFL;
and this Agreement, each Assignment Agreement and AFL's Related Documents
constitute legal, valid and binding obligations of AFL enforceable in
accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered
in a proceeding in equity or at law.

(f) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement, each Assignment Agreement and the Related
Documents and the fulfillment of the terms of this Agreement, each Assignment
Agreement and the Related Documents do not and shall not conflict with,
result in any breach of any of the terms and provisions of or constitute
(with or without notice, lapse of time or both) a default under, the articles
of incorporation or bylaws of AFL, or any indenture, agreement, mortgage,
deed of trust or other instrument to which AFL is a party or by which it or
any of its property is bound, or result in the creation or imposition of any
Lien upon any of AFL's properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other than
this Agreement and each Assignment Agreement, or violate any law, order, rule
or regulation applicable to AFL of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over AFL or any of its properties.

<PAGE>

(g) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to AFL's knowledge, threatened against AFL, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over AFL or its properties (i) asserting
the invalidity of this Agreement, any Assignment Agreement or any of the
Related Documents, (ii) seeking to prevent the issuance of any Securities or
the consummation of any of the transactions contemplated by this Agreement,
any Assignment Agreement or any of the Related Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by AFL of its obligations under, or the validity or
enforceability of, this Agreement, any Assignment Agreement or any of the
Related Documents or (iv) seeking to affect adversely the federal income tax
or other federal, state or local tax attributes of, or seeking to impose any
excise, franchise, transfer or similar tax upon, the transfer and acquisition
of the Receivables and the Other Conveyed Property hereunder, under any
Assignment Agreement or under any of the Related Documents.

(h) CHIEF EXECUTIVE OFFICE. The chief executive office of AFL is
located at 7825 Washington Avenue South, Suite 500, Minneapolis, MN
55439-2435.

SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF ARFC. ARFC makes
the following representations and warranties, on which AFL relies in selling,
assigning, transferring and conveying the Receivables and the Other Conveyed
Property to ARFC hereunder and under each Assignment Agreement. Such
representations are made as of the execution and delivery of this Agreement
and each Assignment Agreement, but shall survive the sale, transfer and
assignment of the Receivables and the Other Conveyed Property hereunder and
under each Assignment Agreement and the sale, transfer and assignment thereof
by ARFC to an Assignee pursuant to any Related Document.

(a) ORGANIZATION AND GOOD STANDING. ARFC has been duly organized
and is validly existing and in good standing as a corporation under the laws
of the State of Delaware, with the power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is currently conducted, and had at all relevant times, and has, full
power, authority and legal right to acquire and own the Receivables and the
Other Conveyed Property, and to transfer the Receivables and the Other
Conveyed Property to an Assignee pursuant to any Related Document.

(b) DUE QUALIFICATION. ARFC is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions where the failure to do so would
materially and adversely affect ARFC's ability to acquire the Receivables or
the Other Conveyed Property or the validity or enforceability of the
Receivables and the Other Conveyed Property or to perform ARFC's obligations
hereunder, under any Assignment Agreement and under the Related Documents.

(c) POWER AND AUTHORITY. ARFC has the power, authority and legal
right to execute and deliver this Agreement and each Assignment Agreement and
to carry out the terms hereof and thereof and to acquire the Receivables and
the Other Conveyed Property hereunder; and the execution, delivery and
performance of this Agreement and each Assignment Agreement and all of the
documents required pursuant hereto and thereto have been duly authorized by
ARFC by all necessary action.

<PAGE>

(d) NO CONSENT REQUIRED. ARFC is not required to obtain the
consent of any other Person, or any consent, license, approval or
authorization or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery or
performance of this Agreement, each Assignment Agreement and the Related
Documents, except for such as have been obtained, effected or made.

(e) BINDING OBLIGATION. This Agreement and each Assignment
Agreement constitute legal, valid and binding obligations of ARFC,
enforceable against ARFC in accordance with their terms, subject, as to
enforceability, to applicable bankruptcy, insolvency, reorganization,
conservatorship, receivership, liquidation and other similar laws and to
general equitable principles.

(f) NO VIOLATION. The execution, delivery and performance by ARFC
of this Agreement and each Assignment Agreement, the consummation of the
transactions contemplated by this Agreement, each Assignment Agreement and
the Related Documents and the fulfillment of the terms of this Agreement,
each Assignment Agreement and the Related Documents do not and will not
conflict with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
certificate of incorporation or bylaws of ARFC, or conflict with or breach
any of the terms or provisions of, or constitute (with or without notice or
lapse of time) a default under, any indenture, agreement, mortgage, deed of
trust or other instrument to which ARFC is a party or by which ARFC is bound
or to which any of its properties are subject, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement, mortgage, deed of trust or other instrument
(other than with respect to Receivables and the related Other Conveyed
Property being transferred under a Related Document, under such Related
Document), or violate any law, order, rule or regulation, applicable to ARFC
or its properties, of any federal or state regulatory body, any court,
administrative agency, or other governmental instrumentality having
jurisdiction over ARFC or any of its properties.

(g) NO PROCEEDINGS. There are no proceedings or investigations
pending, or, to the knowledge of ARFC, threatened against ARFC, before any
court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality having jurisdiction over ARFC or its properties:
(i) asserting the invalidity of this Agreement, any Assignment Agreement or
any of the Related Documents, (ii) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement, any Assignment Agreement
or any of the Related Documents, (iii) seeking any determination or ruling
that might materially and adversely affect the performance by ARFC of its
obligations under, or the validity or enforceability of, this Agreement, any
Assignment Agreement or any of the Related Documents or (iv) that may
adversely affect the federal or state income tax attributes of, or seek to
impose any excise, franchise, transfer or similar tax upon, the transfer and
acquisition of the Receivables and the Other Conveyed Property hereunder or
under any Assignment Agreement or the transfer of the Receivables and the
Other Conveyed Property to an Assignee pursuant to any Related Document.

In the event of any breach of a representation and warranty made by ARFC
hereunder, AFL covenants and agrees that it will not take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on

<PAGE>

which all the Securities have been paid in full. AFL and ARFC agree that
damages will not be an adequate remedy for such breach and that this covenant
may be specifically enforced by ARFC or by an Assignee under any Related
Document.

ARTICLE IV

COVENANTS OF AFL

SECTION 4.01. PROTECTION OF TITLE OF ARFC.

(a) At or prior to the Closing Date, AFL shall have filed or
caused to be filed a UCC-1 financing statement, executed by AFL as seller or
debtor, naming ARFC as purchaser or secured party and describing the
Receivables and the Other Conveyed Property to be sold by AFL to ARFC as
collateral, with the office of the Secretary of State of the State of
Minnesota and in such other locations as ARFC shall have required. From time
to time thereafter AFL shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such
manner and in such places as may be required by law fully to preserve,
maintain and protect the interest of ARFC under this Agreement and of each
Assignee under any Securitization Document or Warehousing Document in the
Receivables and the Other Conveyed Property and in the proceeds thereof. AFL
shall deliver (or cause to be delivered) to ARFC and any party entitled
thereto under any Securitization Document or Warehousing Document
file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing. In the event
that AFL fails to perform its obligations under this subsection, ARFC and any
party entitled thereto under any Securitization Document or Warehousing
Document may do so, at the expense of AFL.

(b) Except for changing its name to Arcadia Financial Ltd., AFL
shall not change its name, identity, or corporate structure in any manner
that would, could or might make any financing statement or continuation
statement filed by AFL (or by ARFC or any party entitled to file a financing
statement under any Securitization Document or Warehousing Document on behalf
of AFL) in accordance with paragraph (a) above seriously misleading within
the meaning of Section 9-402(7) of the UCC, unless it shall have given ARFC
and any party entitled thereto under any Securitization Document or
Warehousing Document and each Security Insurer at least 60 days' prior
written notice thereof, and (including in connection with changing its name
to Arcadia Financial Ltd.) shall promptly file appropriate amendments to all
previously filed financing statements and continuation statements.

(c) AFL shall give ARFC, each Security Insurer (so long as an
Insurer Default with respect to such Security Insurer shall not have occurred
and be continuing) and any party entitled thereto under any Securitization
Document or Warehousing Document at least 60 days' prior written notice of
any relocation of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would require the filing of
any amendment of any previously filed financing or continuation statement or
of any new financing statement. AFL shall at all times maintain each office
from which it services the Receivables and its principal executive office
within the United States of America.

<PAGE>

(d) AFL shall maintain its computer systems so that, from and
after the time of any sale hereunder and under any Assignment Agreement of
the Receivables to ARFC and the conveyance under any Securitization Document
or Warehousing Document of the related Receivables by ARFC to an Assignee,
AFL's master computer records (including archives) that refer to any such
Receivable indicate clearly that such Receivable has been sold to ARFC and
has been conveyed by ARFC to such Assignee. Indication of such Assignee's
ownership of a Receivable shall be deleted from or modified on AFL's computer
systems when, and only when the Receivable shall have been paid in full or
shall have been repurchased by ARFC or AFL.

(e) If at any time AFL shall propose to sell, grant a security
interest in, or otherwise transfer any interest in motor vehicle receivables
to any prospective purchaser, lender or other transferee, AFL shall give to
such prospective purchaser, lender, or other transferee computer tapes,
records, or print-outs (including any restored from archives) that, if they
shall refer in any manner whatsoever to any Receivable, shall indicate
clearly that such Receivable has been sold to ARFC and is owned by the
relevant Assignee pursuant to the applicable Securitization Document or
Warehousing Document.

SECTION 4.02. OTHER LIENS OR INTERESTS. Except for the
conveyances under any Assignment Agreement, AFL will not sell, pledge, assign
or transfer to any other Person, or grant, create, incur, assume or suffer to
exist any Lien on the Receivables or the Other Conveyed Property or any
interest therein, and AFL shall defend the right, title, and interest of ARFC
and each Assignee under any Securitization Document or Warehousing Document
in and to the Receivables and the Other Conveyed Property against all claims
of third parties claiming through or under AFL.

SECTION 4.03. COSTS AND EXPENSES. AFL shall pay all reasonable
costs and disbursements in connection with the performance of its obligations
hereunder, under any Assignment Agreement and under its Related Documents.

SECTION 4.04. INDEMNIFICATION.

(a) AFL shall defend, indemnify and hold harmless ARFC, each
Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each
Security Insurer and the Holders from and against any and all costs,
expenses, losses, damages, claims, and liabilities arising out of or
resulting from any breach of any of AFL's representations and warranties
contained herein.

(b) AFL shall defend, indemnify and hold harmless ARFC, each
Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each
Security Insurer and the Holders from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or
resulting from the use, ownership or operation by AFL or any Affiliate
thereof, other than ARFC and the Issuer, of a Financed Vehicle.

(c) AFL will defend and indemnify ARFC, each Assignee, each Backup
Servicer, each Collateral Agent, each Trustee, each Security Insurer and the
Holders against any and all costs, expenses, losses, damages, claims and
liabilities arising out of or resulting from

<PAGE>

any action taken, or failed to be taken, by AFL in respect of any of the
Receivables other than in accordance with this Agreement or any Warehousing
Document or Securitization Document.

(d) AFL agrees to pay, and shall defend, indemnify and hold
harmless ARFC, each Assignee, each Backup Servicer, each Collateral Agent,
each Trustee, each Security Insurer and the Holders from and against any
taxes that may at any time be asserted against ARFC, any Assignee, any Backup
Servicer or any Holders with respect to the transactions contemplated in this
Agreement, including, without limitation, any sales, gross receipts, general
corporation, tangible or intangible personal property, privilege, or license
taxes (but not including any taxes asserted with respect to, and as of any
date of, the sale, transfer and assignment of any Receivables and Other
Conveyed Property to ARFC and of the sale, transfer and assignment of such
Receivables and Other Conveyed Property to an Assignee or the issuance and
sale of any Securities, or asserted with respect to ownership of the
Receivables and Other Conveyed Property which shall be indemnified by AFL
pursuant to clause (e) below, or federal, state or other income taxes,
arising out of distributions on the Securities or transfer taxes arising in
connection with the transfer of Securities) and costs and expenses in
defending against the same, arising by reason of the acts to be performed by
AFL under this Agreement or any Assignment Agreement or imposed against such
Persons.

(e) AFL agrees to pay, and to indemnify, defend and hold harmless
ARFC, each Assignee, each Backup Servicer, each Collateral Agent, each
Trustee, each Security Insurer and the Holders from, any taxes which may at
any time be asserted against such Persons with respect to, and as of the date
of, any conveyance or ownership of the Receivables or Other Conveyed Property
hereunder and under any Assignment Agreement or the issuance and sale of any
Securities, including, without limitation, any sales, gross receipts,
personal property, tangible or intangible personal property, privilege or
license taxes (but not including any federal or other income taxes, including
franchise taxes, arising out of the transactions contemplated hereby or
transfer taxes arising in connection with the transfer of the Securities) and
costs and expenses in defending against the same, arising by reason of the
acts to be performed by AFL under this Agreement or imposed against such
Persons.

(f) AFL shall defend, indemnify, and hold harmless ARFC, each
Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each
Security Insurer and the Holders from and against any and all costs,
expenses, losses, claims, damages, and liabilities to the extent that such
cost, expense, loss, claim, damage, or liability arose out of, or was imposed
upon ARFC, any Assignee, any Backup Servicer and any Holders through the
negligence, willful misfeasance, or bad faith of AFL in the performance of
its duties under this Agreement or by reason of reckless disregard of AFL's
obligations and duties under this Agreement.

(g) AFL shall indemnify, defend and hold harmless ARFC, each
Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each
Security Insurer and the Holders from and against any loss, liability or
expense imposed upon, or incurred by, ARFC, any Assignee, any Backup Servicer
or any Holders as a result of the failure of any Receivable, or the sale of
the related Financed Vehicle, to comply with all requirements of applicable
law.

(h) AFL shall defend, indemnify, and hold harmless ARFC from and
against all costs, expenses, losses, claims, damages, and liabilities arising
out of or incurred in

<PAGE>

connection with the acceptance or performance of AFL's duties as Servicer
under any Servicing Agreement, except to the extent that such cost, expense,
loss, claim, damage, or liability shall be due to the willful misfeasance,
bad faith, or negligence (except for errors in judgment) of ARFC.

(i) AFL shall indemnify, defend and hold harmless ARFC, each
Assignee, each Security Insurer, each Backup Servicer and the Holders from
and against any loss, liability or expense imposed upon, or incurred by,
ARFC, any Assignee, any Backup Servicer, any Trustee or any Holders as a
result of AFL's or ARFC's use of the name "Arcadia."

(j) Indemnification under this Section 4.04 shall include
reasonable fees and expenses of counsel and expenses of litigation and shall
survive maturity of the related Securities. The indemnity obligations
hereunder shall be in addition to any obligation that AFL may otherwise have.

ARTICLE V

REPURCHASES

SECTION 5.01. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.
Upon the occurrence of a Repurchase Event with respect to a Receivable, AFL
shall, unless such breach shall have been cured in all material respects,
repurchase such Receivable from ARFC or the applicable Assignee, as
applicable, and on or before the related Deposit Date (with respect to a
Purchased Receivable) or the related Repurchase Date (with respect to
Repurchased Receivables), AFL shall deposit the Purchase Amount into the
Collection Account as payment to ARFC or such Assignee pursuant to the
relevant Servicing Agreement or other Related Document. It is understood and
agreed that, except as set forth in Section 6.01, the obligation of AFL to
repurchase any Receivable as to which a breach has occurred and is continuing
shall, if such obligation is fulfilled, constitute the sole remedy against
AFL for such breach available to ARFC, any Security Insurer, any Collateral
Agent, any such Assignee or any Trustee on behalf of its Holders. The
provisions of this Section 5.01 are intended to grant to any such Assignee a
direct right against AFL to demand performance hereunder, and in connection
therewith AFL waives any requirement of prior demand against ARFC with
respect to such repurchase obligation. Any such purchase shall take place in
the manner specified in the related Servicing Agreement or other Related
Document. Notwithstanding any other provision of this Agreement or any
Related Document to the contrary, the obligation of AFL under this Section
shall not terminate upon a termination of AFL as Servicer under the related
Servicing Agreement and shall be performed in accordance with the terms
hereof notwithstanding the failure of the Servicer or ARFC to perform any of
their respective obligations with respect to such Receivable under such
Servicing Agreement.

In addition to the foregoing and whether or not the related
Receivable shall have been purchased by AFL, AFL shall indemnify each such
Assignee, each Backup Servicer, each Collateral Agent, each Security Insurer,
each Trustee and the Holders against all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel,
which may be asserted against or incurred by any of them as a result of third
party claims arising out of the events or facts giving rise to such
Repurchase Events.

<PAGE>

SECTION 5.02. REASSIGNMENT OF PURCHASED RECEIVABLES. Upon deposit
in the Collection Account of the Purchase Amount of any Receivable
repurchased by AFL under Section 5.01, ARFC shall take such steps as may be
reasonably requested by AFL in order to assign to AFL all of ARFC's and the
relevant Assignee's right, title and interest in and to such Receivable and
all security and documents and all Other Conveyed Property conveyed to ARFC
and such Assignee directly relating thereto, without recourse, representation
or warranty, except as to the absence of liens, charges or encumbrances
created by or arising as a result of actions of ARFC or such Assignee. Such
assignment shall be a sale and assignment outright, and not for security.
If, following the reassignment of a Purchased Receivable, in any enforcement
suit or legal proceeding, it is held that AFL may not enforce any such
Receivable on the ground that it shall not be a real party in interest or a
holder entitled to enforce the Receivable, ARFC shall, at the expense of AFL,
take such steps as AFL deems reasonably necessary to enforce the Receivable,
including bringing suit in ARFC's or any such Assignee's name or any
Collateral Agent's name or the name of a Trustee on behalf of its Holders.

SECTION 5.03. WAIVERS. No failure or delay on the part of ARFC,
or any Assignee, in exercising any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other or future
exercise thereof or the exercise of any other power, right or remedy.

ARTICLE VI

MISCELLANEOUS

SECTION 6.01. LIABILITY OF AFL. AFL shall be liable in accordance
herewith only to the extent of the obligations in this Agreement specifically
undertaken by AFL and the representations and warranties of AFL.

SECTION 6.02. MERGER OR CONSOLIDATION OF AFL OR ARFC. Any
corporation or other entity (i) into which AFL or ARFC may be merged or
consolidated, (ii) resulting from any merger or consolidation to which AFL or
ARFC is a party or (iii) succeeding to the business of AFL or ARFC, in the
case of ARFC, which corporation has a certificate of incorporation containing
provisions relating to limitations on business and other matters
substantively identical to those contained in ARFC's certificate of
incorporation or otherwise acceptable to the Security Insurers and the Rating
Agencies, provided that in any of the foregoing cases such corporation shall
execute an agreement of assumption to perform every obligation of AFL or
ARFC, as the case may be, under this Agreement and such party's Related
Documents and, whether or not such assumption agreement or agreements are
executed, shall be the successor to AFL or ARFC, as the case may be,
hereunder (without relieving AFL or ARFC of its responsibilities hereunder,
if it survives such merger or consolidation) without the execution or filing
of any document or any further act by any of the parties to this Agreement.
Notwithstanding the foregoing, ARFC shall not merge or consolidate with any
other Person or permit any other Person to become the successor to ARFC's
business without the prior written consent of each Security Insurer (so long
as no Insurer Default shall have occurred and be continuing with respect to
such Security Insurer). AFL or ARFC shall promptly inform the other party,
and, so long as an Insurer Default shall not have occurred and be continuing
with respect to such Security Insurer, each Security Insurer of such merger,
consolidation or purchase and assumption. Notwithstanding the

<PAGE>

foregoing, as a condition to the consummation of the transactions referred to
in clauses (i), (ii) and (iii) above, (x) immediately after giving effect to
such transaction, no representation or warranty made pursuant to Sections
3.01 and 3.02 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation
of such transaction) and no event that, after notice or lapse of time, or
both, would become an event of default under any Insurance Agreement, shall
have occurred and be continuing, (y) AFL or ARFC, as applicable, shall have
delivered to each Trustee an officer's certificate and an opinion of counsel
each stating that such consolidation, merger or succession and such agreement
of assumption comply with this Section 6.02 and that all conditions
precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) AFL or ARFC, as applicable,
shall have delivered to each Trustee an opinion of counsel, stating, in the
opinion of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of each Assignee under any
Related Document in the Receivables and reciting the details of the filings
or (B) no such actions shall be necessary to preserve and protect such
interest.

SECTION 6.03. LIMITATION ON LIABILITY OF AFL AND OTHERS. AFL and
any director, officer, employee or agent may rely in good faith on the advice
of counsel or on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
AFL shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its obligations under this Agreement
or its Related Documents and that in its opinion may involve it in any
expense or liability.

SECTION 6.04. AMENDMENT.

(a) This Agreement may be amended by AFL and ARFC, without the
consent of any Assignee or any Holders, (i) to cure any ambiguity or (ii) to
correct any ambiguity with respect to any provision in this Agreement;
PROVIDED, HOWEVER, that such action shall not, as evidenced by an opinion of
counsel delivered to each Trustee and each Rating Agency, adversely affect in
any material respect the interests of any Assignee or any Holder.

(b) This Agreement may also be amended from time to time by AFL
and ARFC, with the prior written consent of each Security Insurer (so long as
an Insurer Default shall not have occurred and be continuing with respect to
such Security Insurer) or, if an Insurer Default shall have occurred and be
continuing, with the consent of each Assignee and each Trustee (or other
representative of the Holders of all securities backed by the affected
Receivables), for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of ARFC; PROVIDED, that if such amendment
will have a material adverse effect on any Holders of any Securities, the
consent of the Trustee or other representative for such Holders shall be
required for such amendment; PROVIDED FURTHER, HOWEVER, that no such
amendment shall increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on Receivables or
distributions that shall be required to be made on any Security.

(c) Prior to the execution of any amendment or consent referred to
in subsection (b), AFL shall have furnished written notification of the
substance of such amendment or consent to each Rating Agency.

<PAGE>

(d) It shall not be necessary for the consent of Holders pursuant
to this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Holders shall be subject to
such reasonable requirements as the related Trustee may prescribe, including
the establishment of record dates. The consent of any Holder given pursuant
to this Section or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such
Security and of any Security issued upon the transfer thereof or in exchange
thereof or in lieu thereof whether or not notation of such consent is made
upon the Security.

SECTION 6.05. NOTICES. All demands, notices and communications to
AFL or ARFC hereunder shall be in writing, personally delivered, or sent by
telecopier (subsequently confirmed in writing), delivered by reputable
overnight courier or mailed by certified mail, return receipt requested, and
shall be deemed to have been given upon receipt (a) in the case of AFL, to
Arcadia Financial Ltd., 7825 Washington Avenue South, Suite 500, Minneapolis,
Minnesota 55439-2435, Attention: Treasurer, or such other address as shall
be designated by AFL in a written notice delivered to the other party or to
the Issuer, as applicable or (b) in case of ARFC, to Arcadia Receivables
Finance Corp., 7825 Washington Avenue South, Suite 900 Minneapolis, Minnesota
55439-2435, Attention: Treasurer.

SECTION 6.06. MERGER AND INTEGRATION. Except as specifically
stated otherwise herein, this Agreement, each Assignment Agreement and the
Related Documents sets forth the entire understanding of the parties relating
to the subject matter hereof, and all prior understandings, written or oral,
are superseded by this Agreement and the Related Documents. This Agreement
may not be modified, amended, waived or supplemented except as provided
herein.

SECTION 6.07. SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the
other provisions of this Agreement.

SECTION 6.08. INTENTION OF THE PARTIES. The execution and
delivery of this Agreement shall constitute an acknowledgement by AFL and
ARFC that they intend that the assignments and transfers herein contemplated
pursuant to each Assignment Agreement constitute a sale and assignment
outright, and not for security, of the Receivables and the Other Conveyed
Property, conveying good title thereto free and clear of any Liens, from AFL
to ARFC, and that the Receivables and the Other Conveyed Property shall not
be a part of AFL's estate in the event of the bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under
any federal or state bankruptcy or similar law, or the occurrence of another
similar event, of, or with respect to, AFL. In the event that such
conveyance is determined to be made as security for a loan made by ARFC, any
Assignee or any Holders to AFL, the parties intend that AFL shall have
granted to ARFC a security interest in all of AFL's right, title and interest
in and to the Receivables and the Other Conveyed Property conveyed pursuant
to each Assignment Agreement, and that this Agreement shall constitute a
security agreement under applicable law.

<PAGE>

SECTION 6.09. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

SECTION 6.10. COUNTERPARTS. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.

SECTION 6.11. CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED
PROPERTY TO AN ASSIGNEE. AFL acknowledges that ARFC intends, pursuant to a
Servicing Agreement and other Related Document, to convey the Receivables and
the Other Conveyed Property, together with its rights under this Agreement,
to Assignees under Warehousing Documents and Securitization Documents. AFL
acknowledges and consents to such conveyance and waives any further notice
thereof and covenants and agrees that the representations and warranties of
AFL contained in this Agreement and the rights of ARFC hereunder are intended
to benefit each Security Insurer, each Assignee, each Collateral Agent and
each Trustee on behalf of its Holders. In furtherance of the foregoing, AFL
covenants and agrees to perform its duties and obligations hereunder, in
accordance with the terms hereof for the benefit of each Security Insurer,
each Assignee, each Collateral Agent and each Trustee on behalf of its
Holders and that, notwithstanding anything to the contrary in this Agreement,
AFL shall be directly liable to each such Assignee (notwithstanding any
failure by the Servicer, any Backup Servicer or ARFC to perform its duties
and obligations hereunder or under any Servicing Agreement) and that each
such Assignee or the related Security Insurer may enforce the duties and
obligations of AFL under this Agreement against AFL for the benefit of the
related Assignee.

SECTION 6.12. NONPETITION COVENANT. AFL shall not petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against ARFC under any federal or
state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of ARFC or any substantial part of its property, or ordering the
winding up or liquidation of the affairs of ARFC.

<PAGE>

IN WITNESS WHEREOF, the parties have caused this Amended and
Restated Receivables Purchase Agreement and Assignment to be duly executed by
their respective officers as of the day and year first above written.

ARCADIA RECEIVABLES FINANCE CORP.,
as Purchaser

By:
--------------------------------
Name:
Title:

ARCADIA FINANCIAL LTD., as Seller

By:
--------------------------------
Name:
Title:

[Signature Page to Amended and Restated Receivables Purchase Agreement]

<PAGE>

SCHEDULE A

SCHEDULE OF RECEIVABLES

[Deemed Incorporated from each Assignment Agreement]

<PAGE>

SCHEDULE B

REPRESENTATIONS AND WARRANTIES OF AFL

1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was
originated by AFL or by a Dealer for the retail sale of a Financed Vehicle in
the ordinary course of such Dealer's business and such Dealer had all
necessary licenses and permits to originate Receivables in the state where
such Dealer was located, was fully and properly executed by the parties
thereto, was purchased by AFL from such Dealer under an existing Dealer
Agreement with AFL and was validly assigned by such Dealer to AFL, (B)
contains customary and enforceable provisions such as to render the rights
and remedies of the holder thereof adequate for realization against the
collateral security, and (C) is a fully amortizing Receivable which provides
for level monthly payments (provided that the payment in the first calendar
month and the final calendar month of the life of the Receivable may be
minimally different from the level payment) which, if made when due, shall
fully amortize the Amount Financed over the original term.

2. NO FRAUD OR Misrepresentation. Each Receivable was originated
by AFL or by a Dealer and was sold by the Dealer to AFL without any fraud or
misrepresentation on the part of such Dealer in either case.

3. COMPLIANCE WITH LAW. All requirements of applicable federal,
state and local laws, and regulations thereunder (including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z," the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor
Vehicle Retail Installment Sales Act, and state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code and other consumer
credit laws and equal credit opportunity and disclosure laws) in respect of
all of the Receivables and each and every sale of Financed Vehicles, have
been complied with in all material respects, and each Receivable and the sale
of the Financed Vehicle evidenced by each Receivable complied at the time it
was originated or made and now complies in all material respects with all
applicable legal requirements.

4. ORIGINATION. Each Receivable was originated in the United
States.

5. BINDING OBLIGATION. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except (A) as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law and (B) as such Receivable may
be modified by the application after its Cut-Off Date of the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended; and all parties to each
Receivable had full legal capacity to execute and deliver such Receivable and
all other documents related thereto and to grant the security interest
purported to be granted thereby.

<PAGE>

6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of
America or any State or any agency, department, subdivision or
instrumentality thereof.

7. OBLIGOR BANKRUPTCY. At the applicable Cut-Off Date, no
Obligor had been identified on the records of AFL as being the subject of a
current bankruptcy proceeding.

8. SCHEDULE OF RECEIVABLES. The information set forth in the
most recent Schedule of Receivables delivered to an Assignee was true and
correct in all material respects as of the close of business on the
applicable Cut-Off Date.

9. MARKING RECORDS. On each Assignment Date, the portions of the
Electronic Ledger relating to the Receivables assigned to ARFC on such date
will be clearly and unambiguously marked to show that the Receivables were
sold to ARFC pursuant to this Agreement and each Assignment Agreement. On
each date on which Receivables are transferred by ARFC to an Assignee, AFL
will cause the portion of the Electronic Ledger relating to the Receivables
to be clearly and unambiguously marked to show that the Receivables were sold
by ARFC to an Assignee under the terms of the relevant Related Document.

10. COMPUTER TAPE. The Computer Tape, computer diskette or other
electronic transmission made available by AFL to ARFC and its assignee on
each Assignment Date was complete and accurate as of the applicable Cut-Off
Date, and includes a description of the same Receivables that are described
in the Schedule of Receivables.

11. ADVERSE SELECTION. No selection procedures adverse to an
Assignee or any Holders were utilized in selecting the Receivables from those
receivables owned by AFL which met the selection criteria contained in such
Related Document.

12. CHATTEL PAPER. The Receivables constitute chattel paper
within the meaning of the UCC as in effect in the States of Minnesota and New
York.

13. ONE ORIGINAL. There is only one original executed copy of
each Receivable.

14. RECEIVABLE FILES COMPLETE. On the applicable Assignment Date
there exists a complete Receivable File for each Receivable transferred on
such date, and such Receivable File is in the possession of the relevant
Custodian on such Assignment Date. A Receivable File pertaining to each
Receivable will contain on the related Assignment Date (a) a fully executed
original of the Receivable, (b) a certificate of insurance, application form
for insurance signed by the Obligor or a signed representation letter from
the Obligor named in the Receivable pursuant to which the Obligor has agreed
to obtain physical damage insurance for the Financed Vehicle, or a documented
verbal confirmation by an insurance agent for the Obligor of a policy number
for an insurance policy for the Financed Vehicle, (c) the original Lien
Certificate or application therefor or a letter from the applicable Dealer
agreeing unconditionally to repurchase the related Receivable if the
certificate of title is not received by AFL within 180 days, and (d) a credit
application of the Obligor or a copy thereof. Each of such documents

<PAGE>

which is required to be signed by the Obligor will have been signed by the
Obligor in the appropriate spaces. All blanks on any form will have been
properly filled in and each form will otherwise have been correctly prepared.

15. RECEIVABLES IN FORCE. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the lien of the related Receivable in
whole or in part. No provisions of any Receivable have been waived, altered
or modified in any respect since its origination, except by instruments or
documents identified in the Receivable File. No Receivable has been modified
as a result of application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.

16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is
subject to the laws of, any jurisdiction, the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under any Assignment Agreement, Servicing Agreement or other
Related Document or pursuant to transfers of any Securities.

17. GOOD TITLE. No Receivable has been sold, transferred,
assigned or pledged by AFL to any Person other than ARFC unless the same was
released prior to the transfer of such Receivable to ARFC; immediately prior
to the conveyance of the Receivables to ARFC pursuant to any Assignment
Agreement, AFL had good and indefeasible title thereto, free and clear of any
Lien; and immediately upon the transfer thereof, ARFC shall have good and
indefeasible title to and will be the sole owner of each Receivable, free of
any Lien, other than Liens created by ARFC pursuant to a Related Document.
No Dealer has a participation in, or other right to receive, proceeds of any
Receivable. AFL has not taken any action to convey any right to any Person
that would result in such Person having a right to payments received under
the related Insurance Policies or the related Dealer Agreements or Dealer
Assignments or to payments due under such Receivables.

18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable
creates a valid, binding and enforceable first priority security interest in
favor of AFL in the Financed Vehicle. The Lien Certificate and original
certificate of title for each Financed Vehicle show, or if a new or
replacement Lien Certificate is being applied for with respect to such
Financed Vehicle the Lien Certificate will be received within 180 days of the
related Assignment Date and will show, AFL named as the original secured
party under each Receivable as the holder of a first priority security
interest in such Financed Vehicle. With respect to each Receivable for which
the Lien Certificate has not yet been returned from the Registrar of Titles,
AFL has received written evidence from the related Dealer that such Lien
Certificate showing AFL as first lienholder has been applied for, or a letter
from the applicable Dealer agreeing unconditionally to repurchase the related
Receivable if the certificate of title is not received within 180 days.
AFL's security interest has been validly assigned by AFL to ARFC pursuant to
the applicable Assignment Agreement. Immediately after the sale, transfer
and assignment thereof by ARFC to an Assignee, each Receivable will be
secured by an enforceable and perfected first priority security interest in
the Financed Vehicle in favor of such Assignee as secured party, which
security interest is prior to all other Liens upon and security interests in
such Financed Vehicle which now exist or may hereafter arise or be created
(except, as to priority, for any lien for taxes, labor or materials affecting
a Financed Vehicle). As of the applicable Cut-Off Date there were no

<PAGE>

Liens or claims for taxes, work, labor or materials affecting a Financed
Vehicle which are or may be Liens prior or equal to the lien of the related
Receivable.

19. ALL FILINGS MADE. All filings (including, without limitation,
UCC filings) required to be made by any Person and actions required to be
taken or performed by any Person in any jurisdiction to give ARFC a first
priority perfected lien on, or ownership interest in, the Receivables and the
Other Conveyed Property have been made, taken or performed.

20. NO IMPAIRMENT. AFL has not done anything to convey any right
to any Person that would result in such Person having a right to payments due
under a Receivable or otherwise to impair the rights of ARFC, any Assignee
and the related Trustee on behalf of its Holders in any Receivable or the
proceeds thereof.

21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof from such
Obligor's obligations to AFL with respect to such Receivable.

22. NO DEFENSES. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been
asserted or threatened with respect to any Receivable.

23. NO DEFAULT. There has been no default, breach, violation or
event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than 30 days), and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or
both would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable, and there has been no waiver
of any of the foregoing. As of the applicable Cut-Off Date, no Financed
Vehicle has been repossessed.

24. INSURANCE. As of the Assignment Date for the related
Receivable, each Financed Vehicle is covered by a comprehensive and collision
insurance policy (i) in an amount at least equal to the lesser of (a) its
maximum insurable value or (b) the principal amount due from the Obligor
under the related Receivable, (ii) naming AFL as loss payee and (iii)
insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage. Each Receivable requires the Obligor to maintain physical loss and
damage insurance, naming AFL and its successors and assigns as additional
insured parties, and each Receivable permits the holder thereof to obtain
physical loss and damage insurance at the expense of the Obligor if the
Obligor fails to do so. No Financed Vehicle was or had previously been
insured under a policy of Force-Placed Insurance on the related Cut-Off Date.

25. PAST DUE. As of the applicable Cut-Off Date, no Receivable
was more than 30 days past due and no funds have been advanced by AFL, ARFC,
the Servicer, any Dealer or anyone acting on behalf of any of them in order
to cause any Receivable to satisfy such requirement.

<PAGE>

26. REMAINING PRINCIPAL BALANCE. As of the applicable Cut-Off
Date, each Receivable had a remaining principal balance equal to or greater
than $500.00 and the Principal Balance of each Receivable set forth in the
related Schedule of Receivables is true and accurate in all material respects.

27. ORIGINAL MATURITY. Each Receivable, and the Receivables as a
whole, had original maturities with the parameters represented and warranted
to by ARFC in the related Warehousing Document or Securitization Document.
If represented and warranted to by ARFC in the related Securitization
Document or Warehousing Document, each Receivable with an original maturity
of greater than 72 months is secured by a Financed Vehicle that is a new
automobile or an automobile that is less than one year old. If applicable,
no more than the percentage specified in the applicable Warehousing Document
or Securitization Document of the Receivables are Classic Receivables, or
satisfy any other applicable categorization with respect to Receivable type.

28. COMPLIANCE WITH UNDERWRITING GUIDELINES. Each Receivable was
originated pursuant to AFL's underwriting standards which have not, without
the prior written consent of any Person specified in a Related Document, been
materially changed since the Effective Date.

<PAGE>

EXHIBIT A

FORM OF ASSIGNMENT AGREEMENT

THIS ASSIGNMENT AGREEMENT dated as of ______________ _______, _______,
executed between Arcadia Receivables Finance Corp., a Delaware corporation, as
purchaser ("ARFC"), and Arcadia Financial Ltd., a Minnesota corporation, as
seller ("AFL").

W I T N E S S E T H

WHEREAS, ARFC and AFL are parties to the Amended and Restated
Receivables Purchase Agreement and Assignment dated as of July 21, 1998
(hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "Purchase Agreement"); and

WHEREAS, pursuant to the Purchase Agreement, AFL wishes to convey
Receivables and Other Conveyed Property (as each such term is defined in the
Purchase Agreement) to ARFC hereunder;

1. DEFINITIONS. All terms defined in the Purchase Agreement
(whether directly or by reference to other documents) and used herein shall
have such defined meanings when used herein, unless otherwise defined herein.

"Assignment Date" shall mean, with respect to the Receivables and
the related Other Conveyed Property being conveyed hereby, ______________ __,
_______.

"Cut-Off Date" shall mean, with respect to the Receivables and the
related Other Conveyed Property being conveyed hereby, the date specified in
the Related Document(s) conveying such Receivables to an Assignee.

2. CONVEYANCE OF RECEIVABLES. Subject to the conditions
specified in Section 2.2(b) of the Purchase Agreement and subject to the
mutually agreed upon terms contained in the Purchase Agreement, AFL hereby
sells, transfers, assigns and otherwise conveys to ARFC without recourse (but
without limitation of its obligations in the Purchase Agreement, or any other
Related Document), all of the right, title and interest of AFL, whether now
existing or hereafter acquired, in and to all accounts, contract rights,
general intangibles, chattel paper, instruments, documents, money, deposit
accounts, certificates of deposit, goods, letters of credit, advices of
credit and uncertificated securities consisting of, arising from or relating
to the Receivables listed on Schedule A hereto and the related Other Conveyed
Property.

<PAGE>

3. COUNTERPARTS. This Assignment Agreement may be executed in
two or more counterparts, each of which shall be an original, but all of
which together shall constitute one and the same instrument.

4. GOVERNING LAW. This Assignment Agreement shall be governed by
and construed in accordance with the laws of the State of New York.

IN WITNESS WHEREOF, the undersigned have caused this Assignment
Agreement to be duly executed and delivered by their respective duly
authorized officers on the day and year first above written.

ARCADIA RECEIVABLES FINANCE CORP.,
as Purchaser

By:
--------------------------------
Name:
Title:

ARCADIA FINANCIAL LTD., as Seller

By:
--------------------------------
Name:
Title:

[Signature Page to Amended and Restated Master Receivables Purchase Agreement
and Assignment]

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EXECUTION COPY

_________________________________________________________________________

AMENDED AND RESTATED
SALE AND SERVICING AGREEMENT
(Amending and Restating the Repurchase Agreement dated as of
December 3, 1996 and the Servicing Agreement dated
as of December 3, 1996)
Dated as of July 21, 1998

among

ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
Issuer

ARCADIA RECEIVABLES CONDUIT CORP.
Original Issuer

ARCADIA RECEIVABLES FINANCE CORP.
Seller

ARCADIA FINANCIAL LTD.
In its individual capacity and as Servicer

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Administrative Agent and RCC Agent

MORGAN GUARANTY TRUST COMPANY OF NEW YORK
DFC Agent

and

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Backup Servicer, Collateral Agent and Indenture Trustee

_________________________________________________________________________

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TABLE OF CONTENTS

ARTICLE I

DEFINITIONS

Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1

Section 1.2. Usage of Terms. . . . . . . . . . . . . . . . . . . . . . . .24

Section 1.3. Calculations. . . . . . . . . . . . . . . . . . . . . . . . .24

Section 1.4. Section References. . . . . . . . . . . . . . . . . . . . . .24

Section 1.5. No Recourse.. . . . . . . . . . . . . . . . . . . . . . . . .24

Section 1.6. Material Adverse Effect.. . . . . . . . . . . . . . . . . . .25

Section 1.7. Conditions of Effectiveness.. . . . . . . . . . . . . . . . .25

Section 1.8. Assignment and Delegation of Rights and Duties by
Original Issuer to Issuer . . . . . . . . . . . . . . . . . .25

ARTICLE II

COMMITMENT AND CONVEYANCE OF RECEIVABLES

Section 2.1. Commitment. . . . . . . . . . . . . . . . . . . . . . . . . .26

Section 2.2. Security Interest . . . . . . . . . . . . . . . . . . . . . .28

Section 2.3. Payment, Transfer and Custody . . . . . . . . . . . . . . . .28

Section 2.4. Representations and Warranties of the Seller. . . . . . . . .30

Section 2.5. Events of Default . . . . . . . . . . . . . . . . . . . . . .32

Section 2.6. Remedies Upon Occurrence of an Event of Default . . . . . . .34

Section 2.7. Term of Commitment. . . . . . . . . . . . . . . . . . . . . .35

Section 2.8. Repurchase of Receivables upon Breach of Warranty . . . . . .35

Section 2.9. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . .36

Section 2.10. Additional Conditions . . . . . . . . . . . . . . . . . . . .36

Section 2.11. Covenant of the Seller. . . . . . . . . . . . . . . . . . . .38

ARTICLE III

ADMINISTRATION AND SERVICING OF RECEIVABLES

Section 3.1. Duties of the Servicer. . . . . . . . . . . . . . . . . . . .38

Section 3.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements . . . . . . . . . . . . . . .39

Section 3.3. Realization Upon Receivables. . . . . . . . . . . . . . . . .42

Section 3.4. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . .43

Section 3.5. Maintenance of Security Interests in Vehicles.. . . . . . . .44

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TABLE OF CONTENTS
(CONTINUED)

Section 3.6. Covenants, Representations, and Warranties of
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . .45

Section 3.7. Purchase of Receivables Upon Breach of Covenant.. . . . . . .46

Section 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . .47

Section 3.9. Servicer's Certificate. . . . . . . . . . . . . . . . . . . .47

Section 3.10. Annual Statement as to Compliance; Notice of
Servicer Termination Event. . . . . . . . . . . . . . . . . .48

Section 3.11. Annual Independent Accountants' Report. . . . . . . . . . . .48

Section 3.12. Access to Certain Documentation and Information
Regarding Receivables . . . . . . . . . . . . . . . . . . . .49

Section 3.13. Monthly Tape. . . . . . . . . . . . . . . . . . . . . . . . .49

Section 3.14. Retention and Termination of Servicer.. . . . . . . . . . . .50

Section 3.15. Fidelity Bond.. . . . . . . . . . . . . . . . . . . . . . . .50

Section 3.16. Duties of the Servicer under the Indenture. . . . . . . . . .51

Section 3.17. Collecting Lien Certificates Not Delivered on the
Purchase Date . . . . . . . . . . . . . . . . . . . . . . . .51

Section 3.18. Accountants' Review of Receivable Files.. . . . . . . . . . .51

ARTICLE IV

DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS

Section 4.1. Secured Accounts. . . . . . . . . . . . . . . . . . . . . . .52

Section 4.2. Collections.. . . . . . . . . . . . . . . . . . . . . . . . .56

Section 4.3. Application of Collections. . . . . . . . . . . . . . . . . .56

Section 4.4. Monthly Advances. . . . . . . . . . . . . . . . . . . . . . .57

Section 4.5. Additional Deposits.. . . . . . . . . . . . . . . . . . . . .58

Section 4.6. Distributions.. . . . . . . . . . . . . . . . . . . . . . . .58

Section 4.7. Statements to Noteholders.. . . . . . . . . . . . . . . . . .61

Section 4.8. Indenture Trustee as Agent; Calculation of Weighted
Average APR, WAC Deficiency Amounts, Basis Fee Percent and
Advance Interest Rate . . . . . . . . . . . . . . . . . . . .61

Section 4.9. Eligible Accounts.. . . . . . . . . . . . . . . . . . . . . .62

Section 4.10. Additional Withdrawals from the Collection Account. . . . . .62

Section 4.11. Cross-Collateralization with the Spread Account
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .63

ARTICLE V

THE SERVICER

Section 5.1. Liability of Servicer; Indemnities. . . . . . . . . . . . . .63

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TABLE OF CONTENTS
(CONTINUED)

Section 5.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer . . . . . . .65

Section 5.3. Limitation on Liability of Servicer, Backup Servicer
and Others. . . . . . . . . . . . . . . . . . . . . . . . . .66

Section 5.4. Delegation of Duties. . . . . . . . . . . . . . . . . . . . .66

Section 5.5. Servicer and Backup Servicer Not to Resign. . . . . . . . . .66

ARTICLE VI

SERVICER TERMINATION EVENTS

Section 6.1. Servicer Termination Event. . . . . . . . . . . . . . . . . .67

Section 6.2. Consequences of a Servicer Termination Event. . . . . . . . .69

Section 6.3. Appointment of Successor. . . . . . . . . . . . . . . . . . .70

Section 6.4. Notification to Noteholders.. . . . . . . . . . . . . . . . .71

Section 6.5. Waiver of Past Defaults.. . . . . . . . . . . . . . . . . . .71

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.1. Amendment.. . . . . . . . . . . . . . . . . . . . . . . . . .71

Section 7.2. Protection of Title to the Seller Conveyed Property.. . . . .72

Section 7.3. Governing Law.. . . . . . . . . . . . . . . . . . . . . . . .74

Section 7.4. Severability of Provisions. . . . . . . . . . . . . . . . . .74

Section 7.5. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . .74

Section 7.6. Third-Party Beneficiaries.. . . . . . . . . . . . . . . . . .75

Section 7.7. Disclaimer by Security Insurer. . . . . . . . . . . . . . . .75

Section 7.8. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .75

Section 7.9. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . .75

Section 7.10. Interest Rate Protection. . . . . . . . . . . . . . . . . . .76

Section 7.11. Limited Recourse. . . . . . . . . . . . . . . . . . . . . . .76

Section 7.12. Nonpetition Covenant. . . . . . . . . . . . . . . . . . . . .76

Section 7.13. Limitation of Liability . . . . . . . . . . . . . . . . . . .77

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<PAGE>

EXHIBITS

Exhibit A - Servicing Policies and Procedures

Exhibit B - Form of Servicer's Certificate

Exhibit C - Form of Note for Intercompany Indebtedness

Exhibit D - Opinions of Counsel to Seller and Arcadia

Exhibit E - Form of Confirmation Letter

Exhibit F - Form of Notice of Repurchase Date

Exhibit G - Form of Reconveyance of Receivables

Exhibit H - Form of Notice of Request for an Advance

Exhibit I - Form of Independent Accountants' Report

SCHEDULES

Schedule I - Representations and Warranties of Seller

iv
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THIS AMENDED AND RESTATED SALE AND SERVICING AGREEMENT, dated as of
July 21, 1998, is made among ARCADIA RECEIVABLES CONDUIT CORP., a Delaware
corporation (the "Original Issuer"), ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE
TRUST, a Delaware business trust (the "Issuer"), ARCADIA RECEIVABLES FINANCE
CORP., a Delaware corporation, as the Seller (the "Seller"), ARCADIA FINANCIAL
LTD., a Minnesota corporation, in its individual capacity and as Servicer (in
its individual capacity, "AFL"; in its capacity as Servicer, the "Servicer"),
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, in its capacity as RCC Agent (in such capacity as administrator for
Receivables Capital Corporation and as agent for certain liquidity purchasers,
the "RCC Agent") and in its capacity as Administrative Agent (in such capacity,
the "Administrative Agent"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New
York banking corporation, as DFC Agent (in such capacity as administrator for
Delaware Funding Corporation and as agent for certain liquidity purchasers, the
"DFC Agent"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national
banking association, as Backup Servicer (in such capacity the "Backup
Servicer"), as Collateral Agent (in such capacity the "Collateral Agent") and as
Indenture Trustee (in such capacity the "Indenture Trustee").

In consideration of the mutual agreements herein contained, and of
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1. DEFINITIONS. Each term capitalized and used herein
without being defined herein that is defined in the Spread Account Agreement,
the Security Agreement, the Trust Agreement, the Purchase Agreement, the Note
Purchase Agreement or the Indenture (as defined below) shall have the same
meaning in this Agreement. Whenever capitalized and used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:

ACCOUNTANTS' REPORT: The report of a firm of nationally recognized
independent accountants described in Section 3.11.

ACCOUNTING DATE: With respect to a Distribution Date, the last day of
the Monthly Period immediately preceding such Distribution Date.

ACT OF INSOLVENCY: With respect to any party, (i) the commencement by
such party as debtor of any case or proceeding under any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar law, or such party seeking
the appointment of a receiver, trustee, custodian or similar official for such
party or any substantial part of its property, or (ii) the commencement of any
such case or proceeding against such party, or another seeking such an
appointment, or the filing against a party of an application for a protective
decree under the provisions of the Securities Investor Protection Act of 1970,
which (A) is consented to or not timely contested by such party, (B) results in
the entry of an order for relief, such an

<PAGE>

appointment, the issuance of such a protective decree or the entry of an
order having a similar effect, or (C) is not dismissed within 60 days, (iii)
the making by a party of a general assignment for the benefit of creditors,
or (iv) the admission in writing by a party of such party's inability to pay
such party's debts as they become due.

ADMINISTRATIVE AGENT: BofA in its capacity as administrative agent
hereunder pursuant to the Note Purchase Agreement, and its successors and
assigns in such capacity.

ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period, a
Receivable which the Servicer is required to purchase pursuant to Section 3.7 or
which AFL has elected to purchase pursuant to Section 3.4(c).

ADMINISTRATOR: The meaning assigned to such term in the Trust
Agreement.

ADVANCE: Individually and collectively, the advances representing the
Purchase Price for the Receivables hereunder provided for in Section 2.1(a)
hereof.

ADVANCE INTEREST CARRYOVER SHORTFALL: With respect to any
Distribution Date, the excess of the Advance Monthly Interest Distributable
Amount for the preceding Distribution Date and any outstanding Advance Interest
Carryover Shortfall on such preceding Distribution Date, over the amount in
respect of interest that is actually deposited in the Note Distribution Account
on such preceding Distribution Date, plus interest on the amount of interest due
but not paid with respect to the Advances on the preceding Distribution Date, to
the extent permitted by law, at the Advance Interest Rate from such preceding
Distribution Date through the current Distribution Date.

ADVANCE INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the Advance Monthly Interest Distributable Amount
for such Distribution Date and the Advance Interest Carryover Shortfall for such
Distribution Date.

ADVANCE INTEREST RATE: With respect to each Note and each Interest
Period or any shorter period for which interest accrues, a per annum rate
determined in arrears of the daily weighted average cost of funding of the
Noteholders' purchase or carrying of their Note during such Interest Period or
any shorter period for which interest accrues, which shall be: (A) prior to the
occurrence of an Amortization Event, (i) the CP Rate plus 0.225%, to the extent
the purchase or carrying of such Note issued pursuant to the Indenture is funded
by the applicable Noteholders by issuing Commercial Paper Notes, (ii) the
Offshore Rate or LIBOR, as applicable, plus the Applicable Margin, to the extent
the purchase or carrying of such Note issued pursuant to the Indenture is funded
by the applicable Noteholders by such rate and (iii) the Reference Rate, to the
extent the purchase or carrying of such Note issued pursuant to the Indenture is
funded by such rate and (B) after the occurrence of an Amortization Event, the
Reference Rate for such Note; PROVIDED, that from and after the occurrence of an
Amortization Event, the Advance Interest Rate shall not exceed the Maximum
Interest Rate, and either Agent may, on any Business Day, by prior written
notice to the other Agent, the Issuer, the Indenture Trustee, the Seller, the
Servicer and the Security Insurer, convert the Advance Interest Rate for its
related Note to a fixed interest rate not to exceed the Maximum Interest Rate as
of the close of business on the date such Amortization Event occurs, such fixed
interest rate not to exceed the Two Year

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Treasury Yield (as of the close of business on the date such Amortization
Event occurs) plus 0.60% PLUS the Basis Fee Percent.

ADVANCE MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of the interest accrued on each day during the
immediately preceding Interest Period at the Advance Interest Rate(s) in effect
from time to time with respect to such Interest Period on the outstanding
principal balance of the Advances on each day; PROVIDED that the amount of the
Advance Monthly Interest Distributable Amount distributed pursuant to Sections
4.6(a)(i) or (b)(ii) shall not be duplicative of the amount of any interest that
accrued during such immediately preceding Interest Period on any Advance that
was prepaid during such Interest Period pursuant to Section 2.1(e) and which was
deposited into the Note Distribution Account pursuant to Section 4.10(b).

ADVANCE PRINCIPAL CARRYOVER SHORTFALL: As of the close of business on
any Distribution Date after the occurrence of an Amortization Event, the excess
of the sum of the Principal Distribution Amount and any outstanding Advance
Principal Carryover Shortfall from the preceding Distribution Date over the
amount in respect of Advances that is actually deposited in the Note
Distribution Account on such Distribution Date.

ADVANCE PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date (other than the Final Distribution Date) during the
Amortization Period, the sum of the Principal Distribution Amount for such
Distribution Date and any outstanding Advance Principal Carryover Shortfall as
of the close of the preceding Distribution Date; PROVIDED, HOWEVER, the Advance
Principal Distributable Amount shall not exceed the outstanding principal
balance of the Advances. The "Advance Principal Distributable Amount" on the
Final Distribution Date will equal the outstanding principal balance of the
Advances on the Final Distribution Date.

AFL: Arcadia Financial Ltd., a Minnesota corporation.

AFFILIATE: With respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

AGENTS: The RCC Agent and the DFC Agent.

AGGREGATE PRINCIPAL BALANCE: With respect to any Determination Date,
the sum of the Principal Balances (computed as of the related Accounting Date)
for all Receivables (other than (i) any Receivable that became a Liquidated
Receivable during the related Monthly Period, (ii) any Purchased Receivable with
respect to the related Monthly Period and (iii) any Receivable that became a
Repurchased Receivable during the related Monthly Period).

AGREEMENT OR THIS AGREEMENT: Prior to the Effective Date, the
Original Servicing Agreement or the Original Repurchase Agreement, as
applicable; and from and after the Effective Date, this Amended and Restated
Sale and Servicing Agreement, all amendments and supplements thereto and all
exhibits and schedules to any of the foregoing.

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AMORTIZATION DATE: After a Recapitalization, the date determined by
the application of Section 2.6.

AMORTIZATION EVENT: Any of (i) an Event of Default shall have
occurred and either the Repurchase Date or the Amortization Date shall be deemed
to occur automatically or the Issuer or the Administrative Agent shall exercise
its option to have the Repurchase Date or the Amortization Date with respect to
all Transactions occur automatically, (ii) an Insurance Agreement Event of
Default shall have occurred and the Security Insurer shall have delivered notice
to the Issuer and the Seller that such Insurance Agreement Event of Default
shall constitute an Amortization Event, (iii) an Insurer Default shall have
occurred and be continuing or (iv) the succession of the Backup Servicer as
Servicer hereunder.

AMORTIZATION PERIOD: The period commencing on the earliest to occur
of (i) July 20, 1999, and (ii) the Insurer Notice Date, and ending on the Final
Distribution Date.

AMOUNT FINANCED: With respect to a Receivable, the aggregate amount
advanced under such Receivable toward the purchase price of the Financed Vehicle
and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs. The term "Amount Financed" shall not include any
Insurance Add-On Amounts.

ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable, the rate
per annum of finance charges stated in such Receivable as the "annual percentage
rate" (within the meaning of the Federal Truth-in-Lending Act). If after the
applicable Cut-Off Date with respect to a Receivable, the rate per annum with
respect to such Receivable as of such Cut-Off Date is reduced as a result of (i)
an insolvency proceeding involving the Obligor or (ii) pursuant to the Soldiers'
and Sailors' Civil Relief Act of 1940, Annual Percentage Rate or APR from and
after such date shall refer to such reduced rate.

APPLICABLE MARGIN: 0.375%.

AUTO LOAN SECURITIZATION: A public or private transfer of Auto
Receivables in the ordinary course of business and by which AFL directly or
indirectly securitizes a pool of specified Auto Receivables.

AUTO RECEIVABLE: An installment sales contract or promissory note
originated by AFL or purchased by AFL or a Subsidiary of AFL from motor vehicle
dealers and, in each case, secured by new and used automobiles and light trucks.

AVAILABLE FUNDS: With respect to any Determination Date, the amount
on deposit in the Collection Account as of the immediately preceding Accounting
Date plus any amounts deposited in the Collection Account on such Determination
Date pursuant to Section 4.1(e) to satisfy the Collateral Test.

BACKUP SERVICER: Norwest Bank Minnesota, National Association, or its
successor in interest pursuant to Section 6.2, or such Person as shall have been
appointed as Backup Servicer or successor Servicer pursuant to Section 6.3.

<PAGE>

BASIC SERVICING FEE: With respect to any Monthly Period, the fee
payable to the Servicer for services rendered during such Monthly Period, which
shall be equal to one-twelfth of the Basic Servicing Fee Rate multiplied by the
daily average aggregate Principal Balance of the Receivables during such Monthly
Period; PROVIDED, HOWEVER, with respect to the first Monthly Period, the Basic
Servicing Fee shall accrue from the Closing Date until December 31, 1996 on the
basis of a 360-day year consisting of twelve 30-day months.

BASIC SERVICING FEE RATE: 1.40% per annum, payable monthly at
one-twelfth of the annual rate.

BASIS FEE PERCENT: As of any date of determination, the positive
difference, if any, as determined by the Administrative Agent, as calculation
agent, between (A) the comparable spread over the Two Year Treasury Yield of
the yield on AFL's most recent two year weighted average life AAA/Aaa rated,
publicly issued automobile asset-backed securities; or, if such a spread is
not available, the average price offered for such AAA/Aaa rated automobile
asset-backed securities by the asset-backed trading desk from time to time of
two nationally recognized underwriters or dealers that last underwrote AFL's
most recent AAA/Aaa rated, publicly issued automobile asset-backed
securities, and (B) 0.45%.

BOFA: Bank of America National Trust and Savings Association, a
national banking association, and its successors in interest.

BREAKAGE FEE: An amount payable by the Seller pursuant to Section
2.1(e) in connection with a prepayment of an Advance (and the concurrent
prepayment of Notes pursuant to the Indenture) if the Seller shall have
requested a prepayment of an Advance on a date other than the last day of a
Tranche Period or in an amount in excess of the Tranches maturing on such date,
which shall be equal to the amount as may be necessary to compensate the
applicable Noteholders for any resulting losses or costs, including those
resulting from any liquidation or reemployment of deposits or other funds or
other funding arrangements (such losses to be calculated on a net basis assuming
reinvestment (for the period with respect to which breakage is being paid) equal
to the rate quoted by the applicable Agent for a time deposit equal to the
principal so prepaid for a period equal to the breakage period).

BUSINESS DAY: Any day other than a Saturday, Sunday, legal holiday or
other day on which commercial banking institutions in Minneapolis, Minnesota,
Chicago, Illinois, New York, New York, Wilmington, Delaware, or any other
location of any successor Servicer, successor Indenture Trustee, successor Owner
Trustee or successor Collateral Agent are authorized or obligated by law,
executive order or governmental decree to be closed and, (i) if the applicable
Business Day relates to any calculation of the Offshore Rate, such a day on
which dealings are carried on in the applicable offshore dollar interbank market
or (ii) if the applicable Business Day related to any calculation of LIBOR, such
a day on which dealings in deposits in United States dollars are transacted in
the London interbank market.

CAPITALIZED LEASE: Any lease that is or should be capitalized on the
books of the lessee in accordance with GAAP.

<PAGE>

CLASSIC RECEIVABLES: Receivables originated under AFL's "Classic"
program, but shall not include any Receivables that are secured by Financed
Vehicles that are financed repossessions.

CLOSING DATE: December 3, 1996.

COLLATERAL AGENT: The Collateral Agent named in the Security
Agreement, and any successor thereto pursuant to the terms of the Security
Agreement.

COLLATERAL TEST: On any Determination Date, a test that will be
satisfied if, as of the immediately preceding Accounting Date, the aggregate
outstanding amount of all Advances hereunder is less than or equal to the sum of
the following amounts, each determined as of such Accounting Date: (i)(a) the
amount on deposit in the Collection Account less the WAC Deficiency Deposit, if
any, plus (b) without duplication of amounts on deposit in the Collection
Account, the amount representing collections on the Receivables deposited in the
Lockbox Account on such Accounting Date or on the Business Day immediately
preceding such Accounting Date, and (ii) the product of (I) 0.96 and (II) the
sum of the aggregate outstanding Principal Balance of Premier Receivables that
are Qualifying Receivables and the aggregate outstanding Principal Balance of
Classic Receivables that are Qualifying Receivables; PROVIDED, that any deposit
into the Collection Account that the Seller may make on such Determination Date
pursuant to Section 4.1(e) shall be included as amounts on deposit in the
Collection Account as of the immediately preceding Accounting Date in clause (i)
above.

COLLECTED FUNDS: With respect to any Determination Date, the amount
of funds in the Collection Account representing collections on the Receivables
during the related Monthly Period, including all Liquidation Proceeds collected
during the related Monthly Period (but excluding any Monthly Advances, any
Purchase Amounts and the Repurchase Price of any Repurchased Receivables).

COLLECTION ACCOUNT: The account designated as the Collection Account
in, and which is established and maintained pursuant to, Section 4.1(a).

COLLECTION RECORDS: All manually prepared or computer generated
records relating to collection efforts or payment histories with respect to the
Receivables.

COMMERCIAL PAPER NOTES: The short-term promissory notes issued or to
be issued in the United States commercial paper market to fund (x) with respect
to RCC, its investment in accounts receivable or other financial assets, and (y)
with respect to DFC, the purchase of a Note and its pro rata share of any Note
Increase Amount, which, unless otherwise agreed to in writing by the Seller, the
DFC Agent (with respect to its related Commercial Paper Notes) and the Security
Insurer, shall mature within 120 days from the date of issuance of such notes.

COMMITMENT AMOUNT: $400,000,000.

CONFIRMATION: As defined in Section 2.1(b).

CORPORATE TRUST OFFICE: With respect to the Owner Trustee, the
principal office of the Owner Trustee at which any particular time its corporate
trust business shall be administered,

<PAGE>

which office is located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration;
the telecopy number for the Corporate Trust Office of the Owner Trustee on
the date of execution of this agreement is (302) 651-8882; with respect to
the Indenture Trustee, the principal office of the Indenture Trustee at which
at any particular time its corporate trust business shall be administered,
which office is located at Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479-0070, Attention: Corporate Trust Services - Asset-Backed
Administration; the telecopy number for the Corporate Trust Office of the
Indenture Trustee on the date of execution of this Agreement is (612)
667-3539.

CP COMPOSITE RATE: For any date of determination, the Money Market
Yield of the rate set forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the Board of Governors of
the Federal Reserve System ("H.15(519)") for the 30 day maturity under the
caption "Commercial Paper." If such rate cannot be determined, the Offshore
Rate.

CP RATE: For a Note and any Interest Period or any shorter period for
which interest accrues, and with respect to any portion of the principal amount
of such Note as to which the applicable Noteholders' funding of their purchase
or carrying thereof is provided by Commercial Paper Notes, the rate of interest
per annum determined in arrears in good faith by related Agent equal to such
Noteholders' cost of funding the purchase or carrying of such portion of such
Note, which shall be equal to (x) for RCC, the per annum rate equivalent to the
"weighted average cost" (as defined below) related to the issuance of RCC's
Commercial Paper Notes that are allocated, in whole or in part, by RCC or the
RCC Agent to fund or maintain such portion of the principal of RCC's Note (and
which may also be allocated in part to the funding of other portions of the
principal of RCC's Note hereunder or of other assets of RCC); PROVIDED, HOWEVER,
that if any component of such rate is a discount rate, the RCC Agent shall for
such component use the rate resulting from converting such discount rate to an
interest bearing equivalent rate per annum, and (y) for DFC, the weighted daily
average interest rate payable in respect of DFC's Commercial Paper Notes during
such period (determined in the case of discount Commercial Paper Notes by
converting the discount to an interest bearing equivalent rate per annum), plus
applicable placement fees and commissions and any incremental carrying costs
incurred with respect to such Commercial Paper Notes maturing on dates other
than those on which corresponding funds are received by DFC, but excluding any
other fees related to such funding. As used in this definition, RCC's "weighted
average cost" shall consist of (w) the actual interest rate (or discount) paid
to purchasers of RCC's Commercial Paper Notes, together with the commissions of
placement agents and dealers in respect of such Commercial Paper Notes, to the
extent such commissions are allocated, in whole or in part, to such Commercial
Paper Notes by RCC or the RCC Agent, (x) certain note issuance and wire cleaning
costs associated with the issuance of such Commercial Paper Notes, (y) any
incremental carrying costs incurred with respect to such Commercial Paper Notes
maturing on dates other than those on which corresponding funds are received by
RCC and (z) other borrowings by RCC (other than under any Program Support
Document), including borrowings to fund small or odd dollar amounts that are not
easily accommodated in the commercial paper market.

CP TRANCHE PERIOD: If the funding of the purchase or carrying of a
Note or a Note Increase is funded in whole or in part by Commercial Paper Notes,
(x) with respect to RCC,

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<PAGE>

initially a period commencing on (and including) the date of the initial
purchase or funding of such Note or Note Increase and ending on (but
excluding) the first day of the next following calendar month, and
thereafter, each period commencing on (and including) the last day of the
immediately preceding CP Tranche Period for such Note or Note Increase and
ending on (but excluding) the first day of the following calendar month, and
(y) with respect to DFC, a period of up to 120 days from and including the
date any amount of such Commercial Paper Notes are issued to and including
the date such Commercial Paper Notes mature.

CRAM DOWN LOSS: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the Principal Balance of such Receivable, the amount of such reduction.
A "Cram Down Loss" shall be deemed to have occurred on the date of issuance of
such order.

CUSTODIAN: Arcadia Financial Ltd., a Minnesota corporation, and any
successor thereto pursuant to the terms of the Custodian Agreement.

CUSTODIAN AGREEMENT: Any Custodian Agreement from time to time in
effect among the Custodian named therein, the Issuer, the Seller and the
Administrative Agent relating to custody of the Receivable Files, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, which Custodian Agreement and any amendments,
supplements or modifications thereto shall (so long as an Insurer Default shall
not have occurred and be continuing) be acceptable to the Security Insurer (the
Custodian Agreement which is effective on the Effective Date is acceptable to
the Security Insurer).

CUT-OFF DATE: With respect to any Receivables, the date specified in
the related Confirmation.

DEALER: A seller of new or used automobiles or light trucks that
originated one or more of the Receivables and sold the respective Receivable,
directly or indirectly, to AFL under an existing agreement between such seller
and AFL.

DEALER AGREEMENT: An agreement between AFL and a Dealer relating to
the sale of retail installment sale contracts and installment notes to AFL and
all documents and instruments relating thereto.

DEALER ASSIGNMENT: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to AFL.

DEFAULT AMOUNT: With respect to any Distribution Date, an amount, if
positive, equal to the sum of default interest for each day during the
immediately preceding Interest Period or portion thereof after the occurrence of
an Amortization Event that accrues at the applicable Default Rate on the
aggregate outstanding principal balance of the Notes on each such day,
calculated on the basis of the actual number of days elapsed and a 365-day year.

DEFAULT AMOUNT CARRYOVER SHORTFALL: With respect to any Distribution
Date, the excess of the Default Amount for the preceding Distribution Date and
any outstanding Default Amount Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of such Default Amount and Default
Amount Carryover Shortfall that is actually deposited in the

<PAGE>

Note Distribution Account on such preceding Distribution Date, PLUS interest
on the Default Amount Carryover Shortfall, to the extent permitted by law, at
an annualized rate equal to the weighted average of the Reference Rates from
such preceding Distribution Date through the current Distribution Date.

DEFAULT AMOUNT DISTRIBUTABLE AMOUNT: With respect to any Distribution
Date, the sum of the Default Amount for such Distribution Date and the Default
Amount Carryover Shortfall for such Distribution Date.

DEFAULT RATE: For each Note and each day during an Interest Period or
any portion thereof after the occurrence of an Amortization Event, a per annum
rate equal to the positive difference, if any, between (i) the Reference Rate
for such Note for such Interest Period, and (ii) the Advance Interest Rate for
such Note for such Interest Period; PROVIDED, that if the Advance Interest Rate
for such Note has been converted to a fixed interest rate, the Default Rate
shall be that rate set forth in the side letter between the Issuer and the
Administrative Agent and acknowledged by the Trustee.

DEFICIENCY CLAIM AMOUNT: As defined in Section 4.11(a).

DEFICIENCY CLAIM DATE: With respect to any Distribution Date, the
fourth Business Day immediately preceding such Distribution Date.

DEFICIENCY NOTICE: As defined in Section 4.11(a).

DEPOSIT DATE: With respect to any Monthly Period, the Business Day
immediately preceding the related Distribution Date.

DETERMINATION DATE: With respect to any Monthly Period, the sixth
Business Day prior to the related Distribution Date (or, if such day is not a
Business Day, the next succeeding Business Day); provided, however, that if the
determination dates in all of the other automobile loan securitizations of the
Seller insured by the Security Insurer are on the same date, the Determination
Date shall be such date provided the Seller provides the Indenture Trustee, the
Security Insurer, and each Agent 30 days prior written notice of such change.

DFC: Delaware Funding Corporation, a Delaware corporation.

DISTRIBUTION AMOUNT: With respect to a Distribution Date, the amount
of funds on deposit in the Collection Account on such Distribution Date.

DISTRIBUTION DATE: The 15th day of each calendar month, or if such
15th day is not a Business Day, the next succeeding Business Day, commencing
January 15, 1997 and including the Final Distribution Date.

EFFECTIVE DATE: July 21, 1998.

ELECTRONIC LEDGER: The electronic master record of the retail
installment sales contracts or installment loans of AFL.

<PAGE>

ELIGIBLE ACCOUNT: (i) A segregated trust account that is maintained
with the corporate trust department of a depository institution acceptable to
the Security Insurer (so long as an Insurer Default shall not have occurred and
be continuing), or (ii) a segregated direct deposit account maintained with a
depository institution or trust company organized under the laws of the United
States of America, or any of the States thereof, or the District of Columbia,
having a certificate of deposit, short term deposit or commercial paper rating
of at least "A-1+" by Standard & Poor's and "P-1" by Moody's and (so long as an
Insurer Default shall not have occurred and be continuing) acceptable to the
Security Insurer.

ELIGIBLE INVESTMENTS: Any one or more of the following types of
investments:

(a) (i) direct interest-bearing obligations of, and interest-bearing
obligations guaranteed as to timely payment of principal and interest by,
the United States or any agency or instrumentality of the United States the
obligations of which are backed by the full faith and credit of the United
States; and (ii) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal
and interest by, the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation, but only if, at the time of investment,
such obligations are assigned the highest credit rating by each Rating
Agency;

(b) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depository institution or trust company
organized under the laws of the United States or any State and subject to
supervision and examination by federal or state banking authorities
(including, if applicable, the Indenture Trustee, the Owner Trustee or any
agent of either of them acting in its commercial capacity); provided that
the short-term unsecured debt obligations of such depository institution or
trust company at the time of such investment, or contractual commitment
providing for such investment, are assigned the highest credit rating by
each Rating Agency;

(c) repurchase obligations pursuant to a written agreement (i) with
respect to any obligation described in clause (a) above, where the
Indenture Trustee has taken actual or constructive delivery of such
obligation in accordance with Section 3.1, and (ii) entered into with the
corporate trust department of a depository institution or trust company
organized under the laws of the United States or any state thereof, the
deposits of which are insured by the Federal Deposit Insurance Corporation
and the short-term unsecured debt obligations of which are rated "A-1+" by
Standard & Poor's and "P-1" by Moody's (including, if applicable, the
Indenture Trustee, the Owner Trustee or any agent of either of them acting
in its commercial capacity);

(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any state
whose long-term unsecured debt obligations are assigned the highest credit
rating by each Rating Agency at the time of such investment or contractual
commitment providing for such investment; provided however that securities
issued by any particular corporation will not be Eligible Investments to
the extent that an investment therein will cause the then outstanding
principal amount of securities issued by such corporation and held in the
Secured Accounts to exceed 10% of the Eligible Investments held in the
Secured

<PAGE>

Accounts (with Eligible Investments held in the Secured Accounts valued
at par);

(e) commercial paper that (i) is payable in United States dollars and
(ii) is rated in the highest credit rating category by each Rating Agency;

(f) with the prior written consent of the Security Insurer, money
market mutual funds registered under the Investment Company Act of 1940, as
amended, having a rating at the time of such investment from each of the
Rating Agencies in the highest credit rating category; or

(g) any other demand or time deposit, obligation, security or
investment as may be acceptable to the Security Insurer, as evidenced by
the prior written consent of the Security Insurer, as may from time to time
be confirmed in writing to the Indenture Trustee by the Security Insurer,
and with prior written notice to the Rating Agencies and the Agents.

Eligible Investments may be purchased by or through the Indenture Trustee or any
of its Affiliates.

ELIGIBLE SERVICER: AFL, the Backup Servicer or another Person which
at the time of its appointment as Servicer (i) is servicing a portfolio of motor
vehicle retail installment sales contracts or motor vehicle installment loans,
(ii) is legally qualified and has the capacity to service the Receivables, (iii)
has demonstrated the ability professionally and competently to service a
portfolio of motor vehicle retail installment sales contracts or motor vehicle
installment loans similar to the Receivables with reasonable skill and care, and
(iv) is qualified and entitled to use, pursuant to a license or other written
agreement, and agrees to maintain the confidentiality of, the software which the
Servicer uses in connection with performing its duties and responsibilities
under this Agreement or otherwise has available software which is adequate to
perform its duties and responsibilities under this Agreement.

EVENT OF DEFAULT: As defined in Section 2.5.

FEE LETTERS: Collectively, the Fee Letter dated as of July 21, 1998
among AFL, RCC and the RCC Agent and the Fee Letter dated as of July 21, 1998
among the Issuer, AFL and the DFC Agent.

FINAL DISTRIBUTION DATE: The earlier to occur of (i) the Final Scheduled
Distribution Date, and (ii) if an Amortization Event shall have occurred, the
Distribution Date next succeeding the date on which the Controlling Party shall
have sold, securitized or otherwise liquidated the last Receivable.

FINAL SCHEDULED DISTRIBUTION DATE: After the commencement of the
Amortization Period, the fourth Distribution Date after the Monthly Period in
which occurs the latest final scheduled payment on a Receivable (without giving
effect to any extensions granted by the Servicer pursuant to Section 3.2).

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<PAGE>

FINANCED VEHICLE: A new or used automobile or light truck, together
with all accessories thereto, securing or purporting to secure an Obligor's
indebtedness under a Receivable.

FORCE-PLACED INSURANCE: The meaning set forth in Section 3.4(b).

FRB: The Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.

GAAP: Generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of any
determination.

INDEBTEDNESS: With respect to any Person, without duplication, all
obligations, contingent or otherwise, which in accordance with GAAP should be
classified upon such Person's balance sheet as liabilities, but in any event
including the following (whether or not they should be classified as liabilities
upon such balance sheet): (a) all indebtedness for borrowed money of such
Person and all obligations of such Person secured by any mortgage, pledge,
security interest, lien, charge or other encumbrance existing on property owned
or acquired subject thereto, whether or not the obligation secured thereby shall
have been assumed and whether or not the obligation secured is the obligation of
such Person or another party; (b) any obligation of such Person on account of
deposits or advances; (c) any obligation of such Person for the deferred
purchase price of any property or services, except Trade Accounts Payable; (d)
any obligation of such Person as lessee under any Capitalized Lease; (e) all
guaranties, endorsements and other contingent obligations of such Person in
respect to Indebtedness of others (other than endorsements of instruments for
collection in the ordinary course of such Person's business); and (f)
undertakings or agreements to reimburse or indemnify the issuers of letters of
credit issued for the account of such Person. For all purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer.

INDENTURE: The Amended and Restated Indenture, dated as of July 21,
1998, between the Original Issuer, the Issuer and the Indenture Trustee, as the
same may be amended and supplemented from time to time.

INDENTURE TRUSTEE: The Person acting as Trustee under the Indenture,
its successors in interest and any successor Trustee under the Indenture.

INDEPENDENT ACCOUNTANTS: As defined in Section 3.11(a).

INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor in the
event that the Servicer obtains Force-Placed Insurance pursuant to Section 3.4.

INSURANCE AGREEMENT: The Amended and Restated Insurance and Indemnity
Agreement, dated as of July 21, 1998, among the Security Insurer, the Issuer,
the Seller and

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<PAGE>

AFL, as the same has been and may hereafter be amended,
supplemented, restated and otherwise modified.

INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default" as
defined in the Insurance Agreement.

INSURANCE POLICY: With respect to a Receivable, any insurance policy
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.

INSURER DEFAULT: The occurrence and continuance of any of the
following:

(a) the Security Insurer shall have failed to make a payment required
under the Note Policy;

(b) The Security Insurer shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York State Insurance Law, or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (ii) made a general assignment for the
benefit of its creditors, or (iii) had an order for relief entered against
it under the United States Bankruptcy Code, the New York State Insurance
Law, or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization which is final
and nonappealable; or

(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for the Security Insurer or for all
or any material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the Security
Insurer (or the taking of possession of all or any material portion of the
property of the Security Insurer).

INSURER NOTICE DATE: The earlier of (i) the date specified in the
written notice delivered by the Security Insurer pursuant to Section 2.1(g), and
(ii) the occurrence of an Amortization Event.

INTEREST PERIOD: With respect to any Distribution Date, the Monthly
Period immediately preceding such Distribution Date (or, in the case of the
first Distribution Date, the period from and including the Closing Date to and
excluding the first day of the succeeding calendar month); PROVIDED, that the
final Interest Period shall commence on the first day of the calendar month
immediately preceding the month in which the Final Distribution Date occurs and
shall end on, but shall exclude, the Final Distribution Date.

ISSUER: Arcadia Automobile Receivables Warehouse Trust., a Delaware
business trust.

LIBOR: The Offshore Rate.

<PAGE>

LIEN: Any security interest, lien, charge, pledge, preference, equity
or encumbrance of any kind, including tax liens, mechanics' liens and any liens
that attach by operation of law.

LIEN CERTIFICATE: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.

LIQUIDATED RECEIVABLE: With respect to any Monthly Period, a
Receivable as to which (i) 91 days have elapsed since the Servicer repossessed
the Financed Vehicle, (ii) the Servicer has determined in good faith that all
amounts it expects to recover have been received, or (iii) all or any portion of
a Scheduled Payment shall have become more than 180 days delinquent.

LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than amounts withdrawn
from the Spread Account and drawings under the Note Policy) net of (i)
reasonable expenses incurred by the Servicer in connection with the collection
of such Receivable and the repossession and disposition of the Financed Vehicle
and (ii) amounts that are required to be refunded to the Obligor on such
Receivable; PROVIDED, HOWEVER, that the Liquidation Proceeds with respect to any
Receivable shall in no event be less than zero.

LOCKBOX ACCOUNT: The segregated account maintained on behalf of the
Issuer by the Lockbox Bank in accordance with Section 3.2(d).

LOCKBOX AGREEMENT: The Agency Agreement, dated as of November 13,
1992 by and among Harris Trust and Savings Bank, AFL, Shawmut Bank, N.A., as
trustee, Saturn Financial Services, Inc. and the Program Parties (as defined
therein), taken together with the Retail Lockbox Agreement, dated as of November
13, 1992, among such parties, and the Counterpart to Agency Agreement and Retail
Lockbox Agreement, dated as of July 21, 1998, among Harris Trust and Savings
Bank, AFL, the Issuer, the Indenture Trustee and the Security Insurer, as such
agreements may be amended from time to time, unless the Indenture Trustee and
the Issuer shall cease to be a Program Party thereunder, or such agreement shall
be terminated in accordance with its terms, in which event "Lockbox Agreement"
shall mean such other agreement, in form and substance acceptable to the
Security Insurer, or if an Insurer Default shall have occurred and be
continuing, to the Administrative Agent, among the Servicer, the Issuer, the
Indenture Trustee and the Lockbox Bank.

LOCKBOX BANK: A depository institution named by the Servicer and, so
long as an Insurer Default shall not have occurred and be continuing, acceptable
to the Security Insurer, or, if an Insurer Default shall have occurred and be
continuing, to the Administrative Agent.

MAXIMUM INTEREST RATE: As of the date on which an Amortization Event
occurs, the greater of (I) the sum of (i) the Two Year Treasury Yield determined
as of such day by the

14
<PAGE>

Indenture Trustee pursuant to Section 403(b) of the Indenture plus (ii) 0.60%
plus (iii) the Basis Fee Percent and (II) the weighted average APR (weighted
based on the aggregate outstanding Principal Balance of the relevant
Receivables as of the immediately preceding Accounting Date PLUS the
aggregate outstanding Principal Balance of any Receivables transferred by the
Seller to the Issuer since such Accounting Date and LESS the aggregate
outstanding Principal Balance of any Receivables that became Purchased
Receivables or Repurchased Receivables since such Accounting Date) of
Qualifying Receivables, MINUS 7.25%, MINUS the Total Expense Percent.

MONTHLY ADVANCE: The amount that the Servicer is required to advance
on any Receivable pursuant to Section 4.4(a) or that the Servicer (or AFL if AFL
is not the Servicer) is required to advance on any Determination Date pursuant
to Section 4.4(b).

MONTHLY PERIOD: With respect to a Distribution Date, the calendar
month preceding the month in which such Distribution Date occurs (such calendar
month being referred to as the "related" Monthly Period with respect to such
Distribution Date). With respect to an Accounting Date, the calendar month in
which such Accounting Date occurs is referred to herein as the "related" Monthly
Period to such Accounting Date.

MONTHLY RECORDS: All records and data maintained by the Servicer with
respect to the Receivables, including the following with respect to each
Receivable: the account number; if originated by a Dealer, the identity of the
originating Dealer; Obligor name; Obligor address; Obligor home phone number;
Obligor business phone number; original Principal Balance; original term; Annual
Percentage Rate; current Principal Balance; current remaining term; origination
date; first payment date; final scheduled payment date; next payment due date;
date of most recent payment; new/used classification; collateral description;
days currently delinquent; number of contract extensions (months) to date;
amount, if any, of Force-Placed Insurance payable monthly; amount of the
Scheduled Payment; and past due late charges, if any.

MOODY'S: Moody's Investors Service, Inc., or any successor thereto.

NON-CALLABLE NOTES: A Note issued in connection with a
Recapitalization that is not subject to prepayment in whole or in part in
connection with the occurrence of a Repurchase Date specified in clause (i),
(ii), (iii) or (v) of the definition of Repurchase Date in this Section 1.1, as
applied pursuant to Sections 2.1(d), 2.1(e) and 4.10(b), but is otherwise
subject to mandatory prepayment in the situation described in the third sentence
of Section 2.1(d) as applied pursuant to Sections 2.1(e) and 4.10(b).

NOTES: The two Floating Rate Variable Funding Automobile
Receivables-Backed Notes issued by the Issuer pursuant to the Indenture and
purchased by each Agent under the Note Purchase Agreement.

NOTE DISTRIBUTION ACCOUNT: The account designated as such,
established and maintained pursuant to Section 4.1(b).

NOTE MAJORITY: Holders of Notes representing a majority of the
outstanding principal balance of the Notes.

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<PAGE>

NOTE POLICY: The financial guaranty insurance policy issued by the
Security Insurer to the Indenture Trustee on behalf of the Noteholders.

NOTE PURCHASE AGREEMENT: The Amended and Restated Note Purchase
Agreement, dated as of July 21, 1998, among AFL, the Issuer, the Administrative
Agent, the Agents, RCC and DFC.

OBLIGOR: The purchaser or the co-purchasers of the Financed Vehicle
and any other Person or Persons who are primarily or secondarily obligated to
make payments under a Receivable.

OFFSHORE RATE: (i) For any Interest Period or any shorter period for
which interest accrues and (ii) for the purpose of determining the WAC
Deficiency Percentage, the rate of interest per annum (rounded upward, if
necessary, to the next 1/16th of 1%) determined by the Administrative Agent as
follows:

Offshore Rate = IBOR
---------------------------------------
1.00 - Eurodollar Reserve Percentage.

Where,

EURODOLLAR RESERVE PERCENTAGE means for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal, rounded
upward, if necessary, to the next 1/100th of 1%) in effect on such day and
applicable to any Noteholder related to the RCC Agent under regulations
issued from time to time by the FRB for determining the maximum reserve
requirement (including any emergency supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and

IBOR means the rate of interest per annum determined by the
Administrative Agent as the rate at which dollar deposits in the
approximate amount of the applicable Noteholders' funding for the purchase
or carrying of the related Note that is not being provided by Commercial
Paper Notes are offered for such Interest Period or any shorter period for
which interest accrues based on information presented on the Telerate
Screen page 3750 at approximately 11:00 a.m. (Chicago time) two Business
Days prior to such date of determination; PROVIDED, that if at least two
such offered rates appear on the Telerate Screen in respect of such
Interest Period or any shorter period for which interest accrues, the
arithmetic mean of all such rates (as determined by the Administrative
Agent) will be the rate used; PROVIDED, FURTHER, that if Telerate ceases to
provide the London interbank offered rate quotations, such rate shall be
the rate of interest determined by the Agent at which dollar deposits in
the approximate amount of the applicable Noteholders' funding for the
purchase or carrying of the related Note that is not being provided by
Commercial Paper Notes for such Interest Period or shorter period for which
interest accrues would be offered by BofA's Grand Cayman Branch, Grand
Cayman, B.W.I. (or such other office as may be designated for such purpose
of BofA), to major banks in the offshore dollar market at their request at
approximately 11:00 a.m. (New York City time) two Business Days prior to
such date of determination.

<PAGE>

The Offshore Rate shall be adjusted automatically as of the effective
date of any change in the Eurodollar Reserve Percentage.

OFFSHORE TRANCHE PERIOD: The period commencing on the date any
portion of a Note is no longer funded by Commercial Paper Notes or the last day
of any previous Offshore Tranche Period and ending on the date seven, fourteen
or twenty-one days or one, two or three months thereafter as selected by the
Issuer; PROVIDED that:

(i) if any Offshore Tranche Period would otherwise end on a day
that is not a Business Day, such Offshore Tranche Period shall
be extended to the following Business Day unless, in the case
of an Offshore Tranche Period of one, two or three months, the
result of such extension would be to carry such Offshore
Tranche Period into another calendar month, in which event
such Offshore Tranche Period shall end on the preceding
Business Day;

(ii) any Offshore Tranche Period of one, two or three months that
begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the
calendar month at the end of such Offshore Tranche Period)
shall end on the last Business Day of the calendar month at
the end of such Offshore Tranche Period; and

(iii) no Offshore Tranche Period for such Note shall extend beyond
the end of the Purchase Period.

OPINION OF COUNSEL: A written opinion of counsel acceptable in form
and substance and from counsel acceptable to the Administrative Agent and, if
such opinion or a copy thereof is required to be delivered to the Owner Trustee,
the Indenture Trustee or the Security Insurer, to the Indenture Trustee, the
Owner Trustee or the Security Insurer, as applicable.

ORIGINAL REPURCHASE AGREEMENT: The Repurchase Agreement dated as of
December 3, 1996, between Arcadia Receivables Conduit Corp., as Buyer, and
Arcadia Receivables Finance Corp., as Seller, as amended and in effect on the
Effective Date.

ORIGINAL SERVICING AGREEMENT: The Servicing Agreement dated as of
December 3, 1996 among the Seller, the Original Issuer, Arcadia Financial Ltd.,
in its individual capacity and as Servicer, Bank of America National Trust and
Savings Association, as Agent, and Norwest Bank Minnesota, National Association,
as Backup Servicer, Collateral Agent and Indenture Trustee, as amended and in
effect on the Effective Date.

OUTSTANDING MONTHLY ADVANCES: With respect to any Determination Date,
(A) the sum of all Monthly Advances made pursuant to Section 4.4(a) with respect
to a Receivable on any Determination Date prior to such Determination Date which
have not been reimbursed pursuant to Section 4.6(b)(i) or (B) the sum of all
Monthly Advances made pursuant to Section 4.4(b) on any Determination Date prior
to such Determination Date which have not been reimbursed pursuant to Section
4.6(a)(ii).

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<PAGE>

OWNER TRUSTEE: Wilmington Trust Company, acting not individually but
solely as trustee, or its successor in interest, and any successor Owner Trustee
appointed as provided in the Trust Agreement.

PERSON: Any legal person, including any individual, corporation,
partnership, limited liability company, joint venture, estate, association,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof, or any other entity.

PREMIER RECEIVABLES: Receivables originated under AFL's "Premier"
program.

PRINCIPAL BALANCE: With respect to any Receivable, as of any date,
the Amount Financed minus (i) that portion of all amounts received on or prior
to such date and allocable to principal in accordance with the terms of the
Receivable, and (ii) any Cram Down Loss in respect of such Receivable.

PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution Date
during the Amortization Period, the amount equal to the sum of the following
amounts with respect to the immediately preceding Monthly Period, in each case
computed without duplication (including without duplication of amounts
distributed with respect to prior Distribution Dates): (i) that portion of all
collections on Receivables allocable to principal, including all full and
partial principal prepayments, (ii) the Principal Balance (as of the related
Accounting Date) of all Receivables that are Liquidated Receivables as of the
prior Accounting Date (other than Receivables that became Purchased Receivables
or Repurchased Receivables as of the immediately preceding Accounting Date),
(iii) the portion of the Purchase Amount allocable to principal of all
Receivables that became Purchased Receivables as of the immediately preceding
Accounting Date, (iv) the portion of the Repurchase Price allocable to principal
of all Receivables that became Repurchased Receivables during the preceding
Monthly Period, (v) the portion of the proceeds allocable to principal from the
sale or securitization of the Receivables pursuant to the Security Agreement,
and (vi) the aggregate amount of Cram Down Losses that shall have occurred
during or prior to the related Monthly Period.

PURCHASE AGREEMENT: The Amended and Restated Receivables Purchase
Agreement and Assignment, dated as of July 21, 1998 between AFL and the Seller.

PURCHASE AMOUNT: With respect to a Receivable, the Principal Balance
and all accrued and unpaid interest on the Receivable (without regard to any
Monthly Advances that may have been made with respect to the Receivable) as of
the Accounting Date on which the obligation to purchase such Receivable arises.

PURCHASE DATE: A date prior to the Insurer Notice Date on which
Receivables are transferred by the Seller to the Issuer.

PURCHASE PERIOD: As defined in the Note Purchase Agreement.

PURCHASE PRICE: With respect to each Purchase Date, the price at
which Receivables are transferred by the Seller to the Issuer, which shall equal
the product of 0.96 and

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the outstanding Principal Balance of the Premier Receivables and the Classic
Receivables being transferred on such Purchase Date.

PURCHASED RECEIVABLE: As of any Accounting Date, any Receivable
(including any Liquidated Receivable) that became an Administrative Receivable
as of such Accounting Date, and as to which the Purchase Amount has been
deposited in the Collection Account by AFL or the Servicer, as applicable, on or
before the related Deposit Date.

QUALIFYING RECEIVABLE: With respect to any Monthly Period, a
Receivable as to which (i) no portion of a Scheduled Payment shall have become
more than 30 days delinquent as of the applicable Accounting Date, (ii) the
Servicer in good faith has not determined that the Obligor thereon is unlikely
to continue making Scheduled Payments, (iii) all of the representations and
warranties under the Purchase Agreement and this Agreement are true and correct,
and (iv) is not secured by a Financed Vehicle that is a financed repossession;
PROVIDED, the aggregate Principal Balance of Classic Receivables in excess of
80% of the aggregate outstanding Principal Balance of Qualifying Receivables
shall be excluded from the Principal Balance of Qualifying Receivables for all
purposes hereunder, including, the denominator of the aforesaid calculation and
the calculation of the Collateral Test.

RATING AGENCY: Each of Moody's and Standard & Poor's, so long as such
Persons determined a capital charge with respect to the issuance of the Note
Policy by the Security Insurer; and if either Moody's or Standard & Poor's no
longer determines such capital charge, such other nationally recognized
statistical rating organization selected by the Administrative Agent and (so
long as an Insurer Default shall not have occurred and be continuing) acceptable
to the Security Insurer.

RECAPITALIZATION: A recapitalization of the Trust in which (a) the
Trust issues Non-Callable Notes under the Indenture, the proceeds of which are
used to redeem, in full but not in part, the Outstanding Notes prior to that
recapitalization and (b) the Seller waives its rights and is relieved of its
obligations to repurchase the Receivables pursuant to clauses (i), (ii), (iii)
or (v) of the definition of Repurchase Date in this Section 1.1 as applied
pursuant to Section 2.1(d).

RECEIVABLE: A retail installment sale contract or promissory note
(and related security agreement) for a new or used automobile or light truck
(and all accessories thereto) that is included in the Receivables Schedule, and
all rights and obligations under such a contract, but not including (i) any
Liquidated Receivable (other than for purposes of calculating the Advance
Interest Distributable Amounts, Advance Principal Distributable Amounts and the
WAC Deficiency amount hereunder and for the purpose of determining the
obligations pursuant to Section 3.7 to purchase Receivables), (ii) any Purchased
Receivable on or after the Accounting Date immediately preceding the Deposit
Date on which payment of the Purchase Amount is made in connection therewith
pursuant to Section 4.5 or (iii) any Repurchased Receivable on or after the date
on which payment of the Repurchase Price is deposited in the Collection Account
pursuant to Section 2.1(d).

RECEIVABLE FILES: The documents, electronic entries, instruments and
writings listed in Section 2.3(c) pertaining to a particular Receivable.

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RECEIVABLES SCHEDULE: As defined in Section 2.1(b).

REFERENCE RATE: For any day, a fluctuating interest rate per annum as
shall be in effect from time to time, which rate shall be at all times equal to
(i) with respect to the Note related to the RCC Agent, the rate of interest in
effect for such day, as publicly announced from time to time by BofA in San
Francisco, California, as its "reference rate," which is a rate set by BofA
based upon various factors including BofA's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above or below such announced rate,
or (ii) with respect to the Note related to the DFC Agent, the higher of (a) the
prime rate announced from time to time by the DFC Agent and in effect on the
morning of each such day, and (b) the rate equal to 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 for each such day
(or, if such day is not a Business Day, the next succeeding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
such day, the average of the quotations for such day for such transactions
received by the DFC Agent from three Federal funds brokers of recognized
standing selected by it plus one-half of one percent (1/2 of 1%).

REGISTRAR OF TITLES: With respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.

RELATED DOCUMENTS: This Agreement, the Indenture, the Notes, the
Purchase Agreement, the Trust Agreement, the Administration Agreement, the
Custodian Agreement, the Note Policy, the Security Agreement, the Note Purchase
Agreement, the Fee Letters, the Insurance Agreement, the Spread Account
Agreement and the Lockbox Agreement. The Related Documents executed by any
party are referred to herein as "such party's Related Documents," "its Related
Documents" or by a similar expression.

REPURCHASE DATE: With respect to any Receivable, the date on which
the Seller is required to repurchase such Receivable from the Issuer, which date
shall be the earliest to occur of (i) the date that is twelve months after the
Purchase Date of such Receivable, (ii) a date specified by the Seller upon at
least three Business Days prior notice to the Issuer, the Indenture Trustee and
the Security Insurer in the form set forth in Exhibit F, (iii) any date
determined with respect to such Receivable by the application of the provisions
of Section 2.6 hereof, (iv) any date determined with respect to such Receivable
by the application of the provisions of Section 2.8 hereof and (v) the last day
of the Purchase Period; PROVIDED, that notwithstanding the above, after a
Recapitalization, the Repurchase Date with respect to a Receivable shall refer
only to the date determined under clause (iv) of this definition.

REPURCHASE PRICE: With respect to a Receivable, the price at which
such Receivable is to be transferred from the Issuer to the Seller, which will
equal the product of 0.96 and the aggregate outstanding Principal Balance of
such Receivable as of the date of such transfer, plus interest on 96% of the
Principal Balance of such Receivable at the sum of the Advance Interest Rate
plus the Total Expense Percent, plus any Breakage Fee payable upon the
simultaneous repayment of the related Advance (if such Advance is being repaid),
in each case as of the date of such transfer.

<PAGE>

REPURCHASED RECEIVABLES: Any Receivables that are required to be
repurchased by the Seller pursuant to Section 2.1(d).

RESPONSIBLE OFFICER: The President, any Vice President or Assistant
Vice President, Trust Officer or the Controller of such Person, or any other
officer or employee having similar functions and, with respect to the Seller or
the Servicer, those employees of the Seller or the Servicer, as the case may be,
whose names appear on a list of people authorized to sign on behalf of the
Seller or Servicer, as applicable, furnished to the Owner Trustee, the Indenture
Trustee, the Security Insurer and the Administrative Agent, as such list may
from time to time be amended.

REVOLVING PERIOD: The period from and including the Closing Date to
but excluding the date on which the Amortization Period commences.

SCHEDULE OF REPRESENTATIONS: The Schedule of Representations and
Warranties attached hereto as Schedule A.

SCHEDULED PAYMENT: With respect to any Monthly Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Monthly Period. If after the applicable Cut-Off Date with
respect to a Receivable, the Obligor's obligation under such Receivable with
respect to a Monthly Period has been modified so as to differ from the amount
specified in such Receivable as a result of (i) the order of a court in an
insolvency proceeding involving the Obligor, (ii) pursuant to the Soldiers' and
Sailors' Civil Relief Act of 1940 or (iii) modifications or extensions of the
Receivable permitted by Section 3.2(b), the Scheduled Payment with respect to
such Monthly Period shall refer to the Obligor's payment obligation with respect
to such Monthly Period as so modified.

SECURED ACCOUNTS: The meaning specified in Section 4.1(c).

SECURITIZED OFFERING: An offering of notes or certificates of the
Trust, the proceeds of which are used to redeem, in full, the Notes issued under
the Indenture.

SECURITY AGREEMENT: The Amended and Restated Security Agreement dated
as of July 21, 1998, among AFL, the Seller, the Security Insurer, the
Administrative Agent, the Issuer, the Indenture Trustee and the Collateral
Agent.

SECURITY INSURER: Financial Security Assurance Inc., a financial
guaranty insurance corporation incorporated under the laws of the State of New
York, or any successor thereto, as the Issuer of the Note Policy.

SECURITY INSURER OPTIONAL DEPOSIT: With respect to a Determination
Date, the amount, if any, delivered by the Security Insurer to the Indenture
Trustee pursuant to Section 4.5(b) with respect to such Determination Date.

SELLER: Arcadia Receivables Finance Corp., a Delaware corporation.

SELLER CONVEYED PROPERTY: As defined in Section 2.3(b).

<PAGE>

SERVICER: Arcadia Financial Ltd., its successor in interest pursuant
to Section 6.2 or, after any termination of the Servicer upon a Servicer
Termination Event, the Backup Servicer or any other successor Servicer.

SERVICER EXTENSION NOTICE: The notice delivered pursuant to Section
3.14.

SERVICER TERMINATION EVENT: An event described in Section 6.1.

SERVICER'S CERTIFICATE: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in accordance
with Section 3.9, substantially in the form attached hereto as Exhibit B.

SPREAD ACCOUNT: The Spread Account maintained pursuant to the Spread
Account Agreement.

SPREAD ACCOUNT AGREEMENT: The Spread Account Agreement dated as of
March 25, 1993, as amended and restated as of July 21, 1998, among the Seller,
AFL, the Spread Account Collateral Agent, the Security Insurer and the trustees
specified therein, together with the Warehousing Series Supplement thereto dated
as of December 3, 1996, and amended and restated as of July 21, 1998, as the
same may be further amended, supplemented or otherwise modified in accordance
with the terms thereof.

SPREAD ACCOUNT AVAILABLE FUNDS: With respect to any Deficiency Claim
Date, the amount on deposit in the Collection Account as of such date, without
taking into account any amounts deposited into the Collection Account with
respect to amounts withdrawn from the Spread Account pursuant to Section 4.11.

SPREAD ACCOUNT COLLATERAL AGENT: The Collateral Agent named in the
Spread Account Agreement, and any successor thereto pursuant to the terms of the
Spread Account Agreement.

STANDARD & POOR'S: Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor thereto.

SUBSIDIARY: For any Person means any corporation, association,
partnership, limited liability company, joint venture or other business entity
of which more than 50% of the voting stock, membership interests or other equity
interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by such Person, or one or more of the
Subsidiaries of such Person, or a combination thereof. Without limiting the
generality of the foregoing, the term "Subsidiary" specifically includes any
special purpose vehicle or conduit formed by a Person that is otherwise within
the ambit of the immediately preceding sentence. Unless the context otherwise
clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of
AFL.

SUPPLEMENTAL SERVICING FEE: With respect to any Monthly Period, all
administrative fees, expenses and charges paid by or on behalf of Obligors,
including late fees, collected on the Receivables during such Monthly Period.

<PAGE>

TOTAL EXPENSE PERCENT: 1.68%.

TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.

TRADE ACCOUNTS PAYABLE: As to any Person, the trade accounts payable
to such Person with a maturity of not greater than 90 days incurred in the
ordinary course of such Person's business.

TRANCHE: A portion of the Advances funded by the Notes funded by the
related Noteholders' sale of Commercial Paper Notes maturing at the end of a CP
Tranche Period, or funded at the Offshore Rate or LIBOR, as applicable, for an
Offshore Tranche Period, as selected by the Issuer as provided in the definition
of Offshore Tranche Period.

TRANCHE PERIOD: A CP Tranche Period or an Offshore Tranche Period.

TRANSACTION: A transaction in which the Issuer makes Advances for the
account of the Seller for deposit in the Collection Account and the Seller
transfers Receivables and the related other Seller Conveyed Property to the
Issuer from time to time against release of funds from the Collection Account.

TRUST: Arcadia Automobile Receivables Warehouse Trust.

TRUST AGREEMENT: The Trust Agreement, dated as of July 21, 1998,
between the Seller and the Owner Trustee, as the same may be amended and
supplemented from time to time.

TWO YEAR TREASURY YIELD: As of any date of determination, the per
annum rate equal to the yield for two year United States Treasury notes that
appears as the "ask" price as reported by Bloomberg's Financial Reporting
Markets (or the Telerate Page, or such replacement system or page as is then
customarily used to quote yields on United States Treasury notes) at the close
of business or the date prior to such date of determination; PROVIDED, HOWEVER,
following the occurrence of an Amortization Event, the Two Year Treasury Yield
shall be the yield for two year United States Treasury notes appearing as the
"ask" price as reported by Bloomberg's Financial Reporting Markets (or the
Telerate Page, or such replacement system or pages as is then customarily used
to quote yields on United States Treasury notes) at the close of business, New
York City time, on the date of the occurrence of such Amortization Event.

UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.

WAC DEFICIENCY AMOUNT: As of any date of determination on which the
WAC Deficiency Percentage is greater than zero, an amount equal to the product
of (x) 1.7 times (y) the WAC Deficiency Percentage times (z) the result of (i)
the aggregate outstanding Principal Balance of the Receivables as of the
immediately preceding Accounting Date PLUS (ii) the aggregate outstanding
Principal Balance of any Receivables transferred by the Seller to the Issuer
since such Accounting Date and LESS (iii) the aggregate outstanding Principal
Balance of any Receivables that become Purchased Receivables or Repurchased
Receivables since such Accounting Date.

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WAC DEFICIENCY DEPOSIT: As of any date of determination, the
amount on deposit in the Collection Account in respect of the WAC Deficiency
Amount, which shall equal the amount withheld in the Collection Account in
respect of the WAC Deficiency Amount on the Distribution Date coinciding with
or next preceding such date of determination pursuant to Section 4.6(a)(vii)
plus amounts, if any, deposited into the Collection Account in respect of the
WAC Deficiency Amount from such Distribution Date to and including the date
of determination.

WAC DEFICIENCY PERCENTAGE: As of any date of determination, an
amount expressed as a percentage equal to the excess, if any, of (A) 7.25%
PLUS the greatest of (I) the sum of (i) the Two Year Treasury Yield,
determined as of such date, (ii) 0.60%, (iii) the Basis Fee Percent and (iv)
the Total Expense Percent; (II) the sum of (i) the product of (1) the CP
Composite Rate, if the purchase or carrying of any of the Notes by the
Noteholders is funded by Commercial Paper Notes, and (2) 1.2 PLUS (ii) 0.25%
and (iii) the Total Expense Percent; and (III) the sum of (i) the product of
(1) the Offshore Rate, if the purchase or carrying of any of the Notes by the
Noteholders is not funded by Commercial Paper Notes, and (2) 1.2, (ii) 0.375%
and (iii) the Total Expense Percent over (B) the weighted average APR
(weighted based on the aggregate outstanding Principal Balance of the
relevant Receivables as of the immediately preceding Accounting Date PLUS the
aggregate outstanding Principal Balance of any Receivables transferred by the
Seller to the Issuer since such Accounting Date and LESS the aggregate
outstanding Principal Balance of any Receivables that became Purchased
Receivables or Repurchased Receivables since such Accounting Date) of
Qualifying Receivables.

WAREHOUSING SHORTFALL AVAILABLE FUNDS: With respect to any
Deficiency Claim Date, means the amount on deposit in the Collection Account
as of such date, taking into account amounts deposited into the Collection
Account in respect of a Collection Account Shortfall but without taking into
account amounts deposited into the Collection Account in respect of a
Warehousing Shortfall.

WARRANTY RECEIVABLE: With respect to any Monthly Period, a
Receivable that the Seller or AFL has become obligated to repurchase pursuant
to Section 2.8.

Section 1.2. USAGE OF TERMS. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography, and other means of reproducing words
in a visible form; references to agreements and other contractual instruments
include all subsequent amendments thereto or changes therein entered into in
accordance with their respective terms and not prohibited by this Agreement;
references to Persons include their permitted successors and assigns; and the
terms "include" or "including" mean "include without limitation" or
"including without limitation."

Section 1.3. CALCULATIONS. All calculations of the amount of
interest accrued on the Notes shall be made on the basis of a 360-day year
and actual days elapsed and all calculations of the amount of the Basic
Servicing Fee shall be made on the basis of a 360-day year consisting of
twelve 30-day months. All references to the Principal Balance of a
Receivable as of an Accounting Date shall refer to the close of business on
such day.

<PAGE>

Section 1.4. SECTION REFERENCES. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.

Section 1.5. NO RECOURSE. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing
delivered in connection herewith or therewith, against any stockholder,
employee, incorporator, officer, or director, as such, of the Seller, either
Agent, the Administrative Agent, AFL, the Servicer, the Indenture Trustee,
the Owner Trustee, the Collateral Agent, the Backup Servicer or the Issuer or
of any predecessor or successor of the Seller, either Agent, the
Administrative Agent, AFL, the Servicer, the Indenture Trustee, the Owner
Trustee, the Collateral Agent, the Backup Servicer or the Issuer.

Section 1.6. MATERIAL ADVERSE EFFECT. Whenever a determination
is to be made under this Agreement as to whether a given event, action,
course of conduct or set of facts or circumstances could or would have a
material adverse effect on the Issuer or the Noteholders (or any similar or
analogous determination), such determination shall be made without taking
into account the insurance provided by the Note Policy.

Section 1.7. CONDITIONS OF EFFECTIVENESS. This Agreement shall
amend and restate the Original Servicing Agreement and the Original
Repurchase Agreement and shall become effective as of the Effective Date,
upon receipt by the Administrative Agent of this Agreement and each of the
Related Documents executed and delivered by each of the parties hereto and
thereto, and any and all certificates, opinions and other documents required
hereby or thereby or as the Administrative Agent may request in connection
herewith or therewith, in each case in form and substance satisfactory to the
Administrative Agent in it sole discretion.

Section 1.8. ASSIGNMENT AND DELEGATION OF RIGHTS AND DUTIES BY
ORIGINAL ISSUER TO ISSUER. Effective as of the Effective Date, Arcadia
Receivables Conduit Corp., as Original Issuer, hereby assigns and delegates
all of its rights and obligations under this Agreement and each of its
Related Documents to the Arcadia Automobile Receivables Warehouse Trust, as
Issuer (including with respect to the Original Repurchase Agreement and the
Original Servicing Agreement), and Arcadia Automobile Receivables Warehouse
Trust hereby accepts such assignment and delegation, and from and after the
Effective Date, Arcadia Automobile Receivables Warehouse Trust shall be the
Issuer for all purposes under this Agreement and the Related Documents. Such
assignment and delegation shall include, among other things, an assignment
from the Original Issuer to the Issuer of all of the Original Issuer's right,
title and interest, if any, in the Receivables and the other Seller Conveyed
Property, and the right to receive any amounts in respect thereof under this
Agreement and the Related Documents. In furtherance thereof, on the
Effective Date, the Original Issuer hereby sells, transfers, assigns, and
otherwise conveys to the Issuer, all of the right, title and interest, if
any, whether now or hereafter acquired, of the Original Issuer in and to all
accounts, contract rights, general intangibles, chattel paper, instruments,
documents, money, deposit accounts, certificates of deposit, goods, letters
of credit, advices of credit and authenticated securities consisting of,
arising from or relating to any of the following property: (i) the
Receivables; (ii) the Other Conveyed Property related thereto; (iii) the
rights of the Seller under the Purchase Agreement and each Assignment
Agreement assigned to the Original Issuer pursuant to the Original Servicing
Agreement, including the right to cause AFL to repurchase Receivables from
the Seller

<PAGE>

under certain circumstances; (iv) all amounts required to be deposited, or
deposited, or delivered to the Collateral Agent for deposit, to the
Collection Account by the Seller in respect of the WAC Deficiency Amount or
the Collateral Test; (v) all funds on deposit in the Secured Accounts, and in
all investments and proceeds thereof (including all income thereon); (vi) the
Original Servicing Agreement and the Original Repurchase Agreement; and (vii)
all present and future claims, demands, causes and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any and all of the
foregoing, including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivables, notes, drafts, acceptances, chattel paper, checks,
deposit accounts, insurance proceeds, condemnation awards, rights to payment
of any and every kindand other forms of obligations and receivables,
instruments and other property which at any time constitute all or part of or
are included in the proceeds of any of the foregoing.

ARTICLE II
COMMITMENT AND CONVEYANCE OF RECEIVABLES

Section 2.1. COMMITMENT.

(a) The Issuer agrees, on the terms of this Agreement, to make
Advances for the account of the Seller by depositing the balance of the
proceeds of such Advance in the Collection Account during the period from and
including the Effective Date to but not including the earliest to occur of
(x) the Insurer Notice Date, (y) the termination of the commitment pursuant
to Section 2.7 hereof and (z) the first day of the Amortization Period, in an
amount at any one time outstanding not to exceed the Commitment Amount.
Subject to the terms of this Agreement, during such period the Seller may
request Advances and prepay Advances without limitation, except that (i) each
Advance and prepayment shall be in amounts of $7,000,000 or any amount in
excess thereof, (ii) each request for an Advance shall comply with clause (c)
below and each prepayment of an Advance shall comply with clause (e) below,
and (iii) the Seller shall not be permitted to request an Advance if the
difference between the aggregate outstanding principal balance of the
Advances and the aggregate outstanding Principal Balance of the Receivables
is greater than $5,000,000 (excluding any WAC Deficiency Deposits) (or such
other amount as shall be agreed to in writing from time to time by the
Seller, the Issuer, the Administrative Agent and the Security Insurer). The
Issuer agrees, subject to the terms and conditions of this Agreement, to the
extent and only to the extent of funds available for release to the Seller
for such purpose on deposit in the Collection Account, to purchase
Receivables from the Seller from time to time during the period from and
including the Effective Date to but excluding the earliest to occur of (q)
the Insurer Notice Date, (r) the termination of the commitment pursuant to
Section 2.7 hereof, and (s) the first day of the Amortization Period.

(b) On each Purchase Date, the Receivables shall be transferred
to the Issuer or its agent against the release of the Purchase Price from the
Collection Account for deposit to the Spread Account and payment to the
Seller in accordance with and subject to the provisions of Section 4.10 of
this Agreement and the Security Agreement. On the Purchase Date for a
Transaction hereunder, the Seller shall promptly deliver to the
Administrative Agent, the Owner Trustee and to the Indenture Trustee a
written confirmation, in the form set forth in Exhibit E, of

<PAGE>

such Transaction (a "Confirmation"). The Confirmation shall describe the
Receivables, identify the Issuer and the Seller, have the updated Receivables
Schedule attached thereto and set forth (i) the Purchase Date, (ii) the
Purchase Price, (iii) the Cut-Off Date, and (iv) any additional terms or
conditions of the Transaction not inconsistent with this Agreement. The
Confirmation, together with this Agreement, shall constitute conclusive
evidence of the terms agreed between the Issuer and the Seller with respect
to the transfer to which the Confirmation relates, unless with respect to the
Confirmation specific objection is made promptly after receipt thereof. In
the event of any conflict between the terms of such Confirmation and this
Agreement, this Agreement shall prevail. The Receivables shall be identified
on a detailed list provided by the Seller to the Issuer on each Purchase Date
and Repurchase Date (the "Receivables Schedule") and may be identified in the
related Confirmation by reference to such list. Any release of funds from
the Collection Account in connection with a purchase of Receivables shall not
affect the outstanding principal balance of Advances.

(c) The Seller shall give the Issuer, the Administrative Agent
and the Indenture Trustee notice of each request for an Advance by 12:00
noon, Minneapolis, Minnesota time, at least one Business Day prior to the
date requested for such Advance (or if such request is for an Advance of
$15,000,000 or less, by 11:00 a.m., New York City time, on the date requested
for such Advance), which notice shall be substantially in the form of Exhibit
H attached hereto and which, except for CP Tranche Periods related to RCC,
shall include the Seller's requested Tranche Periods in connection with such
Advance. Each such notice shall be in the form of Exhibit H and shall be
irrevocable unless a written revocation signed by a Responsible Officer of
the Seller is received by the Issuer by the end of the day immediately
preceding the day such Advance will be made and shall be effective only if
received by the Issuer not later than 12:00 noon Minneapolis, Minnesota time
on the date specified in the preceding sentence (or if such notice is for a
same-day Advance, 11:00 a.m. New York City time on the date of the requested
Advance). Not later than 1:00 p.m., Minneapolis, Minnesota time, on the date
specified for each Advance hereunder, the Issuer shall deposit the amount of
such Advance in the Collection Account.

(d) On the Repurchase Date for any Receivables, such repurchase
shall be effected by transfer to the Seller or its agent of such Receivables
against the transfer of the Repurchase Price therefor on behalf of the Issuer
to the Collection Account. On such Repurchase Date , the Issuer shall
execute a written reconveyance substantially in the form of Exhibit G
pursuant to which it shall reconvey to the Seller (without recourse,
representation or warranty other than as to Liens created by the Issuer) all
right, title and interest of the Issuer in such Receivables. On any Business
Day during the Revolving Period on which there has been since the preceding
Business Day an amount greater than $5,000,000 on deposit in the Collection
Account in excess of the WAC Deficiency Deposit, the Seller shall effect a
prepayment of Advances pursuant to Section 2.1(e) hereof in an amount equal
to the lesser of (x) the amount specified by the Seller equal to or greater
than $5,000,000 and (y) the amount permitted to be prepaid pursuant to
Section 2.1(e) hereof. On a Repurchase Date specified in clause (v) of the
definition of Repurchase Date herein, the Seller shall effect a repayment of
Advances pursuant to Section 2.1(e) hereof, up to the outstanding principal
balance of the Notes.

(e) Subject to the terms of this Agreement, the Seller shall
have the right to prepay Advances on any Business Day during the Revolving
Period prior to a Recapitalization in

<PAGE>

an amount equal to $5,000,000 or any amount in excess thereof. In addition,
the Seller shall be required to prepay Advances in the circumstances set
forth in the third sentence or the last sentence of Section 2.1(d). Any such
prepayment shall include accrued and unpaid interest on the Advance at the
Advance Interest Rate being prepaid through but excluding the date such
Advance is prepaid. By 12:00 noon, Minneapolis, Minnesota time, on the
Business Day preceding the date on which the Seller proposes or is required
to prepay Advances, the Seller shall notify the Issuer, the Administrative
Agent, the Servicer, the Backup Servicer, the Collateral Agent, the Indenture
Trustee and the Security Insurer of the amount of such prepayment, which
amount shall be set forth in a certificate executed by a Responsible Officer
of the Seller on such date of notice. The Seller shall pay the Breakage Fee,
if any, on such date of prepayment by paying to the Trustee for deposit into
the Note Distribution Account an amount equal to such Breakage Fee (which
amount may come from amounts otherwise distributable to the Seller on such
date). Any such prepayment (including interest in connection therewith but
excluding the aforementioned Breakage Fee) shall be payable solely out of
funds on deposit in the Collection Account and the Spread Account and shall
not exceed an amount equal to the lesser of (i) on any date occurring during
the period from but excluding a Determination Date through and including the
related Distribution Date, an amount equal to the excess of the total amount
on deposit in the Collection Account and the Spread Account on such date over
the sum of (A) the amounts to be distributed on such Distribution Date
pursuant to clauses (i) through (ix) of Section 4.6(a) of this Agreement as
set forth in a Servicer's Certificate delivered on such Determinaton Date,
and (B) any increase in the WAC Deficiency Amount on such date, if any, above
the WAC Deficiency Amount on such Determination Date, and (ii) an amount
equal to the excess of the total amount on deposit in the Collection Account
on such date over the WAC Deficiency Amounts, if any, on deposit in the
Collection Account on such date. Notwithstanding anything contained in this
Section 2.1(e) to the contrary, if the Breakage Fee is not paid in full on or
before the date of any proposed prepayment, no such prepayment may occur.

(f) Prior to a Recapitalization, all outstanding Advances shall
be due and payable by the Seller on the first day of the Amortization Period.
Unless otherwise paid by the Seller, such Advances shall be repaid by the
Seller to the Issuer on each Distribution Date in the amounts specified for
such repayment in Section 4.6.

(g) Notwithstanding anything in this Agreement or any Related
Document to the contrary, the Security Insurer shall have the right in its
absolute discretion to deliver a notice to the Seller, Issuer, each Agent,
the Indenture Trustee and the Collateral Agent specifying a date such that
any Note Increase (as such term is defined in the Indenture) effected on or
after the date so specified will not have the benefit of the Note Policy.

Section 2.2. SECURITY INTEREST.

(a) In the event, for any reason, any Transaction is construed
by any court as a secured loan rather than a purchase and sale, the parties
intend that the Seller shall have granted to the Issuer a perfected first
priority security interest in all of the Receivables and the other Seller
Conveyed Property.

<PAGE>

(b) The Seller shall pay all fees and expenses associated with
perfecting such security interest including, without limitation, the cost of
filing financing statements under the Uniform Commercial Code as and when
required by the Issuer.

Section 2.3. PAYMENT, TRANSFER AND CUSTODY.

(a) Unless otherwise mutually agreed in writing, all transfers
of funds hereunder shall be in immediately available funds.

(b) On the Purchase Date for a Transaction, ownership of the
Receivables and the related other Seller Conveyed Property shall be
transferred to the Issuer against the simultaneous withdrawal of the Purchase
Price from the Collection Account for payment to the Seller in accordance
with and subject to the provisions hereof. On each Purchase Date, the Seller
hereby sells, transfers, assigns, and otherwise conveys to the Issuer, all of
the right, title and interest, whether now or hereafter acquired, of the
Seller in and to all accounts, contract rights, general intangibles, chattel
paper, instruments, documents, money, deposit accounts, certificates of
deposit, goods, letters of credit, advices of credit and uncertificated
securities consisting of, arising from or relating to any of the following
property: (i) the Receivables listed on the Receivables Schedule from time to
time, (ii) the Other Conveyed Property (as defined in the Purchase Agreement)
related thereto, (iii) the rights of the Seller under the Purchase Agreement
and each Assignment Agreement related thereto, (iv) all amounts required to
be deposited, or deposited, or delivered to the Collateral Agent for deposit,
to the Collection Account by the Seller in respect of the WAC Deficiency
Amount or the Collateral Test, (v) all of the Seller's right, title and
interest in and to funds on deposit from time to time in the Secured Accounts
and all investments therein and proceeds thereof, and (vi) all present and
future claims, demands, causes and choses in action in respect of any or all
of the foregoing and all payments on or under and all proceeds of every kind
and nature whatsoever in respect of any and all of the foregoing, including
all proceeds of the conversion, voluntary or involuntary, into cash or other
liquid property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and
other forms of obligations and reeivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds
of any of the foregoing (all of the foregoing referred to collectively as the
"the Seller Conveyed Property"). It is the intention of the Seller that the
transfer and assignment contemplated by this Agreement shall constitute a
sale of the Receivables and the other Seller Conveyed Property from the
Seller to the Issuer.

(c) Simultaneously with the execution and delivery of this
Agreement, the Seller, the Issuer and the other Secured Parties shall enter
into the Custodian Agreement with the Custodian, dated as of the Effective
Date, pursuant to which the Issuer and the other Secured Parties shall
revocably appoint the Custodian, and the Custodian shall accept such
appointment, to act as the agent of the Issuer and the other Secured Parties
as Custodian of the following documents or instruments in its possession
which the Seller shall deliver to the Custodian as agent of the Issuer and
the other Secured Parties on or prior to the related Purchase Date:

<PAGE>

(i) The fully executed original of the Receivable
(together with the original of any agreements modifying the Receivable,
including without limitation any extension agreements);

(ii) A certificate of insurance, application form for
insurance signed by the Obligor or a signed representation letter from
the Obligor named in the Receivable pursuant to which the Obligor has
agreed to obtain physical damage insurance for the related Financed
Vehicle, or a documented verbal confirmation by the insurance agent for
the Obligor of a policy number for an insurance policy for the Financed
Vehicle;

(iii) The original credit application, or a copy thereof,
of each Obligor, on AFL's customary form, or on a form approved by AFL,
for such application; and

(iv) The original certificate of title (when received)
and otherwise such documents, if any, that AFL keeps on file in
accordance with its customary procedures indicating that the Financed
Vehicle is owned by the Obligor and subject to the interest of AFL as
first lienholder or secured party (including any Lien Certificate
received by AFL), or if such original certificate of title has not yet
been received, a copy of the application therefor, showing AFL as
secured party, or a letter from the applicable Dealer agreeing
unconditionally to repurchase the related Receivable if the certificate
of title is not received by AFL within 180 days.

Section 2.4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
Seller represents and warrants to the Issuer and the Security Issuer, and
shall on and as of the Purchase Date of any Transaction be deemed to
represent and warrant to such Persons, as follows:

(a) The execution, delivery and performance of this Agreement
and the performance of each Transaction do not and will not result in or
require the creation of any lien, security interest or other charge or
encumbrance (other than pursuant hereto and pursuant to the other
Related Documents) upon or with respect to any of its properties.

(b) This Agreement is, and each Transaction when entered into
under this Agreement will be, a legal, valid and binding obligation of
it enforceable against it in accordance with the terms of this Agreement.

(c) The representations and warranties set forth on the Schedule
of Representations are true and correct with respect to the
Receivable(s) transferred in such Transaction.

(d) The Seller has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Receivables and
the other Seller Conveyed Property transferred to the Issuer.

(e) The Seller is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in

<PAGE>

which the ownership or lease of its property or the conduct of its
business requires such qualification.

(f) The Seller has the power and authority to execute and
deliver this Agreement and its Related Documents and to carry out its
terms and their terms, respectively; Seller has full power and authority
to sell and assign the Receivables and other the Seller Conveyed
Property to be sold and assigned to the Issuer and has duly authorized
such sale and assignment to the Issuer by all necessary corporate
action; and the execution, delivery and performance of this Agreement
and the Seller's Related Documents have been duly authorized by the
Seller by all necessary corporate action.

(g) This Agreement and the related Confirmation effects a valid
sale, transfer and assignment of the Receivables and the other Seller
Conveyed Property, enforceable against the Seller and creditors of and
purchasers from the Seller; and this Agreement and the related
Confirmation and the Seller's Related Documents, when duly executed and
delivered, shall constitute legal, valid and binding obligations of the
Seller enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law.

(h) The consummation of the transactions contemplated by this
Agreement and the related Confirmations and the Related Documents and
the fulfillment of the terms of this Agreement and the related
Confirmations and the Related Documents shall not conflict with, result
in any breach of any of the terms and provisions of or constitute (with
or without notice, lapse of time or both) a default under the
certificate of incorporation or by-laws of the Seller, or any indenture,
agreement, mortgage, deed of trust or other instrument to which the
Seller is a party or by which it is bound, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement and the Related Documents, or
violate in any material respect any law, order, rule or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its
properties.

(i) There are no proceedings or investigations pending or, to
the Seller's knowledge, threatened against the Seller or AFL, before any
court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Seller or its
properties (A) asserting the invalidity of this Agreement or any of the
Related Documents, (B) seeking to prevent the issuance of the Notes or
the consummation of any of the transactions contemplated by this
Agreement or any of the Related Documents, or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents.

(j) The chief executive office of the Seller is located at 7825
Washington Avenue South, Suite 900, Minneapolis, MN 55439-2435.

<PAGE>

(k) All the issued common stock of the Seller is owned by AFL
and such common stock is the only capital stock issued by the Seller.
Pursuant to its certificate of incorporation, the Seller's business is
limited to certain financing activities set forth in such certificate.

(l) The Seller does not commingle its assets or business
functions with the assets or business functions of AFL or any other Person.
The bank accounts and funds of the Seller are maintained separately from
those of AFL and all other Affiliates of AFL. The board of directors of the
Seller duly authorizes all the corporate actions of the Seller, to the extent
required by the laws of its state of incorporation. The Seller maintains its
own separate minutes of such actions. The Seller maintains separate and full
corporate records and financial records for itself only and has at least one
director who is not an Affiliate or director of or employed by AFL or any
other Affiliate of AFL. As of the date hereof, the Seller does not have
employees and, in the event that it hires employees in the future, the Seller
will not employ any person employed by AFL or by any AFL Affiliate.

(m) The financial records and accounts of the Seller are
prepared and maintained in accordance with GAAP and are susceptible to audit.

(n) The Seller conducts its business solely in its own name. In
that regard, all written and oral communications, including, without
limitation, letters, invoices, purchase orders and contracts, are made solely
in the name of the Seller. The Seller has its own telephone number,
stationery and business forms, separate from those of AFL and any other AFL
Affiliate.

(o) The Seller pays its own expenses and liabilities from its
own funds, except that certain of the organization expenses of the Seller
have been paid by AFL. That payment serves a valid business purpose and will
not affect the commitment of AFL and the Seller to maintain separate books of
account and other indicia of separate corporate existence. The
capitalization of the Seller is adequate in light of its proposed business
and purpose.

(p) The Seller is not liable for the payment of any liability of
AFL. The assets and the creditworthiness of the Seller are never held out as
being available for the payment of any liability of AFL. The Seller always
describes AFL as a separate legal entity. Each of AFL and the Seller
maintains an arm's length relationship with the other. No transaction
between the Seller and any AFL Affiliate is on terms more favorable than in
similar transactions involving an unrelated third party. Assets are not
transferred from AFL or the Seller to the other without reasonably equivalent
value or with the intent to hinder, delay or defraud the creditors of AFL or
the Seller. The Seller's existence is not dependent on its being a
subsidiary of AFL or any other AFL Affiliate.

(q) The Seller has not transferred any Receivables with the
intent to hinder, delay or defraud any Person. AFL receives reasonably
equivalent value in exchange for its transfer of Receivables to the Seller.
Neither AFL nor the Seller is insolvent nor does AFL or the Seller expect to
become insolvent as a result of any transfer of Receivables. Neither AFL nor
the Seller engages in nor does it expect to engage in a business for

<PAGE>

which its remaining property represents an unreasonably small capitalization.
Neither AFL nor the Seller intends to incur nor does it believe that it will
incur indebtedness that it will not be able to repay at its maturity.

(r) The Seller does not intend to file a voluntary petition for
relief under the Bankruptcy Code or any similar law.

(s) The Seller is not obligated in any way on the Receivables.

(t) The Seller has not taken any action that might cause any
Transaction to violate any regulation of the FRB.

Section 2.5. EVENTS OF DEFAULT. In the event that:

(a) the Seller fails to repurchase or the Issuer fails to
transfer Receivables upon the applicable Repurchase Date or the Issuer fails
to make an Advance in accordance with the provisions hereof, and in each case
such failure continues for two Business Days;

(b) an Act of Insolvency occurs with respect to the Seller, AFL
or the Issuer;

(c) any representation or warranty made by the Seller or AFL in
this Agreement, the Purchase Agreement (excluding, however, any
representation or warranty set forth in Section 2.4(c) hereof or Section
3.1(a) of the Purchase Agreement), the Custodian Agreement, the Insurance
Agreement, the Spread Account Agreement, the Trust Agreement, the Note
Purchase Agreement or the Security Agreement shall have been incorrect or
untrue in any material respect when made or repeated or when deemed to have
been made or repeated; or either the Seller or AFL shall fail to comply in
any material respect with any of their other agreements contained in this
Agreement, the Purchase Agreement, the Insurance Agreement, the Spread
Account Agreement, the Note Purchase Agreement, the Security Agreement or the
Trust Agreement not defined elsewhere in this Section 2.5 as an "Event of
Default" and in such later case such failure to comply shall continue
unremedied for a period of 10 days after written notice thereof to the Seller
by the Issuer or the Administrative Agent;

(d) the Seller or the Issuer shall admit to the other its
inability to, or its intention not to, perform any of its obligations
hereunder;

(e) any governmental or self-regulatory authority shall take
possession of the Issuer, the Seller or AFL or their property or appoint any
receiver, conservator or other official or, with respect to the Seller or
AFL, shall take any action to remove, limit, restrict, suspend or terminate
their rights or privileges, including suspension as an issuer, lender or
seller/servicer of automobile loans, which suspension has a material adverse
effect on the ordinary business operations of the Seller or AFL, and which
continues for more than 24 hours; or any such party shall take any action to
authorize any of the actions set forth in this clause (e);

(f) this Agreement shall for any reason cease to create a valid,
first priority security interest in any of the Receivables purported to be
covered hereby;

<PAGE>

(g) a final judgment by any competent court in the United States
of America for the payment of money in an amount of at least $50,000 is
rendered against the Seller or such a judgment in an amount of at least
$5,000,000 is rendered against AFL, and the same remains undischarged for a
period of 60 days unless execution of such judgment is effectively stayed;

(h) the Seller or AFL dissolves, merges or consolidates with
another entity unless it is the surviving party, or sells, transfers, or
otherwise disposes of a material portion of its business or assets (excluding
the sale, transfer or other disposition of Receivables in the ordinary course
of business) and the surviving party or the party that succeeds to a material
portion of the Seller's or AFL's business or assets shall cause BofA or
Morgan or any Affiliate of BofA or Morgan or any Permitted Assignee (as
defined in the Indenture) to exceed its legal lending limit with respect to
such party or any of its Affiliates;

(i) any of the documents or opinions required to be delivered by
the Seller to the Issuer pursuant to Section 2.10 hereof shall not have been
delivered within ten Business Days after notice shall have been given to the
Seller by the Issuer that such documents or opinions were not delivered when
so required;

(j) the maturity of any Indebtedness in an amount in excess of
$5,000,000 of AFL or a Subsidiary shall be accelerated, or AFL or a
Subsidiary shall fail to pay any such Indebtedness when due, or, in the case
of such Indebtedness payable on demand, when demanded, or there shall occur
any default or event or condition permitting the replacement of AFL or any
Subsidiary as Servicer under any Auto Loan Securitization of AFL or any
Subsidiary;

(k) it shall be determined on any Determination Date that the
Collateral Test shall fail to have been satisfied as of the immediately
preceding Accounting Date, after taking into account any deposit made by the
Seller to the Collection Account on such Determination Date, and such failure
shall continue for one Business Day;

(l) an Insurance Agreement Event of Default shall occur;

(m) a Servicer Termination Event shall occur;

(n) the Seller shall fail to make a deposit with respect to any
WAC Deficiency Amount in accordance with the provisions of Section 4.1(f),
and such failure shall continue for one Business Day; or

(o) after the occurrence of a Recapitalization, there shall fail
to be a Securitized Offering within one year of the later to occur of (x) the
last Repurchase Date on which all of the Receivables then owned by the Issuer
were repurchased by the Seller and (y) the latest date on which a Securitized
Offering has occurred;

(each an "Event of Default").

<PAGE>

Section 2.6. REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT. If an
Event of Default shall have occurred and be continuing:

(a) At the option of the Seller, if the Issuer is the defaulting
party (it being understood that the Issuer shall be deemed to be the
defaulting party only upon the occurrence of an Event of Default specified in
Section 2.5(a), (b), (d) or (e) with respect to the Issuer), or if the Seller
is the defaulting party, the Administrative Agent (at the direction of both
Agents), exercised by written notice to the other party, as the case may be
(which option shall be deemed to have been exercised, even if no notice is
given, immediately upon the occurrence of an Act of Insolvency or the
occurrence of an Insurance Agreement Event of Default which the Security
Insurer specifies in writing shall have such effect), the Repurchase Date for
each Transaction hereunder shall be deemed immediately to occur or, if a
Recapitalization has occurred, the Amortization Date shall be deemed
immediately to occur and, in either case, if the Seller is the defaulting
party, all outstanding Advances shall be and become immediately due and
payable hereunder without notice or any further action; provided, that from
and after a Recapitalization, the Seller shall have no liability to repay the
Advances, which shall be payable solely from the Collateral.

(b) If the defaulting party is the Seller and if the Issuer or
the Administrative Agent exercises or is deemed to have exercised the option
referred to in paragraph (a) of this Section, (i) prior to a
Recapitalization, the Seller's obligations hereunder to repurchase all
Receivables shall thereupon become immediately due and payable, and (ii) the
Seller shall immediately deliver to the Issuer any Receivables subject to
such Transactions then in the Seller's custody or possession.

(c) Prior to a Recapitalization, if the defaulting party is the
Issuer, the Seller may, against transfer to the Seller of the Receivables,
tender payment of the aggregate Repurchase Price for all of the Receivables,
whereupon the Issuer's right, title and interest in all of the Receivables
shall be deemed transferred to the Seller.

(d) If the defaulting party is the Seller or if an Event of
Default specified in Section 2.5(o) shall occur, after one Business Day's
notice to the Seller (which notice need not be given if an Act of Insolvency
shall have occurred and which may be the notice given under subparagraph (a)
of this Section), the Controlling Party, as agent of the Issuer, may exercise
any or all of the remedies provided for in Sections 5.2 and 6.1 of the
Security Agreement.

(e) For purposes of this Section 2.6, the Repurchase Price for
each Transaction hereunder in respect of which the defaulting party is the
Issuer shall not increase above the amount of such Repurchase Price for such
Transaction determined as of the date of the exercise or deemed exercise by
the Seller of its option under paragraph (a) of this Section.

(f) The defaulting party shall be liable to the nondefaulting
party for the amount of all reasonable legal or other expenses incurred by
the nondefaulting party in connection with or as a consequence of an Event of
Default, together with interest thereon at a rate equal to the Reference Rate.

<PAGE>

(g) Each of the Issuer and the Seller agree to provide the
Rating Agencies with written notice of any Event of Default of which they
have actual acknowledge.

Section 2.7. TERM OF COMMITMENT. Unless terminated earlier by
mutual agreement of the Issuer and the Seller with prior written notice to
each Rating Agency and subject to earlier termination as otherwise set forth
herein, the commitment of the Issuer hereunder to make Advances and purchase
Receivables shall remain in effect for a period of one year after the
Effective Date and such commitment shall terminate automatically without any
requirement for notice on the date occurring three years from the date
hereof; provided, however, that such commitment may be extended by mutual
agreement of the Issuer and the Seller; and provided further, however, that
no such party shall be obligated to agree to such an extension.

Section 2.8. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.
Concurrently with the execution and delivery of this Agreement and each
Confirmation, as appropriate, AFL and the Seller have entered into the
Purchase Agreement and an Assignment Agreement, as applicable, the rights of
the Seller under which have been assigned by the Seller to the Issuer. Under
the Purchase Agreement and each Assignment Agreement, AFL has made the same
representations and warranties to the Seller with respect to the Receivables
as those made by the Seller pursuant to the Schedule of Representations, upon
which the Issuer has relied in accepting the Receivables and the other Seller
Conveyed Property and issuing the Notes and upon which the Security Insurer
has relied in issuing the Note Policy and upon which the Indenture Trustee
has relied in authenticating the Notes. Upon discovery by any of AFL, the
Seller, the Servicer, the Security Insurer, the Indenture Trustee or the
Issuer of a breach of any of the representations and warranties contained in
Section 2.4(c) that materially and adversely affects the interests of the
Issuer, the Security Insurer or the Noteholders in any Receivable (including
any Liquidated Receivable), the party discovering such breach shall give
prompt written notice to the others; provided, however, that the failure to
give any such notice shall not affect any obligation of AFL or the Seller.
On the 15th day following the Seller's discovery or the Seller's receipt of
notice of any breach of the representations and warranties set forth on the
Schedule of Representations that materially and adversely affects the
interests of the Issuer, the Security Insurer or the Noteholders in any
Receivable (including any Liquidated Receivable), the Repurchase Date with
respect to such Receivable shall be deemed to occur immediately; provided,
that any breach of a representation and warranty contained in Paragraph 14,
17 or 27 of the Schedule of Representations with respect to any Receivable
shall be deemed to materially and adversely affect the interest of the Issuer
in such Receiable and the Repurchase Date with respect to such Receivable
shall be deemed to occur on, with respect to a breach of a representation or
warranty contained in paragraph 14, the Business Day immediately succeeding
the day and, with respect to a breach of a representation or warranty
contained in paragraph 17 or 27, on the fifth Business Day immediately
succeeding the day upon which, in either case, discovery or receipt of notice
of any breach of such representation and warranty shall occur. The
obligations of the Seller with respect to any such breach of representations
and warranties shall include taking any and all actions necessary to enable
the Issuer to enforce directly the obligations of AFL under the Purchase
Agreement or any Assignment Agreement, as applicable. In addition to the
foregoing and notwithstanding whether the related Receivables shall have been
repurchased by the Seller, the Seller shall indemnify the Issuer, the
Security Insurer, the Agents, the Noteholders, the Owner Trustee and the
Indenture Trustee against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be

<PAGE>

asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach.

Section 2.9. OPINIONS OF COUNSEL. The Seller shall, on the date
hereof and, upon the request of the Issuer, the Administrative Agent or the
Security Insurer, no more than once each calendar year, cause to be delivered
to the Issuer, the Agent and the Security Insurer, with reliance thereon
permitted as to any person or entity that is granted a pledge of the
Receivables and the other Seller Conveyed Property, a favorable opinion or
opinions of counsel with respect to the matters set forth in Exhibit D
hereto, in form and substance acceptable to the Issuer.

Section 2.10. ADDITIONAL CONDITIONS.

(a) Prior to entering into the initial Transaction under this
Agreement, each of the Trust Agreement, the Purchase Agreement, the Security
Agreement, the Spread Account Agreement, the Insurance Agreement, the
Indenture and the Custodian Agreement, in a form satisfactory to the Issuer
shall have been executed and delivered by the parties thereto.

(b) On or before the date of delivery of this Agreement, the
Seller shall, at the Seller's own cost and expense, deliver to the Issuer:

(i) a favorable opinion or opinions of counsel with respect
to the matters set forth in Exhibit D hereto, in form and substance
acceptable to the Issuer and its counsel;

(ii) a certificate of the Secretary of State of the State of
Minnesota, dated reasonably near the date hereof, listing all charter
documents with respect to AFL on file in his or her office and stating that
AFL is duly organized and existing, has filed all annual reports and has
paid all franchise taxes and is in good standing in the State of Minnesota;

(iii) a certificate, dated the date of delivery thereof, of
AFL's Secretary as to (a) the charter documents of AFL (with a copy of
AFL's By-laws attached); (b) the attached resolutions of the Board of
Directors of AFL authorizing AFL to enter into the transactions
contemplated hereby; and (c) the good standing of AFL;

(iv) evidence of filing with the appropriate filing offices
in the State of Minnesota a UCC-1 Financing Statement against AFL in favor
of the Seller;

(v) a certificate of the Secretary of the State of
Delaware, dated reasonably near the date hereof, listing all charter
documents with respect to the Seller on file in his or her office and
stating that the Seller is duly organized and existing, has filed all
annual reports and has paid all franchise taxes and is in good standing in
the State of Delaware;

(vi) a certificate, dated the date of delivery thereof, of
the Seller's Secretary as to (a) the charter documents of the Seller (with
a copy of the Seller's By-laws attached); (b) the attached resolutions of
the Board of Directors of the Seller

<PAGE>

authorizing the Seller to enter into the transactions contemplated hereby;
and (c) the good standing of the Seller and that the Seller is qualified
to do business in Minnesota;

(viii) evidence of filing with the appropriate filing offices
in the State of Minnesota a UCC-1 Financing Statement against the Seller;
and

(ix) such other information and certificates as the Issuer
shall reasonably request.

(c) The Seller shall enter into any Transaction under this
Agreement only upon the satisfaction of each of the following conditions on
or prior to the related Purchase Date:

(i) the Issuer shall have received a Confirmation with the
updated Receivables Schedule attached thereto with respect to the
Receivables being transferred on the related Purchase Date;

(ii) as of such Purchase Date, the Seller shall not have
been insolvent nor shall the Seller have been rendered insolvent by such
Transaction nor shall the Seller be aware of any pending insolvency;

(iii) the Seller shall have taken any action requested by the
Issuer to maintain the first perfected security interest of the Issuer in
the Receivables and the other Seller Conveyed Property;

(iv) no selection procedures believed by the Seller to be
adverse to the interests of the Issuer or the Noteholders shall have been
utilized by AFL or the Seller in selecting such Receivables;

(v) no material change shall have occurred in the
underwriting standards of AFL in effect on the Closing Date (INTER ALIA,
not enter the subprime market) without the prior written consent of the
Administrative Agent;

(vi) the Insurer Notice Date shall not have occurred;

(vii) the provisions of Section 4.10(a) shall be complied
with in connection with such Transaction.

Section 2.11. COVENANT OF THE SELLER. The Seller hereby agrees
that it shall not (i) take any action prohibited or not authorized by its
certificate of incorporation or (ii) without the prior written consent of the
Administrative Agent and (so long as no Insurer Default shall have occurred
and be continuing) the Security Insurer and without giving prior written
notice to the Rating Agencies, amend its certificate of incorporation.

<PAGE>

ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES

Section 3.1. DUTIES OF THE SERVICER. The Servicer is hereby
authorized to act as agent for the Issuer and the Seller and in such capacity
shall manage, service, administer and make collections on the Receivables,
and perform the other actions required by the Servicer under this Agreement.
The Servicer agrees that its servicing of the Receivables shall be carried
out in accordance with customary and usual procedures of institutions which
service motor vehicle retail installment sales contracts and, to the extent
more exacting, the degree of skill and attention that the Servicer exercises
from time to time with respect to all comparable motor vehicle receivables
that it services for itself or others. In performing such duties, so long as
AFL is the Servicer, it shall comply with the policies and procedures
attached hereto as Exhibit A and will not change the manner in which it
services the Receivables if such change could have a material adverse effect
on the Receivables. The Servicer's duties shall include, without limitation,
collection and posting of all payments, responding to inquiries of Obligors
on the Receivables, investigating delinquencies, sending payment coupons to
Obligors, reporting any required tax information to Obligors, policing the
collateral, complying with the terms of the Lockbox Agreement, accounting for
collections and furnishing monthly and annual statements to the Issuer, the
Agents, the Indenture Trustee and the Security Insurer with respect to
distributions, monitoring the status of Insurance Policies with respect to
the Financed Vehicles and performing the other duties specified herein. The
Servicer shall also administer and enforce all rights and responsibilities of
the holder of the Receivables provided for in the Dealer Agreements (and
shall maintain possession of the Dealer Agreements, to the extent it is
necessary to do so), the Dealer Assignments and the Insurance Policies, to
the extent that such Dealer Agreements, Dealer Assignments and Insurance
Policies relate to the Receivables, the Financed Vehicles or the Obligors.
To the extent consistent with the standards, policies and procedures
otherwise required hereby, the Servicer shall follow its customary standards,
policies, and procedures and shall have full power and authority, acting
alone, to do any and all things in connection with such managing, servicing,
administration and collection that it may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer is hereby
authorized and empowered by the Issuer to execute and deliver, on behalf of
the Issuer, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable instruments,
with respect to the Receivables and with respect to the Financed Vehicles;
PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall
not, except pursuant to an order from a court of competent jurisdiction,
release an Obligor from payment of any unpaid amount under any Receivable or
waive the right to collect the unpaid balance of any Receivable from the
Obligor, except that the Servicer may forego collection efforts if the amount
subject to collection is DE MINIMIS and if it would forego collection in
accordance with its customary procedures. The Servicer is hereby authorized
to commence, in its own name or in the name of the Issuer (provided the
Servicer has obtained the Issuer's consent, which consent shall not be
unreasonably withheld), a legal proceeding to enforce a Receivable pursuant
to Section 3.3 or to commence or participate in any other legal proceeding
(including, without limitation, a bankruptcy proceeding) relating to or
involving a Receivable, an Obligor or a Financed Vehicle. If the Servicer
commences or participates in such a legal proceeding in its own name, the
Issuer shall thereupon be deemed to have automatically assigned such
Receivable to the Servicer solely for purposes of commencing or participating
in any such proceeding as a

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party or claimant, and the Servicer is authorized and empowered by the Issuer
to execute and deliver in the Servicer's name any notices, demands, claims,
complaints, responses, affidavits or other documents or instruments in
connection with any such proceeding. The Issuer shall furnish the Servicer
with any powers of attorney and other documents which the Servicer may
reasonably request and which the Servicer deems necessary or appropriate and
take any other steps which the Servicer may deem necessary or appropriate to
enable the Servicer to carry out its servicing and administrative duties
under this Agreement.

Section 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES; LOCKBOX AGREEMENTS.

(a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automobile
receivables that it services for itself or others and otherwise act with respect
to the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance
Policies and the other Seller Conveyed Property in such manner as will, in the
reasonable judgment of the Servicer, maximize the amount to be received by the
Issuer with respect thereto. The Servicer is authorized in its discretion to
waive any prepayment charge, late payment charge or any other similar fees that
may be collected in the ordinary course of servicing any Receivable.

(b) The Servicer may at any time agree to a modification or
amendment of a Receivable in order to (i) change the Obligor's regular due date
to another date within the Monthly Period in which such due date occurs, (ii)
re-amortize the scheduled payments on the Receivable following a partial
prepayment of principal or (iii) subject to the limitation specified in the next
sentence, grant extensions on a Receivable, provided that the aggregate period
of all extensions on a Receivable shall not exceed three months. The aggregate
Principal Balance of Receivables which have been extended during any calendar
quarter shall not exceed the greater of (A) $500,000 and (B) 1.5% of the
Aggregate Principal Balance as of the Accounting Date immediately prior to the
first day of such calendar quarter.

(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Receivable (in addition to those modifications
permitted by Section 3.2(b)) in accordance with its customary procedures if the
Servicer believes in good faith that such extension, modification or amendment
is necessary to avoid a default on such Receivable, will maximize the amount to
be received by the Issuer with respect to such Receivable, and is otherwise in
the best interests of the Issuer; PROVIDED, HOWEVER, that:

(i) In no event may a Receivable be extended beyond the Monthly
Period immediately preceding the Final Scheduled Distribution Date;

(ii) So long as an Insurer Default shall not have occurred and be
continuing, the Servicer shall not amend or modify a Receivable (except as
provided in Section 3.2(b)) without the consent of the Security Insurer;
and

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(iii) If an Insurer Default shall have occurred and be continuing,
the Servicer may not extend or modify any Receivable (other than as
permitted by Section 3.2(b)).

(d) The Servicer shall use its best efforts to cause Obligors to
make all payments on the Receivables, whether by check or by direct debit of the
Obligor's bank account, to be made directly to one or more Lockbox Banks, acting
as agent for the Collateral Agent pursuant to a Lockbox Agreement. Amounts
received by a Lockbox Bank in respect of the Receivables may initially be
deposited into a demand deposit account maintained by the Lockbox Bank as agent
for the Collateral Agent and for other owners of automobile receivables serviced
by the Servicer. The Servicer shall use its best efforts to cause any Lockbox
Bank to deposit all payments on the Receivables in the Lockbox Account no later
than the Business Day after receipt, and to cause all amounts credited to the
Lockbox Account on account of such payments to be transferred to the Collection
Account no later than the second Business Day after receipt of such payments.
The Lockbox Account shall be a demand deposit account held by the Lockbox Bank,
or at the request of the Administrative Agent or the Security Insurer (unless an
Insurer Default shall have occurred and be continuing) an Eligible Account
satisfying clause (i) of the definition thereof. The Collateral Agent shall not
be liable for any actions or omissions of the Lockbox Bank.

Prior to each Purchase Date, the Servicer shall have notified each
Obligor that makes its payments on the Receivables being transferred to the
Issuer on such date by check to make such payments thereafter directly to the
Lockbox Bank (except in the case of Obligors that have already been making such
payments to the Lockbox Bank), and shall provide each such Obligor with respect
to the Receivables with monthly invoices, in each case in order to enable such
Obligors to make such payments directly to the Lockbox Bank for deposit into the
Lockbox Account, and the Servicer will continue, not less often than every three
months, to so notify those Obligors who have failed to make payments to the
Lockbox Bank. If and to the extent requested by the Administrative Agent or the
Security Insurer (unless an Insurer Default shall have occurred and be
continuing), the Servicer shall request each Obligor that makes payment on the
Receivables by direct debit of such Obligor's bank account to execute an
authorization for automatic payment which in the judgment of the Security
Insurer is sufficient to authorize direct debit by the Lockbox Bank on behalf of
the Issuer. If at any time the Lockbox Bank is unable to directly debit an
Obligor's bank account that makes payment on the Receivables by direct debit and
if such inability is not cured within 15 days or cannot be cured by execution by
the Obligor of a new authorization for automatic payment, the Servicer shall
notify such Obligor that it cannot make payment by direct debit and must
thereafter make payment by check.

Notwithstanding any Lockbox Agreement, or any of the provisions of
this Agreement relating to the Lockbox Agreement, the Servicer shall remain
obligated and liable to the Issuer, the Owner Trustee, the Indenture Trustee and
Noteholders for servicing and administering the Receivables and the other Seller
Conveyed Property in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue thereof.

In the event the Servicer shall for any reason no longer be acting as
such, the successor Servicer shall thereupon assume all of the rights and
obligations of the outgoing Servicer under the Lockbox Agreement. In such
event, the successor Servicer shall be deemed to have assumed all of the
outgoing Servicer's interest therein and to have replaced the outgoing

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Servicer as a party to each such Lockbox Agreement to the same extent as if
such Lockbox Agreement had been assigned to the successor Servicer, except
that the outgoing Servicer shall not thereby be relieved of any liability or
obligations on the part of the outgoing Servicer to the Lockbox Bank under
such Lockbox Agreement. The outgoing Servicer shall, upon request of the
Administrative Agent, but at the expense of the outgoing Servicer, deliver to
the successor Servicer all documents and records relating to each such
Lockbox Agreement and an accounting of amounts collected and held by the
Lockbox Bank and otherwise use its best efforts to effect the orderly and
efficient transfer of any Lockbox Agreement to the successor Servicer. In
the event that the Security Insurer (so long as an Insurer Default shall not
have occurred and be continuing) or the Administrative Agent (if an Insurer
Default shall have occurred and be continuing) elects to change the identity
of the Lockbox Bank, the outgoing Servicer, at its expense, shall cause the
Lockbox Bank to deliver, at the direction of the Security Insurer (so long as
an Insurer Default shall not have occurred and be continuing) or the
Administrative Agent (if an Insurer Default shall have occurred and be
continuing) to the Administrative Agent or a successor Lockbox Bank, all
documents and records relating to the Receivables and all amounts held (or
thereafter received) by the Lockbox Bank (together with an accounting of such
amounts) and shall otherwise use its best efforts to effect the orderly and
efficient transfer of the lockbox arrangements and the Servicer shall notify
the Obligors to make payments to the Lockbox Account established by the
successor.

(e) The Servicer shall remit all payments by or on behalf of the
Obligors received directly by the Servicer to the Collection Account or the
Lockbox Account for deposit into the Collection Account as soon as practicable,
but in no event later than the Business Day after receipt thereof.

Section 3.3. REALIZATION UPON RECEIVABLES.

(a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall use its best efforts to repossess
(or otherwise comparably convert the ownership of) and liquidate any Financed
Vehicle securing a Receivable with respect to which the Servicer has determined
that payments thereunder are not likely to be resumed, as soon as is practicable
after default on such Receivable but in no event later than the date on which
all or any portion of a Scheduled Payment has become 91 days delinquent. The
Servicer is authorized to follow such customary practices and procedures as it
shall deem necessary or advisable, consistent with the standard of care required
by Section 3.1, which practices and procedures may include reasonable efforts to
realize upon any recourse to Dealers, the sale of the related Financed Vehicle
at public or private sale, the submission of claims under an Insurance Policy
and other actions by the Servicer in order to realize upon such a Receivable.
The foregoing is subject to the provision that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with any repair or towards the repossession of such Financed
Vehicle unless it shall determine in its discretion that such repair or
repossession shall increase the proceeds of liquidation of the related
Receivable by an amount greater than the amount of such expenses. All amounts
received upon liquidation of a Financed Vehicle shall be remitted directly by
the Servicer to the Collection Account or the Lockbox Account for deposit into
the Collection Account without deposit into any intervening account as soon as
practicable, but in no event later than the Business Day after receipt thereof.
The Servicer shall be entitled to recover all reasonable expenses incurred by it
in the course of

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repossessing and liquidating a Financed Vehicle into cash proceeds, but only
out of the cash proceeds of such Financed Vehicle, any deficiency obtained
from the Obligor or an amounts received from the related Dealer, which
amounts may be retained by the Servicer (and shall not be required to be
deposited as provided in Section 3.2(e)) to the extent of such expenses. The
Servicer shall pay on behalf of the Issuer any personal property taxes
assessed on repossessed Financed Vehicles; the Servicer shall be entitled to
reimbursement of any such tax from Liquidation Proceeds with respect to such
Receivable.

(b) If the Servicer elects to commence a legal proceeding to
enforce a Dealer Agreement or Dealer Assignment, the act of commencement shall
be deemed to be an automatic assignment from the Issuer to the Servicer of the
rights under such Dealer Agreement and Dealer Assignment for purposes of
collection only. If, however, in any enforcement suit or legal proceeding, it
is held that the Servicer may not enforce a Dealer Agreement or Dealer
Assignment on the grounds that it is not a real party in interest or a Person
entitled to enforce the Dealer Agreement or Dealer Assignment, the Issuer, at
the Servicer's expense, or the Seller, at the Seller's expense, shall take such
steps as the Servicer deems necessary to enforce the Dealer Agreement or Dealer
Assignment, including bringing suit in its name or the name of the Seller or of
the Issuer and the Collateral Agent for the benefit of the Secured Parties. All
amounts recovered shall be remitted directly by the Servicer as provided in
Section 3.2(e).

Section 3.4. INSURANCE.

(a) The Servicer shall require that each Financed Vehicle be
insured by the Insurance Policies referred to in Paragraph 24 of the Schedule of
Representations and shall monitor the status of such comprehensive and collision
insurance coverage thereafter, in accordance with its customary servicing
procedures. Each Receivable requires the Obligor to maintain such comprehensive
and collision insurance, naming AFL and its successors and assigns as additional
insureds, and permits the holder of such Receivable to obtain comprehensive and
collision insurance at the expense of the Obligor if the Obligor fails to
maintain such insurance. If the Servicer shall determine that an Obligor has
failed to obtain or maintain a comprehensive and collision Insurance Policy
covering the related Financed Vehicle which satisfies the conditions set forth
in such Paragraph 24 (including, without limitation, during the repossession of
such Financed Vehicle) the Servicer shall enforce the rights of the holder of
the Receivable under the Receivable to require the Obligor to obtain such
comprehensive and collision insurance.

(b) The Servicer may, if an Obligor fails to obtain or maintain a
comprehensive and collision Insurance Policy, obtain insurance with respect to
the related Financed Vehicle and advance on behalf of such Obligor, as required
under the terms of the insurance policy, the premiums for such insurance (such
insurance being referred to herein as "Force-Placed Insurance"). All policies
of Force-Placed Insurance shall be endorsed with clauses providing for loss
payable to the Issuer. Any cost incurred by the Servicer in maintaining such
Force-Placed Insurance shall only be recoverable out of premiums paid by the
Obligors or Liquidation Proceeds with respect to the Receivable, as provided in
Section 3.4(c).

(c) In connection with any Force-Placed Insurance obtained
hereunder, AFL may, in the manner and to the extent permitted by applicable law,
require the Obligors to repay

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the entire premium to AFL. In no event shall AFL include the amount of the
premium in the Amount Financed under the Receivable. For all purposes of this
Agreement, the Insurance Add-on Amount with respect to any Receivable having
Force-Placed Insurance will be treated as a separate obligation of the
Obligor and will not be added to the Principal Balance of such Receivable,
and amounts allocable thereto will not be available for distribution on the
Notes. AFL shall retain and separately administer the right to receive
payments from Obligors with respect to Insurance Add-on Amounts or rebates of
Forced-Placed Insurance premiums. If an Obligor makes a payment with respect
to a Receivable having Force-Placed Insurance, but AFL is unable to determine
whether the payment is allocable to the Receivable or to the Insurance Add-on
Amount, the payment shall be applied first to any unpaid Scheduled Payments
and then to the Insurance Add-on Amount. Liquidation Proceeds on any
Receivable will be used first to pay the Principal Balance and accrued
interest on such Receivable and then to pay the related Insurance Add-on
Amount. If an Obligor under a Receivable with respect to which AFL has
placed Force-Placed Insurance fails to make scheduled payments of such
Insurance Add-on Amount as due, and AFL has determined that eventual payment
of the Insurance Add-on Amount is unlikely, AFL may, but shall not be
required to, purchase such Receivable from the Issuer for the Purchase Amount
on any subsequent Deposit Date. Any such Receivable, and any Receivable with
respect to which AFL has placed Force-Placed Insurance which has been paid in
full (excluding any Insurance Add-on Amounts) will be assigned to AFL.

(d) The Servicer may sue to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Issuer. If the
Servicer elects to commence a legal proceeding to enforce an Insurance Policy,
the act of commencement shall be deemed to be an automatic assignment of the
rights of the Issuer under such Insurance Policy to the Servicer for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce an Insurance Policy on the grounds that
it is not a real party in interest or a holder entitled to enforce the Insurance
Policy, the Issuer, on behalf of the Collateral Agent and the Secured Parties,
at the Servicer's expense, or the Seller, at the Seller's expense, shall take
such steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Issuer and the Collateral
Agent for the benefit of the Secured Parties.

Section 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.

(a) Consistent with the policies and procedures required by this
Agreement, the Servicer shall take such steps as are necessary to maintain
perfection of the security interest created by each Receivable in the related
Financed Vehicle on behalf of the Issuer, including but not limited to
obtaining the execution by the Obligors and the recording, registering,
filing, re-recording, re-filing, and re-registering of all security
agreements, financing statements and continuation statements as are necessary
to maintain the security interest granted by the Obligors under the
respective Receivables. The Issuer hereby authorizes the Servicer, and the
Servicer agrees, to take any and all steps necessary to re-perfect such
security interest on behalf of the Issuer as necessary because of the
relocation of a Financed Vehicle or for any other reason. In the event that
the assignment of a Receivable to the Issuer is insufficient, without a
notation on the related Financed Vehicle's certificate of title, or without
fulfilling any additional administrative requirements under the laws of the
state in which the Financed Vehicle is located, to perfect a security
interest in the related Financed Vehicle in favor of the Issuer, the Servicer

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hereby agrees that the Servicer's designation as the secured party on the
certificate of title is in its capacity as agent of the Issuer.

(b) Upon the occurrence of an Insurance Agreement Event of
Default, the Security Insurer may (so long as an Insurer Default shall not
have occurred and be continuing) instruct the Issuer and the Servicer to take
or cause to be taken, or, if an Insurer Default shall have occurred, upon the
occurrence of a Servicer Termination Event, the Issuer and the Servicer shall
take or cause to be taken such action as may, in the opinion of counsel to
the Security Insurer (or, if an Insurer Default shall have occurred and be
continuing, counsel to the Administrative Agent), be necessary to perfect or
reperfect the security interests in the Financed Vehicles securing the
Receivables in the name of the Issuer by amending the title documents of such
Financed Vehicles or by such other reasonable means as may, in the opinion of
counsel to the Security Insurer or the Agent (as applicable), be necessary or
prudent. AFL hereby agrees to pay all expenses related to such perfection or
reperfection and to take all action necessary therefor. In addition, prior
to the occurrence of an Insurance Agreement Event of Default, the Security
Insurer may (unless an Insurer Default shall have occurred and be continuing)
instruct the Issuer and the Servicer to take or cause to be taken such action
as may, in the opinion of counsel to the Security Insurer, be necessary to
perfect or re-perfect the security interest in the Financed Vehicles
underlying the Receivables in the name of the Issuer, including by amending
the title documents of such Financed Vehicles or by such other reasonable
means as may, in the opinion of counsel to the Security Insurer, be necessary
or prudent; PROVIDED, HOWEVER, that (unless an Insurer Default shall have
occurred and be continuing) if the Security Insurer requests that the title
documents be amended prior to the occurrence of an Insurance Agreement Event
of Default, the out-of-pocket expenses of the Servicer or the Issuer in
connection with such action shall be reimbursed to the Servicer or the
Issuer, as applicable, by the Security Insurer.

Section 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SERVICER.
By its execution and delivery of this Agreement, the Servicer makes the
following representations, warranties and covenants on which the Issuer relies
in purchasing the Receivables and issuing the Notes, on which the Indenture
Trustee relies in authenticating the Notes and on which the Security Insurer
relies in issuing the Note Policy.

(a) The Servicer covenants as follows:

(i) LIENS IN FORCE. The Financed Vehicle securing each
Receivable shall not be released in whole or in part from the security
interest granted by the related Obligor, except upon payment in full of the
Receivable or as otherwise contemplated herein;

(ii) NO IMPAIRMENT. The Servicer shall do nothing to impair
the rights of the Issuer or the Noteholders in the Receivables, the Dealer
Agreements, the Dealer Assignments, the Insurance Policies or the other
Seller Conveyed Property; and

(iii) NO AMENDMENTS. The Servicer shall not extend or
otherwise amend the terms of any Receivable, except in accordance with
Section 3.2.

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(b) The Servicer represents, warrants and covenants as of the
Closing Date as to itself:

(i) ORGANIZATION AND GOOD STANDING. The Servicer has been duly
organized and is validly existing and in good standing under the laws of
its jurisdiction of organization, with power, authority and legal right to
own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right to enter into
and perform its obligations under this Agreement;

(ii) DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business (including
the servicing of the Receivables as required by this Agreement) requires or
shall require such qualification, if the failure to be so qualified would
have a material adverse effect on the ability of the Servicer to perform
its obligations hereunder or on the enforceability of any Receivable.

(iii) POWER AND AUTHORITY. The Servicer has the power and authority
to execute and deliver this Agreement and its Related Documents and to
carry out its terms and their terms, respectively, and the execution,
delivery and performance of this Agreement and the Servicer's Related
Documents have been duly authorized by the Servicer by all necessary
corporate action;

(iv) BINDING OBLIGATION. This Agreement and the Servicer's Related
Documents shall constitute legal, valid and binding obligations of the
Servicer enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law;

(v) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the Servicer's Related Documents, and
the fulfillment of the terms of this Agreement and the Servicer's Related
Documents, shall not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of
time) a default under, the articles of incorporation or bylaws of the
Servicer, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Servicer is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument, other than this Agreement, or violate any law,
order, rule or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or any
of its properties;

(vi) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer,
before any court, regulatory

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body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Servicer or its properties
(A) asserting the invalidity of this Agreement or any of the Related
Documents, (B) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement
or any of the Related Documents, or (C) seeking any determination or
ruling that might materially and adversely affect the performance by
the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents or
(D) seeking to adversely affect the federal income tax or other
federal, state or local tax attributes of the Notes; and

(vii) NO CONSENTS. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement.

Section 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon
discovery by any of the Servicer, the Security Insurer, the Issuer or the
Indenture Trustee of a breach of any of the covenants set forth in Sections
3.5(a) or 3.6(a), the party discovering such breach shall give prompt written
notice to the others; PROVIDED, HOWEVER, that the failure to give any such
notice shall not affect any obligation of the Servicer. As of the second
Accounting Date following its discovery or receipt of notice of any breach of
any covenant set forth in Sections 3.5(a) or 3.6(a) which materially and
adversely affects the interests of the Noteholders, the Issuer or the Security
Insurer in any Receivable (including any Liquidated Receivable) (or, at the
Servicer's election, the first Accounting Date so following), the Servicer
shall, unless it shall have cured such breach in all material respects, purchase
from the Issuer the Receivable affected by such breach and, on the related
Deposit Date, the Servicer shall pay the related Purchase Amount. It is
understood and agreed that the obligation of the Servicer to purchase any
Receivable (including any Liquidated Receivable) with respect to which such a
breach has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against the Servicer for such breach available to the
Security Insurer, the Noteholders, the Issuer or the Indenture Trustee on behalf
of Noteholders; PROVIDED, HOWEVER, that the Servicer shall indemnify the Issuer,
the Backup Servicer, the Collateral Agent, the Security Insurer, the Indenture
Trustee, the Administrative Agent and the Noteholders against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the events or facts giving rise to
such breach.

Section 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. On each Distribution Date, the Servicer shall be entitled to receive
out of the Collection Account the Basic Servicing Fee and any Supplemental
Servicing Fee for the related Monthly Period pursuant to Section 4.6. The
Servicer shall be required to pay all expenses incurred by it in connection with
its activities under this Agreement (including taxes imposed on the Servicer,
expenses incurred in connection with distributions and reports to Noteholders
and the Security Insurer and all other fees and expenses of the Issuer,
including claims against the Issuer in respect of indemnification, unless such
fees, expenses or claims in respect of indemnification are expressly stated to
be for the account of AFL or not to be for the account of the Servicer). The
Servicer shall be liable for the fees and expenses of the Owner Trustee, the
Indenture Trustee, the

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Custodian, the Backup Servicer, the Collateral Agent, the Lockbox Bank (and
any fees under the Lockbox Agreement) and the Independent Accountants.
Notwithstanding the foregoing, if the Servicer shall not be AFL, a successor
to AFL as Servicer permitted by Section 5.2 or an Affiliate of any of the
foregoing, such Servicer shall not be liable for claims against the Issuer in
respect of indemnification.

Section 3.9. SERVICER'S CERTIFICATE. No later than 5:00 p.m. New
York City time on each Determination Date, the Servicer shall deliver to the
Issuer, each Agent, the Indenture Trustee, the Backup Servicer, the Security
Insurer and the Collateral Agent, a Servicer's Certificate executed by a
Responsible Officer of the Servicer containing, among other things, (i) all
information available as of such date necessary to enable the Indenture Trustee
to make the distributions required by Section 4.6 and to determine the amount to
which the Servicer is entitled to be reimbursed or has been reimbursed during
the related Monthly Period for Monthly Advances, (ii) all information available
as of such date necessary to enable the Indenture Trustee to send the statements
to Noteholders and the Security Insurer required by Section 4.7, (iii) a listing
of all Warranty Receivables and Administrative Receivables purchased or
repurchased as of the related Deposit Date, identifying the Receivables so
purchased or repurchased and (iv) all information available as of such date
necessary to enable the Indenture Trustee to reconcile all deposits to, and
withdrawals from, the Collection Account for the related Monthly Period and
Distribution Date, including the accounting required by compliance with the
Collateral Test. Receivables purchased by the Servicer or by the Seller or AFL
on the related Deposit Date and each Receivable which became a Liquidated
Receivable or which was paid in full during the related Monthly Period shall be
identified by account number (as set forth in the Receivables Schedule).

Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER
TERMINATION EVENT.

(a) The Servicer shall deliver to the Issuer, each Agent, the
Indenture Trustee, the Backup Servicer, the Security Insurer, the Collateral
Agent and each Rating Agency, on or before March 31, (or 90 days after the end
of the Servicer's fiscal year, if other than December 31) of each year,
beginning on March 31, 1997, an officer's certificate signed by any Responsible
Officer of the Servicer, dated as of December 31, (or other applicable date) of
such year, stating that (i) a review of the activities of the Servicer during
the preceding 12-month period (or such other period as shall have elapsed from
the Closing Date to the date of the first such certificate) and of its
performance under this Agreement has been made under such officer's supervision,
and (ii) to such officer's knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Agreement throughout such period, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.

(b) The Servicer shall deliver to the Issuer, each Agent, the
Indenture Trustee, the Backup Servicer, the Security Insurer, the Collateral
Agent and each Rating Agency, promptly after having obtained knowledge thereof,
but in no event later than two Business Days thereafter, written notice in an
officer's certificate of any event which with the giving of notice or lapse of
time, or both, would become a Servicer Termination Event under Section 6.1(a).
The Seller or the Servicer shall deliver to the Issuer, each Agent, the
Indenture Trustee, the Backup

<PAGE>

Servicer, the Security Insurer, the Collateral Agent, each Rating Agency and
the Servicer or the Seller (as applicable) promptly after having obtained
knowledge thereof, but in no event later than two Business Days thereafter,
written notice in an officer's certificate of any event which with the giving
of notice or lapse of time, or both, would become a Servicer Termination
Event under any other clause of Section 6.1.

Section 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT.

(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer or to the Seller, to deliver to
the Issuer, the Indenture Trustee, each Agent, the Backup Servicer, the Security
Insurer, the Collateral Agent and each Rating Agency, on or before March 31 (or
90 days after the end of the Servicer's fiscal year, if other than December 31)
of each year, beginning on March 31, 1997, with respect to the twelve months
ended the immediately preceding December 31 (or other applicable date) (or such
other period as shall have elapsed from the Closing Date to the date of such
certificate), a statement (the "Accountant's Report") addressed to the Board of
Directors of the Servicer, to the Agents, the Indenture Trustee, the Backup
Servicer, the Collateral Agent and the Security Insurer, to the effect that such
firm has audited the financial statements of the Servicer and issued its report
thereon and that such audit (1) was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary in
the circumstances; (2) included an examination of documents and records relating
to the servicing of automobile installment sales contracts under pooling and
servicing agreements, sale and servicing agreements and warehousing agreements
substantially similar one to another (such statement to have attached thereto a
schedule setting forth the pooling and servicing agreements and sale and
servicing agreements covered thereby, including this Agreement); (3) included an
examination of the delinquency and loss statistics relating to the Servicer's
portfolio of automobile installment sales contracts; and (4) except as described
in the statement, disclosed no exceptions or errors in the records relating to
automobile and light truck loans serviced for others that, in the firm's
opinion, generally accepted auditing standards requires such firm to report.
The Accountants' Report shall further state that (1) a review in accordance with
agreed upon procedures was made of three randomly selected Servicer's
Certificates for each such pooling and servicing agreement, sale and servicing
agreement or warehousing agreements and (2) except as disclosed in the
Accountant's Report, no exceptions or errors in the Servicer's Certificates so
examined were found.

(b) The Accountants' Report shall also indicate that the firm is
independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.

(c) A copy of the Accountants' Report may be obtained by any
Noteholder by a request in writing to the Indenture Trustee addressed to the
Corporate Trust Office.

Section 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Servicer shall provide to representatives of the
Issuer, the Indenture Trustee, the Administrative Agent, either Agent, the
Backup Servicer and the Security Insurer reasonable access to the documentation
and its operations regarding the Receivables. In each case, such

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access shall be afforded without charge but only upon reasonable request and
during normal business hours and on a date not more than two Business Days
after the date of such request. Nothing in this Section shall derogate from
the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section.

Section 3.13. MONTHLY TAPE.

(a) On or before the third Business Day, but in no event later
than the fifth calendar day, of each month, the Servicer will deliver to the
Indenture Trustee and the Backup Servicer a computer tape or a diskette (or any
other electronic transmission acceptable to the Indenture Trustee and the Backup
Servicer) in a format acceptable to the Indenture Trustee and the Backup
Servicer containing the information with respect to the Receivables as of the
preceding Accounting Date necessary for preparation of the Servicer's
Certificate relating to the immediately succeeding Determination Date and
necessary to determine the application of collections as provided in Section
4.3. The Backup Servicer shall use such tape or diskette (or other electronic
transmission acceptable to the Indenture Trustee and the Backup Servicer) to
verify the Servicer's Certificate delivered by the Servicer, and the Backup
Servicer shall certify to the Security Insurer and the Administrative Agent that
it has verified the Servicer's Certificate in accordance with this Section 3.13
and shall notify the Servicer, the Security Insurer and the Administrative Agent
of any discrepancies, in each case, on or before the second Business Day
following the Determination Date. In the event that the Backup Servicer reports
any discrepancies, the Servicer and the Backup Servicer shall attempt to
reconcile such discrepancies prior to the related Deficiency Claim Date, but in
the absence of a reconciliation, the Servicer's Certificate shall control for
the purpose of calculations and distributions with respect to the related
Distribution Date. In the event that the Backup Servicer and the Servicer are
unable to reconcile discrepancies with respect to a Servicer's Certificate by
the related Distribution Date, the Servicer shall cause the Independent
Accountants, at the Servicer's expense, to audit the Servicer's Certificate and,
prior to the third Business Day, but in no event later than the fifth calendar
day, of the following month, reconcile the discrepancies. The effect, if any,
of such reconciliation shall be reflected in the Servicer's Certificate for such
next succeeding Determination Date. In addition, the Servicer shall, if so
requested by the Administrative Agent or the Security Insurer (unless an Insurer
Default shall have occurred and be continuing) deliver to the Backup Servicer
its Collection Records and its Monthly Records within one Business Day of demand
therefor and a computer tape containing as of the close of business on the date
of demand all of the data maintained by the Servicer in computer format in
connection with servicing the Receivables. Other than the duties specifically
set forth in this Agreement, the Backup Servicer shall have no obligations
hereunder, including, without limitation, to supervise, verify, monitor or
administer the performance of the Servicer. The Backup Servicer shall have no
liability for any actions taken or omitted by the Servicer. The duties and
obligations of the Backup Servicer shall be determined solely by the express
provisions of this Agreement and no implied covenants or obligations shall be
read into this Agreement against the Backup Servicer.

Section 3.14. RETENTION AND TERMINATION OF SERVICER. The Servicer
hereby covenants and agrees to act as such under this Agreement for an initial
term, commencing on the Effective Date and ending on December 31, 1998 which
term may be extended by the Security

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Insurer for successive quarterly terms ending on each successive June 30,
September 30, December 31, and March 31, (or, pursuant to revocable written
standing instructions from time to time to the Servicer, the Indenture
Trustee and the Administrative Agent, for any specified number of terms
greater than one), until the termination of this Agreement. Each such notice
(including each notice pursuant to standing instructions, which shall be
deemed delivered at the end of successive quarterly terms for so long as such
instructions are in effect) (a "Servicer Extension Notice") shall be
delivered by the Security Insurer to the Administrative Agent, the Indenture
Trustee and the Servicer. The Servicer hereby agrees that, as of the date
hereof and upon its receipt of any such Servicer Extension Notice, the
Servicer shall become bound, for the initial term beginning on the Closing
Date and for the duration of the term covered by such Servicer Extension
Notice, to continue as the Servicer subject to and in accordance with the
other provisions of this Agreement. Until such time as an Insurer Default
shall have occurred and be continuing, the Indenture Trustee agrees that if
as of the fifteenth day prior to the last day of any term of the Servicer the
Indenture Trustee shall not have received any Servicer Extension Notice from
the Security Insurer, the Indenture Trustee will, within five days
thereafter, give written notice of such non-receipt to the Administrative
Agent, the Security Insurer and the Servicer.

Section 3.15. FIDELITY BOND. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian of
funds and documents in respect of consumer contracts on behalf of institutional
investors.

Section 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE. The
Servicer shall, and hereby agrees that it will, perform on behalf of the Issuer
the following duties of the Issuer under the Indenture (references are to the
applicable Sections in the Indenture):

(a) the direction to the Paying Agent, if any, to deposit moneys
with the Indenture Trustee (Section 1011);

(b) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance and other
instruments, in accordance with Section 1016 of the Indenture, necessary to
protect the Trust Estate (Section 1016); and

(c) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate trustee and
any written instruments necessary in connection with the resignation or
removal of any co-trustee or separate trustee (Sections 710 and 716).

Section 3.17. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE
PURCHASE DATE. In the case of any Receivable in respect of which written
evidence from the Dealer selling the related Financed Vehicle that the Lien
Certificate for such Financed Vehicle showing AFL as first lienholder has been
applied for from the Registrar of Titles was delivered to the Custodian on the
applicable Purchase Date in lieu of a Lien Certificate, the Servicer shall use
its best efforts to collect such Lien Certificate from the Registrar of Titles
as promptly as practicable. If such Lien Certificate showing AFL as first
lienholder is not received by the Custodian within 180 days after the applicable
Purchase Date, then the representation and warranty in paragraph 5 of the
Schedule of Representations shall be deemed to have been incorrect in a manner
that materially and adversely affects the Security Insurer and the Issuer.

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Section 3.18. ACCOUNTANTS' REVIEW OF RECEIVABLE FILES. For every
group of approximately $60,000,000 (or such other amount as the Controlling
Party may determine in its sole and absolute discretion from time to time by
prior written notice to the Seller, the Servicer, the Issuer, the Trustee, the
Agents, the Collateral Agent and the Security Insurer) in aggregate Principal
Balance of Receivables transferred by the Seller to the Issuer pursuant to this
Agreement, the Servicer (or AFL, if AFL is not the Servicer) at its own expense
shall cause Independent Accountants acceptable to the Security Insurer to
conduct a physical inventory and limited review of the related Receivable Files,
commencing within three Business Days immediately succeeding the day the last
Receivable of such group of Receivables is transferred to the Issuer pursuant to
this Agreement. The Independent Accountants shall within such three Business
Days complete such physical inspection and limited review and execute and
deliver to the Secured Parties an Independent Accountant's Report with respect
to such review substantially in the form of Exhibit I hereto. If such review
reveals, in the Controlling Party's opinion, an unsatisfactory number of
exceptions, the Controlling Party, in its sole and absolute discretion, may
require a full review of every Receivable File by the Independent Accountants at
the expense of the Servicer (or AFL, if AFL is not the Servicer).

ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS

Section 4.1. SECURED ACCOUNTS.

(a) The Servicer shall establish the Collection Account in the
name of the Collateral Agent for the benefit of the Secured Parties (as defined
in the Security Agreement). The Collection Account shall be an Eligible Account
and shall be a segregated trust account established with the Collateral Agent
and maintained with the Collateral Agent. The Issuer and the Collateral Agent
agree that the Indenture Trustee shall have full power and authority to
withdraw, or cause to be withdrawn, funds held in the Collection Account in
accordance with the provisions of this Agreement and the Indenture.

(b) The Issuer shall establish the Note Distribution Account in
the name of the Collateral Agent for the benefit of the Secured Parties. The
Note Distribution Account shall be an Eligible Account and shall be a segregated
trust account established with the Collateral Agent and maintained with the
Collateral Agent. The Issuer and the Collateral Agent agree that the Indenture
Trustee shall have full power and authority to withdraw, or cause to be
withdrawn, funds held in the Note Distribution Account in accordance with the
provisions of this Agreement and the Indenture.

(c) All amounts held in the Collection Account and the Note
Distribution Account (collectively, the "Secured Accounts") shall, to the extent
permitted by applicable laws, rules and regulations, be invested, as directed in
writing by the Servicer, in Eligible Investments that mature not later than one
Business Day prior to the date that any payment is due from the Secured Accounts
hereunder or under any Related Document; PROVIDED, that the amounts held in the
Secured Accounts shall be invested in overnight funds or next-day funds as
constitute Eligible Investments (which shall initially be the Indenture
Trustee's U.S. Government Fund and, from time to time, shall include such other
proprietary Eligible Investments of the Indenture

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Trustee as shall be confirmed in writing by the Security Insurer to the
Indenture Trustee; PROVIDED, HOWEVER, any such proprietary investment may not
be invested in if it is not an eligible Investment) for the period of time
between such Business Day and the date such payment is due. Any such written
direction shall certify that any such investment is authorized by this
Section 4.1. Investments in Eligible Investments shall be made in the name
of the Collateral Agent on behalf of the Secured Parties, and such
investments shall not be sold or disposed of prior to their maturity. Any
investment of funds in the Secured Accounts shall be made in Eligible
Investments held by a financial institution in accordance with the following
requirements:

(A) all Eligible Investments shall be held in an account with such
financial institution in the name of the Collateral Agent;

(B) all Eligible Investments held in such account shall be
delivered to the Collateral Agent in the following manner:

(i) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC (other than certificated securities) and are susceptible of
physical delivery, transferred to the Collateral Agent by physical
delivery to the Collateral Agent, indorsed to, or registered in the
name of, the Collateral Agent or its nominee or indorsed in blank; or
such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Eligible Investments to the Collateral Agent free of any adverse
claims, consistent with changes in applicable law or regulations or
the interpretation thereof;

(ii) with respect to a "certificated security" (as defined
in Section 8-102(a)(4) of the UCC), transferred:

(I) by physical delivery of such certificated security
to the Collateral Agent, provided that if the certificated
security is in registered form, it shall be indorsed to, or
registered in the name of, the Collateral Agent or indorsed in
blank;

(II) by physical delivery of such certificated security
in registered form to a "securities intermediary" (as defined
in Section 8-102(a)(14) of the UCC) acting on behalf of the
Collateral Agent if the certificated security has been
specially indorsed to the Collateral Agent by an effective
endorsement.

(iii) with respect to any security issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or by the Federal
National Mortgage Association that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations, the following procedures, all in accordance with
applicable law, including applicable federal regulation and Articles 8
and 9 of the UCC: book-entry registrations of such property to an
appropriate book-entry account maintained with a Federal Reserve Bank
by a

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securities intermediary which is also a "depositary" pursuant to
applicable federal regulations and issuance by such securities
intermediary of a deposit advice or other written confirmation of such
book-entry registration to the Collateral Agent of the purchase by the
securities intermediary on behalf of the Collateral Agent of such
book-entry security; the making by such securities intermediary of
entries in its books and records identifying such book-entry security
held through the Federal Reserve System pursuant to Federal book-entry
regulations as belonging to the Collateral Agent and indicating that
such securities intermediary holds such book-entry security solely as
agent for the Collateral Agent; or such additional or alternative
procedures as may hereafter become appropriate to effect complete
transfer of ownership of any such Eligible Investments to the
Collateral Agent free of any adverse claims, consistent with changes
in applicable law or regulations or the interpretation thereof;

(iv) with respect to any "uncertificated security" (as
defined in Section 8-102(a)(18) of the UCC) that is not governed by
clause (iii) above, transferred:

(I)(1) by registration to the Collateral Agent as
the registered owner thereof, on the books and records of the
issuer thereof, or

(2) by another Person (not a securities intermediary)
either becomes the registered owner of the uncertificated
security on behalf of the Collateral Agent, or having become
the registered owner acknowledges that it holds for the
Collateral Agent; or

(II) by the issuer thereof having agreed that it will
comply with instruction originated by the Collateral Agent
without further consent of the registered owner thereof:

(v) with respect to any "securities entitlement" (as
defined in Section 8-102(a)(17) of the UCC):

(I) if a securities intermediary (1) indicates by book
entry that a "financial asset" (as defined in Section 8-102(a)
(9) of the UCC) has been credited to the Collateral
Agent's "securities account" (as defined in Section 8-501(a)
of the UCC), (2) receives a financial asset (as so defined)
from the Collateral Agent or acquires a financial asset for
the Collateral Agent, and in either case, accepts it as credit
to the Collateral Agent's securities account (as so defined),
(3) becomes obligated under other law, regulation or rule to
credit a financial asset to the Collateral Agent's securities
account, or (4) has agreed that it will comply with
"entitlement orders" (as defined in Section 8-102(a)(8) of the
UCC) originated by the Collateral Agent, without further
consent by the "entitlement holder" (as defined in Section
8-102(a)(7) of the UCC), of a confirmation of the purchase and
the making of such securities intermediary of entries on its
books and records identifying as belonging to the Collateral
Agent of (I) a

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specific certificated security in the securities
intermediary's possession, (II) a quantity of securities
that constitute or are part of a fungible bulk of
certificated securities in the securities intermediary's
possession, or (III) a quantity of securities that constitute
or are part of a fungible bulk of securities shown on the
account of the securities intermediary on the books of another
securities intermediary.

(vi) in each case of delivery contemplated pursuant to
clauses (i) through (v) of subsection (b) hereof, the Collateral Agent
shall make appropriate notations on its records, and shall cause the
same to be made on the records of its nominees, indicating that such
Eligible Investment is held in trust pursuant to and as provided in
this Agreement.

Any cash held by the Collateral Agent shall not be considered a "financial
asset" for purposes of this Section 4.1(c).

Subject to the other provisions hereof, the Collateral Agent shall
have sole control over each such investment and the income thereon, and any
certificate or other instrument evidencing any such investment, if any, shall be
delivered directly to the Collateral Agent or its agent, together with each
document of transfer, if any, necessary to transfer title to such investment to
the Collateral Agent in a manner which complies with this Section 4.1. All
interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Secured Accounts shall be deposited in the
Collection Account and distributed on the next Distribution Date pursuant to
Section 4.6. The Servicer shall deposit in the applicable Secured Account an
amount equal to any net loss on such investments immediately as realized.

(d) On each Purchase Date, the Servicer shall deposit in the
Collection Account (x) all Scheduled Payments and prepayments of the Receivables
transferred to the Issuer on such date that are received by the Servicer after
the related Cut-Off Date and on or prior to the Business Day immediately
preceding such Purchase Date or received by the Lockbox Bank after the related
Cut-Off Date and on or prior to the second Business Day immediately preceding
such Purchase Date and (y) all Liquidation Proceeds and proceeds of Insurance
Policies in respect of a Financed Vehicle and applied by the Servicer after the
related Cut-Off Date.

(e) The Seller shall have the right (but not the obligation) to
make deposits into the Collection Account in order to satisfy the Collateral
Test. AFL represents and warrants and agrees that it will not make a capital
contribution to the Seller to enable the Seller to make such a deposit and that
it will have the option (but not the obligation) to make loans to the Seller to
enable the Seller to make such a deposit, but only if (i) such loans are made on
an arms-length basis, (ii) AFL reasonably believes that at the time it shall
make such loan it will be repaid by the Seller and (iii) if AFL shall make any
such loan to the Seller, AFL shall enter into a Note for Intercompany
Discretionary Advance and Subordination Agreement and a Subordinated Revolving
Credit Promissory Note in substantially the form of Exhibit C hereto. The
Seller shall provide the Rating Agencies prior written notice of any loans it
shall receive from AFL in order to satisfy the Collateral Test.

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(f) On any Business Day on which there is a WAC Deficiency Amount,
the Seller shall deposit into the Collection Account the positive difference, if
any, between the WAC Deficiency Amount on such Business Day and the WAC
Deficiency Deposit. The Seller shall provide the Rating Agencies prior written
notice of any loans it shall receive from AFL in order to make a deposit in
respect of the WAC Deficiency Amount.

(g) The Issuer shall deposit into the Collection Account the
amount of all Advances made by the Issuer to the Seller pursuant to Section 2.1.

(h) The Seller may at any time deposit into the Collection Account
the positive difference, if any, between the Spread Account Minimum Amount (as
defined in the Insurance Agreement) and the amount on deposit in the Warehousing
Series Spread Account. The Seller shall provide the Rating Agencies prior
written notice of any loans it shall receive from AFL in order to make a deposit
in respect of any such deficiency in the Warehousing Series Spread Account. Any
such amount deposited in the Collection Account pursuant to this Section 4.1(h)
shall not be deemed to be amounts on deposit in the Collection Account for any
other purposes of this Agreement or the Indenture other than for purpose of
Section 4.10(c).

Section 4.2. COLLECTIONS. The Servicer will be entitled to be
reimbursed from amounts on deposit in the Collection Account with respect to a
Monthly Period for amounts previously deposited in the Collection Account but
later determined by the Servicer or the Lockbox Bank to have resulted from
mistaken deposits or postings or checks returned for insufficient funds. The
amount to be reimbursed hereunder shall be paid to the Servicer on the related
Distribution Date pursuant to Sections 4.6(a)(iv) and 4.6(b)(iv) upon
certification by the Servicer of such amounts and the provision of such
information to the Indenture Trustee, the Administrative Agent and the Security
Insurer as may be necessary in the opinion of the Administrative Agent or the
Security Insurer to verify the accuracy of such certification. In the event
that the Security Insurer or the Administrative Agent has not received evidence
satisfactory to it of the Servicer's entitlement to reimbursement pursuant to
this Section 4.2, the Administrative Agent or the Security Insurer, as the case
may be, shall (unless an Insurer Default shall have occurred and be continuing)
give the Indenture Trustee notice to such effect, following receipt of which the
Indenture Trustee shall not make a distribution to the Servicer in respect of
such amount pursuant to Section 4.6, or if the Servicer prior thereto has been
reimbursed pursuant to Section 4.6, the Indenture Trustee shall withhold such
amounts from amounts otherwise distributable to the Servicer on the next
succeeding Distribution Date.

Section 4.3. APPLICATION OF COLLECTIONS. For the purposes of this
Agreement, all collections for a Monthly Period shall be applied by the Servicer
as follows:

(a) With respect to each Receivable, payments by or on behalf of
the Obligor thereof (other than of Supplemental Servicing Fees with respect to
such Receivable, to the extent collected) shall be applied to interest and
principal with respect to such Receivable in accordance with the terms of such
Receivable. With respect to each Liquidated Receivable, Liquidation Proceeds
shall be applied to interest and principal with respect to such Receivable in
accordance with the terms of such Receivable, and then to any Insurance Add-On
Amount due and payable with respect to such Receivable. The Servicer shall not
be entitled to any Supplemental Servicing Fees with respect to a Liquidated
Receivable.

<PAGE>

(b) With respect to each Receivable that has become a Purchased
Receivable on any Deposit Date, the Purchase Amount shall be applied, for
purposes of this Agreement only, to interest and principal on the Receivable in
accordance with the terms of the Receivable as if the Purchase Amount had been
paid by the Obligor on the Accounting Date next preceding such Deposit Date.
The Servicer shall not be entitled to any Supplemental Servicing Fees with
respect to such a Receivable. Nothing contained herein shall relieve any
Obligor of any obligation relating to any Receivable.

(c) With respect to each Receivable that has become a Repurchased
Receivable on any date, the Repurchase Price shall be applied, for purposes of
this Agreement only, to interest and principal on the Receivable in accordance
with the terms of the Receivable as if the Repurchase Price had been paid by the
Obligor on such date. The Servicer shall not be entitled to any Supplemental
Servicing Fees with respect to such a Receivable. Nothing contained herein
shall relieve any Obligor of any obligation relating to any Receivable.

(d) All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall be deposited in the Collection
Account and paid to the Servicer in accordance with Sections 4.6(a)(iv) and
4.6(b)(iv).

(e) All payments by or on behalf of an Obligor received with
respect to any Purchased Receivable after the Accounting Date immediately
preceding the Deposit Date on which the Purchase Amount was paid by the Seller,
AFL or the Servicer shall be paid to the Seller, AFL or the Servicer,
respectively, and shall not be included in the Available Funds, the Distribution
Amount or the Spread Account Available Funds.

Section 4.4. MONTHLY ADVANCES.

(a) After the occurrence of an Amortization Event, if with respect
to a Receivable the amount deposited into the Collection Account during a
Monthly Period in respect of such Receivable and allocable to interest
(determined in accordance with Section 4.3) is less than the amount of interest
accrued on such Receivable (for the number of calendar days in such Monthly
Period), the Servicer shall make a Monthly Advance equal to the amount of such
shortfall; PROVIDED, HOWEVER, that the Servicer shall not be required to make a
Monthly Advance with respect to a Receivable extended pursuant to Section 3.2(b)
for any Monthly Period during which no Scheduled Payment is due according to the
terms of such extension.

(b) If with respect to any Determination Date so long as an
Amortization Event has not occurred, the amount of Available Funds is less than
the sum of the amounts payable on the related Distribution Date pursuant to
clause (i) of Section 4.6(a), then on such Determination Date the Servicer, or
AFL if AFL is no longer the Servicer, shall make a Monthly Advance equal to the
amount of such shortfall.

(c) On or before each Determination Date and prior to the delivery
of the Servicer's Certificate for such Determination Date pursuant to Section
3.9, the Servicer (or AFL if AFL is not the Servicer and AFL is required to make
a Monthly Advance pursuant to Section 4.4(b)) shall deposit in the Collection
Account the aggregate amount of Monthly Advances required for the related
Monthly Period in immediately available funds.

<PAGE>

(d) The Servicer shall be entitled to be reimbursed for
Outstanding Monthly Advances pursuant to Section 4.6(b)(i) from the following
sources on any day subsequent to the Distribution Date in respect of which such
Monthly Advance was made: (i) subsequent payments by or on behalf of any
Obligor with respect to such Receivable, (ii) collections of Liquidation
Proceeds with respect to any Receivable if such Receivable becomes a Liquidated
Receivable, (iii) payment of any Purchase Amount with respect to any Receivable
if such Receivable becomes a Purchased Receivable and (iv) payment of any
Repurchase Price with respect to any Receivable if such Receivable becomes a
Repurchased Receivable. If any Receivable shall become a Liquidated Receivable
and the Servicer shall not have been fully reimbursed for Outstanding Monthly
Advances with respect to such Receivable from the sources of funds previously
described in this paragraph, the Servicer shall be entitled to reimbursement
from collections on Receivables other than the Receivable in respect of which
such Outstanding Monthly Advance shall have been made.

Section 4.5. ADDITIONAL DEPOSITS.

(a) On or before each Deposit Date, the Servicer or AFL shall
deposit in the Collection Account the aggregate Purchase Amounts with respect to
Administrative Receivables. The Seller shall deposit in the Collection Account
the Repurchase Price with respect to Repurchased Receivables. All such deposits
of Purchase Amounts and Repurchase Prices shall be made in immediately available
funds. On each Deficiency Claim Date, the Indenture Trustee shall deposit in
the Collection Account any amounts delivered to the Indenture Trustee by the
Spread Account Collateral Agent.

(b) The Security Insurer shall at any time, and from time to time,
have the option but not the obligation to deliver amounts to the Indenture
Trustee for deposit into the Collection Account, for distribution with respect
to the Deficiency Claim Date coinciding with or next succeeding the date of such
deposit to the extent that without such distribution a draw would be required to
be made on the Note Policy, in order to provide for the compensation of a
Successor Servicer as provided in Section 6.3(c), or otherwise to provide for
expenses of the Issuer, including amounts due to providers of services to the
Issuer.

Section 4.6. DISTRIBUTIONS.

(a) On each Distribution Date prior to the occurrence of an
Amortization Event, the Indenture Trustee shall (based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date) distribute the following amounts in the following order of priority:

(i) first, from the Distribution Amount, to the Note Distribution
Account, an amount equal to the Advance Interest Distributable Amount for
such Distribution Date;

(ii) second, from the Distribution Amount, to the Servicer (or to
AFL if AFL is not the Servicer and AFL has made a Monthly Advance pursuant
to Section 4.4(b)), the amount of Outstanding Monthly Advances for which
the Servicer (or AFL) is entitled to be reimbursed and for which the
Servicer (or AFL) has not previously been reimbursed;

<PAGE>

(iii) third, from the Distribution Amount, PRO RATA, to the Owner
Trustee, any accrued and unpaid fees of the Owner Trustee in accordance
with the Trust Agreement and including amounts with respect to which the
Administrator is entitled to be reimbursed pursuant to the Administration
Agreement; to the Indenture Trustee, any accrued and unpaid fees of the
Indenture Trustee in accordance with the Indenture; to any Lockbox Bank,
Custodian, Backup Servicer or Collateral Agent (including the Indenture
Trustee if acting in any such additional capacity), any accrued and unpaid
fees (in each case, to the extent such Person has not previously received
such amount from the Servicer or AFL); to any successor Servicer, to the
extent not previously paid by the predecessor Servicer pursuant to Section
6.2, reasonable transition expenses incurred in acting as successor
Servicer in an amount not to exceed $50,000 in total;

(iv) fourth, from the Distribution Amount, to the Servicer, the
Basic Servicing Fee for the related Monthly Period, any Supplemental
Servicing Fees for the related Monthly Period, and any amounts permitted to
be paid to the Servicer pursuant to Section 4.2;

(v) fifth, from the Distribution Amount, on Distribution Dates
with respect to the Amortization Period so long as no Amortization Event
shall have occurred, to the Note Distribution Account, an amount equal to
the Advance Principal Distributable Amount for such Distribution Date;

(vi) sixth, from the Distribution Amount, to the Security Insurer,
to the extent of any amounts owing to the Security Insurer under the
Insurance Agreement and not paid, whether or not AFL or any other Person is
also obligated to pay such amounts;

(vii) seventh, from the Distribution Amount, on Distribution Dates
with respect to the Revolving Period, an amount determined and certified by
the Servicer and included in the Servicer's Certificate delivered on the
related Determination Date to be at least equal to the sum of (1) the WAC
Deficiency Amount, if any, on such Determination Date, and (2) the amount
necessary to be held in the Collection Account such that after giving
effect to all deposits and distributions to be made on such Distribution
Date, the Collateral Test will be satisfied (not taking into account any
WAC Deficiency Amounts provided for in clause (1) above) as of the
immediately preceding Accounting Date, shall remain on deposit in the
Collection Account;

(viii) eighth, from the Distribution Amount, on Distribution Dates
with respect to the Amortization Period so long as no Amortization Event
shall have occurred, to the Note Distribution Account, an amount equal to
the remaining amount on deposit in the Collection Account until an amount
payable in respect of the principal of the Advances equal to the unpaid
principal amount of the Advances has been deposited in the Note
Distribution Account;

(ix) ninth, from the Distribution Amount, to each Agent for
distribution to the applicable parties, any amounts owing to such Agent,
the Noteholders or any Permitted Assignee by the Issuer or the Seller under
the Note Purchase Agreement, the Fee Letters or any other Related Document,
to the extent not otherwise paid; and

<PAGE>

(x) tenth, from the Distribution Amount (excluding amounts
required to be retained in the Collection Account pursuant to clause (vii)
above), the remaining portion of the Distribution Amount to the Spread
Account Collateral Agent for deposit in the Spread Account.

(b) On each Distribution Date after the occurrence of an
Amortization Event, the Indenture Trustee shall (based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date) distribute the following amounts and in the following order of priority:

(i) first, from the Distribution Amount, to the Servicer, an
amount equal to the amount of Outstanding Monthly Advances for which the
Servicer is entitled to be reimbursed and for which the Servicer has not
previously been reimbursed;

(ii) second, from the Distribution Amount, to the Note Distribution
Account, an amount equal to the Advance Interest Distributable Amount for
such Distribution Date;

(iii) third, from the Distribution Amount, PRO RATA, to the Owner
Trustee, any accrued and unpaid fees of the Owner Trustee in accordance
with the Trust Agreement and including amounts with respect to which the
Administrator is entitled to under the Administration Agreement; to the
Indenture Trustee, an amount equal to any accrued and unpaid fees of the
Indenture Trustee in accordance with the Indenture; to any Lockbox Bank,
Custodian, Backup Servicer, Collateral Agent (including the Indenture
Trustee if acting in any such additional capacity), an amount equal to any
accrued and unpaid fees owing to such Persons (in each case, to the extent
such Person has not previously received such amount from the Servicer or
AFL); to any successor Servicer, to the extent not previously paid by the
predecessor Servicer pursuant to Section 6.2, reasonable transition
expenses incurred in acting as successor Servicer in an amount not to
exceed $50,000 in total;

(iv) fourth, from the Distribution Amount, to the Servicer, the sum
of the Basic Servicing Fee for the related Monthly Period, any Supplemental
Servicing Fees for the related Monthly Period, and any amounts specified in
Section 4.2;

(v) fifth, from the Distribution Amount, to the Note Distribution
Account, an amount equal to the Advance Principal Distributable Amount for
such Distribution Date;

(vii) seventh, if an Insurer Default has occurred, from the
Distribution Amount, to the Note Distribution Account, an amount equal to
the Default Amount Distributable Amount for such Distribution Date;

(viii) eighth, from the Distribution Amount, to the Note Distribution
Account, an amount equal to the remaining Distribution Amount until an
amount payable in

<PAGE>

respect of principal of the Notes equal to the unpaid principal amount of
the Notes has been deposited in the Note Distribution Account;

(ix) ninth, from the Distribution Amount, PRO RATA, (I) to the
Administrative Agent, for distribution to the applicable parties, an amount
equal to the sum, without duplication, of (A) any expenses incurred by the
Administrative Agent, the Agents or the Noteholders as a result of any
failure of the Seller to perform hereunder PLUS (B) any amounts owing to
each Agent, the Noteholders or any Permitted Assignee under the Note
Purchase Agreement, the Fee Letters or any other Related Document, to the
extent not otherwise paid; and (II) if an Insurer Default has not occurred,
to the Note Distribution Account, an amount equal to the Default Amount
Distributable Amount for such Distribution Date; and

(x) tenth, any remaining Distribution Amount to the Spread Account
Collateral Agent for deposit in the Spread Account.

Section 4.7. STATEMENTS TO NOTEHOLDERS. On each Distribution Date,
the Indenture Trustee shall include with each distribution to each Noteholder, a
Servicer's Certificate.

Section 4.8. INDENTURE TRUSTEE AS AGENT; CALCULATION OF WEIGHTED
AVERAGE APR, WAC DEFICIENCY AMOUNTS, BASIS FEE PERCENT AND ADVANCE INTEREST
RATE.

(a) The Indenture Trustee, in making distributions as provided in
this Agreement, shall act solely on behalf of and as agent for the Noteholders.

(b) Prior to the occurrence of an Amortization Event, on each
Business Day the Seller shall calculate the Maximum Interest Rate, the weighted
average APR of the Receivables, the WAC Deficiency Percentage and the WAC
Deficiency Amount, if any, and shall, upon request, provide such calculation in
writing to the Indenture Trustee, the Issuer, the Administrative Agent, the
Servicer or the Security Insurer. Prior to the occurrence of an Amortization
Event, if on any Business Day the WAC Deficiency Amount is greater than zero,
the Seller shall provide written notice of such WAC Deficiency Amount and the
corresponding WAC Deficiency Percentage and the WAC Deficiency Deposit, if any,
with respect to such Business Day to the Issuer, the Administrative Agent, the
Indenture Trustee, the Servicer, and the Security Insurer by 12:00 noon, New
York City time, on such day.

(c) On the Effective Date, the Basis Fee Percent shall be 0%.
On any Business Day on which the Administrative Agent determines, in its sole
discretion, that there has been a change in the Basis Fee Percent, the
Administrative Agent shall calculate the Basis Fee Percent and shall provide
the Seller with telephonic notice of such calculation by 10:00 a.m. New York
City time on each such day. In the absence of notice of a change in the
Basis Fee Percent, the Basis Fee Percent shall remain the same as it was as
of the Closing Date or, if notice of a change in the Basis Fee Percent has
been given to the Seller by the Administrative Agent, as it was as of the
date of the last such notice of change in the Basis Fee Percent.

<PAGE>

(d) Each Agent shall provide the Indenture Trustee, the Security
Insurer, the Issuer, the Seller and the Servicer by facsimile transmission no
later than 10:00 a.m. on the Business Day prior to each Determination Date, a
certificate of a Responsible Officer, which shall set forth the Advance
Interest Rate for its related Note for the immediately preceding Interest
Period and shall set forth in reasonable detail the manner in which such
calculation of the Advance Interest Rate was determined and, absent manifest
error, the amount set forth in such certificate with respect to the Advance
Interest Rate shall be conclusive. Each Agent shall provide to the Security
Insurer, the Issuer, the Seller, AFL and the Indenture Trustee, on the
Business Day preceding the date of prepayment, if each Agent shall have
received notice of such prepayment on or prior to such Business Day, or on
the prepayment date, if each Agent shall receive notice of such prepayment on
such date of prepayment, a certificate of a responsible officer, which shall
set forth the interest due on its Note being prepaid together with the
Breakage Fee, if any, due on such prepayment date, and which also shall set
forth, in reasonable detail, the manner in which the calculation of the
interest due on its Note and the Breakage Fee was determined. Absent
manifest error, the amount set forth in such certificate with respect to the
Breakage Fee and interest shall be conclusive.

Section 4.9. ELIGIBLE ACCOUNTS. Any account which is required to be
established as an Eligible Account pursuant to this Agreement and which ceases
to be an Eligible Account shall within five Business Days (or such longer
period, not to exceed 30 days, as to which each Rating Agency, the
Administrative Agent and the Security Insurer may consent) be established as a
new account which shall be an Eligible Account and any cash or any investments
shall be transferred to such new account.

Section 4.10. ADDITIONAL WITHDRAWALS FROM THE COLLECTION ACCOUNT.

(a) On each Purchase Date, the Servicer shall instruct the
Indenture Trustee in writing by 10:00 a.m., Minneapolis, Minnesota time, to
withdraw from the Collection Account and deposit to the Spread Account and pay
to the account of the Seller specified by the Servicer in such writing, and upon
such instruction, the Indenture Trustee shall withdraw from the Collection
Account and initiate a wire transfer to the Spread Account and to such account
of the Seller no earlier than 2:00 p.m., New York City time, and no later than
3:00 p.m., New York City time, the amounts set forth in such instructions. The
aggregate amount set forth in the instruction referred to in the preceding
sentence shall be equal to the least of (i) the Purchase Price for the
Receivables being purchased by the Issuer on such date, (ii) for any Purchase
Date occurring during the period from but excluding a Determination Date through
and including the related Distribution Date, an amount equal to the total amount
on deposit in the Collection Account on such date over the sum of (A) the
amounts to be distributed from or retained in the Collection Account on such
Distribution Date pursuant to clauses (i) through (ix) of Section 4.6(a) as set
forth in the Servicer's Certificate delivered on such Determination Date, and
(B) any increase in the WAC Deficiency Amount on such date, if any, above the
WAC Deficiency Amount on such Determination Date, and (iii) an amount equal to
the excess of the total amount on deposit in the Collection Account on such date
over the WAC Deficiency Amounts, if any, required to be on deposit in the
Collection Account on such date. The Servicer shall instruct the Trustee to
wire an amount equal to 1% of the aggregate Principal Balance of Receivables
being purchased by the Issuer on such date to the Spread Account and the
Servicer shall instruct the

<PAGE>

Trustee to wire the remainder of the amount specified in the preceding
sentence to the account of the Seller.

(b) On the Business Day specified by the Seller in the notice of
a prepayment of an Advance delivered to the Indenture Trustee pursuant to
Section 2.1(e), the Indenture Trustee shall withdraw from the Collection
Account and, if applicable, the Spread Account the amount of such prepayment
determined in accordance with the provisions of Section 2.1(e) (as set forth
in a certificate of a Responsible Officer of the Seller) and shall deposit
such amount into the Note Distribution Account for application in accordance
with the provisions of the Indenture.

(c) On the date of any deposit into the Collection Account made
pursuant to Section 4.1(h), the Servicer shall instruct the Indenture Trustee to
withdraw from the Collection Account and deposit to the Spread Account the
amount deposited into the Collection Account pursuant to Section 4.1(h), and
upon such instruction the Indenture Trustee shall withdraw such amount from the
Collection Account and initiate a wire transfer in such account to the Spread
Account.

Section 4.11. CROSS-COLLATERALIZATION WITH THE SPREAD ACCOUNT
AGREEMENT.

(a) In the event that the Indenture Trustee shall determine on any
Deficiency Claim Date, based on information in the Servicer's Certificate, that
there exists a Collection Account Shortfall or a Warehousing Shortfall (each as
defined in the Spread Account Agreement) (any such shortfall being a "Deficiency
Claim Amount"), then on such Deficiency Claim Date, the Indenture Trustee shall
deliver to the Collateral Agent, the Spread Account Collateral Agent, the
Security Insurer, the Issuer and the Servicer, by hand delivery, telex or
facsimile transmission, a written notice (a "Deficiency Notice") specifying the
Deficiency Claim Amount for such Distribution Date. Such Deficiency Notice
shall direct the Spread Account Collateral Agent to remit such Deficiency Claim
Amount (to the extent of the funds available to be distributed pursuant to the
Spread Account Agreement) to the Indenture Trustee for deposit in the Collection
Account.

(b) Any Deficiency Notice shall be delivered by 10:00 a.m., New
York City time, on the related Deficiency Claim Date. The amounts distributed
by the Spread Account Collateral Agent to the Indenture Trustee pursuant to a
Deficiency Notice shall be deposited by the Indenture Trustee into the
Collection Account pursuant to Section 4.5.

<PAGE>

ARTICLE V
THE SERVICER

Section 5.1. LIABILITY OF SERVICER; INDEMNITIES.

(a) The Servicer (in its capacity as such and, in the case of AFL,
without limitation of its obligations under the Purchase Agreement) shall be
liable hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Servicer and the representations made by the
Servicer.

(b) The Servicer shall defend, indemnify and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Collateral Agent, the
Backup Servicer, the Administrative Agent, each Agent, the Security Insurer,
their respective officers, directors, agents and employees and the Noteholders
from and against any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation arising out of or resulting from the use, ownership or operation by
the Servicer or any Affiliate thereof other than the Seller or the Issuer of any
Financed Vehicle.

(c) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Collateral Agent, the
Backup Servicer, the Administrative Agent, each Agent, the Security Insurer,
their respective officers, directors, agents and employees and the Noteholders
from and against any taxes that may at any time be asserted against the Issuer,
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Administrative Agent, the Collateral Agent, or the Noteholders with respect to
the execution, delivery and performance of this Agreement, including, without
limitation, any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but not including any taxes asserted with
respect to, and as of the date of, the sale of the Receivables and the other the
Seller Conveyed Property to the Issuer or the issuance and original sale of the
Notes, or federal or other income taxes arising out of distributions on the
Notes) and costs and expenses in defending against the same.

(d) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Collateral Agent, the
Backup Servicer, the Administrative Agent, each Agent, the Security Insurer,
their respective officers, directors, agents and employees and the Noteholders
from and against any and all costs, expenses, losses, claims, damages, and
liabilities to the extent that such cost, expense, loss, claim, damage, or
liability arose out of, or was imposed upon the Issuer, the Owner Trustee, the
Indenture Trustee, the Collateral Agent, the Backup Servicer, the Administrative
Agent, the Security Insurer or the Noteholders through the breach of this
Agreement, the negligence, willful misfeasance, or bad faith of the Servicer in
the performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.

(e) Indemnification under this Article shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Servicer has made any indemnity payments pursuant to this Article and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Servicer, without interest.

<PAGE>

(f) AFL, in its individual capacity, hereby acknowledges that the
indemnification provisions in the Purchase Agreement benefiting the Issuer, the
Administrative Agent, each Agent, the Owner Trustee, the Indenture Trustee, the
Collateral Agent and the Backup Servicer are enforceable by each hereunder.

(g) AFL, in its individual capacity, shall indemnify, defend and
hold harmless the Issuer, the Owner Trustee, the Indenture Trustee, the
Collateral Agent, the Backup Servicer, the Administrative Agent, each Agent,
the Security Insurer, their respective officers, directors, agents and
employees and the Noteholders from and against any taxes that may at any time
be asserted against the Issuer, the Owner Trustee, the Indenture Trustee, the
Backup Servicer, the Administrative Agent, the Collateral Agent, the Security
Insurer or the Noteholders with respect to the transactions contemplated in
this Agreement, including, without limitation, any sales, gross receipts,
general corporation, tangible personal property, privilege or license taxes
(but not including any taxes asserted with respect to, and as of the date of,
the sale of the Receivables and the other Seller Conveyed Property to the
Issuer or the issuance and original sale of the Notes, or federal or other
income taxes arising out of distributions on the Notes) and costs and
expenses in defending against the same, but only to the extent such amounts
are not otherwise covered by the indemnities set forth in Sections 5.1(b)
through (f) above.

Section 5.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER.

(a) The Servicer shall not merge or consolidate with any other
person, convey, transfer or lease substantially all its assets as an entirety to
another Person, or permit any other Person to become the successor to the
Servicer's business unless, after the merger, consolidation, conveyance,
transfer, lease or succession, the successor or surviving entity shall be an
Eligible Servicer and shall be capable of fulfilling the duties of the Servicer
contained in this Agreement. Any corporation (i) into which the Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation to which
the Servicer shall be a party, (iii) which acquires by conveyance, transfer, or
lease substantially all of the assets of the Servicer, or (iv) succeeding to the
business of the Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Servicer under this
Agreement and, whether or not such assumption agreement is executed, shall be
the successor to the Servicer under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties to this
Agreement, anything in this Agreement to the contrary notwithstanding; PROVIDED,
HOWEVER, that nothing contained herein shall be deemed to release the Servicer
from any obligation. The Servicer shall provide notice of any merger,
consolidation or succession pursuant to this Section 5.2(a) to the Issuer, the
Indenture Trustee, the Administrative Agent, the Security Insurer and each
Rating Agency. Notwithstanding the foregoing, the Servicer shall not merge or
consolidate with any other Person or permit any other Person to become a
successor to the Servicer's business, unless (x) immediately after giving effect
to such transaction, no representation or warranty made pursuant to Section 3.6
shall have been breached (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such transaction)
and no event that, after notice or lapse of time, or both, would become an
Insurance Agreement Event of Default shall have occurred and be continuing, (y)
the Servicer shall have delivered to the Issuer, the Administrative Agent, the
Indenture Trustee and the Security Insurer an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 5.2(a) and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) the Servicer shall have delivered
to the Issuer, the Administrative Agent, the Indenture

<PAGE>

Trustee and the Security Insurer an Opinion of Counsel, stating, in the
opinion of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of the Issuer in the Seller
Conveyed Property and reciting the details of the filings or (B) no such
action shall be necessary to preserve and protect such interest.

(b) Any corporation (i) into which the Backup Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation to which
the Backup Servicer shall be a party, (iii) which acquires by conveyance,
transfer or lease substantially all of the assets of the Backup Servicer, or
(iv) succeeding to the business of the Backup Servicer, in any of the foregoing
cases shall execute an agreement of assumption to perform every obligation of
the Backup Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall
be deemed to release the Backup Servicer from any obligation.

Section 5.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER
AND OTHERS.

(a) Neither the Servicer, the Backup Servicer nor any of the
directors or officers or employees or agents of the Servicer or Backup Servicer
shall be under any liability to the Noteholders, except as provided in this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement; PROVIDED, HOWEVER, that this provision shall not
protect the Servicer, the Backup Servicer or any such Person against any
liability that would otherwise be imposed by reason of a breach of this
Agreement or willful misfeasance, bad faith or negligence in the performance of
duties, by reason of reckless disregard of obligations and duties under this
Agreement or any violation of law by the Servicer, Backup Servicer or such
Person, as the case may be; PROVIDED FURTHER, that this provision shall not
affect any liability to indemnify the Issuer and the Indenture Trustee for
costs, taxes, expenses, claims, liabilities, losses or damages paid by the
Issuer or the Indenture Trustee, each in its individual capacity. The Servicer,
the Backup Servicer and any director, officer, employee or agent of the Servicer
or Backup Servicer may rely in good faith on the advice of counsel or on any
document of any kind PRIMA FACIE properly executed and submitted by any Person
respecting any matters arising under this Agreement.

(b) The Backup Servicer shall not be liable for any obligation of
the Servicer contained in this Agreement, and the Issuer, the Indenture Trustee,
the Administrative Agent, the Seller, the Security Insurer and the Noteholders
shall look only to the Servicer to perform such obligations.

Section 5.4. DELEGATION OF DUTIES. The Servicer may delegate duties
under this Agreement to an Affiliate of AFL with the prior written consent of
the Security Insurer (unless

<PAGE>

an Insurer Default shall have occurred and be continuing) and the
Administration Agent. Any successor Servicer may delegate duties under this
Agreement with the prior written consent of the Security Insurer (unless an
Insurer Default shall have occurred and be continuing) and the Administrative
Agent. The Servicer also may at any time perform the specific duty of
repossession of Financed Vehicles through sub-contractors who are in the
business of servicing automotive receivables and may perform other specific
duties through such sub-contractors with the prior written consent of the
Security Insurer (unless an Insurer Default shall have occurred and be
continuing); PROVIDED, HOWEVER, that no such delegation or sub-contracting
duties by the Servicer shall relieve the Servicer of its responsibility with
respect to such duties. Neither AFL nor any party acting as Servicer
hereunder shall appoint any subservicer hereunder without the prior written
consent of the Security Insurer (unless an Insurer Default shall have
occurred and be continuing) and the Administrative Agent.

Section 5.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to
the provisions of Section 5.2, neither the Servicer nor the Backup Servicer
shall resign from the obligations and duties imposed on it by this Agreement as
Servicer or Backup Servicer except upon a determination that by reason of a
change in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner which
would have a material adverse effect on the Servicer or the Backup Servicer, as
the case may be, and the Security Insurer (so long as an Insurer Default shall
not have occurred and be continuing) or the Administrative Agent (if an Insurer
Default shall have occurred and be continuing) does not elect to waive the
obligations of the Servicer or the Backup Servicer, as the case may be, to
perform the duties which render it legally unable to act or to delegate those
duties to another Person. Any such determination permitting the resignation of
the Servicer or Backup Servicer shall be evidenced by an Opinion of Counsel to
such effect delivered and acceptable to the Issuer, the Indenture Trustee, the
Administrative Agent and the Security Insurer (unless an Insurer Default shall
have occurred and be continuing). No resignation of the Servicer shall become
effective until, so long as no Insurer Default shall have occurred and be
continuing, the Backup Servicer or an entity acceptable to the Security Insurer
shall have assumed the responsibilities and obligations of the Servicer or, if
an Insurer Default shall have occurred and be continuing, the Backup Servicer or
a successor Servicer that is an Eligible Servicer shall have assumed the
responsibilities and obligations of the Servicer. No resignation of the Backup
Servicer shall become effective until, so long as no Insurer Default shall have
occurred and be continuing, an entity acceptable to the Security Insurer shall
have assumed the responsibilities and obligations of the Backup Servicer or, if
an Insurer Default shall have occurred and be continuing, a Person that is n
Eligible Servicer shall have assumed the responsibilities and obligations of the
Backup Servicer; PROVIDED, HOWEVER, that in the event a successor Backup
Servicer is not appointed within 60 days after the Backup Servicer has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 5.5, the Backup Servicer may petition a court for its removal.

<PAGE>

ARTICLE VI
SERVICER TERMINATION EVENTS

Section 6.1. SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":

(a) Any failure by the Servicer to deliver to the Indenture
Trustee for distribution to Noteholders any proceeds or payment required to be
so delivered under the terms of this Agreement (or, if AFL is the Servicer, the
Purchase Agreement) that continues unremedied for a period of two Business Days
(one Business Day with respect to payment of Purchase Amounts) after written
notice is received by the Servicer from the Indenture Trustee or (unless an
Insurer Default shall have occurred and be continuing) the Security Insurer or
after discovery of such failure by a Responsible Officer of the Servicer;

(b) Failure by the Servicer to deliver the Servicer's Certificate
to the Indenture Trustee, the Issuer, the Administrative Agent and (so long as
an Insurer Default shall not have occurred and be continuing) the Security
Insurer by 5:00 p.m., New York City time on the fifth Business Day prior to the
Distribution Date, or failure on the part of the Servicer to observe its
covenants and agreements set forth in Section 5.2(a);

(c) Failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the Servicer set
forth in this Agreement (or, if AFL is the Servicer, the Purchase Agreement),
which failure (i) materially and adversely affects the rights of the Issuer
(determined without regard to the availability of funds under the Note Policy),
or of the Security Insurer (unless an Insurer Default shall have occurred and be
continuing), and (ii) continues unremedied for a period of 30 days after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Issuer, the Administrative Agent,
the Indenture Trustee or the Security Insurer;

(d) The entry of a decree or order for relief by a court or
regulatory authority having jurisdiction in respect of the Servicer or the
Seller in an involuntary case under the federal bankruptcy laws, as now or
hereafter in effect, or another present or future, federal or state, bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Servicer or
the Seller or of any substantial part of their respective properties or ordering
the winding up or liquidation of the affairs of the Servicer or the Seller and
the continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days or the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law and such case is
not dismissed within 60 days;

(e) The commencement by the Servicer or the Seller of a voluntary
case under the federal bankruptcy laws, as now or hereafter in effect, or any
other present or future, federal or state, bankruptcy, insolvency or similar
law, or the consent by the Servicer or the Seller to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer or the Seller or of any
substantial part of its property or the making by the Servicer or the Seller of
an assignment for the benefit of creditors

<PAGE>

or the failure by the Servicer or the Seller generally to pay its debts as
such debts become due or the taking of corporate action by the Servicer or
the Seller in furtherance of any of the foregoing;

(f) Any representation, warranty or statement of the Servicer or
the Seller made in this Agreement or any certificate, report or other writing
delivered pursuant hereto shall prove to be incorrect in any material respect as
of the time when the same shall have been made, and the incorrectness of such
representation, warranty or statement has a material adverse effect on the
Issuer or the Security Insurer and, within 30 days after written notice thereof
shall have been given to the Servicer or the Seller by the Issuer, the
Administrative Agent, the Indenture Trustee or the Security Insurer (or, if an
Insurer Default shall have occurred and be continuing, a Noteholder), the
circumstances or condition in respect of which such representation, warranty or
statement was incorrect shall not have been eliminated or otherwise cured;

(g) So long as an Insurer Default shall not have occurred and be
continuing, the Security Insurer shall not have delivered a Servicer Extension
Notice pursuant to Section 3.14;

(h) So long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Event of Default shall have occurred;

(i) A claim is made under the Note Policy; or

(j) A servicer termination event or like event shall occur in any
other securitization with respect to which AFL or any of its Affiliates is
acting as servicer.

Section 6.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a
Servicer Termination Event shall occur and be continuing, the Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, either the
Indenture Trustee or the Administrative Agent (acting at the direction of each
Agent)), by notice given in writing to the Servicer (and to the Indenture
Trustee and the Administrative Agent if given by the Security Insurer) may
terminate all of the rights and obligations of the Servicer under this
Agreement; PROVIDED, that if the Security Insurer shall not deliver a Servicer
Extension Notice, the rights and obligations of the Servicer hereunder shall
terminate automatically upon the expiration of the term of the Servicer without
the requirement of notice. On or after the receipt by the Servicer of such
written notice or upon such automatic termination, all authority, power,
obligations and responsibilities of the Servicer under this Agreement
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer (or such other successor Servicer
appointed by the Security Insurer); PROVIDED, HOWEVER, that the successor
Servicer shall have no liability with respect to any obligation which was
required to be performed by the terminated Servicer prior to the date that the
successor Servicer becomes the Servicer or any claim of a third party based on
any alleged action or inaction of the terminated Servicer. The successor
Servicer is authorized and empowered by this Agreement to execute and deliver,
on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and the other Seller Conveyed Property and related documents to show the Issuer
as lienholder or secured party on the related Lien Certificates, or otherwise.
The terminated Servicer agrees to

<PAGE>

cooperate with the successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Agreement,
including, without limitation, the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the terminated Servicer for deposit, or have been deposited by the terminated
Servicer, in the Collection Account or thereafter received with respect to
the Receivables and the delivery to the successor Servicer of all Receivable
Files, Monthly Records and Collection Records and a computer tape or diskette
in readable form as of the most recent Business Day containing all
information necessary to enable the successor Servicer to service the
Receivables and the other Seller Conveyed Property. If requested by the
Administrative Agent or the Security Insurer (unless an Insurer Default shall
have occurred and be continuing), the successor Servicer shall terminate the
Lockbox Agreement and direct the Obligors to make all payments under the
Receivables directly to the successor Servicer (in which event the successor
Servicer shall process such payments in accordance with Section 3.2(e)), or
to a lockbox established by the successor Servicer at the direction of the
Administrative Agent or the Security Insurer (unless an Insurer Default shall
have occurred and be continuing), at the successor Servicer's expense. In
addition to any other amounts that are then payable to the terminated
Servicer under this Agreement, the terminated Servicer shall then be entitled
to receive out of Available Funds reimbursements for any Outstanding Monthly
Advances made during the period prior to the notice pursuant to this Section
6.2 which terminates the obligation and rights of the terminated Servicer
under this Agreement. The Issuer, the Administrative Agent, the Indenture
Trustee and the successor Servicer may set off and deduct any amounts owed by
the terminated Servicer from any amounts payable to the terminated Servicer
pursuant to the preceding sentence. The terminated Servicer shall grant the
Issuer, the Administrative Agent, each Agent, the Indenture Trustee, the
successor Servicer and the Security Insurer reasonable access to the
terminated Servicer's premises at the terminated Servicer's expense.

Section 6.3. APPOINTMENT OF SUCCESSOR.

(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 6.2 or upon the resignation of the Servicer
pursuant to Section 5.5, or in the event the term of the Servicer expires as a
consequence of the Security Insurer electing not to deliver a Servicer Extension
Notice, the Backup Servicer (unless the Security Insurer shall have exercised
its option pursuant to Section 6.3(b) to appoint an alternate successor
Servicer) shall be the successor in all respects to the Servicer in its capacity
as servicer under this Agreement and the transactions set forth or provided for
in this Agreement, and shall be subject to all the responsibilities,
restrictions, duties, liabilities and termination provisions relating thereto
placed on the Servicer by the terms and provisions of this Agreement; PROVIDED,
HOWEVER, that the successor Servicer shall have no liability with respect to any
obligation which was required to be performed by the terminated Servicer prior
to the date that the successor Servicer becomes the Servicer or any claim of a
third party based on any alleged action or inaction of the terminated Servicer.
The Issuer and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. If a
successor Servicer is acting as Servicer hereunder, it shall be subject to
termination under Section 6.2 upon the occurrence of any Servicer Termination
Event applicable to it as Servicer.

(b) The Security Insurer may (so long as an Insurer Default shall
not have occurred and be continuing) exercise at any time its right to appoint
as Backup Servicer or as

<PAGE>

successor to the Servicer a Person other than the Person serving as Backup
Servicer at the time, and (without limiting its obligations under the Note
Policy) shall have no liability to the Issuer, the Indenture Trustee, AFL,
the Seller, the Person then serving as Backup Servicer, any Noteholders or
any other Person if it does so. Notwithstanding the above, if the Backup
Servicer shall be legally unable or unwilling to act as Servicer and an
Insurer Default shall have occurred and be continuing, the Backup Servicer,
the Indenture Trustee or the Administrative Agent may petition a court of
competent jurisdiction to appoint any Eligible Servicer as the successor to
the Servicer. Pending appointment pursuant to the preceding sentence, the
Backup Servicer shall act as successor Servicer unless it is legally unable
to do so, in which event the outgoing Servicer shall continue to act as
Servicer until a successor has been appointed and accepted such appointment.
Subject to Section 5.5, no provision of this Agreement shall be construed as
relieving the Backup Servicer of its obligation to succeed as successor
Servicer upon the termination of the Servicer pursuant to Section 6.2, the
resignation of the Servicer pursuant to Section 5.5 or the expiration of the
term of the Servicer. If upon the termination of the Servicer pursuant to
Section 6.2, the resignation of the Servicer pursuant to Section 5.5 or the
expiration of the term of the Servicer, the Security Insurer appoints a
successor Servicer other than the Backup Servicer, the Backup Servicer shall
not be relieved of its duties as Backup Servicer hereunder.

(c) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under the Agreement if the Servicer had not resigned
or been terminated hereunder. If any successor Servicer is appointed as a
result of the Backup Servicer's refusal (in contravention of the terms of this
Agreement) to act as Servicer although it is legally able to do so, the Security
Insurer and such successor Servicer may agree on reasonable additional
compensation to be paid to such successor Servicer by the Backup Servicer, which
additional compensation shall be paid by the Backup Servicer in its individual
capacity and solely out of its own funds. If any successor Servicer is
appointed for any reason other than the Backup Servicer's refusal to act as
Servicer although legally able to do so, the Security Insurer and such successor
Servicer may agree on additional compensation to be paid to such successor
Servicer, which additional compensation may be payable by the Security Insurer
as a Security Insurer Optional Deposit. In addition, any successor Servicer
shall be entitled to reasonable transition expenses incurred in acting as
successor Servicer to the extent provided in Section 4.6(a)(iii) or 4.6(b)(iii).

Section 6.4. NOTIFICATION TO NOTEHOLDERS. Upon any termination of
or appointment of a successor to the Servicer pursuant to this Article VI, the
Indenture Trustee shall give prompt written notice thereof to Noteholders at
their respective addresses appearing in the Note Register.

Section 6.5. WAIVER OF PAST DEFAULTS. The Security Insurer (or, if
an Insurer Default shall have occurred and be continuing, the Administrative
Agent (at the direction of each Agent)) may, waive any default by the Servicer
in the performance of its obligations hereunder and its consequences. Upon any
such waiver of a past default, such default shall cease to exist, and any
Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.

<PAGE>

ARTICLE VII
MISCELLANEOUS PROVISIONS

Section 7.1. AMENDMENT.

(a) This Agreement may be amended by the Seller, the Servicer, the
Administrative Agent, the Agents and the Issuer, with the prior written consent
of the Indenture Trustee, the Backup Servicer and the Security Insurer (so long
as an Insurer Default shall not have occurred and be continuing) but without the
consent of any of the Noteholders, (i) to cure any ambiguity, (ii) to correct or
supplement any provisions in this Agreement or (iii) for the purpose of adding
any provision to or changing in any manner or eliminating any provision of this
Agreement or of modifying in any manner the rights of the Noteholders; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of the Noteholders.

(b) This Agreement may also be amended from time to time by the
Seller, the Servicer, the Administrative Agent, the Agents and the Issuer with
the prior written consent of the Indenture Trustee, the Collateral Agent, the
Backup Servicer and the Security Insurer (so long as an Insurer Default shall
not have occurred and be continuing) and with the consent of a Note Majority
(which consent of any Holder of a Note given pursuant to this Section or
pursuant to any other provision of this Agreement shall be conclusive and
binding on such Holder and on all future Holders of such Note and of any Note
issued upon the transfer thereof or in exchange thereof or in lieu thereof
whether or not notation of such consent is made upon the Note) for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Holders of Notes; PROVIDED, HOWEVER, that subject to the express rights of the
Security Insurer under the Related Documents, including its rights to agree to
certain modifications of the Receivables pursuant to Section 3.2 and its rights
to cause the Collateral Agent to liquidate the Collateral under the
circumstances and subject to the provisions of Section 7.1 of the Security
Agreement, no such amendment shall (a) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
Receivables or distributions required to be made with respect to any Advance or
the Advance Interest Rate, (b) amend any provisions of Section 4.6 in such a
manner as to affect the priority of payment of interest, principal or premium to
Noteholders, or (c) reduce the aforesaid percentage required to consent to any
such amendment or any waiver hereunder, without the consent of the Holders of
all Notes then outstanding.

(c) Prior to the execution of any such amendment or consent, the
Issuer shall furnish written notification of the substance of such amendment or
consent to each Rating Agency.

(d) Promptly after the execution of any such amendment or consent,
the Issuer shall furnish written notification of the substance of such amendment
or consent to the Indenture Trustee.

(e) It shall not be necessary for the consent of Noteholders
pursuant to Section 7.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be

<PAGE>

sufficient if such consent shall approve the substance thereof. The manner
of obtaining such consents (and any other consents of Noteholders provided
for in this Agreement) and of evidencing the authorization of the execution
thereof by Noteholders shall be subject to such reasonable requirements as
the Issuer or Indenture Trustee, as applicable, may prescribe, including the
establishment of record dates.

(f) Prior to the execution of any amendment to this Agreement, the
Issuer and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement, in addition to the Opinion of Counsel referred to
in Section 7.2(i). The Indenture Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Indenture Trustee's own rights,
duties or immunities under this Agreement or otherwise.

Section 7.2. PROTECTION OF TITLE TO THE SELLER CONVEYED PROPERTY.

(a) The Servicer and the Seller shall execute and file such
financing statements and cause to be executed and filed such continuation and
other statements, all in such manner and in such places as may be required by
law fully to preserve, maintain and protect the interest of the Issuer and the
Collateral Agent in the Seller Conveyed Property and in the proceeds thereof.
The Servicer shall deliver (or cause to be delivered) to the Issuer, the
Administrative Agent, the Collateral Agent and the Security Insurer file-stamped
copies of, or filing receipts for, any document filed as provided above, as soon
as available following such filing.

(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed by the Seller in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Issuer, the
Administrative Agent, the Indenture Trustee and the Security Insurer (so long as
an Insurer Default shall not have occurred and be continuing) at least 60 days
prior written notice thereof, and shall promptly file appropriate amendments to
all previously filed financing statements and continuation statements.

(c) Each of the Seller and the Servicer shall give the Issuer, the
Administrative Agent, the Indenture Trustee and the Security Insurer at least 60
days' prior written notice of any relocation of its principal executive office
if, as a result of such relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement. The Servicer shall at
all times maintain each office from which it services Receivables and its
principal executive office within the United States of America.

(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.

<PAGE>

(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale hereunder of the Receivables to the Issuer, the
Servicer's master computer records (including any backup archives) that refer to
any Receivable indicate clearly that the Receivable is owned by the Issuer.
Indication of the Issuer's ownership of a Receivable shall be deleted from or
modified on the Servicer's computer systems when, and only when, the Receivable
has been paid in full or repurchased by the Seller or Servicer.

(f) If at any time the Seller or the Servicer proposes to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they refer in any manner whatsoever to any Receivable,
indicate clearly that such Receivable has been sold and is owned by the Issuer
unless such Receivable has been paid in full or repurchased by the Seller or
Servicer.

(g) The Servicer shall permit the Issuer, the Administrative
Agent, either Agent, the Indenture Trustee, the Collateral Agent, the Backup
Servicer, the Security Insurer and their respective agents, at any time to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivables or any other portion of the Seller Conveyed Property.

(h) The Servicer shall furnish to the Issuer, the Administrative
Agent, either Agent, the Indenture Trustee, the Collateral Agent, the Backup
Servicer and the Security Insurer at any time upon request a list of all
Receivables then held by the Issuer, together with a reconciliation of such list
to the Receivables Schedule and to each of the Servicer's Certificates furnished
before such request indicating repurchase of Receivables from the Issuer. Upon
request, the Servicer shall furnish a copy of any list to the Seller. The
Indenture Trustee shall hold any such list and Receivables Schedule for
examination by interested parties during normal business hours at the Corporate
Trust Office upon reasonable notice by such Persons of their desire to conduct
an examination.

(i) The Seller and the Servicer shall deliver to the Issuer, the
Administrative Agent, the Indenture Trustee, the Collateral Agent and the
Security Insurer simultaneously with the execution and delivery of this
Agreement and of each amendment thereto and upon the occurrence of the events
giving rise to an obligation to give notice pursuant to Section 7.2(b) or (c),
an Opinion of Counsel either (a) stating that, in the opinion of such counsel,
all financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Issuer and the Collateral Agent in the Receivables and the other Seller Conveyed
Property, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (b) stating that, in the
opinion of such counsel, no such action is necessary to preserve and protect
such interest.

(j) The Servicer shall deliver to the Issuer, the Administrative
Agent, the Indenture Trustee, the Collateral Agent and the Security Insurer,
within 90 days after the beginning of each calendar year beginning with the
first calendar year beginning more than three months after the Closing Date, an
Opinion of Counsel, either (a) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and filed

<PAGE>

that are necessary fully to preserve and protect the interest of the Issuer and
the Collateral Agent in the Receivables, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (b) stating that, in the opinion of such counsel, no action shall be
necessary to preserve and protect such interest.

Section 7.3. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.

Section 7.4. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or the
respective rights of the Holders thereof.

Section 7.5. ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 5.2 or Section 6.2
(and as provided in the provisions of the Agreement concerning the resignation
of the Servicer and the Backup Servicer), this Agreement may not be assigned by
the Seller or the Servicer without the prior written consent of the Issuer, the
Administrative Agent, the Indenture Trustee, the Collateral Agent and the
Security Insurer (or, if an Insurer Default shall have occurred and be
continuing, the Administrative Agent, the Issuer and the Indenture Trustee)

Section 7.6. THIRD-PARTY BENEFICIARIES. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. The Security Insurer and the Noteholders and
their successors and assigns shall be third-party beneficiaries to the
provisions of this Agreement, and shall be entitled to rely upon and directly to
enforce such provisions of this Agreement so long as, with respect to the
Security Insurer, no Insurer Default shall have occurred and be continuing.
Except as set forth in this Section 7.6, nothing in this Agreement, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement. Except as expressly stated otherwise herein or in
the Related Documents, any right of the Security Insurer to direct, appoint,
consent to, approve of, or take any action under this Agreement, shall be a
right exercised by the Security Insurer in its sole and absolute discretion.

Section 7.7. DISCLAIMER BY SECURITY INSURER. The Security Insurer
may disclaim any of its rights and powers under this Agreement (but not its
duties and obligations under the Note Policy) upon delivery of a written notice
to the Issuer, the Administrative Agent and the Indenture Trustee.

<PAGE>

Section 7.8. COUNTERPARTS. For the purpose of facilitating its
execution and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterpart shall be deemed to be
an original, and all of which counterparts shall constitute but one and the same
instrument.

Section 7.9. NOTICES. All demands, notices and communications
under this Agreement shall be in writing, personally delivered, sent by
facsimile transmission or mailed by certified mail-return receipt requested,
and shall be deemed to have been duly given upon receipt (a) in the case of
the Seller, at the following address: Arcadia Receivables Finance Corp., 7825
Washington Avenue South, Suite 900, Minneapolis, Minnesota 55439-2435,
Attention: Treasurer, with copies to: Arcadia Financial Ltd., 7825
Washington Avenue South, Minneapolis, Minnesota 55439-2435, Attention:
Treasurer; and in the case of AFL or the Servicer, 7825 Washington Avenue
South, Suite 500, Minneapolis, Minnesota 55439-2439, Attention: Treasurer;
(b) in the case of the Issuer, Arcadia Automobile Receivables Warehouse
Trust, c/o Wilmington Trust Company, as Owner Trustee, 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, with copies to: Arcadia Financial Ltd., 7825
Washington Avenue South, Suite 500, Minneapolis, Minnesota 55439-2435,
Attention: Treasurer, (c) in the case of the Owner Trustee, at the Corporate
Trust Office, (d) in the case of the Indenture Trustee and, for so long as
the Indenture Trustee is the Backup Servicer or the Collateral Agent, at
Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070,
Attention: Corporate Trust Services - Asset-Backed Administration, (e) in the
case of each Rating Agency, 99 Church Street, New York, New York 10007 (for
Moody's) and 26 Broadway, New York, New York 10004 (for Standard & Poor's),
Attention: Asset-Backed Surveillance), (f) in the case of the Security
Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York, New
York 10022, Attention: Surveillance Department, Telex No.: (2) 688-3103,
Confirmation: (2) 826-0100, Telecopy Nos.: (2) 339-3518, (2) 339-3529, (in
each case in which notice or other communication to Financial Security refers
to an Event of Default, a claim on the Note Policy or with respect to which
failure on the part of Financial Security to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED"), (g) in the
case of the Administrative Agent or the RCC Agent, Bank of America National
Trust and Savings Association, Asset Securitization Group, 231 South LaSalle
Street, Chicago, Illinois, 60697, Attention: Mr. Albert Yoshimura and (h) in
the case of the DFC Agent, Morgan Guaranty Trust Company of New York, 500
Stanton Christiana Road, Newark, Delaware 19713-2107, Attention: Asset
Finance Group, or at such other address as shall be designated by any such
party in a written notice to the other parties. Any notice required or
permitted to be mailed to a Noteholder shall be given by first class mail,
postage prepaid, at the address of such Holder as shown in the Note Register,
and any notice so mailed within the time prescribed in this Agreement shall
be conclusively presumed to have been duly given, whether or not the
Noteholder receives such notice.

Section 7.10. INTEREST RATE PROTECTION. The parties hereto agree,
upon the request of the Seller, to amend this Agreement to allow for the
substitution of interest rate caps or other interest rate hedges acceptable to
the Security Insurer and the Administrative Agent (acting at the direction of
each Agent) for the obligation of the Seller to make deposits to the Collection
Account or retain amounts on deposit in the Collection Account in respect of the
WAC Deficiency Amount, but only to the extent that such interest rate caps or
other interest rate hedges would have the same economic effect as the WAC

<PAGE>

Deficiency Amount, as determined by the Security Insurer and the Administrative
Agent in their reasonable discretion.

Section 7.11. LIMITED RECOURSE. Notwithstanding anything to the
contrary contained herein, the obligations of the Issuer and the Seller
hereunder shall not be recourse to the Issuer or the Seller, respectively (or
any person or organization acting on behalf of the Issuer or the Seller or
any affiliate, employee, incorporator, stockholder, officer or director of
the Issuer or the Seller), other than to the Receivables and the other Seller
Conveyed Property and the proceeds thereof as provided in this Agreement and
the Security Agreement. Each of the Issuer and the Seller hereby agree that
to the extent such funds are insufficient or assets are unavailable to pay
any amounts owing to it from the other party pursuant to this Agreement, it
shall not constitute a claim against the other party.

Section 7.12. NONPETITION COVENANT. Notwithstanding any prior
termination of this Agreement, each of the parties hereto agrees that it shall
not, prior to one year and one day after the Final Distribution Date, acquiesce,
petition or otherwise invoke the process of the United States of America, any
State or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government for the purpose of commencing or sustaining a case by or against
the Issuer or the Seller under a Federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or the Seller or all or any
part of its property or assets or ordering the winding up or liquidation of the
affairs of the other. Each of the parties hereto agrees that damages will be an
inadequate remedy for breach of this covenant and that this covenant may be
specifically enforced.

Section 7.13. LIMITATION OF LIABILITY. It is expressly understood
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but solely
as Owner Trustee, in the exercise of the powers and authority conferred and
vested in it, (b) each of the representations, undertakings and agreements
herein made on the part of the Issuer is made and intended not as a personal
representation, undertakings or agreements by Wilmington Trust Company but is
made and intended for the purpose for binding only the Issuer, (c) nothing
herein contained shall be construed as creating any liability on Wilmington
Trust Company, individually or personally, to perform any covenant either
pressed or implied contained herein, all such liability, if any, being expressly
waived by the parties hereto and by any Person claiming by, through or under
such parties and (d) under no circumstances shall Wilmington Trust Company be
personally liable for the payment of any indebtedness or expenses of the Issuer
to be liable for the breach or failure of any obligation, representation,
warranty, or covenant made or undertaken by the Trust under this Agreement or
the Related Documents.

<PAGE>

IN WITNESS WHEREOF, the Issuer, the Original Issuer, the
Administrative Agent, the RCC Agent, the DFC Agent, the Seller, AFL, the
Servicer and the Backup Servicer have caused this Amended and Restated Sale and
Servicing Agreement to be duly executed by their respective officers as of the
day and year first above written.

THE ISSUER:

ARCADIA AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST

By: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee

By:
----------------------------
Name:
Title:

THE ORIGINAL ISSUER:

ARCADIA RECEIVABLES CONDUIT CORP.

By:
-----------------------------
Name:
Title:

THE SELLER:

ARCADIA RECEIVABLES FINANCE CORP.

By:
----------------------------
Name:
Title:

ARCADIA FINANCIAL LTD.,
in its individual capacity and as Servicer

By:
---------------------------
Name:
Title:

[Signature Page to Amended and Restated Sale and Servicing Agreement]

<PAGE>

BACKUP SERVICER:

NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Backup Servicer

By:
---------------------------
Name:
Title:

BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent and RCC Agent

By:
---------------------------
Name:
Title:

MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as DFC Agent

By:
---------------------------
Name:
Title:

Acknowledged and Accepted:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity
but as Indenture Trustee and
Collateral Agent,
By: ____________________________
Name:
Title:

[Signature Page to Amended and Restated Sale and Servicing Agreement]

<PAGE>

Consented to by:

FINANCIAL SECURITY ASSURANCE INC.

By:
------------------------------
Name:
Title:

RECEIVABLES CAPITAL CORPORATION

By:
------------------------------
Name:
Title:

[Signature Page to Amended and Restated Sale and Servicing Agreement]

<PAGE>

Exhibit A

SERVICING POLICIES AND PROCEDURES
---------------------------------

A-1
<PAGE>

Exhibit B

FORM OF SERVICER'S CERTIFICATE
------------------------------

B-1
<PAGE>

Exhibit C

FORM OF NOTE FOR INTERCOMPANY INDEBTEDNESS
------------------------------------------

C-1
<PAGE>

EXHIBIT D

OPINIONS OF COUNSEL TO SELLER AND ARCADIA
-----------------------------------------

[Opinions of Counsel to Seller]

(i) Arcadia Receivables Finance Corp. (the "Seller") has been duly
incorporated and is validly existing under the laws of the State of Delaware,
with corporate power and authority to own its properties and to transact the
business in which it is now engaged, and the Seller is duly qualified to do
business and is in good standing as a foreign corporation in the State of
Minnesota.

(ii) The Seller has full corporate power and authority to execute
and deliver the Purchase Agreement, the Trust Agreement, the Sale and Servicing
Agreement, the Security Agreement, the Insurance Agreement and the Spread
Account Agreement and to perform its obligations thereunder and has all
necessary licenses and approvals under federal and state law to transact the
business in which it is now engaged.

(iii) Each of the Purchase Agreement, the Trust Agreement, the Sale
and Servicing Agreement, the Security Agreement, the Insurance Agreement and
the Spread Account Agreement has been duly authorized, executed and delivered
by the Seller and, as to the Seller, is a legal, valid and binding
obligation, enforceable against the Seller in accordance with its terms
(except as may be limited by bankruptcy and insolvency laws and general
principles of equity).

(iv) The compliance by the Seller with all of the provisions of
the Purchase Agreement, the Trust Agreement, the Sale and Servicing
Agreement, the Security Agreement, the Insurance Agreement and the Spread
Account Agreement will not (1) conflict with or result in any breach which
would constitute a default under, or except as contemplated by the Sale and
Servicing Agreement, result in the creation or imposition of any Lien, charge
or encumbrance upon any of the property or assets of the Seller pursuant to
any material terms of, any indenture, loan agreement or other agreement or
instrument for borrowed money to which the Seller is a party or by which the
Seller may be bound or to which any of the property or assets of the Seller
is subject, (2) violate any provisions of the Certificate of Incorporation or
the By-Laws of the Seller, or (3) violate or conflict with any order,
judgment, decree, writ, injunction, rule or regulation applicable to the
Seller of any court or any federal, state or other regulatory authority or
other governmental body having jurisdiction over the Seller.

(v) No consent, approval, authorization or other order of, or
filing with, any court or any federal, state or other regulatory authority or
other governmental body having jurisdiction over the Seller, which has not
already been made or obtained, is required for the execution, delivery, or
performance of the Purchase Agreement, the Trust Agreement, the Sale and
Servicing Agreement, the Security Agreement, the Insurance Agreement and the
Spread Account Agreement except for the filing of any financing statements
required to perfect the Issuer's and the Seller's respective interests in the
Receivables.

D-1

<PAGE>

(vi) The Seller is not an "investment company" nor is it
controlled by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

(vii) There is no action, suit, investigation, litigation or
proceeding pending or, to the best of our knowledge, threatened before any
court, governmental agency or arbitrator (1) against the Seller or any of its
properties, (2) asserting the invalidity of the Purchase Agreement, the Trust
Agreement, the Sale and Servicing Agreement, the Security Agreement, the
Insurance Agreement or the Spread Account Agreement, (3) seeking to prevent the
consummation of any of the transactions contemplated by the Purchase Agreement,
the Trust Agreement, the Sale and Servicing Agreement, the Security Agreement,
the Insurance Agreement or the Spread Account Agreement or (4) challenging the
enforceability of the Purchase Agreement, the Trust Agreement, the Sale and
Servicing Agreement, the Security Agreement, the Insurance Agreement and the
Spread Account Agreement.

(viii) If the transfer of the Receivables from the Seller to the
Buyer does not constitute an absolute sale, the Repurchase Agreement grants to
the Buyer a security interest in the Seller's rights in the Receivables and the
proceeds thereof, which security interest is a first priority perfected security
interest.

ADDRESSEES:
- ----------
Moody's Investors Service, Inc.
Standard & Poor's Ratings Group
Arcadia Automobile Receivables Warehouse Trust
Bank of America National Trust and Savings Association
Morgan Guaranty Trust Company of New York
Financial Security Assurance Inc.
Norwest Bank Minnesota, National Association

D-2

<PAGE>

[Opinions of Counsel to Arcadia]

(i) Arcadia Financial Ltd. ("Arcadia") has been duly incorporated
and is validly existing as a corporation under the laws of the State of
Minnesota, with corporate power and authority to own its properties and to
transact the business in which it is now engaged, and Arcadia is duly qualified
to do business and is in good standing in each State of the United States where
the nature of its business requires it to be so qualified.

(ii) Arcadia has full corporate power and authority to execute and
deliver the Purchase Agreement, the Sale and Servicing Agreement, the Security
Agreement, the Insurance Agreement, the Spread Account Agreement and the
Custodian Agreement and to perform its obligations thereunder.

(iii) Each of the Purchase Agreement, the Sale and Servicing
Agreement, the Security Agreement, the Insurance Agreement, the Spread Account
Agreement and the Custodian Agreement has been duly authorized, executed and
delivered by Arcadia and, as to Arcadia, is a legal, valid and binding
obligation enforceable in accordance with its terms (except as may be limited by
bankruptcy and insolvency laws and general principles of equity).

(iv) The execution and delivery by Arcadia of, and the performance
by Arcadia of the provisions of each of the Purchase Agreement, the Sale and
Servicing Agreement, the Security Agreement, the Insurance Agreement, the
Spread Account Agreement and the Custodian Agreement will not (1) conflict
with or result in any breach which would constitute a default under, or
result in the creation or imposition of any Lien, charge or encumbrance upon
any of the property or assets of Arcadia pursuant to any material terms of,
any indenture, loan agreement or other agreement or instrument for borrowed
money to which Arcadia is a party or by which Arcadia may be bound or to
which any of the property or assets of Arcadia is subject, (2) violate any
provisions of the Articles of Incorporation or the By-Laws of Arcadia or (3)
violate or conflict with any order, judgment, decree, writ, injunction of any
court or any federal, state or other regulatory authority or other
governmental body having jurisdiction over Arcadia or any rule or regulation
applicable to Arcadia.

(v) No consent, approval, authorization or other order of, or
filing with, any court or any federal, state or other regulatory authority or
other governmental body having jurisdiction over Arcadia, which has not already
been made or obtained, is required in connection with the execution, delivery or
performance of the transactions contemplated by the Purchase Agreement, the Sale
and Servicing Agreement, the Security Agreement, the Insurance Agreement, the
Spread Account Agreement and the Custodian Agreement.

(vi) There is no action, suit, investigation, litigation or
proceeding pending or, to the best of our knowledge, threatened before any
court, governmental agency or arbitrator (1) against Arcadia or any of its
properties, (2) asserting the invalidity of the Purchase Agreement, the Sale and
Servicing Agreement, the Security Agreement, the Insurance Agreement, the Spread
Account Agreement and the Custodian Agreement, (3) seeking to prevent the
consummation of any of the transactions contemplated by the Purchase Agreement,
the Sale and Servicing

D-3

<PAGE>

Agreement, the Security Agreement, the Insurance Agreement, the Spread
Account Agreement and the Custodian Agreement, or (4) challenging the
enforceability of the Purchase Agreement, the Sale and Servicing Agreement,
the Security Agreement, the Insurance Agreement, the Spread Account Agreement
and the Custodian Agreement.

(vii) The Receivables constitute "chattel paper" as such term is
defined in Article 9 of the Uniform Commercial Code in effect in Minnesota.

(viii) Should Arcadia become the debtor in a case under the
Bankruptcy Code, if the matter were properly briefed and presented to a
court, the court would hold that (1) the transfer of the Receivables (and the
collections thereon) by Arcadia to the Seller in the manner set forth in the
Purchase Agreement would constitute an absolute sale of the Receivables (and
the collections thereon), rather than a borrowing by Arcadia secured by the
Receivables (and the collections thereon), so that the Receivables would not
be the property of the estate of Arcadia under Section 541(a) of the
Bankruptcy Code, and thus (2) the Seller's rights to the Receivables (and the
collections thereon) would not be impaired by the operation of Section 362(a)
of the Bankruptcy Code.

(ix) Under present reported decisional authority and statutes
applicable to bankruptcy cases, should Arcadia become the debtor in a case
under the Bankruptcy Code, and the Seller would not otherwise properly be a
debtor in a case under the Bankruptcy Code, and if the matter were properly
briefed and presented to a court exercising bankruptcy jurisdiction, the
court, exercising reasonable judgment after full consideration of all
relevant factors, should not order, over the objection of the Issuer, the
Indenture Trustee on behalf of the Noteholders or the Security Insurer, the
substantive consolidation of the assets and liabilities of the Seller with
those of Arcadia.

D-4
<PAGE>

EXHIBIT E

FORM OF CONFIRMATION LETTER
---------------------------
[date]

Arcadia Automobile Receivables Warehouse Trust
c/o Arcadia Financial Ltd.
7825 Washington Avenue South
Minneapolis, Minnesota 55439-2435
Attention: Treasurer

Confirmation No.:

Ladies and Gentlemen:

This letter confirms our agreement to sell to you the Receivables listed in
SCHEDULE A hereto, pursuant to the Amended and Restated Sale and Servicing
Agreement between us, dated as of July 21, 1998 (as amended from time to time,
the "Agreement"), as follows:

Purchase Date:

Cut-Off Date:

Receivables: See SCHEDULE A hereto

1) Purchase Price: Product of 0.96 and the Aggregate
Outstanding Principal Balance of Receivables
being transferred: $
--------
Calculation of Amount to be released from the Collection Account:

The least of
1) Purchase Price: $
--------
2) On each such date occurring during the period from but
excluding a Determination Date through and including the
related Distribution Date:

a) Amount on deposit in Collection Account $
--------

b) minus amount of distributions or retentions to be made
pursuant to SECTIONS 4.6(a)(i) THROUGH (ix) of the Agreement $
--------

E-1

<PAGE>

c) minus any increase in the WAC Deficiency Amount above the WAC
Deficiency Amount on such Determination Date $
--------

3) a) Amount on deposit in Collection Account $
--------

b) minus WAC Deficiency Amount on deposit in Collection Account $
--------
The least of 1), 2), and 3): $
--------

ARCADIA RECEIVABLES FINANCE CORP.

By:_____________________________
Responsible Officer

ARCADIA FINANCIAL LTD.,
as Servicer

By:_____________________________
Responsible Officer

E-2

<PAGE>

EXHIBIT F

FORM OF NOTICE OF REPURCHASE DATE
---------------------------------

_________ __, 19__

Arcadia Automobile Receivables Warehouse Trust
c/o Arcadia Financial Ltd.
7825 Washington Avenue South
Minneapolis, Minnesota 55439-2435
Attention: Treasurer

Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Department

Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department

Ladies and Gentlemen:

Reference is made to the Amended and Restated Sale and Servicing
Agreement, dated as of July 21, 1998 (the "Sale and Servicing Agreement").
Capitalized terms used herein shall have the meanings given to them in the Sale
and Servicing Agreement.

Notice is hereby given that on __________ __, 19__ (the "Repurchase
Date") [Note: Date specified must be at least one Business Days after the letter
is delivered] we will repurchase the Receivables listed on SCHEDULE 1 hereto

with an aggregate outstanding Principal Balance of $__________ and an aggregate
Repurchase Price of $_________.

The Seller hereby represents and warrants that the Receivables
selected by the Seller to be repurchased on the Repurchase Date, if less than
all of the Receivables transferred to the Issuer under the Sale and Servicing
Agreement that have not been repurchased as of the date hereof, were selected
for repurchase randomly and that no selection procedures adverse to the Issuer
or the Noteholders were utilized in selecting the Receivables for repurchase.

ARCADIA RECEIVABLES FINANCE CORP.

By:______________________
Responsible Officer

F-1

<PAGE>

EXHIBIT G

FORM OF RECONVEYANCE OF RECEIVABLES
-----------------------------------

RECONVEYANCE OF RECEIVABLES dated as of _________ __, 19__ by and
between Arcadia Automobile Receivables Warehouse Trust, a Delaware business
trust (the "Issuer"), and ARCADIA RECEIVABLES FINANCE CORP., a Delaware
corporation (the "Seller").

WHEREAS, the Buyer and the Seller are parties to an Amended and
Restated Sale and Servicing Repurchase Agreement dated as of July 21, 1998
(hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "Sale and Servicing
Agreement");

WHEREAS, pursuant to the Sale and Servicing Agreement the Issuer is
required to reconvey and the Seller is required to repurchase the Receivables
(as such term is defined in the Sale and Servicing Agreement) listed on SCHEDULE
1 hereto;

NOW THEREFORE, the Issuer and the Seller hereby agree as follows:

1. DEFINED TERMS. All terms defined in the Sale and Servicing
Agreement and used herein shall have such defined meanings when used herein,
unless otherwise defined herein.

"REPURCHASE DATE" shall mean ________ __, 19__.

2. RECONVEYANCE OF RECEIVABLES.

Upon deposit of the Repurchase Price in respect thereof by the Seller,
the Issuer does hereby reconvey to the Seller, without recourse, on the
Repurchase Date, all right, title and interest of the Issuer in and to each
Receivable listed on SCHEDULE 1 hereto.

In connection with such reconveyance, the Issuer agrees to execute and
deliver, at the Seller's expense, to the Seller on or prior to the Repurchase
Date, such UCC termination statements prepared by the Seller as the Seller may
reasonably request, evidencing the release by the Issuer of its lien on the
Receivables.

3. COUNTERPARTS. The Reconveyance may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.

4. GOVERNING LAW. This Reconveyance shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions.

G-1

<PAGE>

IN WITNESS WHEREOF, the undersigned have caused this Reconveyance of
Receivables to be duly executed and delivered by their respective duly
authorized officers on the day and year first above written.

ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
Issuer

By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee

By:___________________________
Responsible Officer

ARCADIA RECEIVABLES FINANCE CORP.,
Seller

By:__________________________
Responsible Officer

G-2

<PAGE>

EXHIBIT H

FORM OF NOTICE OF REQUEST FOR AN ADVANCE
----------------------------------------

_________ __, 19__

Arcadia Automobile Receivables Warehouse Trust
c/o Arcadia Financial Ltd.
7825 Washington Avenue South
Minneapolis, Minnesota 55439-2435
Attention: Treasurer

Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Department

Ladies and Gentlemen:

Notice is hereby given of our request for an Advance in the amount of
$_________ (Note: such amount shall be at least $7 million) to be made on
_________ __, 19__ [Note: Date specified must be at least one Business Day after
letter is delivered unless request is for $15,000,000 or less] to be deposited
into the Collection Account. The difference between the aggregate outstanding
principal amount of Advances, including the Advance being requested hereby
($___________) and the aggregate outstanding Principal Balance of Receivables
($__________) is less than $5,000,000.

Requested Tranche Periods:

RCC (not applicable to CP Tranche Period):
DFC:
Note Increase Amount:
RCC Purchase Percentage (56.25%)
DFC Purchase Percentage (43.75%):

ARCADIA RECEIVABLES FINANCE CORP.

By:___________________________
Responsible Officer

H-1

<PAGE>
EXHIBIT I

FORM OF INDEPENDENT ACCOUNTANTS' REPORT
ON APPLYING AGREED-UPON PROCEDURES
----------------------------------

I-1

<PAGE>

SCHEDULE A

REPRESENTATIONS AND WARRANTIES OF SELLER

1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was
originated by AFL or by a Dealer for the retail sale of a Financed Vehicle in
the ordinary course of such Dealer's business and such Dealer had all
necessary licenses and permits to originate Receivables in the state where
such Dealer was located, was fully and properly executed by the parties
thereto, was purchased by Arcadia from such Dealer under an existing Dealer
Agreement with AFL and was validly assigned by such Dealer to Arcadia, (B)
contains customary and enforceable provisions such as to render the rights
and remedies of the holder thereof adequate for realization against the
collateral security, and (C) is a fully amortizing Receivable which provides
for level monthly payments (provided that the payment in the first Monthly
Period and the final Monthly Period of the life of the Receivable may be
minimally different from the level payment) which, if made when due, shall
fully amortize the Amount Financed over the original term.

2. NO FRAUD OR MISREPRESENTATION. Each Receivable was
originated by AFL or by a Dealer and was sold by the Dealer to AFL without
any fraud or misrepresentation on the part of such Dealer in either case.

3. COMPLIANCE WITH LAW. All requirements of applicable
federal, state and local laws, and regulations thereunder (including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z," the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor
Vehicle Retail Installment Sales Act, and state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code and other consumer
credit laws and equal credit opportunity and disclosure laws) in respect of
all of the Receivables and each and every sale of Financed Vehicles, have
been complied with in all material respects, and each Receivable and the sale
of the Financed Vehicle evidenced by each Receivable complied at the time it
was originated or made and now complies in all material respects with all
applicable legal requirements.

4. ORIGINATION. Each Receivable was originated in the United
States.

A-1

<PAGE>

6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of
America or any State or any agency, department, subdivision or
instrumentality thereof.

7. OBLIGOR BANKRUPTCY. At the applicable Cut-Off Date, no
Obligor had been identified on the records of Arcadia as being the subject of
a current bankruptcy proceeding.

8. RECEIVABLES SCHEDULE. The information set forth in the most
recent Receivables Schedule delivered to the Issuer or the Administrative
Agent was true and correct in all material respects as of the close of
business on the applicable Cut-Off Date.

9. MARKING RECORDS. On each Purchase Date, the portions of the
Electronic Ledger relating to the Receivables will be clearly and
unambiguously marked to show that the Receivables constitute part of the
Seller Conveyed Property and are owned by the Issuer in accordance with the
terms of the Agreement.

10. COMPUTER TAPE. The Computer Tape, computer diskette or
other electronic transmission made available by the Seller to the Issuer on
each Purchase Date was complete and accurate as of the applicable Cut-Off
Date, and includes a description of the same Receivables that are described
in the Receivables Schedule.

11. ADVERSE SELECTION. No selection procedures adverse to the
Issuer or the Noteholders were utilized in selecting the Receivables from
those receivables owned by Arcadia which met the selection criteria contained
in the Agreement.

12. CHATTEL PAPER. The Receivables constitute chattel paper
within the meaning of the UCC as in effect in the States of Minnesota and New
York.

13. ONE ORIGINAL. There is only one original executed copy of
each Receivable.

14. RECEIVABLE FILES COMPLETE. On the applicable Purchase Date
there exists a complete Receivable File for each Receivable transferred on
such date, and such receivable File is in the possession of the Custodian on
such Purchase Date. A Receivable File pertaining to each Receivable will
contain on the related Purchase Date (a) a fully executed original of the
Receivable, (b) a certificate of insurance, application form for insurance
signed by the Obligor, or a signed representation letter from the Obligor
named in the Receivable pursuant to which the Obligor has agreed to obtain
physical damage insurance for the related Financed Vehicle, or a documented
verbal confirmation by an insurance agent for the Obligor of a policy number
for an insurance policy for the Financed Vehicle, (c) the original Lien
Certificate or application therefor or a letter from the applicable Dealer
agreeing unconditionally to repurchase the related Receivable if the Lien
Certificate is not received by Arcadia within 180 days, and (d) a credit
application signed by the Obligor or a copy thereof. Each of such documents
which is required to be signed by the Obligor will have been signed by the
Obligor in the appropriate spaces. All blanks on any form will have been
properly filled in and each form will otherwise have been correctly prepared.

A-2

<PAGE>

16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is
subject to the laws of, any jurisdiction, the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or any Assignment Agreement or pursuant to
transfers of the Notes.

17. GOOD TITLE. No Receivable has been sold, transferred,
assigned or pledged by Arcadia to any Person other than the Seller unless the
same was released prior to the transfer of such Receivable to the Seller or
by the Seller to any Person other than the Issuer; immediately prior to the
conveyance of the Receivables pursuant to the Purchase Agreement, Arcadia was
the sole owner of and had good and indefeasible title thereto, free and clear
of any Lien other than Liens created pursuant to its Related Documents.
Immediately prior to the conveyance of the Receivables to the Issuer pursuant
to this Agreement and any Transaction, the Seller was the sole owner thereof
and had good and indefeasible title thereto, free of any Lien; and, upon
execution and delivery of this Agreement and any Confirmation by the Seller,
the Issuer shall have good and indefeasible title to and will be the sole
owner of such Receivables, free of any Lien. No Dealer has a participation
in, or other right to receive, proceeds of any Receivable. Neither Arcadia
nor the Seller has taken any action to convey any right to any Person that
would result in such Person having a right to payments received under the
related Insurance Policies or the related Dealer Agreements or Dealer
Assignments or to payments due under such Receivables.

18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable
creates a valid, binding and enforceable first priority security interest in
favor of Arcadia in the Financed Vehicle. The Lien Certificate and original
certificate of title for each Financed Vehicle show, or if a new or
replacement Lien Certificate is being applied for with respect to such
Financed Vehicle the Lien Certificate will be received within 180 days of the
related Purchase Date and will show, Arcadia named as the original secured
party under each Receivable as the holder of a first priority security
interest in such Financed Vehicle. With respect to each Receivable for which
the Lien Certificate has not yet been returned from the Registrar of Titles,
Arcadia has received written evidence from the related Dealer that such Lien
Certificate showing Arcadia as first lienholder has been applied for, or a
letter from the applicable Dealer agreeing unconditionally to repurchase the
related Receivable if the Certificate of title is not received within 180
days. Arcadia's security interest has been validly assigned by Arcadia to
the Seller pursuant to the Purchase Agreement and by the Seller to the Issuer
pursuant to this Agreement. Immediately after the sale, transfer and
assignment thereof to the Issuer, each Receivable will be secured by an
enforceable and perfected first priority security interest in the Financed
Vehicle in favor of the Issuer as secured party, which security interest is
prior to all other liens upon and security interests in such Financed Vehicle
which now exist or may hereafter arise or be created (except, as to priority,
for any lien for taxes, labor or materials affecting a Financed Vehicle). As

A-3

<PAGE>

of the applicable Cut-Off Date, there were no Liens or claims for taxes,
work, labor or materials affecting a Financed Vehicle which are or may be
Liens prior or equal to the lien of the related Receivable.

19. ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions
required to be taken or performed by any Person in any jurisdiction to give
the Issuer a first priority perfected lien on, or ownership interest in, the
Receivables and the proceeds thereof and the other Seller Conveyed Property
have been made, taken or performed.

20. NO IMPAIRMENT. Neither Arcadia nor the Seller has done
anything to convey any right to any Person that would result in such Person
having a right to payments due under a Receivable or otherwise to impair the
rights of the Issuer and the Indenture Trustee on behalf of the Noteholders
in any Receivable or the proceeds thereof.

21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof from such
Obligor's obligations to the Seller with respect to such Receivable.

22. NO DEFENSES. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been
asserted or threatened with respect to any Receivable.

23. NO DEFAULT. There has been no default, breach, violation or
event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than 30 days), and no condition exists or
event has occurred and is continuing, that with notice, the lapse of time or
both would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable, and there has been no waiver
of any of the foregoing. As of the applicable Cut-Off Date, no Financed
Vehicle had been repossessed.

24. INSURANCE. As of the Purchase Date for the related
Receivable, each Financed Vehicle is covered by a comprehensive and collision
insurance policy (i) in an amount at least equal to the lesser of (a) its
maximum insurable value or (b) the principal amount due from the Obligor
under the related Receivable, (ii) naming Arcadia as loss payee and (iii)
insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage. Each Receivable requires the Obligor to maintain physical loss and
damage insurance, naming Arcadia and its successors and assigns as additional
insured parties, and each Receivable permits the holder thereof to obtain
physical loss and damage insurance at the expense of the Obligor if the
Obligor fails to do so. No Financed Vehicle was or had previously been
insured under a policy of Force-Placed Insurance on the related Cut-Off Date.

25. PAST DUE. As of the applicable Cut-Off Date, no Receivable
being transferred on the related Purchase Date was more than 30 days past due
and no funds have been advanced by the Seller, the Servicer, AFL, and Dealer,
or anyone acting on behalf of any of them in order to cause any Receivable to
satisfy such requirement.

A-4

<PAGE>

26. REMAINING PRINCIPAL BALANCE. As of the applicable Cut-Off
Date, each Receivable had a remaining principal balance equal to or greater
than $500.00 and the Principal Balance of each Receivable set forth in the
most recent Receivables Schedule delivered to the Issuer or the
Administrative Agent is true and accurate in all material respects.

27 ORIGINAL MATURITY. Each Receivable had an original maturity
of at least 12 months but not more than 84 months and no more than 10% of the
Receivables had an original maturity of greater than 72 months. Each
Receivable with an original maturity of greater than 72 months is secured by
a Financed Vehicle that is a new automobile or an automobile that is less
than one year old. No more than 80% of the aggregate outstanding Principal
Balance of the Receivables are Classic Receivables.

28. COMPLIANCE WITH UNDERWRITING GUIDELINES. Each Receivable
was originated pursuant to Arcadia's underwriting standards in effect on the
Effective Date which have not, without the prior written consent of the
Agent, been materially changed since the Effective Date.

A-5

<PAGE>

EXECUTION COPY

- -------------------------------------------------------------------------------

AMENDED AND RESTATED SECURITY AGREEMENT
(Amending and Restating the Security Agreement
dated as of December 3, 1996)

among

ARCADIA FINANCIAL LTD.,

ARCADIA RECEIVABLES FINANCE CORP.,

ARCADIA RECEIVABLES CONDUIT CORP.,

ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST

FINANCIAL SECURITY ASSURANCE INC.,

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION

and

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee and as Collateral Agent

Dated as of July 21, 1998

- -------------------------------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

PAGE
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . 2
Section 1.2. Rules of Interpretation. . . . . . . . . . . . . . . . 4

ARTICLE II
THE COLLATERAL

Section 2.1. Grant of Security Interest by the Issuer . . . . . . . 4
Section 2.2. No Transfer of Duties. . . . . . . . . . . . . . . . . 5
Section 2.3. Termination and Release of Rights. . . . . . . . . . . 5
Section 2.4. Effectiveness. . . . . . . . . . . . . . . . . . . . . 6

ARTICLE III
THE COLLATERAL AGENT

Section 3.1. Appointment and Powers . . . . . . . . . . . . . . . . 6
Section 3.2. Performance of Duties. . . . . . . . . . . . . . . . . 7
Section 3.3. Limitation on Liability. . . . . . . . . . . . . . . . 7
Section 3.4. Reliance upon Documents. . . . . . . . . . . . . . . . 7
Section 3.5. Successor Collateral Agent . . . . . . . . . . . . . . 8
Section 3.6. Indemnification. . . . . . . . . . . . . . . . . . . . 9
Section 3.7. Compensation and Reimbursement . . . . . . . . . . . . 9
Section 3.8. Representations and Warranties of the Collateral Agent 9
Section 3.9. Waiver of Setoffs. . . . . . . . . . . . . . . . . . . 10
Section 3.10. Control by the Controlling Party . . . . . . . . . . . 10

ARTICLE IV
COVENANTS OF THE ISSUER

Section 4.1. Preservation of Collateral . . . . . . . . . . . . . . 10
Section 4.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.3. Waiver of Stay or Extension Laws; Marshalling of
Assets . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.4. Noninterference, Etc.. . . . . . . . . . . . . . . . . 11
Section 4.5. Issuer Changes . . . . . . . . . . . . . . . . . . . . 11
</TABLE>

i
<PAGE>

TABLE OF CONTENTS
(continued)

PAGE
----

ARTICLE V
CONTROLLING PARTY; INTERCREDITOR PROVISIONS

<S> <C> <C>
Section 5.1. Appointment of Controlling Party . . . . . . . . . . . 12
Section 5.2. Controlling Party's Authority. . . . . . . . . . . . . 12
Section 5.3. Rights of Secured Parties. . . . . . . . . . . . . . . 13
Section 5.4. Degree of Care . . . . . . . . . . . . . . . . . . . . 13

ARTICLE VI
REMEDIES UPON DEFAULT

Section 6.1. Remedies upon a Default. . . . . . . . . . . . . . . . 14
Section 6.2. Restoration of Rights and Remedies . . . . . . . . . . 15
Section 6.3. No Remedy Exclusive. . . . . . . . . . . . . . . . . . 16

ARTICLE VIII
MISCELLANEOUS

Section 7.1. Further Assurances . . . . . . . . . . . . . . . . . . 16
Section 7.2. Waiver . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.3. Amendments; Waivers. . . . . . . . . . . . . . . . . . 16
Section 7.4. Severability . . . . . . . . . . . . . . . . . . . . . 17
Section 7.5. Nonpetition Covenant . . . . . . . . . . . . . . . . . 17
Section 7.6. Notices. . . . . . . . . . . . . . . . . . . . . . . . 17
Section 7.7. Term of this Security Agreement. . . . . . . . . . . . 20
Section 7.8. Assignments; Third-Party Rights; Reinsurance . . . . . 20
Section 7.9. Consent of Controlling Party . . . . . . . . . . . . . 20
Section 7.10. Trial by Jury Waived . . . . . . . . . . . . . . . . . 21
Section 7.11. Governing Law. . . . . . . . . . . . . . . . . . . . . 21
Section 7.12. Consents to Jurisdiction . . . . . . . . . . . . . . . 21
Section 7.13. Limitation of Liability. . . . . . . . . . . . . . . . 21
Section 7.14. Determination of Adverse Effect. . . . . . . . . . . . 22
Section 7.15. Counterparts . . . . . . . . . . . . . . . . . . . . . 22
Section 7.16. Headings . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>

ii
<PAGE>

TABLE OF CONTENTS
(continued)

PAGE
----

<S> <C> <C>
Section 7.17. Limited Recourse . . . . . . . . . . . . . . . . . . . 22
Section 7.18. Respective Rights of the Issuer and the Secured
Parties in the Collateral. . . . . . . . . . . . . . . 22
</TABLE>

iii
<PAGE>

AMENDED AND RESTATED SECURITY AGREEMENT

AMENDED AND RESTATED SECURITY AGREEMENT, dated as of July 21, 1998, by
and among ARCADIA FINANCIAL LTD., a Minnesota corporation ("AFL"), ARCADIA
RECEIVABLES FINANCE CORP., a Delaware corporation (the "Seller"), ARCADIA
RECEIVABLES CONDUIT CORP., a Delaware corporation (the "Original Issuer"),
ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the
"Issuer"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company
(the "Security Insurer"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
(the "Administrative Agent") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as collateral agent (in such capacity, the "Collateral Agent") and as indenture
trustee (in such capacity, the "Indenture Trustee").

W I T N E S E T H

WHEREAS, pursuant to the Amended and Restated Receivables Purchase
Agreement and Assignment dated as of July 21, 1998 (the "Purchase Agreement")
between AFL and the Seller, AFL is selling to the Seller from time to time all
of its right, title and interest in and to certain Receivables and the other
property specified therein; and

WHEREAS, pursuant to the Amended and Restated Sale and Servicing
Agreement dated as of July 21, 1998 (the "Sale and Servicing Agreement"), among
the Seller, the Issuer, the Original Issuer, AFL, in its individual capacity and
as Servicer, Bank of America National Trust and Savings Association, as RCC
Agent and as Administrative Agent, Morgan Guaranty Trust Company of New York, as
DFC Agent, and Norwest Bank Minnesota, National Association, as Backup Servicer,
Indenture Trustee and Collateral Agent, the Seller is selling to the Issuer from
time to time all of its right, title and interest in and to certain Receivables
and the other property specified therein; and

WHEREAS, pursuant to the Amended and Restated Indenture dated as of
July 21, 1998 (the "Indenture"), between the Issuer and the Indenture Trustee,
the Issuer is issuing from time to time its Floating Rate Variable Funding
Automobile Receivables-Backed Notes (the "Notes"); and

WHEREAS, the Seller has requested that the Security Insurer issue the
Note Policy to the Indenture Trustee to guarantee payment of the Scheduled
Payments (as defined in such Note Policy) on each Distribution Date in respect
of the Notes; and

WHEREAS the parties hereto (other than the Issuer) have entered
into a Security Agreement dated as of December 3, 1996 (as amended and in
effect on the date hereof, the "Original Security Agreement"), and the
parties hereto wish to replace the Original Issuer with the Issuer hereunder
and to amend and restate the Original Security Agreement as herein provided;

<PAGE>

NOW THEREFORE, in order to secure the performance of the Secured
Obligations and for other good and valuable consideration, the adequacy, receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. DEFINED TERMS.

Terms defined in the Sale and Servicing Agreement (including by way of
reference to other documents), unless otherwise defined herein, shall have such
defined meanings when used herein, and the following terms shall have such
following meanings:

"AUTHORIZED OFFICER" shall mean, (i) with respect to Financial
Security, the Chairman of the Board, the President, the Chief Executive
Officer, Chief Operating Officer, or any Managing Director of Financial
Security, (ii) with respect to the Indenture Trustee or the Collateral Agent,
any Vice President or Trust Officer thereof, (iii) with respect to either AFL
or the Seller, the President, any Vice President or the Treasurer thereof and
(iv) with respect to the Issuer, any officer of the Owner Trustee who is
authorized to act for the Owner Trustee in matters relating to the Issuer and
who is identified on the list of Authorized Officers delivered by the Owner
Trustee to the Indenture Trustee on the Effective Date (as such list may be
modified or supplemented from time to time thereafter).

"COLLATERAL" shall have the meaning assigned to such term in Section
2.1(a) hereof.

"COLLATERAL AGENT" shall mean, initially, Norwest Bank Minnesota,
National Association, in its capacity as Collateral Agent on behalf of the
Secured Parties, including its successors in interest, until a successor Person
shall have become the Collateral Agent pursuant to Section 3.1, and thereafter
"Collateral Agent" shall mean such successor Person.

"CONTROLLING PARTY" shall mean at any time the Person designated as
the Controlling Party at such time pursuant to Section 5.1.

"EFFECTIVE DATE" shall mean July 21, 1998.

"FINAL TERMINATION DATE" shall mean the date that is the later of (i)
the Insurer Termination Date and (ii) the Trustee Termination Date.

"INSURER SECURED OBLIGATIONS" shall mean all amounts and obligations
that may at any time be owed or required to be performed to or on behalf of the
Security Insurer (or any agents, accountants or attorneys for the Security
Insurer), including the Security Insurer as third party beneficiary, under the
Insurance Agreement or under any other Transaction Document,

<PAGE>

regardless of whether such amounts are owed or performance is due now or in
the future, whether liquidated or unliquidated, contingent or non-contingent.

"INSURER TERMINATION DATE" shall mean the date that is the latest of
(i) the date of the expiration of the Note Policy, (ii) the date on which the
Security Insurer shall have received payment and performance in full of all
Insurer Secured Obligations and (iii) the latest date on which any payment
referred to in clause (ii) above could be avoided as a preference under the
United States Bankruptcy Code or any other similar federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, as
specified in an Opinion of Counsel delivered to the Collateral Agent.

"NON-CONTROLLING PARTY" shall mean at any time a Secured Party that is
not the Controlling Party at such time.

"OPINION OF COUNSEL" shall mean a written opinion of counsel
acceptable, as to form, substance and issuing counsel, to the Controlling Party.

"PROCEEDING" means any suit in equity, action at law or other judicial
or administrative proceeding.

"SECURED OBLIGATIONS" shall mean the Insurer Secured Obligations and
the Trustee Secured Obligations.

"SECURED PARTIES" shall mean each of the Indenture Trustee, in respect
of the Trustee Secured Obligations, and the Security Insurer, in respect of the
Insurer Secured Obligations.

"SECURITY AGREEMENT" shall mean, prior to the Effective Date, the
Original Security Agreement; and from and after the Effective Date, this Amended
and Restated Security Agreement, as the same may from time to time be amended,
supplemented, waived or modified.

"TRANSACTION DOCUMENTS" shall mean the Indenture, this Security
Agreement, the Sale and Servicing Agreement, the Trust Agreement, the
Administration Agreement, the Note Purchase Agreement, the Purchase Agreement
and any Assignment Agreements (but only with respect to the Collateral), the
Spread Account Agreement, the Insurance Agreement, the Custodian Agreement and
the Lockbox Agreement.

"TRUSTEE SECURED OBLIGATIONS" shall mean all amounts and obligations
that the Issuer may at any time owe or be required to perform to or for the
benefit of the Indenture Trustee or the Noteholders under the Indenture.

"TRUSTEE TERMINATION DATE" shall mean the date on which the Indenture
Trustee shall have received on behalf of the Noteholders payment and performance
in full of all Trustee Secured Obligations.

<PAGE>

"UNIFORM COMMERCIAL CODE" or "UCC" shall mean, with respect to any
jurisdiction, the Uniform Commercial Code, or any successor statute, or any
comparable law, as the same may from time to time be amended, supplemented or
otherwise modified and in effect.

Section 1.2. RULES OF INTERPRETATION. The terms "hereof," "herein"
or "hereunder," unless otherwise modified by more specific reference, shall
refer to this Security Agreement in its entirety. Unless otherwise indicated
in context, the terms "Article" or "Section" shall refer to an Article or
Section of this Security Agreement. The definition of a term shall include the
singular, the plural, the past, the present, the future, the active and the
passive forms of such terms.

ARTICLE II

THE COLLATERAL

Section 2.1. GRANT OF SECURITY INTEREST BY THE ISSUER.

(a) The Issuer hereby grants to the Collateral Agent at the Effective
Date and on each Purchase Date, on behalf of and for the benefit of the Secured
Parties to secure the performance of the respective Secured Obligations, a
security interest in all of the Issuer's right, title and interest, whether now
owned or hereafter acquired, in and to all accounts, contract rights, general
intangibles, chattel paper, instruments, documents, money, deposit accounts,
certificates of deposit, goods, letters of credit, advices of credit and
authenticated securities consisting of, arising from or relating to any of the
following property: (i) the Receivables; (ii) the Other Conveyed Property
related thereto; (iii) the rights of the Seller under the Purchase Agreement and
each Assignment Agreement assigned to the Issuer pursuant to the Sale and
Servicing Agreement, including the right to cause AFL to repurchase Receivables
from Seller under certain circumstances; (iv) all amounts required to be
deposited, or deposited, or delivered to the Collateral Agent for deposit, to
the Collection Account by the Seller in respect of the WAC Deficiency Amount or
the Collateral Test; (v) all funds on deposit from time to time in the Secured
Accounts, and in all investments and proceeds thereof (including all income
thereon); (vi) the Sale and Servicing Agreement; and (vii) all present and
future claims, demands, causes and choses in action in respect of any or all of
the foregoing and all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any and all of the foregoing, including all
proceeds of the conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivables, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in theproceeds of any of the foregoing
(collectively, the "Collateral").

The Collateral Agent, for the benefit of the Indenture Trustee on
behalf of the Holders of the Notes and for the benefit of the Security
Insurer acknowledges such grant of a security interest.

<PAGE>

(b) In order to effectuate the provisions and purposes of this
Security Agreement, including for the purpose of perfecting the security
interests granted hereunder, the Issuer represents and warrants that it has,
prior to the execution of this Security Agreement, executed and filed
appropriate UCC-1 financing statements in Minnesota and Delaware sufficient to
ensure that the Collateral Agent, as agent for the Secured Parties, has a first
priority perfected security interest in all of the Collateral that can be
perfected by the filing of a financing statement.

Section 2.2. NO TRANSFER OF DUTIES. The security interests granted
hereby are granted as security only and shall not (i) transfer or in any way
affect or modify, or relieve the Issuer from, any obligation to perform or
satisfy any term, covenant, condition or agreement to be performed or satisfied
by the Issuer under or in connection with this Security Agreement or any other
Transaction Document to which it is a party or (ii) impose any obligation on any
of the Secured Parties or the Collateral Agent to perform or observe any such
term, covenant, condition or agreement or impose any liability on any of the
Secured Parties or the Collateral Agent for any act or omission on its part
relative thereto or for any breach of any representation or warranty on its part
contained therein or made in connection therewith except, in each case, to the
extent specifically provided herein and in the other Transaction Documents.

Section 2.3. TERMINATION AND RELEASE OF RIGHTS.

(a) On the Insurer Termination Date, the rights, remedies, powers,
duties, authority and obligations conferred upon the Security Insurer pursuant
to this Security Agreement in respect of the Collateral shall terminate and be
of no further force and effect and all rights, remedies, powers, duties,
authority and obligations of the Security Insurer with respect to the Collateral
shall be automatically released; PROVIDED, that any indemnity provided to or by
the Security Insurer herein shall survive such Insurer Termination Date. If the
Security Insurer is acting as Controlling Party on the Insurer Termination Date,
the Security Insurer agrees, at the expense of AFL, to execute and deliver such
instruments as the successor Controlling Party may reasonably request to
effectuate such release, and any such instruments so executed and delivered
shall be fully binding on the Security Insurer and any Person claiming by,
through or under the Security Insurer.

(b) On the Trustee Termination Date, the rights, remedies, powers,
duties, authority and obligations, if any, conferred upon the Indenture
Trustee pursuant to this Security Agreement in respect of the Collateral
shall terminate and be of no further force and effect and all such rights,
remedies, powers, duties, authority and obligations of the Indenture Trustee
with respect to such Collateral shall be automatically released; PROVIDED,
that any indemnity provided to the Indenture Trustee herein shall survive
such Trustee Termination Date. If the Indenture Trustee is acting as
Controlling Party on the related Trustee Termination Date, the Indenture
Trustee agrees, at the expense of AFL, to execute and deliver such
instruments as AFL may reasonably request to effectuate such release, and any
such instruments so executed and delivered shall be fully binding on the
Indenture Trustee.

(c) On the Final Termination Date, the rights, remedies, powers,
duties, authority and obligations conferred upon the Collateral Agent and each
Secured Party pursuant to this Security Agreement shall terminate and be of no
further force and effect and all rights,

<PAGE>

remedies, powers, duties, authority and obligations of the Collateral Agent
and each Secured Party with respect to the Collateral shall be automatically
released. On the Final Termination Date, the Collateral Agent and each
Secured Party agrees, at the expense of AFL, to execute such instruments of
release, in recordable form if necessary, in favor of the Seller or AFL as
the Seller or AFL may reasonably request, to deliver any Collateral in its
possession to the Issuer, and to otherwise release the lien of this Security
Agreement and release and deliver to the Issuer the Collateral.

(d) To the extent required of the Issuer and its assignees by the
terms of any Transaction Document and permitted by the terms hereof, each of the
Collateral Agent and the Controlling Party shall, and otherwise upon the prior
written instructions of an Authorized Officer of the Controlling Party, the
Collateral Agent shall, at the expense of AFL take (in each case) such steps as
may be necessary, or as the Issuer, in a manner consistent with the Transaction
Documents, may reasonably request, to release the interests of the Secured
Parties in the Collateral, including but not limited to redelivering and
reassigning to the Issuer any releases necessary to permit the Issuer to release
its interest in the Collateral in accordance with the terms thereof and of the
Sale and Servicing Agreement.

Section 2.4. EFFECTIVENESS.

This Amended and Restated Security Agreement amends and restates the
Original Security Agreement, and on the Effective Date replaces the Original
Security Agreement and substitutes the Issuer for the Original Issuer, in each
case without interruption of the parties' performance thereunder or hereunder.

ARTICLE III

THE COLLATERAL AGENT

Section 3.1. APPOINTMENT AND POWERS. Subject to the terms and
conditions hereof, each of the Secured Parties hereby appoints Norwest Bank
Minnesota, National Association as the Collateral Agent, and Norwest Bank
Minnesota, National Association hereby accepts such appointment and agrees to
act as Collateral Agent with respect to the Collateral for the Secured Parties,
to maintain custody and possession of the Collateral (except as otherwise
provided hereunder and under the Custodian Agreement) and to perform the other
duties of the Collateral Agent in accordance with the provisions of this
Security Agreement. Each Secured Party hereby authorizes the Collateral Agent
to take such action on its behalf, and to exercise such rights, remedies, powers
and privileges hereunder and under the other Transaction Documents, as the
Controlling Party may direct and as are specifically authorized to be exercised
by the Collateral Agent by the terms hereof or by the terms of any Transaction
Document, together with such actions, rights, remedies, powers and privileges as
are reasonably incidental thereto. The Collateral Agent shall act upon and in
compliance with the written instructions of the Controlling Party delivered
pursuant to this Security Agreement promptly following receipt of such written
instructions; PROVIDED, that the Collateral Agent shall not act in accordance
with any instructions (i) which are not authorized by, or are in violation of
the provisions of, this Security Agreement or any Transaction Document, (ii)
which are in violation of any applicable

<PAGE>

law, rule or regulation or (iii) for which the Collateral Agent has not
received reasonable indemnity. Receipt of such instructions shall not be a
condition to the exercise by the Collateral Agent of its express duties
hereunder or under any Transaction Document, except where this Security
Agreement provides that the Collateral Agent is permitted to act only
following and in accordance with such instructions.

Section 3.2. PERFORMANCE OF DUTIES. The Collateral Agent shall have
no duties or responsibilities except those expressly set forth in this Security
Agreement and the other Transaction Documents to which the Collateral Agent is a
party or as directed by the Controlling Party in accordance with this Security
Agreement. The Collateral Agent shall not be required to take any discretionary
actions hereunder except at the written direction and with the indemnification
of the Controlling Party.

Section 3.3. LIMITATION ON LIABILITY. Neither the Collateral Agent
nor any of its directors, officers or employees, shall be liable for any action
taken or omitted to be taken by it or them hereunder, or in connection herewith,
except that the Collateral Agent shall be liable for its negligence, bad faith
or willful misconduct; nor shall the Collateral Agent be responsible for the
validity, effectiveness, value, sufficiency or enforceability against the
Issuer, the Seller or AFL of this Security Agreement or any of the Collateral
(or any part thereof). Notwithstanding any term or provision of this Security
Agreement, the Collateral Agent shall incur no liability to the Seller, AFL, the
Issuer or the Secured Parties for any action taken or omitted by the Collateral
Agent in connection with the Collateral, except for the negligence or willful
misconduct on the part of the Collateral Agent, and shall incur no liability to
the Seller, AFL, the Issuer or the Secured Parties except for negligence or
willful misconduct in carrying out its duties. Subject to Section 3.4, the
Collateral Agent shall be protected and shall incur no liability to any such
party in relying upon the genuineness of any notice, demand, certificate,
signature, instrument or other document reasonably believed by the Collateral
Agent to be genuine and to have been duly executed by the appropriate signatory,
and (absent actual knowledge to the contrary) the Collateral Agent shall not be
required to make any independent investigation with respect thereto. The
Collateral Agent shall at all times be free independently to establish to its
reasonable satisfaction, but shall have no duty to independently verify, the
existence or nonexistence of facts that are a condition to the exercise or
enforcement of any right or remedy hereunder or under any of the Transaction
Documents. The Collateral Agent may consult with counsel, and shall not be
liable for any action taken or omitted to be taken by it hereunder in good faith
and in accordance with the written advice of such counsel. The Collaeral Agent
shall not be under any obligation to exercise any of the remedial rights or
powers vested in it by this Security Agreement or to follow any direction from
the Controlling Party unless it shall have received reasonable security or
indemnity satisfactory to the Collateral Agent against the costs, expenses and
liabilities which might be incurred by it.

Section 3.4. RELIANCE UPON DOCUMENTS. In the absence of bad
faith or negligence on its part, the Collateral Agent shall be entitled to
rely on any communication, instrument, paper or other document reasonably
believed by it to be genuine and correct and to have been signed or sent by
the proper Person or Persons and shall have no liability in acting, or
omitting to act, where such action or omission to act is in reasonable
reliance upon any statement or opinion contained in any such document or
instrument.

<PAGE>

Section 3.5. SUCCESSOR COLLATERAL AGENT.

(a) MERGER. Any Person into which the Collateral Agent may be
converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its trust business and assets as a whole or substantially as a
whole, or any Person resulting from any such conversion, merger, consolidation,
sale or transfer to which the Collateral Agent is a party, shall (provided it is
otherwise qualified to serve as the Collateral Agent hereunder) be and become a
successor Collateral Agent hereunder and be vested with all of the title to and
interest in the Collateral and all of the trusts, powers, discretions,
immunities, privileges and other matters as was its predecessor without the
execution or filing of any instrument or any further act, deed or conveyance on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding, except to the extent, if any, that any such action is necessary
to perfect, or continue the perfection of, the security interest of the Secured
Parties in the Collateral.

(b) RESIGNATION. The Collateral Agent and any successor
Collateral Agent may resign upon not less than 60 days' prior written notice
of such resignation by registered or certified mail to the other Secured
Parties and the Seller; PROVIDED, that such resignation shall take effect
only upon the date that is the latest of (i) the effective date of the
appointment of a successor Collateral Agent and the acceptance in writing by
such successor Collateral Agent of such appointment and of its obligation to
perform its duties hereunder in accordance with the provisions hereof and
(ii) delivery of the Collateral to such successor to be held in accordance
with the procedures specified in this Agreement and the Custodian Agreement.
Notwithstanding the preceding sentence, if by the contemplated date of
resignation specified in the written notice of resignation delivered as
described above no successor Collateral Agent or temporary successor
Collateral Agent has been appointed Collateral Agent or become the Collateral
Agent pursuant to subsection (d) hereof, the resigning Collateral Agent may
petition a court of competent jurisdiction in New York, New York for the
appointment of a successor.

(c) REMOVAL. The Collateral Agent may be removed by the Controlling
Party at any time, with or without cause, by an instrument or concurrent
instruments in writing delivered to the Collateral Agent, the other Secured
Parties and the Seller. A temporary successor may be removed at any time to
allow a successor Collateral Agent to be appointed pursuant to subsection (d)
below. Any removal pursuant to the provisions of this subsection (c) shall take
effect only upon the date that is the latest of (i) the effective date of the
appointment of a successor Collateral Agent and the acceptance in writing by
such successor Collateral Agent of such appointment and of its obligation to
perform its duties hereunder in accordance with the provisions hereof, (ii)
delivery of the Collateral to such successor to be held in accordance with the
procedures specified in the Sale and Servicing Agreement and (iii) receipt by
the Controlling Party of an Opinion of Counsel to the effect described in
Section 4.5.

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whereupon such successor, without any further act, deed or conveyance, shall
become fully vested with all the estates, properties, rights, powers, duties
and obligations of its predecessor. Such predecessor shall, nevertheless, on
the written request of any Secured Party or the Seller, execute and deliver
an instrument transferring to such successor all the estates, properties,
rights and powers of such predecessor hereunder. In the event that any
instrument in writing from the Seller or a Secured Party is reasonably
required by a successor Collateral Agent to more fully and certainly vest in
such successor the estates, properties, rights, powers, duties and
obligations vested or intended to be vested hereunder in the Collateral
Agent, any and all such written instruments shall, at the request of the
temporary or permanent successor Collateral Agent, be forthwith executed,
acknowledged and delivered by the Seller or such Secured Party. The
designation of any successor Collateral Agent and the instrument or
instruments removing any Collateral Agent and appointing a successor
hereunder, together with all other instruments provided for herein, shall be
maintained with the records relating to the Collateral and, to the extent
required by applicable law, filed or recorded by the successor Collateral
Agent in each place where such filing or recording is necessary to effect the
transfer of the Collateral to the sucessor Collateral Agent or to protect or
continue the perfection of the security interests granted hereunder.

Section 3.6. INDEMNIFICATION. AFL shall indemnify the
Collateral Agent, its directors, officers, employees and agents for, and hold
the Collateral Agent, its directors, officers, employees and agents harmless
against, any loss, liability or expense (including the costs and expenses of
defending against any claim of liability) arising out of or in connection with
the Collateral Agent's acting as Collateral Agent hereunder, except such loss,
liability or expense as shall result from the negligence, bad faith or willful
misconduct of the Collateral Agent or its officers or agents. The obligation of
AFL under this Section shall survive the termination of this Agreement and the
resignation or removal of the Collateral Agent. The Collateral Agent covenants
not to assert any Lien or to take any other action in respect of the Collateral
to enforce its rights to indemnification hereunder until the Final Termination
Date.

Section 3.7. COMPENSATION AND REIMBURSEMENT. The Seller agrees
for the benefit of the Secured Parties and as part of the Secured Obligations
(a) to pay to the Collateral Agent, from time to time, reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a collateral
trustee); and (b) to reimburse the Collateral Agent upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Collateral Agent in accordance with any provision of, or carrying out its duties
and obligations under, this Security Agreement (including the reasonable
compensation and fees and the expenses and disbursements of its agents, any
independent certified public accountants and independent counsel), except any
expense, disbursement or advances as may be attributable to negligence, bad
faith or willful misconduct on the part of the Collateral Agent.

Section 3.8. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL
AGENT. The Collateral Agent represents and warrants to the Seller and to each
Secured Party as follows:

(a) DUE ORGANIZATION. The Collateral Agent is a national banking
association, duly organized, validly existing and in good standing under the
laws of the United States and is duly authorized and licensed under applicable
law to conduct its business as presently conducted.

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<PAGE>

(b) CORPORATE POWER. The Collateral Agent has all requisite
right, power and authority to execute and deliver this Security Agreement and
to perform all of its duties as Collateral Agent hereunder.

(c) DUE AUTHORIZATION. The execution and delivery by the Collateral
Agent of this Security Agreement and the other Transaction Documents to which it
is a party, and the performance by the Collateral Agent of its duties hereunder
and thereunder, have been duly authorized by all necessary corporate proceedings
and no further approvals or filings, including any governmental approvals, are
required for the valid execution and delivery by the Collateral Agent, or the
performance by the Collateral Agent, of this Security Agreement and such other
Transaction Documents.

(d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly
executed and delivered this Security Agreement and each other Transaction
Document to which it is a party, and each of this Security Agreement and each
such other Transaction Document constitutes the legal, valid and binding
obligation of the Collateral Agent, enforceable against the Collateral Agent in
accordance with its terms, except as (i) such enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.

Section 3.9. WAIVER OF SETOFFS. The Collateral Agent hereby
expressly waives any and all rights of setoff that the Collateral Agent may
otherwise at any time have under applicable law with respect to any Secured
Account and agrees that amounts in the Secured Accounts shall at all times be
held and applied solely in accordance with the provisions hereof and of the
Transaction Documents.

Section 3.10. CONTROL BY THE CONTROLLING PARTY. The Collateral
Agent shall comply with notices and instructions given by the Issuer only if
accompanied by the written consent of the Controlling Party, except that if any
Amortization Event shall have occurred and be continuing, the Collateral Agent
shall act upon and comply with notices and instructions given by the Controlling
Party alone in the place and stead of the Issuer.

ARTICLE IV

COVENANTS OF THE ISSUER

Section 4.1. PRESERVATION OF COLLATERAL. Subject to the rights,
powers and authorities granted to the Collateral Agent and the Controlling Party
in this Security Agreement, the Issuer shall take such action as is necessary
and proper with respect to the Collateral in order to preserve and maintain such
Collateral and to cause (subject to the rights of the Secured Parties) the
Collateral Agent to perform its obligations with respect to such Collateral as
provided herein. The Issuer will do, execute, acknowledge and deliver, or cause
to be done, executed, acknowledged and delivered, such instruments of transfer
or take such other steps or actions as may be necessary, or required by the
Controlling Party, to perfect the security interests

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granted hereunder in the Collateral, to ensure that such security interests
rank prior to all other Liens and to preserve the priority of such security
interests and the validity and enforceability thereof. Upon any delivery or
substitution of Collateral, the Issuer shall be obligated to execute such
documents and perform such actions as are necessary to create in the
Collateral Agent for the benefit of the Secured Parties a valid first Lien
on, and valid and perfected first priority security interest in, the
Collateral so delivered and to deliver such Collateral to the Collateral
Agent, free and clear of any other Lien, together with satisfactory
assurances thereof, and to pay any reasonable costs incurred by any of the
Secured Parties or the Collateral Agent (including its agents) or otherwise
in connection with such delivery.

Section 4.2. NOTICES. In the event that the Issuer acquires
knowledge of the occurrence and continuance of any Amortization Event or of any
event of default or like event, howsoever described or called, under any of the
Transaction Documents, the Issuer shall immediately give notice thereof to the
Collateral Agent and each Secured Party.

Section 4.3. WAIVER OF STAY OR EXTENSION LAWS; MARSHALLING OF
ASSETS. The Issuer covenants, to the fullest extent permitted by applicable
law, that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any appraisement,
valuation, stay, extension or redemption law wherever enacted, now or at any
time hereafter in force, in order to prevent or hinder the enforcement of this
Security Agreement or any absolute sale of the Collateral or any part thereof,
or the possession thereof by any purchaser at any sale under Article VI of this
Security Agreement; and the Issuer, to the fullest extent permitted by
applicable law, for itself and all who may claim under it, hereby waives the
benefit of all such laws, and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Collateral Agent, but will
suffer and permit the execution of every such power as though no such law had
been enacted. The Issuer, for itself and all who may claim under it, waives, to
the fullest extent permitted by applicable law, all right to have the Collateral
marshalled upon any foreclosure or other disposition thereof.

Section 4.4. NONINTERFERENCE, ETC. The Issuer shall not (i) waive
or alter any of its rights under the Collateral (or any agreement or instrument
relating thereto) without the prior written consent of the Controlling Party; or
(ii) fail to pay any tax, assessment, charge or fee levied or assessed against
the Collateral, or to defend any action, if such failure to pay or defend may
adversely affect the priority or enforceability of the Seller's right, title or
interest in and to the Collateral or the Collateral Agent's lien on, and
security interest in, the Collateral for the benefit of the Secured Parties; or
(iii) take any action, or fail to take any action, if such action or failure to
take action will interfere with the enforcement of any rights under the
Transaction Documents.

Section 4.5. ISSUER CHANGES.

(a) CHANGE IN NAME, STRUCTURE, ETC. The Issuer shall not change its
name, identity or trust structure unless it shall have given each Secured Party
and the Collateral Agent at least 30 days' prior written notice thereof, shall
have effected any necessary or appropriate assignments or amendments thereto and
filings of financing statements or amendments thereto, and shall have delivered
to the Collateral Agent and each Secured Party an Opinion of Counsel either (a)
stating that, in the opinion of such counsel, such action has been taken with
respect to

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the execution and filing of any amendments to previously recorded financing
statements and continuation statements and other actions as are necessary to
perfect, maintain and protect the lien and security interest of the
Collateral Agent (and the priority thereof), on behalf of the Secured
Parties, with respect to such Collateral against all creditors and purchasers
from the Issuer and reciting the details of such action, or (b) stating that,
in the opinion of such counsel, no such action is necessary to maintain such
perfected lien and security interest.

(b) RELOCATION OF THE ISSUER. The Issuer shall not change its
principal executive office unless it gives each Secured Party and the
Collateral Agent at least 30 days' prior written notice of any relocation of
its principal executive office. If the Issuer relocates its principal
executive office or principal place of business from 7825 Washington Avenue
South, Minneapolis, Minnesota 55439-2435, or 1100 North Market Street, Rodney
Square North, Wilmington, Delaware, 19890-0001, the Issuer shall give prior
notice thereof to the Controlling Party and the Collateral Agent and shall
effect whatever appropriate recordations and filings are necessary and shall
provide an Opinion of Counsel to the Controlling Party and the Collateral
Agent, to the effect that, upon the recording of any necessary assignments or
amendments to previously-recorded assignments and filing of any necessary
amendments to the previously filed financing or continuation statements or
upon the filing of one or more specified new financing statements, and the
taking of such other actions as may be specified in such opinion, the
security interests in the Collateral shall remain, after such relocation,
valid and perfected.

ARTICLE V

CONTROLLING PARTY; INTERCREDITOR PROVISIONS

Section 5.1. APPOINTMENT OF CONTROLLING PARTY. From and after the
Closing Date until the Insurer Termination Date, the Security Insurer shall be
the Controlling Party and shall be entitled to exercise all the rights given the
Controlling Party hereunder. From and after the Insurer Termination Date until
the Trustee Termination Date, the Indenture Trustee hereby agrees that the
Administrative Agent (acting at the direction of the Agents) shall be the
Controlling Party. Notwithstanding the foregoing, in the event that an Insurer
Default shall have occurred and be continuing, the Administrative Agent (acting
at the direction of the Agents) shall be the Controlling Party until the Trustee
Termination Date. If prior to an Insurer Termination Date the Administrative
Agent shall have become the Controlling Party as a result of the occurrence of
an Insurer Default and either such Insurer Default is cured or for any other
reason ceases to exist or the Trustee Termination Date occurs, then upon such
cure or other cessation or on such Trustee Termination Date, as the case may be,
the Security Insurer shall, upon notice thereof being duly given to the
Collateral Agent, again be the Controlling Party.

Section 5.2. CONTROLLING PARTY'S AUTHORITY.

(a) Each of the Issuer, AFL, the Seller and the Secured Parties
hereby irrevocably appoints the Controlling Party, and any successor to the
Controlling Party appointed pursuant to Section 5.1, its true and lawful
attorney, with full power of substitution, in the name of the Issuer, AFL, the
Seller, the Secured Parties or otherwise, but at the expense of the Seller, to
the extent permitted by law to exercise in its sole and absolute discretion, at
any time and from

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time to time while any Amortization Event has occurred and is continuing, any
or all of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any and all
monies due or to become due upon or by virtue thereof, (ii) to settle,
compromise, compound, prosecute or defend any action or proceeding with
respect thereto, (iii) to sell, securitize, transfer, assign or otherwise
deal with the same or the proceeds thereof as fully and effectively as if the
Collateral Agent were the absolute owner thereof, and (iv) to extend the time
of payment of any or all thereof and to make any allowance or other
adjustments with respect thereto; PROVIDED, that the foregoing powers and
rights shall be exercised in accordance with the provisions of Article VI.

(b) Each Secured Party hereby irrevocably and unconditionally
constitutes and appoints the Controlling Party, and any successor to the
Controlling Party appointed pursuant to Section 5.1 from time to time, as the
true and lawful attorney-in-fact of such Secured Party for so long as such
Secured Party is a Non-Controlling Party, with full power of substitution, to
execute, acknowledge and deliver any notice, document, certificate, paper,
pleading or instrument and to do in the name of the Controlling Party as well
as in the name, place and stead of such Secured Party such acts, things and
deeds for and on behalf of and in the name of such Secured Party under this
Security Agreement that such Secured Party could or might do or which may be
necessary, desirable or convenient in the Controlling Party's sole discretion
to effect the purposes contemplated hereunder and, without limitation,
exercise full right, power and authority to take, or defer from taking, any
and all acts with respect to the administration of the Collateral, and the
enforcement of the rights of the Secured Parties hereunder, on behalf of and
for the benefit of the Controlling Party and such Non-Controlling Party, as
their interests may appear.

Section 5.3. RIGHTS OF SECURED PARTIES. The Non-Controlling Parties
at any time expressly agree that they shall not assert any right that they may
otherwise have, as a Secured Party with respect to the Collateral, to direct the
maintenance, sale or other disposition of the Collateral or any portion thereof,
notwithstanding the occurrence and continuation of any Amortization Event or any
non-performance by AFL, the Seller or the Issuer of any obligation owed to such
Secured Party hereunder or under any other Transaction Document, and each party
hereto agrees that the Controlling Party shall be the only Person entitled to
assert and exercise such rights.

Section 5.4. DEGREE OF CARE.

(a) CONTROLLING PARTY. Notwithstanding any term or provision of this
Security Agreement, the Controlling Party shall incur no liability to AFL, the
Seller or the Issuer for any action taken or omitted by the Controlling Party in
connection with the Collateral, except for any gross negligence, bad faith or
willful misconduct on the part of the Controlling Party and, further, shall
incur no liability to the Non-Controlling Parties except for a breach of the
terms of this Security Agreement or for gross negligence, bad faith or willful
misconduct in carrying out its duties to the Non-Controlling Parties. The
Controlling Party shall be protected and shall incur no liability to any such
party in relying upon the accuracy, acting in reliance upon the contents and
assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document believed by the Controlling Party to be genuine and
to have been duly executed by the appropriate signatory, and (absent manifest
error or actual knowledge to the contrary) the

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<PAGE>

Controlling Party shall not be required to make any independent investigation
with respect thereto. The Controlling Party shall, at all times, be free
independently to establish to its reasonable satisfaction the existence or
nonexistence, as the case may be, of any fact the existence or nonexistence
of which shall be a condition to the exercise or enforcement of any right or
remedy under this Security Agreement or any of the Transaction Documents.

(b) THE NON-CONTROLLING PARTIES. The Non-Controlling Parties shall
not be liable to the Seller, AFL or the Issuer for any action or failure to act
by the Controlling Party or the Collateral Agent in exercising, or failing to
exercise, any rights or remedies hereunder.

ARTICLE VI

REMEDIES UPON DEFAULT

Section 6.1. REMEDIES UPON A DEFAULT.

(a) If an Amortization Event has occurred and is continuing, the
Collateral Agent shall, at the direction of the Controlling Party, take
whatever action at law or in equity as may appear necessary or desirable in
the judgment of the Controlling Party to collect and satisfy all Secured
Obligations (including, but not limited to, foreclosure upon the Collateral
and sale or securitization of the Collateral and all other rights available
to secured parties under applicable law) or to enforce performance and
observance of any obligation, agreement or covenant under any of the
Transaction Documents. In addition to all other rights and remedies granted
to the Collateral Agent for the benefit of the Secured Parties by this
Security Agreement, the other Transaction Documents, the UCC and other
applicable law, rules, or regulations, the Collateral Agent may with the
consent of the Controlling Party, and shall upon the request of the
Controlling Party, upon the occurrence and during the continuance of any such
Amortization Event, exercise any one or more of the following rights and
remedies: foreclose upon or otherwise enforce the security interests in any
or all Collateral in any manner permitted by applicable law, rules, or
regulations or in this Security Agreement; notify any or all Obligors to
make payments with respect to Receivables directly to the Collateral Agent;
sell or otherwise dispose of any or all Collateral at one or more public or
private sales, for cash or credit or future delivery, on such terms and in
such manner as the Controlling Party may determine; require AFL, the Seller
or the Issuer to assemble the Collateral and make it available to the
Collateral Agent at a place to be designated by the Collateral Agent; enter
onto any property where any Collateral is located and take possession thereof
with or without judicial process; and enforce any rights of the Issuer under
any Receivable or other agreement to the extent the Controlling Party deems
appropriate. In furtherance of the Collateral Agent's rihts hereunder, each
of AFL, the Seller and the Issuer hereby grants to the Collateral Agent an
irrevocable, non-exclusive license (exercisable without royalty or other
payment by the Collateral Agent) to use, license or sublicense any patent,
trademark, tradename, copyright or other intellectual property in which the
Issuer now or hereafter has any right, title or interest, together with the
right of access to all media in which any of the foregoing may be recorded or
stored. Each of AFL, the Seller and the Issuer hereby agrees that ten (10)
days notice of any intended sale or disposition of any Collateral is
reasonable. Notwithstanding the foregoing, the Collateral Agent shall not be
entitled to take any action and the Controlling Party shall not be entitled
to give any direction

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<PAGE>

with respect to the Collateral, except to the extent provided herein and in
the Sale and Servicing Agreement or other Transaction Documents.

(b) In the event of any sale, collection, conversion or other
disposition into cash of the Collateral, or any part thereof, after deducting
any actual costs and expenses incurred in connection with any such
disposition, the Collateral Agent shall deposit the proceeds thereof into the
Collection Account for distribution on the next succeeding Distribution Date
in accordance with the priorities set forth in Section 4.6 of the Sale and
Servicing Agreement.

(c) The Controlling Party and the Collateral Agent shall be entitled
to obtain from AFL, the Seller and the Issuer all records and documentation in
the possession of AFL, the Seller or the Issuer, as the case may be, pertaining
to any Collateral. Upon consummation of any sale pursuant to this Section 6.1,
the Controlling Party, or the Collateral Agent acting on behalf of and at the
direction of the Controlling Party, shall have the right to assign, transfer,
endorse and deliver to the purchaser or purchasers thereof (which may include
the Security Insurer), free and clear of any Lien, the Collateral, or any
portion thereof or any interest therein, so sold. Each purchaser at any such
sale shall hold the property purchased by it absolutely free and clear from any
claim or right on the part of the Secured Parties, AFL, the Seller or the Issuer
and AFL, the Seller and the Issuer hereby irrevocably waive all rights of
redemption, stay, marshalling of assets or appraisal that either of them now has
or may at any time in the future have under applicable law or statute now
existing or hereafter enacted.

(d) In addition to the remedies granted in this Agreement and the
other Transaction Documents, if an Amortization Event has occurred and is
continuing, the Collateral Agent shall, at the direction of the Controlling
Party, take whatever action at law or in equity as may appear necessary or
desirable in the judgment of the Controlling Party to collect the amounts then
due and thereafter to become due under this Agreement and any of the other
Transaction Documents (including but not limited to, all rights available to
secured parties under applicable law) or to enforce performance and observance
of any obligation, agreement or covenant under any of the Transaction Documents,
including the exercise of the following powers with respect to the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any and all
monies due or to become due upon or by virtue thereof, (ii) to settle,
compromise, compound, prosecute or defend any action or proceeding with respect
thereto, (iii) to sell, securitize, transfer, assign or otherwise deal with the
same or the proceeds thereof as fully and effectively as if the Collateral Agent
were the absolute owner thereof, and (iv) to extend the time of payment of any
or all thereof and to make any allowance or other adjustment with respect
thereto. All proceeds of any portion of the Collateral liquidated pursuant to
this Section 6.1 shall be applied as set forth in Subsection (b) above.

(e) The Collateral Agent and the Controlling Party, as the case may
be, may exercise the powers and rights granted by this Section 6.1, without
notice or demand to the Indenture Trustee, AFL, the Seller or the Issuer except
as provided in (a) above.

Section 6.2. RESTORATION OF RIGHTS AND REMEDIES. If the Collateral
Agent has instituted any proceeding to enforce any right or remedy under this
Agreement, and such proceeding has been discontinued or abandoned for any
reason, or has been determined

<PAGE>

adversely to such Collateral Agent, then and in every such case the Seller,
the Collateral Agent and each of the Secured Parties shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of
the Secured Parties shall continue as though no such proceeding had been
instituted.

Section 6.3. NO REMEDY EXCLUSIVE. No right or remedy herein
conferred upon or reserved to the Collateral Agent, the Controlling Party or any
of the Secured Parties is intended to be exclusive of any other right or remedy,
and every right or remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law, in equity or otherwise and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised by the Controlling Party, and the exercise of or the beginning of the
exercise of any right or power or remedy shall not be construed to be a waiver
of the right to exercise at the same time or thereafter any other right, power
or remedy.

ARTICLE VII

MISCELLANEOUS

Section 7.1. FURTHER ASSURANCES. Each party hereto shall take such
action and deliver such instruments to any other party hereto, in addition to
the actions and instruments specifically provided for herein, as may be
reasonably requested or required to effectuate the purpose or provisions of this
Security Agreement or to confirm or perfect any transaction described or
contemplated herein.

Section 7.2. WAIVER. Any waiver by any party of any provision of
this Security Agreement or any right, remedy or option hereunder shall only
prevent and estop such party from thereafter enforcing such provision, right,
remedy or option if such waiver is given in writing and only as to the specific
instance and for the specific purpose for which such waiver was given. The
failure or refusal of any party hereto to insist in any one or more instances,
or in a course of dealing, upon the strict performance of any of the terms or
provisions of this Security Agreement by any party hereto or the partial
exercise of any right, remedy or option hereunder shall not be construed as a
waiver or relinquishment of any such term or provision, but the same shall
continue in full force and effect.

Section 7.3. AMENDMENTS; WAIVERS. No amendment, modification,
waiver or supplement to this Security Agreement or any provision of this
Security Agreement shall in any event be effective unless the same shall have
been made or consented to in writing by each of the parties hereto; PROVIDED,
HOWEVER, that, for so long as the Security Insurer shall be the Controlling
Party, amendments, modifications, waivers or supplements hereto or any
requirement hereunder to deposit or retain any amounts in the Secured Accounts
shall be effective if made or consented to in writing by the Security Insurer,
the Seller, AFL, the Issuer, the Agent, the Indenture Trustee and the Collateral
Agent (the consent of which shall not be withheld or delayed with respect to any
amendment that has been consented to by the Security

<PAGE>

Insurer and that does not adversely affect the Collateral Agent) but shall in
no circumstances require the consent of the Noteholders.

Section 7.4. SEVERABILITY. In the event that any provision of this
Security Agreement or the application thereof to any party hereto or to any
circumstance or in any jurisdiction governing this Security Agreement shall, to
any extent, be invalid or unenforceable under any applicable statute, regulation
or rule of law, then such provision shall be deemed inoperative to the extent
that it is invalid or unenforceable and the remainder of this Security
Agreement, and the application of any such invalid or unenforceable provision to
the parties, jurisdictions or circumstances other than to whom or to which it is
held invalid or unenforceable, shall not be affected thereby nor shall the same
affect the validity or enforceability of any other provision of this Security
Agreement. The parties hereto further agree that the holding by any court of
competent jurisdiction that any remedy pursued by the Collateral Agent or any of
the Secured Parties hereunder is unavailable or unenforceable shall not affect
in any way the ability of the Collateral Agent or any of the Secured Parties to
pursue any other remedy available to it or them (subject, however, to the
provisions of this Security Agreement limiting such remedies).

Section 7.5. NONPETITION COVENANT. Notwithstanding any prior
termination of this Security Agreement, each of the parties hereto agrees that
it shall not, prior to one year and one day after the Final Termination Date,
acquiesce, petition or otherwise invoke or cause the Seller or the Issuer to
invoke the process of the United States of America, any State or other political
subdivision thereof or any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government for the
purpose of commencing or sustaining a case by or against the Seller or the
Issuer under a Federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Seller or the Issuer or all or any part of its
property or assets or ordering the winding up or liquidation of the affairs of
the Seller or the Issuer. The parties agree that damages will be an inadequate
remedy for breach of this covenant and that this covenant may be specifically
enforced.

Section 7.6. NOTICES. All notices, demands, certificates, requests
and communications hereunder ("notices") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or (d)
on the date transmitted by legible telecopier transmission with a confirmation
of receipt, in all cases addressed to the recipient as follows:

(i) If to AFL:

Arcadia Financial Ltd.
7825 Washington Avenue South, Suite 500
Minneapolis, Minnesota 55439-2435
Attention: Treasurer

Telecopier No.: (612) 942-6620

<PAGE>

(ii) If to the Seller:

Arcadia Receivables Finance Corp.
7825 Washington Avenue South
Suite 900
Minneapolis, Minnesota 55439-2435
Attention: Treasurer

Telecopier No.: (612) 942-6620

(iii) If to the Security Insurer:

Financial Security Assurance Inc.
350 Park Avenue - 13th Floor
New York, New York 10022
Attention: Surveillance Department

Telecopier No.: (212) 755-5165
(212) 688-3101

(in each case in which notice or other communication to the
Security Insurer refers to an Amortization Event or a claim on
the Policy or in which failure on the part of the Security
Insurer to respond shall be deemed to constitute consent or
acceptance, then with a copy to the attention of the Senior Vice
President Surveillance)

(iv) If to the Indenture Trustee:

Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services -
Asset-Backed Administration

Telecopier No.: (612) 667-3539

(v) If to the Collateral Agent:

Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services -
Asset-Backed Administration

Telecopier No.: (612) 667-3539

<PAGE>

(vi) If to Moody's:

Moody's Investor's Service, Inc.
99 Church Street
New York, New York 10007

Telecopier No.: (212) 553-0344

(vii) If to Standard & Poor's:

Standard & Poor's Ratings Group
26 Broadway
New York, New York 10004

Telecopier No.: (212) 208-1582

(viii) If to the Issuer:

Arcadia Automobile Receivables Warehouse Trust
c/o Wilmington Trust Company,
as Owner Trustee
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration,

with copies to:

Arcadia Financial Ltd.
7825 Washington Avenue South, Suite 500
Minneapolis, Minnesota 55439-2435

Telecopier No.: (612) 942-6620

(ix) If to the Administrative Agent:

Bank of America National Trust and Savings Association
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Albert Yoshimura

Telecopier No.: (312) 923-0273

A copy of each notice given hereunder to any party hereto shall also be given to
(without duplication) the Security Insurer, the Seller, the Issuer, the
Administrative Agent, the Indenture

<PAGE>

Trustee and the Collateral Agent. Each party hereto may, by notice given in
accordance herewith to each of the other parties hereto, designate any
further or different address to which subsequent notices shall be sent.

Section 7.7. TERM OF THIS SECURITY AGREEMENT. This Security
Agreement shall continue in effect until the Final Termination Date. On such
Final Termination Date, this Security Agreement shall terminate, all obligations
of the parties hereunder shall cease and terminate and the Collateral, if any,
held hereunder and not to be used or applied in discharge of any obligations of
the Issuer, the Seller or AFL in respect of the Secured Obligations or otherwise
under this Agreement or any of the Transaction Documents, shall be released to
and in favor of the Issuer; PROVIDED, that the provisions of Sections 3.6, 3.7
and 7.5 shall survive any termination of this Security Agreement and the release
of any Collateral upon such termination.

Section 7.8. ASSIGNMENTS; THIRD-PARTY RIGHTS; REINSURANCE.

(a) This Security Agreement shall be a continuing obligation of the
parties hereto and shall (i) be binding upon the parties and their respective
successors and assigns, and (ii) inure to the benefit of and be enforceable by
each Secured Party and the Collateral Agent, and by their respective successors,
transferees and assigns. None of the Issuer, the Seller nor AFL may assign this
Security Agreement, or delegate any of its duties hereunder, without the prior
written consent of the Controlling Party.

(b) The Security Insurer shall have the right (unless an Insurer
Default shall have occurred and be continuing) to give participations in its
rights under this Security Agreement and to enter into contracts of reinsurance
with respect to the Note Policy and each such participant or reinsurer shall be
entitled to the benefit of any representation, warranty, covenant and obligation
of each party (other than the Security Insurer) hereunder as if such participant
or reinsurer was a party hereto and, subject only to such agreement regarding
such reinsurance or participation, shall have the right to enforce the
obligations of each such other party directly hereunder; PROVIDED, HOWEVER, that
no such reinsurance or participation agreement or arrangement shall relieve the
Security Insurer of its obligations hereunder, under the Transaction Documents
to which it is a party or under the Note Policy. In addition, nothing contained
herein shall restrict the Security Insurer from assigning to any Person pursuant
to any liquidity facility or credit facility any rights of the Security Insurer
under this Security Agreement or with respect to any real or personal property
or other interests pledged to the Security Insurer, or in which the Security
Insurer has a security interest, in connection with the transactions
contemplated hereby. The terms of any such assignment or participation shall
contain an express acknowledgment by such Person of the condition of this
Section and the limitations of the rights of the Security Insurer hereunder.

Section 7.9. CONSENT OF CONTROLLING PARTY. In the event that the
Controlling Party's consent is required under the terms hereof or under the
terms of any Transaction Document, it is understood and agreed that, except as
otherwise provided expressly herein, the determination whether to grant or
withhold such consent shall be made solely by the Controlling Party in its sole
and absolute discretion.

<PAGE>

Section 7.10. TRIAL BY JURY WAIVED. EACH OF THE PARTIES HERETO
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF,
UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT, ANY OF THE OTHER
TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER OR
THEREUNDER. EACH OF THE PARTIES HERETO (a) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAVIER AND (b) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS SECURITY AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A
PARTY, BY AMONG OTHER THINGS, THIS WAIVER.

Section 7.11. GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK.

Section 7.12. CONSENTS TO JURISDICTION. Each of the parties hereto
irrevocably submits to the jurisdiction of the United States District Court for
the Southern District of New York, any court in the sate of New York located in
the city and county of New York, and any appellate court from any thereof, in
any action, suit or proceeding brought against it and related to or in
connection with this Security Agreement, the other Transaction Documents or the
transactions contemplated hereunder or thereunder or for recognition or
enforcement of any judgment and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such suit or action or
proceeding may be heard or determined in such New York State court or, to the
extent permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. To the extent permitted by applicable law,
each of the parties hereby waives and agrees not to assert by way of motion, as
a defense or otherwise in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Security Agreement or any of
the other Transaction Documents or the subject matter hereof or thereof may not
be litigated in or by such courts. Each of AFL, the Seller and the Issuer
hereby irrevocably appoints and designates CT Corporation System, 1633 Broadway,
New York, New York 10019 as its true and lawful attorney and duly authorized
agent for acceptance of service of legal process. Each of AFL, the Seller and
the Issuer agrees that service of such process upon such Person shall constitute
personal service of such process upon it. Nothing contained in this Security
Agreement shall limit or affect the rights of any party herto to serve process
in any other manner permitted by law or to start legal proceedings relating to
any of the Transaction Documents against AFL, the Seller, the Issuer or their
respective property in the courts of any jurisdiction.

Section 7.13. LIMITATION OF LIABILITY.

(a) It is expressly understood and agreed by the parties hereto
that Norwest Bank Minnesota, National Association is executing this Security
Agreement not in its individual capacity but solely in its capacity as indenture
trustee pursuant to the Indenture and as Collateral Agent hereunder.

<PAGE>

(b) It is expressly understood and agreed to by the parties
hereto that Wilmington Trust Company is executing this Security Agreement not in
its individual capacity but solely in its capacity as Owner Trustee pursuant to
the Trust Agreement.

Section 7.14. DETERMINATION OF ADVERSE EFFECT. Any determination of
an adverse effect on the interest of the Secured Parties or the Noteholders
shall be made without consideration of the availability of funds under the Note
Policy.

Section 7.15. COUNTERPARTS. This Security Agreement may be executed
in two or more counterparts by the parties hereto, and each such counterpart
shall be considered an original and all such counterparts shall constitute one
and the same instrument.

Section 7.16. HEADINGS. The headings of sections and paragraphs and
the Table of Contents contained in this Security Agreement are provided for
convenience only. They form no part of this Security Agreement and shall not
affect its construction or interpretation.

Section 7.17. LIMITED RECOURSE. Notwithstanding anything to the
contrary contained herein, the obligations of the Issuer hereunder shall not be
recourse to the Issuer (or any person or organization acting on behalf of the
Issuer, the Owner Trustee or any affiliate, employee, incorporator, stockholder,
officer or director of the Owner Trustee), other than to the Receivables and the
other Collateral and the proceeds thereof as provided in this Security
Agreement, the Sale and Servicing Agreement. Each of the parties hereto hereby
agree that to the extent such funds are insufficient or assets are unavailable
to pay any amounts owing to it from the other party pursuant to this Security
Agreement, it shall not constitute a claim against the other party.

Section 7.18. RESPECTIVE RIGHTS OF THE ISSUER AND THE SECURED PARTIES
IN THE COLLATERAL. The Issuer hereby acknowledges and agrees that its interest
in the Collateral under the Sale and Servicing Agreement is subject and
subordinate in all respects to its pledge of the Collateral to the Secured
Parties under this Security Agreement and that the Collateral Agent holds the
Collateral first for the Secured Parties hereunder and second on behalf of the
Issuer in respect of its interest in the Collateral under the Sale and Servicing
Agreement.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Security Agreement as of the date set forth on the first page hereof.

ARCADIA FINANCIAL LTD.

By:
------------------------------------
Name:
Title:

ARCADIA RECEIVABLES FINANCE CORP.

By:
------------------------------------
Name:
Title:

ARCADIA RECEIVABLES CONDUIT CORP.

By:
------------------------------------
Name:
Title:

ARCADIA AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST

By: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee,

By:
------------------------------------
Name:
Title:

FINANCIAL SECURITY ASSURANCE INC.

By:
------------------------------------
Name:
Title:

[Signature Page to Amended and Restated Security Agreement]

<PAGE>

NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee

By:
------------------------------------
Name:
Title:

NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Collateral Agent

By:
------------------------------------
Name:
Title:

BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION

By:
------------------------------------
Name:
Title:

[Signature Page to Amended and Restated Security Agreement]

<PAGE>

EXECUTION COPY

ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST

U.S. $400,000,000 FLOATING RATE VARIABLE FUNDING

FSA INSURED

AUTOMOBILE RECEIVABLES-BACKED NOTES

AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT

DATED AS OF JULY 21, 1998

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. The Notes............................................................ 2

SECTION 2. Effective Date, Exchange and Purchase; Funding of Note Increases..... 3

SECTION 3. Delivery and Payment................................................. 3

SECTION 4. Issuer's Representations, Warranties and Covenants................... 4

SECTION 5. Purchaser Representations............................................ 6

SECTION 6. Conditions of Purchaser's Obligations................................ 8

SECTION 7. Expenses............................................................. 9

SECTION 8. Definitions.......................................................... 10

SECTION 9. Successors and Assigns............................................... 11

SECTION 10. Indemnification...................................................... 12

SECTION 11. Increased Costs...................................................... 13

SECTION 12. Notices.............................................................. 14

SECTION 13. Counterparts......................................................... 14

SECTION 14. Entire Agreement..................................................... 15

SECTION 15. Governing Law........................................................ 15

SECTION 16. Severability of Provisions........................................... 15

SECTION 17. Survival............................................................. 15

SECTION 18. Limited Recourse..................................................... 15

SECTION 19. No Proceedings....................................................... 15

SECTION 20. Trial By Jury Waived................................................. 15

SECTION 21. Matters Relating to Agents and Administrative Agent.................. 16

SECTION 22. Limitation of Liability.............................................. 17

</TABLE>

<PAGE>

ARCADIA FINANCIAL, LTD.
7825 Washington Avenue South
Minneapolis, Minnesota 55439

ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST
7825 Washington Avenue South
Minneapolis, Minnesota 55439

__________________________

AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT

__________________________

Dated as of July 21, 1998

Receivables Capital Corporation
c/o Bank of America National Trust
and Savings Association
as RCC Agent
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697

Bank of America National Trust
and Savings Association
as RCC Agent
and as Administrative Agent
Asset Securitization Group
231 South LaSalle Street
Chicago, Illinois 60697

Delaware Funding Corporation
c/o J. H. Holdings Corporation
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2464

Morgan Guaranty Trust Company of
New York, as DFC Agent
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Attention: Asset Finance Group

<PAGE>

Ladies and Gentlemen:

The undersigned, Arcadia Automobile Receivables Warehouse Trust, a
Delaware business trust (the "ISSUER"), and Arcadia Financial Ltd., a
Minnesota corporation ("AFL"), propose to enter into with you this Amended
and Restated Note Purchase Agreement which supersedes in its entirety the
Note Purchase Agreement dated as of December 3, 1996, as previously amended,
among AFL, Arcadia Receivables Conduit Corp. (the "ORIGINAL ISSUER"),
Receivables Capital Corporation and Bank of America National Trust and
Savings Association, and to that end, hereby agree with you as follows:

SECTION 1. THE NOTES. On the Effective Date, the Issuer proposes to
deliver to (i) Receivables Capital Corporation ("RCC") in exchange for the
Floating Rate Variable Funding Automobile Receivables-Backed Note (the
"CURRENTLY OUTSTANDING NOTE") held by RCC, a Floating Rate Variable Funding
Automobile Receivables-Backed Note (the "RCC NOTE") in the maximum authorized
principal amount outstanding at any time of $ 225,000,000 (the "RCC PURCHASE
LIMIT") and (ii) Delaware Funding Corporation ("DFC") (each of RCC and DFC, a
"PURCHASER" and collectively, the "PURCHASERS"), a Floating Rate Variable
Funding Automobile Receivables-Backed Note (the "DFC NOTE"; each of the RCC
Note and the DFC Note, a "NOTE"; and collectively, the RCC Note and the DFC
Note, the "NOTES") in the maximum authorized principal amount outstanding at
any time of $175,000,000 (the "DFC PURCHASE LIMIT"). Subject to the terms
and conditions hereof, the Purchasers agree to fund increases in the
outstanding principal amount of their respective Notes (each, a "NOTE
INCREASE", and the principal amount of any such Note Increase, the "NOTE
INCREASE AMOUNT"), from time to time during the Purchase Period, in an
aggregate maximum authorized amount to be outstanding at any time (the
"MAXIMUM AUTHORIZED AMOUNT") of U.S. $400,000,000.

The Currently Outstanding Note was issued prior to the Effective Date,
and the Notes shall be issued by the Issuer on the Effective Date, pursuant
to the Amended and Restated Indenture, dated as of July 21, 1998 (as from
time to time amended, supplemented or modified, the "INDENTURE"), between the
Issuer and Norwest Bank Minnesota, National Association, as trustee (in such
capacity, the "TRUSTEE") and as Collateral Agent (as defined in the
Indenture).

The Indenture provides for Note Increases from time to time upon the
terms and conditions set forth therein. On each day on which Note Increases
are to occur and be funded hereunder, each Purchaser's Note will have a Note
Increase Amount equal to such Purchaser's Purchase Percentage of the total
Note Increase Amount effected by the Issuer on such day. Each Purchaser's
Purchase Percentage of each Note Increase Amount shall be recorded on the
grid attached to such Purchaser's Note. Each Note issued to a Purchaser: (i)
bears interest (subject to conversion to a fixed rate at the option of the
related Agent upon the occurrence of an Amortization Event) at a fluctuating
rate per annum equal to the Note Interest Rate (as defined in the Indenture)
for such Note; (ii) can be funded by Note Increases in a minimum amount of
$7,000,000 and any higher amount on any Purchase Date (as defined below), and
(iii) is subject to prepayment at the option of the Issuer as provided in the
Indenture. Each Note shall be issued in the form of a fully registered
security in certificated form (as contemplated by Article VIII of the New
York Uniform Commercial Code).

2
<PAGE>

The Notes are secured by a revolving pool of automobile receivables
originated by AFL and sold by AFL to its wholly-owned subsidiary, Arcadia
Receivables Finance Corp. ("ARFC"), and by ARFC to the Issuer, and by
collections received in respect thereof. Payment of principal and interest
on the entire Maximum Authorized Amount of Notes is insured by Financial
Security Assurance Inc. ("FSA") under a financial guaranty insurance policy
(the "POLICY") dated December 3, 1996, Endorsement No. 1 to the Policy, dated
December 3, 1996, Endorsement No. 2 to the Policy, dated August 4, 1997,
Endorsement No. 3 to the Policy, dated November 14, 1997, and Endorsement No.
4 to the Policy, dated July 21, 1998.

The Issuer, the Original Issuer, the RCC Agent, the Administrative Agent,
the DFC Agent, AFL, ARFC and the Trustee have entered into an Amended and
Restated Sale and Servicing Agreement, dated as of July 21, 1998 (as from
time to time amended, supplemented or modified, the "SALE AND SERVICING
AGREEMENT"), which provides for the sale of Receivables from time to time by
ARFC to the Trust, the servicing of the Receivables and certain other matters.

SECTION 2. EFFECTIVE DATE, EXCHANGE AND PURCHASE; FUNDING OF NOTE
INCREASES. On the Effective Date, RCC shall receive its RCC Note in exchange
for the Currently Outstanding Note and DFC shall receive its DFC Note.
During the Purchase Period and subject to the terms and conditions of, and in
reliance upon the representations, warranties and covenants set forth in,
this Agreement, the Purchasers agree to fund, from time to time on each date
as specified in Section 3 hereof (each, a "PURCHASE DATE") the Note Increase
on such Purchase Date in an amount of the Note Increase Amount up to an
aggregate principal amount at any time outstanding not to exceed the Maximum
Authorized Amount, at a purchase price equal to 100% of such Note Increase
Amount (the "PURCHASE PRICE"). Each Purchaser shall fund its Purchase
Percentage of a Note Increase Amount on any day and shall pay its Purchase
Percentage of the Purchase Price. No Purchaser shall be required to fund a
Note Increase Amount in excess of its Purchase Limit.

SECTION 3. DELIVERY AND PAYMENT. The Issuer will provide each Agent with
written notice of each Purchase Date and of the Note Increase Amount to be
funded on such Purchase Date no later than 12:00 noon (Minneapolis, Minnesota
time) one Business Day prior to the proposed Purchase Date; PROVIDED, that if
the Purchase Price for the Note Increase Amount on a Purchase Date is less
than or equal to $15,000,000, then such notice may be made no later than
11:00 a.m., New York City time on such Purchase Date; PROVIDED FURTHER, that
if such notice is given on a Purchase Date, the Purchasers will not be
obligated to fund the Note Increase Amount on such Purchase Date unless the
Purchasers are able to issue and sell their respective Commercial Paper Notes
in an amount sufficient to fund such Note Increase Amount, and AFL and the
Issuer agree to hold harmless the Purchasers for failing to effect a funding
on such Purchase Date. Each Note Increase shall be recorded on the grid
attached to each Purchaser's Note by the applicable Agent on each Purchase
Date. The notation of the Note Increase shall be made against payment by
wire transfer of immediately available funds to the account of Norwest Bank
Minnesota, National Association as Trustee for Arcadia Receivables Conduit
Warehouse, Clearing Account #1038377, Norwest Bank Minnesota, National
Association, ABA # 091000019, for further credit to Arcadia Automobile
Receivables Warehouse Trust A-C # 13284501 in the amount of the Purchase
Price. The Administrative Agent agrees to notify the RCC Agent and the DFC
Agent of the receipt of a Purchase Date notice by 2:00 p.m. (New York

3
<PAGE>

City time) on the day received by the Administrative Agent. Each Agent
agrees to collect the Purchase Price due or any Purchase Date from its
related Purchaser.

SECTION 4. ISSUER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The
Issuer represents and warrants to, and agrees with, each Purchaser, the
Administrative Agent, the RCC Agent and the DFC Agent as of the date hereof
and as of each Purchase Date, as follows:

(a) The Issuer is a business trust duly organized, validly existing and
in good standing under the laws of the State of Delaware.

(b) The Issuer has all requisite power and authority necessary to enter
into this Agreement and the Basic Agreements, to offer, sell and deliver the
Notes and to perform its obligations hereunder and thereunder; the Issuer has
taken all corporate action required to authorize the execution and delivery
of this Agreement, the Basic Agreements and the Notes, the offer, sale and
delivery of the Notes and the performance of all obligations to be performed
by it hereunder and under the Basic Agreements and the Notes; this Agreement
and the Basic Agreements to which the Issuer is a party have been duly
authorized, executed and delivered by the Issuer and constitute, and each
Note when purchased by a Purchaser will have been duly authorized, executed
and delivered and will constitute, the legal, valid and binding obligation of
the Issuer, enforceable against the Issuer in accordance with its terms,
subject to (i) limitations on enforceability imposed by bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
relating to or affecting the enforcement of creditors' rights generally, and
(ii) general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.

(c) Neither the authorization, execution, sale, delivery or performance
of the Notes or the authorization, execution, delivery or performance of this
Agreement or the Basic Agreements to which the Issuer is a party, nor the
consummation of any of the transactions contemplated herein or therein, nor
the execution, delivery or performance of the terms of this Agreement, the
Notes or any Basic Agreement, will result in the breach of any term or
provision of the Certificate of Trust of the Issuer, or conflict with, result
in a breach or violation of, or the acceleration of, indebtedness under, or
constitute a default under, the terms of any indenture or other agreement,
instrument or arrangement to which the Issuer is a party or by which it is
bound, or any statute or regulation applicable to the Issuer or any order
applicable to it of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it.

(d) With the exception of applicable blue-sky or state securities
regulations (as to which no representation is made), no consent, approval,
authorization of, registration or filing with, or notice to, any governmental
or regulatory authority, agency, department, commission, board, bureau, body
or instrumentality was or is required for the execution, delivery or
performance of or compliance by the Issuer with this Agreement, the Notes or
any Basic Agreement or the offer, sale, delivery or performance of the Notes,
or the consummation by the Issuer of any other transaction contemplated by
this Agreement, the Notes or any Basic Agreement, or such consent, approval
or authorization has been obtained, or such registration, filing or notice
has been made (and, in either such case, copies thereof delivered to you and
your counsel). No tax, assessment or other governmental charge is or will
become payable as a result

4
<PAGE>

of (i) the execution, delivery or performance of this Agreement or any Basic
Agreement, or (ii) the execution, sale, delivery or performance of any Note,
or (iii) except for taxes imposed on the net income of a Purchaser with
respect to interest on the Notes, the receipt or non-receipt of any payment
of principal or interest on any Note (or in respect thereof under the Policy).

(e) There is no action, suit or proceeding pending, or investigation
of, the Issuer, pending or, to the best of the Issuer's knowledge after due
inquiry, threatened, against the Issuer before any court, administrative
agency or other tribunal which, (i) either individually or in the aggregate,
could, if adversely determined, result in any material adverse change in the
business, operations, financial condition, prospects, properties, or assets
of the Issuer or in any impairment of the right or ability of the Issuer to
carry on its business substantially as now conducted, (ii) asserts the
invalidity of this Agreement, any Note or any of the Basic Agreements, (iii)
seeks to prevent the issuance, sale or purchase of the Notes or the
consummation of any of the transactions contemplated by this Agreement or any
of the Basic Agreements or (iv) could materially and adversely affect the
performance by the Issuer of its obligations under, or the validity or
enforceability of, this Agreement, any of the Notes or any of the Basic
Agreements.

(f) The Issuer is not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in,
and is not otherwise in default under, (i) any law or statute applicable to
it, or (ii) any judgment, decree, writ, injunction, order, award or other
action of any court or governmental authority or arbitrator or any order,
rule or regulation, of any federal, state, county, municipal or other
governmental or public authority or agency having or asserting jurisdiction
over it or any of its properties, or (iii) (x) any indebtedness or any
instrument or agreement under or pursuant to which any such indebtedness has
been, or could be, issued or incurred, or (y) any other instrument or
agreement to which it is a party or by which it is bound or any of its
properties is affected including, without limitation, the Basic Agreements
which, (A) either individually or in the aggregate, could result in any
material adverse change in the business, operations, financial condition,
prospects, properties, or assets of the Issuer or in any impairment of the
right or ability of the Issuer to carry on its business substantially as now
conducted or (B) could materially and adversely affect the performance by the
Issuer of its obligations under, or the validity or enforceability of, this
Agreement, any of the Notes or any of the Basic Agreements.

(g) Neither the Issuer nor, to the best of the Issuer's knowledge,
anyone acting on behalf of the Issuer, has offered, transferred, pledged,
sold or otherwise disposed of any Note or any interest in any Note to, or
solicited any offer to buy or accept a transfer, pledge or other disposition
of any Note or any interest in any Note from, or otherwise approached or
negotiated with respect to any Note or any interest in any Note with, any
person in any manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action, which would
constitute a public distribution of the Notes under the Securities Act of
1933, as amended (the "1933 ACT"), or which would render the disposition of
any Note a violation of Section 5 of the 1933 Act or any state securities
laws, or require registration or qualification pursuant thereto or require
registration of the Issuer under the Investment Company Act of 1940, as
amended, nor will the Issuer act, nor has the Issuer authorized or will it
authorize any person to act, in such manner with respect to any Note.

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(h) (i) The offer and sale of the Notes from the Issuer to the
Purchasers in the manner contemplated herein are transactions exempt from the
registration requirements of the 1933 Act and (ii) the Indenture is not
required to be qualified under the Trust Indenture Act of 1939, as amended.
The representation by the Issuer with respect to the sale from the Issuer to
the Purchasers in clause (i) of the preceding sentence is made upon and
subject to the accuracy of the representations made by you in Section 5(a)
hereof.

(i) The Issuer is not required, and will not be required as a result of
the offer and sale of the Notes under the circumstances contemplated by this
Agreement or the other transactions contemplated by this Agreement and the
Basic Agreements, to register as an "investment company" under the Investment
Company Act of 1940, as amended (the "1940 ACT"), and the Issuer is not
"controlled" by an "investment company" as defined in the 1940 Act.

(j) Each Note purchased hereunder by a Purchaser will have been duly
authorized, executed and delivered by the Issuer, will be entitled to the
benefit of the security provided for in the Indenture, will bear interest and
mature and be subject to prepayment all as specified in Section 1 hereof and
will, as to both principal and interest, be fully and unconditionally insured
under the Policy.

(k) The Issuer further agrees that it will not permit any amendment,
modification or waiver, which could in any way be materially adverse to the
Noteholders, to any of the provisions of any of the Basic Agreements without
the prior written consent of the Administrative Agent (acting at the
direction of the RCC Agent and the DFC Agent) , it being agreed that a waiver
of any Event of Default under the Sale and Servicing Agreement or of any
Amortization Event materially adversely affects the Noteholders.

(l) The Issuer will treat the Notes as debt of the Issuer for federal
income and state and local income and franchise tax purposes.

SECTION 5. PURCHASER REPRESENTATIONS.

This Agreement is made with each of you in reliance upon your
representation to the Issuer, which by your acceptance hereof you confirm,
that you understand that the Notes have not been and will not be registered
under the 1933 Act in reliance upon the exemption provided in Section 4(2) of
the 1933 Act or registered or qualified under the securities or "Blue Sky"
laws of any jurisdiction and may not be resold or otherwise pledged or
transferred except in a transaction which is exempt from the registration
requirements of the 1933 Act (and, in that regard each Purchaser hereby
represents that any Notes purchased by it (or by the RCC Agent or DFC Agent,
as the case may be, on behalf of its related Purchaser) hereunder will be
purchased for its own account and not with a view to distribution thereof);
PROVIDED, that, (i) the disposition of your property shall at all times be
within your control; and (ii) it is recognized and agreed that you may
transfer your rights and interests under the Notes and herein to one or more
liquidity purchasers ("LIQUIDITY PURCHASERS") under, in the case of RCC, an
Amended and Restated Liquidity Asset Purchase Agreement dated as of July 21,
1998 (the "RCC ASSET PURCHASE AGREEMENT") among the Liquidity Purchasers from
time to time party thereto, RCC and Bank of

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America National Trust and Savings Association, as Administrator and
Liquidity Agent and, in the case of DFC, the Asset Purchase Agreement dated
as of July 21, 1998, by and among DFC, the Liquidity Purchasers from time to
time party thereto, and Morgan Guaranty Trust Company of New York, as DFC
Agent and agent for the Liquidity Purchasers (the "DFC ASSET PURCHASE
AGREEMENT", with the RCC Asset Purchase Agreement, the "LIQUIDITY
AGREEMENTS"). Each Purchaser represents that the Liquidity Purchasers under
its related Liquidity Agreement will make the foregoing representations and
warranties with respect to any purchase of the Notes pursuant to such
Liquidity Agreement.

Each Purchaser hereby represents to the Issuer that:

(a) The Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its formation.

(b) The Purchaser has all requisite power (corporate and other) and
authority necessary to enter into this Agreement and to perform its
obligations hereunder; the Purchaser has taken all corporate action required
to authorize the execution and delivery of this Agreement and the performance
of all obligations to be performed by it hereunder; this Agreement has been
duly authorized, executed and delivered by the Purchaser, and constitutes the
legal, valid and binding agreement of the Purchaser, enforceable against the
Purchaser in accordance with its terms, subject to (i) limitations imposed by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws
relating to or affecting the enforcement of creditors' rights generally, and
(ii) general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.

(c) Neither the purchase of the Notes nor the consummation of any of
the transactions contemplated herein by the Purchaser, nor the execution,
delivery or performance of the terms of this Agreement by the Purchaser, will
result in the breach of any term or provision of the certificate of
incorporation or by-laws of the Purchaser, or conflict with, result in a
breach or violation of or the acceleration of indebtedness under or
constitute a default under, the terms of any indenture or other agreement or
instrument to which the Purchaser is a party or by which it is bound, or any
statute or regulation applicable to the Purchaser or any order applicable to
it of any court, regulatory body, administrative agency or governmental body
having jurisdiction over it which materially and adversely affects, or may in
the future materially and adversely affect, (i) the ability of the Purchaser
to perform its obligations hereunder or (ii) the business, operations,
financial condition, prospects, properties or assets of the Purchaser.

(d) No consent, approval, authorization of, registration or filing
with, or notice to, any governmental or regulatory authority, agency,
department, commission, board, bureau, body or instrumentality was or is
required for the execution, delivery or performance of or compliance by the
Purchaser with this Agreement or the purchase of the Notes by the Purchaser,
or the consummation by the Purchaser of any other transaction contemplated
under this Agreement or such consent, approval or authorization has been
obtained or such registration, filing or notice has been made.

(e) There is no action, suit or proceeding against, or investigation
of, the Purchaser, pending or, to the best of the Purchaser's knowledge,
threatened, before any court,

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administrative agency or other tribunal which, either individually or in the
aggregate, (i) may result in any material adverse change in the business,
operations, financial condition, prospects, properties, or assets of
Purchaser or in any impairment of the right or ability of the Purchaser to
carry on its business substantially as now conducted, or (ii) asserts the
invalidity of this Agreement or (iii) seeks to prevent the purchase of the
Notes or the consummation of any of the transactions contemplated by this
Agreement or (iv) could materially and adversely affect the performance by
the Purchaser of its obligations under, or the validity or enforceability of,
this Agreement.

(f) The Purchaser is not required, and will not be required as a result
of the purchase of the Notes under the circumstances contemplated by this
Agreement, to register as an "investment company" under the 1940 Act.

(g) On the date hereof, the Purchaser's commercial paper notes are
rated A-1+ by Standard & Poor's and P-1 by Moody's.

SECTION 6. CONDITIONS OF PURCHASER'S OBLIGATIONS.

(a) EACH FUNDING OF A NOTE INCREASE. The obligation of each of you to
fund your Purchase Percentage of a Note Increase on any Purchase Date shall
be subject to the fact that: (u) no Default or Event of Default shall have
occurred; (v) the Insurer Notice Date shall not have occurred; (w) the Note
Increase to be funded shall be in conformity with the description thereof
contained in Section 1 hereof; (x) the Purchase Period shall not have
expired; (y) the representations and warranties that are made on the part of
the Issuer and contained in this Agreement shall be true and correct, on and
as of such Purchase Date, as if made on and as of such Purchase Date; and (z)
the Issuer shall be in continuing compliance, in all material respects, with
all of its obligations hereunder and under the Basic Agreements and that the
Issuer and AFL are in continuing compliance in all material respects with
their obligations under the Fee Letters. The obligation of each of you to
fund your Purchase Percentage of a Note Increase shall also be subject to the
accuracy in all material respects, on and as of the date of such funding, of
the representations and warranties contained herein and of the statements
made by the Issuer in any certificates furnished pursuant to the provisions
hereof. Each funding of a Note Increase hereunder shall constitute a
representation and warranty by the Issuer that all of the above conditions
are satisfied on and as of the respective Purchase Date.

(b) EFFECTIVE DATE. The obligation of RCC to accept the exchange of
the RCC Note for the Currently-Outstanding Note and of DFC to purchase and
pay for the DFC Note on the Effective Date shall be subject to the following
additional conditions:

(i) Each Agent shall have received and had an opportunity to review
the Basic Agreements (and, the respective amendments, appendices and
exhibits thereto) and the form of Notes, and each of such documents shall
be in form and substance satisfactory to the RCC Agent and the DFC Agent.

(ii) Fully executed Endorsement No. 4 to the Policy shall have been
delivered to the Administrative Agent and timely payment, as and when due,
of all principal of and interest on the Notes shall be fully and
unconditionally insured under the Policy.

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(iii) The Issuer shall have complied in all material respects with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied by it on or prior to the Effective Date under this
Agreement.

(iv) Each of the Basic Agreements shall have been duly authorized,
executed and delivered by each of the parties thereto, shall be in full
force and effect and shall constitute a legal, valid and binding agreement
of each of the parties thereto, enforceable against each of them in
accordance with its terms, subject, with respect to enforceability, to
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforceability of creditors' rights generally and to general principles of
equity regardless of whether enforcement is sought in a proceeding in
equity or at law, and no event shall have occurred which constitutes or,
with the passage of time or with notice or both, would constitute a
default thereunder, and each Agent shall have received two fully executed
copies of each of the Basic Agreements.

(v) The Administrative Agent shall have received opinions of counsel
(or reliance letters with respect to certain opinions previously rendered)
to the Issuer, AFL, ARFC, FSA, the Owner Trustee and the Indenture
Trustee, each dated the Effective Date, and such opinions shall be in
form, scope and substance satisfactory to the RCC Agent and the DFC Agent.

(vi) All proceedings in connection with the transactions contemplated
by this Agreement and the Basic Agreements and all documents incident
hereto and thereto shall be satisfactory in form and substance to the RCC
Agent and the DFC Agent, and each Agent shall have received such
information, certificates and documents as either Agent may request.

(vii) The Administrative Agent shall have received a certificate from
AFL dated the date hereof confirming that (y) its representations and
warranties contained in the Basic Agreements are true and correct in all
material respects on and as of the Effective Date and (z) as of the
Effective Date, no Event of Default or Servicer Termination Event has
occurred under the Sale and Servicing Agreement and to the best knowledge
of AFL, there is no set of circumstances existing on the date hereof that
with the passage of time would constitute such an Event of Default or
Servicer Termination Event.

(viii) The Administrative Agent shall have received from each of the
Issuer, AFL, ARFC, FSA, the Owner Trustee and the Indenture Trustee copies
of the certificate of trust, charter, by-laws, board resolutions,
signature and incumbency and other related trust and/or corporate matters,
as applicable, of those respective Persons, in form and substance
acceptable to the RCC Agent and the DFC Agent, together with copies of the
Officers' Certificates with respect thereto delivered on the Effective
Date.

(ix) The Indenture shall be in form and substance satisfactory to
each Agent, and each Agent shall have received two true and complete
copies thereof.

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<PAGE>

SECTION 7. EXPENSES. The Issuer and AFL shall, jointly and severally, be
obligated to pay on demand to (i) each Purchaser, the RCC Agent and the DFC
Agent all reasonable costs and expenses in connection with the preparation,
execution, and delivery of the Basic Agreements and any other documents to be
delivered in connection therewith, including, without limitation, the
reasonable fees and expenses of counsel for each Purchaser and each Agent,
and (ii) each Purchaser and each Agent all reasonable costs and expenses,
including, without limitation, the reasonable fees and expenses of counsel
for each Purchaser and each Agent, in connection with the enforcement of any
Basic Agreement or any document delivered in connection therewith.

SECTION 8. DEFINITIONS. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:

(a) The term "AGENT" means the RCC Agent or the DFC Agent, as the context
requires;

(b) the term "ADMINISTRATIVE AGENT" means Bank of America National
Trust and Savings Association and its successors and assigns, as
administrative agent for the Purchasers and the Agents;

(c) the term "BASIC AGREEMENTS" shall mean this Agreement, the Trust
Agreement, the Administration Agreement, the Indenture, the Sale and
Servicing Agreement, the Purchase Agreement, the Security Agreement, the
Lockbox Agreement, the Custodian Agreement, the Policy, the Spread Account
Agreement, the Fee Letters, the Assignment Agreement and the Insurance
Agreement;

(d) the term "CP RATE" means, with respect to either Purchaser, for any
period and with respect to any portion of the principal amount of the Notes
as to which such Purchaser's funding of the purchase or carrying thereof is
being provided by such Purchaser's Commercial Paper Notes, the rate of
interest per annum determined in arrears in good faith by the applicable
Agent to reflect such Purchaser's cost of funding the purchase or carrying of
such portion of the Notes, which shall be equal to the weighted daily average
interest rate payable in respect of such Commercial Paper Notes during such
period (determined in the case of discount commercial paper notes by
converting the discount to an interest bearing equivalent rate per annum),
plus applicable placement fees and commissions, but excluding any other fees
related to such funding;

(e) the term "DFC AGENT" means Morgan Guaranty Trust Company of New
York, as agent for DFC and the Liquidity Purchasers under DFC's Liquidity
Agreement;

(f) the term "EFFECTIVE DATE" means the date on which the conditions
set forth in Section 6(b) hereof are satisfied;

(g) the term "FEE LETTERS" shall mean, collectively, the Fee Letter
dated as of July 21, 1998 among AFL, RCC and the RCC Agent, and the Fee
Letter dated as of July 21, 1998, among the Issuer, AFL and the DFC Agent;

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<PAGE>

(h) the term "PROGRAM SUPPORT DOCUMENT" shall mean, for each Purchaser,
the Liquidity Agreement and any other agreement entered into by any other
Program Support Provider providing for the issuance of one or more letters of
credit for the account of such Purchaser, the issuance of one or more surety
bonds for which such Purchaser is obligated to reimburse the applicable
Program Support Provider of the related Commercial Paper Notes (or any
interest therein) or the making of loans or other extensions of credit to the
Purchaser in connection with such Purchaser's securitization program,
together with any letter of credit, surety bond or other instrument issued
thereunder (but excluding any discretionary advance facility provided by such
Purchaser's Agent);

(i) the term "PURCHASE PERCENTAGE" shall mean 56.25% for RCC and 43.75%
for DFC, as either percentage may be revised from time to time with the prior
written consent of the Issuer, the RCC Agent and the DFC Agent;

(j) the term "PURCHASE PERIOD" shall mean the period from the date of
execution hereof to the earliest to occur of (i) July 20, 1999, (ii) the
commencement of the Amortization Period, (iii) the commitment of related
Liquidity Purchasers to purchase interests in the respective Notes from a
Purchaser under the related Liquidity Agreement shall expire and (iv) the
date specified by the Issuer with five Business Day's prior notice to the
Administrative Agent, each Agent, the Security Insurer, the Indenture Trustee
and the Rating Agencies;

(k) the term "RCC AGENT" means Bank of America National Trust and Savings
Association, as agent for RCC and the Liquidity Purchasers under RCC's Liquidity
Agreement;

(l) all capitalized terms used herein and not otherwise defined shall
have the meanings assigned thereto in the Sale and Servicing Agreement
(including by way of reference to other documents);

(m) terms defined in this Agreement include the plural as well as the
singular, and the use of any gender herein shall be deemed to include each
other gender;

(n) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provisions; and

(o) the term "include" or "including" shall mean without limitation by
reason of enumeration.

SECTION 9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns; PROVIDED, that the Issuer may not assign any of its
rights or obligations hereunder without the prior written consent of the
Purchasers. No provision of this Agreement shall in any way limit a
Purchaser's ability to assign all or any portion of its rights and
obligations hereunder to any related Liquidity Purchaser, to any related
Program Support Provider, or a related collateral agent under such
Purchaser's securitization program.

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SECTION 10. INDEMNIFICATION. (a) Without limiting any other rights that
the Administrative Agent, a Purchaser, an Agent or any of their respective
Affiliates, employees, agents, successors, transfers or assigns (each, an
"INDEMNIFIED PARTY") may have hereunder or under applicable law, the Issuer
hereby agrees to indemnify each Indemnified Party from and against any and
all claims, damages, expenses, losses and liabilities (including fees and
expenses of counsel) (all of the foregoing being collectively referred to as
"INDEMNIFIED AMOUNTS") arising out of or resulting from this Agreement and
the Basic Agreements (whether directly or indirectly) or the ownership of the
Notes, or any interest therein, or in respect of any Receivable, excluding,
however, (i) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of such Indemnified Party, (ii)
any losses arising out of or relating to any non-payment of any Receivable,
or (iii) any overall net income tax es or franchise taxes imposed on such
Indemnified Party by the jurisdiction under the laws of which such
Indemnified Party is organized or any political subdivision thereof.

(b) Without limiting any other rights that the Indemnified Parties may
have hereunder or under applicable law, AFL hereby agrees to indemnify each
Ind emnified Party from and against any and all Indemnified Amounts for or
on account of or arising from or in connection with any breach of any rep
resentation, warranty or covenant of AFL in this Note Purchase Agreement or
any Basic Agreement or in any certificate or other written material
delivered pur suant hereto or thereto, excluding, however, (i) Indemnified
Amounts to the extent resulting from gross negligence or willful misconduct
on the part of such Indemnified Party and (ii) any overall net income taxes
or franchise taxes imposed on such Indemnified Party by the jurisdiction
under the laws of which such Indemnified Party is organized or any political
subdivision thereof.

(c) In order for an Indemnified Party to be entitled to any
indemnification provided for under this Agreement in respect of, arising out
of, or involving a claim made by any Person against the Indemnified Party (a
"THIRD PARTY CLAIM"), such Indemnified Party must notify the Issuer or AFL,
as applicable, in writing of the Third Party Claim within five Business Days
of receipt of a summons, complaint or other notice of the commencement of
litigation and within ten Business Days after receipt by such Indemnified
Party of any other written notice of the Third Party Claim. Thereafter, the
Indemnified Party shall deliver to the Issuer or AFL, as applicable, within a
reasonable time after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified
Party relating to the Third Party Claim.

(d) If a Third Party Claim is made against an Indemnified Party, (x)
the Issuer or AFL, as applicable, will be entitled to participate in the
defense thereof and, (y) if either so chooses, to assume the defense thereof
with counsel selected by the Issuer or AFL, as applicable, provided that in
connection with such assumption (i) such counsel is not reasonably objected
to by the Indemnified Party and (ii) the Issuer or AFL, as applicable, first
admits in writing its liability to indemnify the Indemnified Party with
respect to all elements of such claim in full. Should the Issuer or AFL, as
applicable, so elect to assume the defense of a Third Party Claim, the Issuer
or AFL, as applicable, will not be liable to the Indemnified Party for any
legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof. If the Issuer or AFL, as applicable, elects to
assume the defense of a Third Party Claim, the

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<PAGE>

Indemnified Party will (i) cooperate in all reasonable respects with the
Issuer or AFL in connection with such defense and (ii) not admit any
liability with respect to, or settle, compromise or discharge, such Third
Party Claim without the Issuer's or AFL's prior written consent, as the case
may be. If the Issuer or AFL, as applicable, shall assume the defense of any
Third Party Claim, the Indemnified Party shall be entitled to participate in
(but not control) such defense with its own counsel at its own expense. If
the Issuer or AFL, as applicable, does not assume the defense of any such
Third Party Claim, the Indemnified Party may defend the same in such manner
as it may deem appropriate, including settling such claim or litigation after
giving notice to the Issuer or AFL, as applicable, of such terms and the
Issuer or AFL, as applicable, will promptly reimburse the Indemnified Party
upon written request. Anything contained in this Note Purchase Agreement to
the contrary notwithstanding, the Issuer or AFL, as applicable, shall not be
entitled to assume the defense of any part of a Third Party Claim that seeks
an order, injunction or other equitable relief or relief for other than money
damages against the Indemnified Party.

SECTION 11. INCREASED COSTS. (a) If the Purchaser, any Liquidity
Purchaser, any other Program Support Provider or any of their respective
Affiliates (each an "AFFECTED PERSON") determines that the existence of or
compliance with (i) any law or regulation or any change therein or in the
interpretation or application thereof, in each case adopted, issued or
occurring after the date hereof or (ii) any request, guideline or directive
from any central bank or other Governmental Authority (whether or not having
the force of law) issued or occurring after the date of this Agreement
affects or would affect the amount of capital required or expected to be
maintained by such Affected Person and such Affected Person determines that
the amount of such capital is increased by or based upon the existence of any
commitment to make purchases of or otherwise to maintain the investment in
the Notes or the applicable Liquidity Agreement or any other applicable
Program Support Document, then, upon demand by such Affected Person (with a
copy to the applicable Agent), the Issuer agrees to immediately pay to such
Agent, for the account of such Affected Person, from time to time as
specified by such Affected Person, additional amounts sufficient to
compensate such Affected Person in the light of such circumstances, to the
extent that such Affected Person reasonably determines such increase in
capital to be allocable to the existence of any of such commitments. A
certificate as to such amounts submitted to the Issuer and such Agent by such
Affected Person shall be conclusive and binding for all purposes, absent
manifest error.

(b) If, due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) compliance with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law), there shall be any increase in the cost to any
Affected Person of agreeing to purchase or purchasing, or maintaining the
ownership of the Notes in respect of which interest is computed by reference to
the Offshore Rate or LIBOR, as applicable, then, upon demand by such Affected
Person, the Issuer agrees to immediately pay to such Affected Person, from time
to time as specified, additional amounts sufficient to compensate such Affected
Person for such increased costs. A certificate as to such amounts submitted to
the Issuer by such Affected Person shall be conclusive and binding for all
purposes, absent manifest error.

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<PAGE>

(c) Before giving any notice to the Issuer under this Section 11, the
Affected Person shall use commercially reasonable efforts to designate a
different office with respect to its purchase of Notes or its provision of
liquidity or credit sup port under the relevant Program Support Document if
such designation will avoid the need for giving such notice or making such
demand and will not, in the judgment of the Affected Person, be illegal or
otherwise disadvantageous to such Affected Person.

(d) Upon the receipt by the Issuer of a claim for reimbursement or
compensation under this Section 11 related to the ownership of a Note or any
interest therein by an Affected Person, and payment thereof hereunder shall
not be waived by such Affected Person, the Issuer may (i) request the
Affected Person to use its reasonable efforts to obtain a replacement bank,
financial institution or asset-backed commercial paper conduit, as
applicable, satisfactory to the Issuer to acquire and assume all or a
ratable part of all of such Affected Person's Note or interests therein (a
"REPLACEMENT PURCHASER"), (ii) request one or more of the other Noteholders
or Liquidity Purchasers to acquire and assume all or a part of such Affected
Person's Note or interests therein; or (iii) designate a Replacement
Purchaser. Any such designation of a Replacement Purchaser under CLAUSE (i)
or (iii) shall be subject to the prior written consent of each Agent (which
consent shall not be unreasonably withheld). Upon notice from the Issuer,
such Affected Person shall assign its Note or interests therein and its other
rights and obligations (if any) hereunder or a ratable share thereof to the
Replacement Purchaser or Replacement Purchasers designated by the Issuer for
a purchase price equal to the sum of the principal amount of the Notes or
interests therein so assigned and all accrued and unpaid interest thereon and
any other amounts (including fees) to which it is entitled hereunder or under
any Basic Agreement or other Program Support Document (including any fee
letters entered into in connection therewith); PROVIDED, that the Issuer
shall provide such Affected Person with an officer's certificate stating that
such Replacement Purchaser has advised the Issuer that it is not subject to,
or has agreed not to seek, such increased amount.

(e) The parties to this Agreement acknowledge that the payment rights
provided for in this Section 11 are not insured under the Policy.

SECTION 12. NOTICES. (a) All communications provided for or permitted
hereunder and under any other Basic Agreement shall be in writing and shall
be delivered, sent by overnight courier or mailed or transmitted by
telecopier and confirmed by a similar mailed writing, if to a Purchaser, or
the Administrative Agent, addressed to a Purchaser, the Administrative Agent
or an Agent, as applicable, at the addresses shown on page 1 of this
Agreement, or to such other address as a Purchaser, an Agent or the
Administrative Agent may have designated in writing to the Issuer, and if to
the Issuer, AFL or the Rating Agencies, to their respective addresses set
forth in the Sale and Servicing Agreement, or to such other address as the
Issuer or AFL may have designated in writing to a Purchaser.

(b) All such written communications shall, when so sent by overnight
courier, telecopied or mailed, be deemed given when delivered to the
overnight courier, when telephone confirmation of telecopy is received, or,
in the case of communications by mail, on the fourth Business Day following
deposit in the mails. All other written communications shall be deemed to
have been given upon receipt thereof.

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<PAGE>

SECTION 13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original, but all of which
together shall constitute one instrument notwithstanding that all parties are
not signatories to the same counterparts.

SECTION 14. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the matters and
transactions contemplated by this Agreement and supersedes any prior
agreement and understandings with respect to those matters and transactions.

SECTION 15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF. THE PARTIES HERETO SUBMIT
TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK, OVER
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, OR RELATING TO, THIS
AGREEMENT, ANY NOTE OR ANY BASIC AGREEMENT AND HEREBY WAIVE ANY OBJECTION TO
THE VENUE OF ANY SUCH COURT AS WELL AS ANY CLAIM OF INCONVENIENT FORUM.

SECTION 16. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, the invalidity of any such covenant,
agreement, provision or term of this Agreement shall in no way affect the
validity or enforceability of the other provisions of this Agreement,
PROVIDED, HOWEVER, that if the invalidity of any covenant, agreement or
provision shall deprive any party of the economic benefit intended to be
conferred by this Agreement, the parties shall negotiate in good faith to
develop a structure the economic effect of which is as nearly as possible the
same as the economic effect of this Agreement.

SECTION 17. SURVIVAL. All representations, warranties and covenants
made by the Issuer herein shall be considered to have been relied upon by you
and shall survive the delivery to you of the Notes regardless of any
investigation made by you or on your behalf.

SECTION 18. LIMITED RECOURSE. This Agreement is solely a corporate
obligation of the Issuer, AFL, the Administrative Agent, each Agent and each
Purchaser. No recourse may be taken, directly or indirectly, under this
Purchase Agreement or any certificate or other writing delivered in
connection herewith against any stockholder, incorporator, employee, officer,
director or agent of the Issuer, AFL, the Administrative Agent, either
Purchaser or either Agent. The obligations of the Issuer hereunder shall be
payable solely out of the Trust Property.

SECTION 19. NO PROCEEDINGS. Each of the Issuer and AFL hereby agrees
that it will not institute or join with others in instituting against either
Purchaser, and each Purchaser hereby agrees that it will not institute or
join with others in instituting against the Issuer, a bankruptcy,
reorganization or analogous proceeding until at least 368 days after the
later of (i) the last maturing commercial paper note issued or to be issued
by such Purchaser matures and (ii) the last maturing Note issued or to be
issued by the Issuer matures.

SECTION 20. TRIAL BY JURY WAIVED. Each of the parties hereto waives, to
the fullest extent permitted by law, any right it may have to a trial by jury
in respect of any

15
<PAGE>

litigation arising directly or indirectly out of, under or in connection with
this Agreement or any of the transactions contemplated hereunder.

SECTION 21. MATTERS RELATING TO AGENTS AND ADMINISTRATIVE AGENT.

(a) DFC hereby accepts the appointment of and authorizes the DFC Agent
to take such action as agent on its behalf and to exercise such powers as are
delegated to the DFC Agent by the terms hereof and any other Basic
Agreements, together with such powers as are reasonably incidental thereto.
RCC hereby accepts the appointment of and authorizes the RCC Agent to take
such action as agent on its behalf and to exercise such powers as are
delegated to the RCC Agent by the terms hereof and any other Basic
Agreements, together with such powers as are reasonably incidental thereto.
Each Purchaser and each Agent hereby accepts the appointment of and
authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers as are delegated to the Administrative
Agent by the terms hereof and the other Basic Agreements, together with such
powers as are reasonably incidental thereto. Each of the Agents and the
Administrative Agent reserves the right, in its sole discretion, to take any
actions, exercise any rights or remedies under this Note Purchase Agreement
and any Basic Agreements. Except for actions which the Administrative Agent
or either Agent is expressly required to take pursuant to this Note Purchase
Agreement or the applicable Liquidity Agreement, the Administrative Agent or
an Agent shall not be required to take any action which exposes the
Administrative Agent or such Agent to personal liability or which is contrary
to applicable law unless such Person shall receive further assurances to its
satisfaction of indemnification against any and all liability and expense
which may be incurred in taking or continuing to take such action. Each
Agent and the Administrative Agent agrees to give its respective Purchaser
and Liquidity Purchasers and the Agents, as applicable, prompt notice of each
notice and determination given to it by the Issuer, the Servicer, the Owner
Trustee or the Trustee, pursuant to the terms of this Note Purchase Agreement
or any Basic Agreement. Subject to clause (e) hereof or any Basic Agreement,
the appointment and authority of the Agents and the Administrative Agent
hereunder shall terminate after the Purchase Period upon the payment to each
Purchaser of all amounts owing to such Purchaser.

(b) The Administrative Agent agrees to provide to each Agent (i) prompt
notice of eac h notice the Administrative Agent (in its capacity as
Administrative Agent) receives pursuant to this Agreement or any of the other
Basic Agreements and (ii) copies of each written notice, certificate, report
or other document that the Administrative Agent (in its capacity as
Administrative Agent) receives hereunder or under any of the other Basic
Agreements, other than any document which is, in the reasonable judgment of
the Administrative Agent, immaterial.

(c) Neither the Agents nor the Administrative Agent nor any of their
respective directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them as Agent or Administrative
Agent under or in connection with this Note Purchase Agreement or any Basic
Agreement, except for its or their own gross negligence or willful misconduct.

16
<PAGE>

(d) Each Purchaser and Liquidity Purchaser acknowledges or is deemed to
have acknowledged that it has, independently and without reliance upon the
Administrative Agent or the Agents, and based on such documents and
information as it has deemed appropriate, made its own evaluation and
decision to enter into this Note Purchase Agreement and to purchase its Notes
or a portion thereof. Each Purchaser and Liquidity Purchaser also
acknowledges or is deemed to have acknowledged that it will, independently
and without reliance upon the Agents or the Administrative Agent, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own decisions in taking or not taking action under this
Note Purchase Agreement or any Basic Agreement.

(e) Each Agent or the Administrative Agent may resign at any time by
giving thirty days' written notice thereof to the Purchasers, the other
Agents, the Administrative Agent, the Servicer, FSA and the Indenture
Trustee. Upon any such resignation, each Purchaser shall have the right to
appoint a related successor Agent and the Purchasers and the Agents shall
have the right to appoint a successor Administrative Agent approved by the
Issuer (which approval will not be unreasonably withheld or delayed). Upon
the acceptance of any appointment as Agent or Administrative Agent hereunder
by a successor Agent or Administrative Agent, such successor Agent or
Administrative Agent shall thereupon succeed to and become vested with all of
the rights, powers, privileges and duties of the retiring Agent or
Administrative Agent, as the case may be, and the retiring Administrative
Agent or Agent shall be discharged from its duties and obligations under this
Note Purchase Agreement.

(f) Each Agent (pro rata in accordance with its related Purchaser's
Purchase Percentage) hereby severally covenants and agrees to indemnify the
Administrative Agent, its directors, officers, officers, employees and agents
for, and hold the Administrative Agent, its directors, officers, employees
and agents harmless against, any loss, liability or expense (including the
costs and expenses of defending against any claim of liability) arising out
of or in connection with the Administrative Agent acting as Administrative
Agent hereunder or under any Basic Agreement, except such loss, liability or
expense as shall result from the gross negligence, bad faith or willful
misconduct of the Administrative Agent or its officers or agents. The
obligation of the Agents under this Section 21 shall survive the termination
of this Note Purchase Agreement or the resignation of the Administrative
Agent.

SECTION 22. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee, in the exercise of the powers and authority
conferred and vested in it, (b) each of the representations, undertakings and
agreements herein made on the part of the Issuer is made and intended not as
a personal representation, undertaking or agreement by Wilmington Trust
Company but is made and intended for the purpose for binding only the Issuer,
(c) nothing herein contained shall be construed as creating any liability on
Wilmington Trust Company, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any,
being expressly waived by the parties hereto and by any Person claiming by,
through or under such parties and (d) under no circumstances shall Wilmington
Trust Company be personally liable for the payment of any indebtedness or
expenses of the Issuer or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the
Issuer under this Agreement or the Basic Agreements.

17
<PAGE>

IN WITNESS WHEREOF, the Purchasers, the Administrative Agent, the
Agents, AFL and the Issuer have caused their names to be signed hereto by
their respective officers thereunto duly authorized as of the date first
above written.

ARCADIA AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST

By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee

By:
--------------------------------------
Name:
Title:

ARCADIA FINANCIAL LTD.

By:
--------------------------------------
Name:
Title:

The foregoing Agreement
is hereby accepted as of the
21st day of July, 1998:

RECEIVABLES CAPITAL CORPORATION

By:
------------------------------------
Name:
Title:

BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as RCC Agent and Administrative Agent

By:
------------------------------------
Name:
Title:

[Signature Page to Amended and Restated Note Purchase Agreement]

<PAGE>

DELAWARE FUNDING CORPORATION

By: Morgan Guaranty Trust Company of New
York, as attorney-in-fact
for Delaware Funding
Corporation

By:
------------------------------------
Name:
Title:

MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as DFC Agent

By:
------------------------------------
Name:
Title:

Acknowledgment and Consent:

ARCADIA RECEIVABLES CONDUIT
CORP

By:
------------------------------------
Name:
Title:

[Signature Page to Amended and Restated Note Purchase Agreement]

<PAGE>

INSURANCE AND INDEMNITY AGREEMENT

dated as of December 3, 1996

amended and restated as of July 21, 1998

among

FINANCIAL SECURITY ASSURANCE INC.,

ARCADIA FINANCIAL LTD.,

ARCADIA RECEIVABLES FINANCE CORP.,

and

ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST

Floating Rate Variable Funding
FSA Insured
Automobile Receivables-Backed Notes

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS

SECTION 1.01. DEFINITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS

SECTION 2.01. REPRESENTATIONS AND WARRANTIES OF AFL AND ARFC. . . . . . . . . 2

SECTION 2.02. AFFIRMATIVE COVENANTS OF AFL AND ARFC.. . . . . . . . . . . . . 7
SECTION 2.03. NEGATIVE COVENANTS OF AFL AND ARFC. . . . . . . . . . . . . . .13
SECTION 2.04. REPRESENTATIONS AND WARRANTIES OF AFL AND THE ISSUER. . . . . .17
SECTION 2.05. AFFIRMATIVE COVENANTS OF AFL AND THE ISSUER.. . . . . . . . . .20
SECTION 2.06. NEGATIVE COVENANTS OF AFL AND THE ISSUER. . . . . . . . . . . .25

ARTICLE III THE POLICY; REIMBURSEMENT; INDEMNIFICATION

SECTION 3.01. ISSUANCE OF THE POLICY. . . . . . . . . . . . . . . . . . . . .26
SECTION 3.02. PAYMENT OF FEES AND PREMIUM.. . . . . . . . . . . . . . . . . .26
SECTION 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION.. . . . . . . .27
SECTION 3.04. INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 3.05. SUBROGATION.. . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 3.06. CERTAIN OBLIGATIONS NOT RECOURSE TO AFL AND ARFC. . . . . . . .30
SECTION 3.07. LIMITED RECOURSE TO ISSUER. . . . . . . . . . . . . . . . . . .30

ARTICLE IV FURTHER AGREEMENTS

SECTION 4.01. EFFECTIVE DATE; TERM OF AGREEMENT.. . . . . . . . . . . . . . .31
SECTION 4.02. OBLIGATIONS ABSOLUTE. . . . . . . . . . . . . . . . . . . . . .31
SECTION 4.03. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS. . . . . . . . . .32
SECTION 4.04. LIABILITY OF FINANCIAL SECURITY.. . . . . . . . . . . . . . . .33

ARTICLE V EVENTS OF DEFAULT; REMEDIES

SECTION 5.01. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . . . . . . .33
SECTION 5.02. REMEDIES; WAIVERS.. . . . . . . . . . . . . . . . . . . . . . .35

ARTICLE VI MISCELLANEOUS

SECTION 6.01. AMENDMENTS, ETC.. . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 6.02. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 6.03. PAYMENT PROCEDURE.. . . . . . . . . . . . . . . . . . . . . . .38
SECTION 6.04. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 6.05. GOVERNING LAW.. . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 6.06. CONSENT TO JURISDICTION.. . . . . . . . . . . . . . . . . . . .39
</TABLE>

i
<PAGE>

<TABLE>
<S> <C>
SECTION 6.07. CONSENT OF FINANCIAL SECURITY.. . . . . . . . . . . . . . . . .40
SECTION 6.08. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 6.09. TRIAL BY JURY WAIVED. . . . . . . . . . . . . . . . . . . . . .40
SECTION 6.10. LIMITED LIABILITY.. . . . . . . . . . . . . . . . . . . . . . .40
SECTION 6.11. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 6.12. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . .41

Appendix A Definitions
Appendix B Conditions Precedent to Issuance of the Policy
Exhibit I Form of Policy
</TABLE>

ii
<PAGE>

INSURANCE AND INDEMNITY AGREEMENT

INSURANCE AND INDEMNITY AGREEMENT dated as of December 3, 1996,
amended and restated as of July 21, 1998, among FINANCIAL SECURITY ASSURANCE
INC. ("FINANCIAL SECURITY"), ARCADIA FINANCIAL LTD. ("AFL"), ARCADIA
RECEIVABLES FINANCE CORP. ("ARFC") and ARCADIA AUTOMOBILE RECEIVABLES
WAREHOUSE TRUST (the "ISSUER").

INTRODUCTORY STATEMENTS

1. ARFC has agreed from time to time to purchase from AFL, and AFL has
agreed from time to time to sell and assign to ARFC, Receivables pursuant to
the Receivables Purchase Agreement and Assignment.

2. ARFC proposes to transfer Receivables to the Issuer against the
transfer of funds by the Issuer in accordance with the terms of the Sale and
Servicing Agreement.

3. The Issuer will issue Securities pursuant to the Indenture. Each
Security will be secured by the Receivables and other collateral.

4. The Issuer has requested that Financial Security issue a financial
guaranty insurance policy guarantying scheduled payments of interest and
ultimate payment of principal on the Securities (including any such payments
subsequently avoided as a preference under applicable bankruptcy law) upon
the terms and subject to the conditions provided herein.

5. The parties hereto desire to specify the conditions precedent to
the issuance of the Policy by Financial Security, the payment of premium in
respect of the Policy, the indemnity and reimbursement to be provided to
Financial Security in respect of certain amounts paid by Financial Security
under the Policy or otherwise and certain other matters.

In consideration of the premises and of the agreements herein
contained, Financial Security, AFL, ARFC and the Issuer hereby agree as
follows:

ARTICLE I

DEFINITIONS

Section 1.01. DEFINITIONS.

Capitalized terms used herein shall have the meanings provided in
Appendix A hereto, or the meanings given such terms in the Sale and Servicing
Agreement, unless the context otherwise requires.

1
<PAGE>

ARTICLE II

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 2.01. REPRESENTATIONS AND WARRANTIES OF AFL AND ARFC.

AFL and ARFC jointly and severally represent, warrant and covenant,
as of the date hereof and as of the Date of Issuance, as follows:

(a) DUE ORGANIZATION AND QUALIFICATION. Each of AFL and ARFC is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota or the laws of the State of Delaware,
respectively, with power and authority to own its properties and conduct
its business. Each of AFL and ARFC is duly qualified to do business, is in
good standing and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "APPROVALS") necessary for the
conduct of its business as currently conducted and the performance of its
obligations under the Transaction Documents, in each jurisdiction in which
the failure to be so qualified or to obtain such approvals would render any
Receivable unenforceable in such jurisdiction or any Transaction Document
unenforceable in any respect or would otherwise have a material adverse
effect upon the Transaction.

(b) POWER AND AUTHORITY. Each of AFL and ARFC has all necessary
corporate power and authority to conduct its business as currently
conducted, to execute, deliver and perform its obligations under this
Agreement and each other Transaction Document to which it is a party and to
carry out the terms of each such Transaction Document and has full power
and authority to sell and assign the Receivables as contemplated by the
Transaction Documents and to consummate the Transaction.

(c) DUE AUTHORIZATION. The execution, delivery and performance by
each of AFL and ARFC of this Agreement and each other Transaction Document
to which it is a party have been duly authorized by all necessary corporate
action and do not require any additional approvals or consents or other
action by or any notice to or filing with any Person, including, without
limitation, any governmental entity, the stockholders of AFL or the
stockholder of ARFC.

(d) NONCONTRAVENTION. Neither the execution nor delivery of this
agreement and each other Transaction Document to which AFL or ARFC is a
party, nor the consummation of the Transaction nor the satisfaction of the
terms and conditions of this agreement and each other Transaction Documents
to which AFL or ARFC is a party,

(i) conflicts with or results, or will conflict with or
result, in any breach or violation of any provision of the
Certificate of Incorporation or Bylaws of AFL or ARFC or any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect

2
<PAGE>

having applicability to AFL or ARFC, or any of their respective
properties,

(ii) constitutes or will constitute a default by AFL or
ARFC under or a breach of any provision of any loan agreement,
mortgage, indenture or other agreement or instrument to which AFL
or ARFC or any of their respective Subsidiaries is a party or by
which it or any of its or their properties is or may be bound or
affected, or

(iii) results in or requires, or will result in or require,
the creation of any Lien upon or in respect of any of the assets of
AFL or ARFC or any of their respective Subsidiaries except as
otherwise expressly contemplated by the Transaction Documents.

(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation pending, or to the best knowledge of AFL and ARFC after
reasonable inquiry, threatened by or before any court, regulatory body,
governmental or administrative agency or arbitrator against or affecting
AFL or ARFC, or any properties or rights of AFL or ARFC, including without
limitation, the Receivables: (A) asserting the invalidity of this Agreement
or any other Transaction Document to which the AFL or ARFC is a party, (B)
seeking to prevent the issuance of the Securities or the consummation of
the Transaction, (C) seeking any determination or ruling that might
materially and adversely affect the validity or enforceability of this
Agreement or any other Transaction Document to which AFL or ARFC is a party
or (D) which might result in a Material Adverse Change with respect to AFL
or ARFC.

(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction
Documents to which either AFL or ARFC is a party, when executed and
delivered by it, and assuming due authorization, execution and delivery by
the other parties thereto, will constitute the legal, valid and binding
obligations of such Person, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general equitable principles. The Securities when
executed, authenticated and delivered in accordance with the Indenture,
will be entitled to the benefits of the Indenture and will constitute
legal, valid and binding obligations of the Issuer, enforceable in
accordance with their terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles.

(g) NO CONSENTS. No consent, license, approval or authorization
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any
consent, approval, waiver or notification of any creditor, lessor or other
non-governmental person, is required in connection with the execution,
delivery and performance by AFL or ARFC of this Agreement or of any other
Transaction Document to which it is a

3
<PAGE>

party, except (in each case) such as have been obtained and are in full
force and effect.

(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by AFL or ARFC in the conduct of their
respective businesses violates any law, regulation, judgment, agreement,
order or decree applicable to it which, if enforced, would result in a
Material Adverse Change with respect to such Person.

(i) GOOD TITLE; VALID TRANSFER ABSENCE OF LIENS; SECURITY
INTEREST.

(i) Immediately prior to the transfer of any Receivables
and related Other Conveyed Property to ARFC pursuant to the
Receivables Purchase Agreement and Assignment, AFL was or will have
been the owner of, and had or will have had good and marketable
title to, such Receivables free and clear of all Liens and
Restrictions on Transferability, and had or will have had full
right, corporate power and lawful authority to assign, transfer and
pledge such Receivables and related Other Conveyed Property and
immediately following such transfer ARFC will be the owner of, and
have good and marketable title to, such Receivables and related
Other Conveyed Property free and clear of all Liens and
Restrictions on Transferability. Each such transfer pursuant to the
Receivables Purchase Agreement and Assignment constitutes or will
constitute a valid sale, transfer and assignment of such
Receivables and related Other Conveyed Property to ARFC enforceable
against creditors of and purchasers from AFL. In the event that, in
contravention of the intention of the parties, a transfer of
Receivables and related Other Conveyed Property by AFL to ARFC is
characterized as other than a sale, such transfer shall be
characterized as a secured financing, and ARFC shall have a valid
and perfected first priority security interest in such Receivables
and related Other Conveyed Property free and clear of all Liens and
Restrictions on Transferability, subject to the provisions of the
Sale and Servicing Agreement.

(ii) Immediately prior to the transfer of any Receivables
and related Other Conveyed Property to the Issuer pursuant to the
Sale and Servicing Agreement, ARFC was or will have been the owner
of, and had good and marketable title to, such property free and
clear of all Liens and Restrictions on Transferability, and had or
will have had full right, corporate power and lawful authority to
assign, transfer and pledge such Receivables. In the event that a
transfer of the Receivables and related Other Conveyed Property by
ARFC to the Issuer is characterized as other than a sale, such
transfer shall be characterized as a secured financing, and the
Issuer shall have a valid and perfected first priority security
interest in such Receivables and related Other Conveyed Property
free and clear of all Liens and Restrictions on Transferability,
other than the Lien of the Security Agreement in favor of the
Collateral Agent.

4
<PAGE>

(j) ACCURACY OF INFORMATION. None of the Transaction Documents
nor any of the other Provided Documents provided by AFL or ARFC contain any
statement of a material fact with respect to AFL or ARFC or the Transaction
that was untrue or misleading in any material respect when made (except
insofar as any such Document was connected or superseded by a subsequent
Provided Document and Financial Security has not detrimentally relied on
the original Provided Document). There is no fact known to AFL or ARFC
which has a material possibility of causing a Material Adverse Change with
respect to either of them or which has a material possibility of impairing
the value or marketability of the Receivables, taken as a whole, or
decreasing the possibility that amounts due in respect of the Receivables
will be collected as due. Since the furnishing of the Provided Documents,
there has been no change, or any development or event involving a
prospective change known to AFL or ARFC that would render any
representation or warranty or other statement made by either of them in any
of the Provided Documents untrue or misleading in any material respect.

(k) FINANCIAL STATEMENTS. The Financial Statements of AFL, copies
of which have been furnished to Financial Security, (i) are, as of the
dates and for the periods referred to therein, complete and correct in all
material respects, (ii) present fairly the financial condition and results
of operations of such Person as of the dates and for the periods indicated
and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, except as noted therein
(subject as to interim statements to normal year-end adjustments). Since
the date of the most recent Financial Statements with respect to such
Person, there has been no material adverse change in such financial
condition or results of operations of such Person. Except as disclosed in
the Financial Statements, AFL is not subject to any contingent liabilities
or commitments that, individually or in the aggregate, have a material
possibility of causing a Material Adverse Change in respect of AFL.

(l) ERISA. AFL is in compliance with ERISA in all material
respects and has not incurred and does not reasonably expect to incur any
material liabilities to the PBGC under ERISA in connection with any Plan or
Multiemployer Plan or to contribute now or in the future in respect of any
Plan or Multiemployer Plan.

(m) COMPLIANCE WITH SECURITIES LAWS. ARFC is not required to be
registered as an "investment company" under the Investment Company Act and
is not subject to the information reporting requirements of the Exchange
Act.

(n) TRANSACTION DOCUMENTS. Each of the representations and
warranties of AFL and ARFC contained in the Transaction Documents is true
and correct in all material respects and each of AFL and ARFC hereby makes
each such representation and warranty made by it to, and for the benefit
of, Financial Security as if the same were set forth in full herein.

(o) SPECIAL PURPOSE ENTITY.

5
<PAGE>

(i) The capital of ARFC is adequate for the business and
undertakings of ARFC.

(ii) Other than with respect to the ownership by AFL of
the stock of ARFC and as provided in this Agreement and the
Receivables Purchase Agreement and Assignment, the Sale and
Servicing Agreement, the Security Agreement and the Spread Account
Agreement, and in connection with the Term Transactions, ARFC is
not engaged in any business transactions with AFL or any affiliate
of AFL.

(iii) At least one director of ARFC shall be a person who
is not, and will not be, a director, officer, employee or holder of
any equity securities of AFL or any of its affiliates or
Subsidiaries.

(iv) The funds and assets of ARFC are not, and will not
be, commingled with the funds of any other person.

(v) The bylaws of ARFC require it to maintain (A) correct
and complete minute books and records of account, and (B) minutes
of the meetings and other proceedings of its shareholders and board
of directors.

(p) SOLVENCY; FRAUDULENT CONVEYANCE. Each of AFL and ARFC is
solvent and will not be rendered insolvent by the Transaction and, after
giving effect to the Transaction, neither AFL nor ARFC will be left with an
unreasonably small amount of capital with which to engage in its business.
Neither AFL nor ARFC intends to incur, or believes that it has incurred,
debts beyond its ability to pay such debts as they mature. Neither AFL nor
ARFC contemplates the commencement of insolvency, bankruptcy, liquidation
or consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of AFL or ARFC or any
of its assets. The amount of consideration being received by ARFC upon the
transfer of Receivables and related Other Conveyed Property to the Issuer
constitutes reasonably equivalent value and fair consideration for the
Receivables and such Other Conveyed Property. The amount of consideration
being received by AFL upon the sale of the Receivables and related Other
Conveyed Property to ARFC constitutes reasonably equivalent value and fair
consideration for the Receivables and such Other Conveyed Property. Neither
AFL nor ARFC is entering into the Transaction Documents or consummating the
transactions contemplated thereby with any intent to hinder, delay or
defraud any of the Issuer's creditors.

(q) TAXES. Each of AFL and ARFC has, and each member of the
respective affiliated groups of corporations of which such Person is a
member has, filed all federal and state tax returns which are required to
be filed and paid all taxes, including any assessments received by such
Person, to the extent that such taxes have become due other than taxes that
such Person shall currently be contesting the validity thereof in good
faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto. Any taxes, fees

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and other governmental charges payable by AFL or ARFC in connection with
the Transaction, the execution and delivery of the Transaction Documents
and the issuance of the Securities have been paid or shall have been
paid at or prior to the Date of Issuance.

(r) PLEDGE OF SHARES. The shares of stock of ARFC which have been
pledged pursuant to the Stock Pledge Agreement constitute all of the issued
and outstanding shares of ARFC.

(s) PERFECTION OF LIENS AND SECURITY INTEREST. The Lien and
security interest in favor of the Collateral Agent with respect to the
Receivables and Other Conveyed Property will be perfected by the filing of
financing statements on Form UCC-1 on or prior to the Date of Issuance in
each jurisdiction where such recording or filing is necessary for the
perfection thereof, the delivery of the Receivable Files for the
Receivables to the Custodian, and the establishment of the Collection
Account, the Note Distribution Account and the Spread Account in accordance
with the provisions of the Transaction Documents, and no other filings in
any jurisdiction or any other actions (except as expressly provided herein)
are necessary to perfect the Collateral Agent's Lien on and security
interest in the Receivables and Other Conveyed Property as against any
third parties.

(t) SECURITY INTEREST IN ACCOUNTS. Assuming the retention of
funds in the Collection Account, the Note Distribution Account and the
Spread Account and the acquisition of Eligible Investments, in each case,
in accordance with the Transaction Documents, such funds and Eligible
Investments will be subject to a valid and perfected, first priority
security interest in favor of the Collateral Agent on behalf of Financial
Security and the Trustee for the benefit of the Noteholders.

Section 2.02. AFFIRMATIVE COVENANTS OF AFL AND ARFC.

AFL and ARFC jointly and severally hereby agree, during the Term of
this Agreement, unless Financial Security shall otherwise expressly consent in
writing, as follows:

(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. Each of AFL
and ARFC shall perform each of its respective obligations under the
Transaction Documents and shall comply with all material requirements of
any law, rule or regulation applicable to it or thereto, or that are
required in connection with its performance under any of the Transaction
Documents. Neither AFL nor ARFC will cause or permit to become effective
any amendment to or modification of any of the Transaction Documents to
which it is a party unless (i) so long as no Insurer Default shall have
occurred and be continuing Financial Security shall have previously
approved in writing the form of such amendment or modification or (ii) if
an Insurer Default shall have occurred and be continuing such amendment
would not adversely affect the interests of Financial Security. Neither

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<PAGE>

AFL nor ARFC shall take any action or fall to take any action that would
interfere with the enforcement of any rights under the Transaction
Documents.

(b) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; BOOKS AND RECORDS;
OTHER INFORMATION. Each of AFL and ARFC shall keep or cause to be kept in
reasonable detail books and records of account of its assets and business.
Each of AFL and ARFC shall furnish or cause to be furnished to Financial
Security:

(i) ANNUAL FINANCIAL STATEMENTS. As soon as available,
and in any event within 90 days after the close of each fiscal year
of AFL, the audited balance sheets of AFL, as of the end of such
fiscal year and the audited statements of income, changes in
shareholders' equity and cash flows of AFL, for such fiscal year,
all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the
preceding fiscal year, prepared in accordance with generally
accepted accounting principles, consistently applied, and
accompanied by the certificate of independent accountants (which
shall be a nationally recognized firm or otherwise acceptable to
Financial Security) for AFL, and by the certificate specified in
Section 2.02(c) hereof.

(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as
available, and in any event within 45 days after the close of each
of the first three quarters of each fiscal year of AFL, the
unaudited balance sheets of AFL as of the end of such quarter and
the unaudited statements of income, changes in shareholders' equity
and cash flows of AFL for the portion of the fiscal year then
ended, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the
preceding fiscal year, prepared in accordance with generally
accepted accounting principles, consistently applied (subject to
normal year-end adjustments), and accompanied by the certificate
specified in Section 2.02(c) hereof if such certificate is required
to be provided pursuant to such Section.

(iii) ACCOUNTANTS' REPORTS. If a Special Event specified
in clauses (a) or (d) of the definition thereof or clause (b) or
(c) of the definition thereof with respect to AFL or ARFC has
occurred, copies of any reports submitted to AFL or ARFC by their
respective independent accountants in connection with any
examination of the financial statements of AFL or ARFC promptly
upon receipt thereof.

(iv) OTHER INFORMATION. Promptly upon receipt thereof,
copies of all reports, statements, certifications, schedules, or
other similar items delivered to or by AFL or ARFC pursuant to the
terms of the Transaction Documents and, promptly upon request, such
other data as Financial Security may reasonably request; PROVIDED,
HOWEVER, that neither AFL nor ARFC shall be required to deliver any
such items if provision by some other party to Financial Security
is required under the Transaction

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<PAGE>

Documents unless such other party wrongfully fails to deliver such
item. AFL and ARFC shall, upon the request of Financial Security,
permit Financial Security and its authorized agents (A) to inspect
its books, records and operations as they may relate to the
Securities, the Receivables, the obligations of AFL or ARFC under
the Transaction Documents, the Transaction and AFL's business; (B)
to discuss the affairs, finances and accounts of AFL and ARFC with
its Chief Operating Officer and Chief Financial Officer upon
Financial Security's reasonable request; and (C) to discuss the
affairs, finances and accounts of AFL and ARFC with their
respective independent accountants, PROVIDED that an officer of
such Person shall have the right to be present during such
discussions. Such inspections and discussions shall be conducted
during normal business hours and shall not unreasonably disrupt the
business of such Person. The fees and expenses of any such
authorized agents of Financial Security shall be for the account of
AFL. In addition, AFL and ARFC shall promptly (but in no case more
than 30 days following issuance or receipt by a Commonly Controlled
Entity) provide to Financial Security a copy of all correspondence
between a Commonly Controlled Entity and the PBGC, IRS, Department
of Labor or the administrators of a Multiemployer Plan relating to
any Reportable Event or the underfunded status, termination or
possible termination of a Plan or a Multiemployer Plan. The books
and records of AFL and ARFC with respect to the Receivables will be
maintained at 7825 Washington Avenue South, Suite 900, Minneapolis,
Minnesota 55439-2435, unless AFL or ARFC shall otherwise advise the
parties hereto in writing.

(v) AFL shall provide or cause to be provided to
Financial Security an executed original copy of each document
executed in connection with the Transaction within 30 days after
the date of closing.

(c) COMPLIANCE CERTIFICATE. AFL shall deliver to Financial
Security concurrently with the delivery of the financial statements
required pursuant to Section 2.02(b)(i) hereof (and concurrently with the
delivery of the financial statements required pursuant to Section
2.02(b)(ii) hereof, if a Special Event specified in clauses (a) or (d) of
the definition thereof or clause (b) or (c) of the definition thereof with
respect to AFL or ARFC has occurred), a certificate signed by its Chief
Financial Officer stating that:

(i) a review of such Person's performance under the
Transaction Documents during such period has been made under such
officer's supervision;

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<PAGE>

Default pursuant to Section 5.01, stating in reasonable detail the
steps, if any, being taken by such Person to cure such Default or
Event of Default or to otherwise comply with the terms of the
agreement to which such Default or Event of Default relates; and

(iii) the attached financial reports submitted in
accordance with Section 2.02(b)(i) or (ii) hereof, as applicable,
are complete and correct in all material respects and present
fairly the financial condition and results of operations of AFL as
of the dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied
(subject as to interim statements to normal year-end adjustments).

(d) NOTICE OF MATERIAL EVENTS. AFL and ARFC shall promptly inform
Financial Security in writing of the occurrence of any of the following:

(i) the submission of any claim or the initiation of any
legal process, litigation or administrative or judicial
investigation against AFL or ARFC involving potential damages or
penalties in an uninsured amount in excess of $5,000 in any one
instance or $25,000 in the aggregate with respect to ARFC and in
excess of $10,000 in any one instance or $25,000 in the aggregate
with respect to AFL;

(ii) any change in the location of such Person's principal
office or any change in the location of the books and records of
AFL or ARFC;

(iii) the occurrence of any Default or Special Event (which
notice shall also be delivered to the Rating Agencies);

(iv) the commencement of any proceedings by or against AFL
under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator,
conservator, trustee or similar official shall have been, or may
be, appointed or requested for AFL or ARFC or any of their assets;

(v) the receipt of notice that (A) AFL or ARFC is being
placed under regulatory supervision, (B) any license, permit,
charter, registration or approval necessary for the conduct of
AFL's or ARFC's business is to be, or may be, suspended or revoked,
or (C) AFL or ARFC is to cease and desist any practice, procedure
or policy employed by AFL or ARFC in the conduct of its business,
and such cessation may result in a Material Adverse Change with
respect to AFL or ARFC; or

(vi) any other event, circumstance or condition that has
resulted, or which such Person reasonably believes might result, in
a Material Adverse Change in respect of AFL or ARFC.

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<PAGE>

(e) FURTHER ASSURANCES. Each of AFL and ARFC will file all
necessary financing statements, assignments or other instruments, and any
amendments or continuation statements relating thereto, necessary to be
kept and filed in such manner and in such places as may be required by law
to preserve and protect fully the Lien on and security interest in, and all
rights of the Collateral Agent, for the benefit of the Trustee for the
Noteholders and Financial Security, with respect to, the Receivables, the
Collection Account, the Note Distribution Account and the Spread Account.
In addition, each of AFL and ARFC shall, upon the request of Financial
Security, from time to time, execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, within thirty (30) days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Transaction Documents or to protect the
interest of the Collateral Agent, for the benefit of the Trustee for
Noteholders and Financial Security, in the Receivables, the Collection
Account, the Note Distribution Account and the Spread Account, free and
clear of all Liens and Restrictions on Transferability except the
Restrictions on Transferability imposed by the Transaction Documents. In
addition, each of AFL and ARFC agrees to cooperate with S&P and Moody's in
connection with any review of the Transaction which may be undertaken by
S&P and Moody's after the date hereof.

(f) THIRD-PARTY BENEFICIARY. Each of AFL and ARFC agrees that
Financial Security shall have all rights of a third-party beneficiary in
respect of the Sale and Servicing Agreement and hereby incorporates and
restates its representations, warranties and covenants as set forth therein
for the benefit of Financial Security.

(g) CORPORATE EXISTENCE. Each of AFL and ARFC shall maintain its
corporate existence and shall at all times continue to be duly organized
under the laws of the State of Minnesota or laws of the State of Delaware,
respectively, and duly qualified and duly authorized (as described in
Sections 2.01(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its Certificate of Incorporation and Bylaws.

(h) SPECIAL PURPOSE ENTITY.

(i) ARFC shall conduct its business solely in its own
name through its duly authorized officers or agents so as not to
mislead others as to the identity of the entity with which those
others are concerned. It particularly will use its best efforts to
avoid the appearance of conducting business on behalf of AFL or any
affiliate of AFL and to avoid the appearance that the assets of
ARFC are available to pay the creditors of AFL or any affiliate
thereof. Without limiting the generality of the foregoing, all oral
and written communications, including, without limitation, letters,
invoices, purchase orders, contracts, statements and loan
applications, will be made solely in the name of ARFC.

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<PAGE>

(ii) ARFC shall maintain corporate records and books of
account separate from those of AFL and the affiliates thereof.
ARFC's books and records shall clearly reflect the transfer of the
Receivables to the Issuer.

(iii) ARFC shall obtain proper authorization from its Board
of Directors of all corporate action requiring such authorization,
meetings of the board of directors of ARFC shall be held not less
frequently than three times per annum and copies of the minutes of
each such board meeting shall be delivered to Financial Security
within two weeks of such meeting.

(iv) ARFC shall obtain proper authorization from its
shareholders of all corporate action requiring shareholder
approval, meetings of the shareholders of ARFC shall be held not
less frequently than one time per annum and copies of each such
authorization and the minutes of each such shareholder meeting
shall be delivered to Financial Security within two weeks of such
authorization or meeting, as the case may be.

(v) Although the organizational expenses of ARFC have
been paid by AFL, operating expenses and liabilities of ARFC shall
be paid from its own funds. If AFL transfers funds to ARFC which
funds ARFC applies to the satisfaction of an obligation under the
Transaction Documents, such transfer shall be characterized by ARFC
and AFL as a loan recourse only to amounts available for payment to
AFL pursuant to Section 2.08 of the Spread Account Agreement, shall
be pursuant to documentation substantially in the form set forth as
Exhibit C to the Sale and Servicing Agreement, and ARFC's
obligation to AFL with respect to such loan shall be limited to the
amounts so available; ARFC and AFL covenant and agree that any such
available amounts shall be applied to the satisfaction of any
amounts outstanding under any such loan, prior to distribution by
ARFC on or in respect of the capital stock of ARFC.

(vi) The annual financial statements of ARFC shall
disclose the effects of its transactions in accordance with
generally accepted accounting principles and shall disclose that
the assets of ARFC are not available to pay creditors of AFL or any
affiliate of AFL.

(vii) The resolutions, agreements and other instruments of
ARFC underlying the transactions described in this Agreement and in
the other Transaction Documents shall be continuously maintained by
ARFC as official records of ARFC separately identified and held
apart from the records of AFL and each affiliate of AFL.

(viii) ARFC shall maintain an arm's-length relationship
with AFL and the affiliates thereof and will not hold itself out as
being liable for the debts of AFL or any of AFL's affiliates.

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<PAGE>

(ix) ARFC shall keep its assets and liabilities wholly
separate from those of all other entities, including, but not
limited to, AFL and its affiliates.

(x) The books and records of ARFC will be maintained at
7825 Washington Avenue South, Suite 900, Minneapolis, Minnesota
55439-2435, unless it shall otherwise advise the parties hereto in
writing. ARFC shall, upon the request of Financial Security, permit
Financial Security or its authorized agents to inspect its books
and records.

(i) MAINTENANCE OF LICENSES. Each of AFL and ARFC shall maintain
all licenses, permits, charters and registrations which are material to the
performance by it of its obligations under this Insurance Agreement and
each other Transaction Document to which is a party or by which it is
bound.

(j) MAINTENANCE OF WAREHOUSING FACILITIES. AFL and its
Subsidiaries shall at all times have warehousing facilities (other than
that contemplated by the Transaction) under which the amount of credit
available (including amounts outstanding) to finance the purchase of
automobile receivables originated by AFL, together with the sum of the
amount of unrestricted cash on AFL's balance sheet and the aggregate
principal balance of automobile receivables eligible to be pledged by AFL
(but not pledged) under the Transaction or such warehouse facilities as of
the end of the immediately preceding calendar quarter, at least equal to
$250,000,000.

(k) PROVISION OF INFORMATION. ARFC shall provide the Independent
Accountants with such information as is necessary to conduct the review
required by Section 3.18 of the Sale and Servicing Agreement.

(l) CLOSING DOCUMENTS. AFL shall provide or cause to be provided
to Financial Security an executed original copy of each document executed
in connection with the Transaction within 30 days after the Closing Date,
except that AFL shall cause a copy of the Sale and Servicing Agreement, the
Purchase Agreement, the Indenture, and each Transaction Document to which
Financial Security is a party to be provided to Financial Security on the
Closing Date.

(m) INCORPORATION OF COVENANTS. Each of AFL and ARFC agrees to
comply with their respective covenants set forth in the Transaction
Documents and hereby incorporates such covenants by reference as if each
were set forth herein.

Section 2.03. NEGATIVE COVENANTS OF AFL AND ARFC.

AFL and ARFC hereby jointly and severally agree, during the Term of
the Agreement, unless Financial Security shall otherwise expressly consent in
writing, as follows:

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<PAGE>

(a) RESTRICTIONS ON LIENS. Neither AFL nor ARFC shall (i) create,
incur or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any Lien
or Restriction on Transferability of the Receivables and related Other
Conveyed Property except for (w) the Liens imposed by the Transaction
Documents, and (x) Liens for taxes if such taxes shall not at the time be
due and payable or if the Issuer shall currently be contesting the validity
thereof in good faith by appropriate proceedings and shall have set aside
on its books adequate reserves with respect thereto, and (y) the
Restrictions on Transferability imposed by the Transaction Documents, or
(ii) sign or file under the Uniform Commercial Code of any jurisdiction any
financing statement which names either AFL, ARFC or the Issuer as a debtor,
or sign any security agreement authorizing any secured party thereunder to
file such financing statement, with respect to the Receivables, except in
each case any such instrument solely securing the rights and preserving the
Lien of the Issuer or of the Collateral Agent for the benefit of the
Trustee for the Noteholders and Financial Security.

(b) IMPAIRMENT OF RIGHTS. Neither AFL nor ARFC shall take any
action, or fail to take any action, if such action or failure to take
action may (i) interfere with the enforcement of any rights under the
Transaction Documents that are material to the rights, benefits or
obligations of the Trustee, the Noteholders or Financial Security, (ii)
result in a Material Adverse Change in respect of the Receivables or (iii)
impair the ability of AFL or ARFC to perform their respective obligations
under the Transaction Documents.

(c) LIMITATION ON MERGERS. AFL shall not consolidate with or
merge with or into any Person or transfer all or any material part of its
assets to any Person (except as contemplated by the Transaction Documents)
or liquidate or dissolve, provided that AFL may consolidate with, merge
with or into, or transfer all or a material part of its assets to, another
corporation if (i) the acquiror of its assets, or the corporation surviving
such merger or consolidation, shall be organized and existing under the
laws of any state and shall be qualified to transact business in each
jurisdiction in which failure to qualify would render any Transaction
Document unenforceable or would result in a Material Adverse Change in
respect of AFL or the Other Conveyed Property; (ii) after giving effect to
such consolidation, merger or transfer of assets, no Default or Event of
Default shall have occurred or be continuing; (iii) such acquiring or
surviving entity can lawfully perform the obligations of AFL under the
Transaction Documents and shall expressly assume in writing all of the
obligations of AFL, including, without limitation, its obligations under
the Transaction Documents; and (iv) such acquiring or surviving entity and
the consolidated group of which it is a part shall each have a net worth
immediately subsequent to such consolidation, merger or transfer of assets
at least equal to the net worth of AFL immediately prior to such
consolidation, merger or transfer of assets; and AFL shall give Financial
Security written notice of any such consolidation, merger or transfer of
assets on the earlier of: (A) the date upon which any publicly available
filing or release is made with respect to such action or (B) 10 Business
Days prior to the date of consummation

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<PAGE>

of such action. AFL shall furnish to Financial Security all information
requested by it that is reasonably necessary to determine compliance with
this paragraph.

(d) WAIVER, AMENDMENTS, ETC. Neither AFL nor ARFC shall waive,
modify, amend, supplement or consent to any waiver, modification or
amendment of, any of the provisions of any of the Transaction Documents or
the certificate of incorporation or by-laws of ARFC (i) unless, if no
Insurer Default shall have occurred and be continuing, Financial Security
shall have consented thereto in writing or (ii) if an Insurer Default shall
have occurred and be continuing, which would adversely affect the interests
of Financial Security.

(e) SUCCESSORS. Neither AFL nor ARFC shall terminate or
designate, or consent to the termination or designation of, the servicer,
back-up servicer or collateral agent or any successor thereto without the
prior approval of Financial Security.

(f) CREATION OF INDEBTEDNESS; GUARANTEES. ARFC shall not create,
incur, assume or suffer to exist any Indebtedness, other than in connection
with Term Transactions, the Sale and Servicing Agreement, Indebtedness
permitted by Section 2.02(j) hereof and any other Indebtedness guaranteed
or approved in writing by Financial Security. Without the prior written
consent in writing by Financial Security, ARFC shall not assume, guarantee,
endorse or otherwise be or become directly or contingently liable for the
obligations of any Person by, among other things, agreeing to purchase any
obligation of another Person, agreeing to advance funds to such Person or
causing or assisting such Person to maintain any amount of capital.

(g) SUBSIDIARIES. ARFC shall not form, or cause to be formed, any
Subsidiaries.

(h) ISSUANCE OF STOCK. ARFC shall not issue any shares of capital
stock or rights, warrants or options in respect of capital stock or
securities convertible into or exchangeable for capital stock.

(i) NO MERGERS. ARFC shall not consolidate with or merge into any
Person or (except as contemplated in the Transaction Documents or any Term
Transaction) transfer all or any material amount of its assets to any
Person or liquidate or dissolve.

(j) ERISA. (A) AFL shall not contribute or incur any obligation
to contribute to, or incur any liability in respect of, any Plan or
Multiemployer Plan, except that AFL may make such a contribution or incur
such a liability provided that neither AFL nor any Commonly Controlled
Entity will:

(i) terminate any Plan so as to incur any material
liability to the PBGC;

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<PAGE>

(ii) knowingly participate in any "prohibited transaction"
(as defined in ERISA) involving any Plan or Multiemployer Plan or
any trust created thereunder which would subject any of them to a
material tax or penalty on prohibited transactions imposed under
Section 4975 of the Code or ERISA;

(iii) fail to pay to any Plan or Multiemployer Plan any
contribution which it is obligated to pay under the terms of such
Plan or Multiemployer Plan, if such failure would cause such Plan
to have any material Accumulated Funding Deficiency, whether or not
waived; or

(iv) allow or suffer to exist any occurrence of a
Reportable Event, or any other event or condition, which presents a
material risk of termination by the PBGC of any Plan or
Multiemployer Plan, to the extent that the occurrence or
nonoccurrence of such Reportable Event or other event or condition
is within the control of it or any Commonly Controlled Entity.

(B) ARFC shall not contribute or incur any obligation to contribute to
any Multiemployer Plan.

(k) OTHER ACTIVITIES. ARFC shall not:

(i) sell, transfer, exchange or otherwise dispose of any
of its assets except as permitted under the Transaction Documents
and the Term Transactions; or

(ii) engage in any business or activity other than in
connection with the Sale and Servicing Agreement, the Trust
Agreement, the Security Agreement, the Spread Account Agreement,
the Receivables Purchase Agreement and Assignment and the Term
Transactions, and as permitted by its certificate of incorporation.

(l) INSOLVENCY. Neither AFL nor ARFC shall commence with respect
to ARFC or the Issuer, as the case may be, any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to the bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect
to it, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, corporation or other relief with respect to it or
(B) seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, or make a
general assignment for the benefit of its creditors. Neither AFL nor ARFC
shall take any action in furtherance of, or indicating the consent to,
approval of, or acquiescence in any of the acts set forth above. ARFC shall
not admit in writing its inability to pay its debts.

(m) DIVIDENDS. ARFC shall not declare or make payment of (i) any
dividend or other distribution on any shares of its capital stock, or (ii)
any

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<PAGE>

payment on account of the purchase, redemption, retirement or
acquisition of any option, warrant or other right to acquire shares of its
capital stock, unless (in each case) at the time of such declaration or
payment (and after giving effect thereto) no amount payable by ARFC under
any Transaction Document is then due and owing but unpaid.

Section 2.04. REPRESENTATIONS AND WARRANTIES OF AFL AND THE ISSUER.

Each of AFL and the Issuer represent and warrant as of the date
hereof and as of the Date of Issuance, as follows:

(a) DUE ORGANIZATION AND QUALIFICATION. The Issuer is duly
formed and validly existing as a Delaware statutory business trust and
is in good standing under the laws of the State of Delaware, with power
and authority to own its properties and to conduct its business. The
Issuer is duly qualified to do business, is in good standing and has
obtained all necessary licenses, permits, charters, registrations and
approvals (together, "approvals") necessary for the conduct of its
business as described in the Transaction Documents and the performance
of its obligations under the Transaction Documents, in each jurisdiction
in which the failure to be so qualified or to obtain such approvals
would render the Receivables in such jurisdiction or any Transaction
Document unenforceable in any respect or would otherwise have a material
adverse effect upon the Transaction.

(b) POWER AND AUTHORITY. The Issuer has all necessary trust
power and authority to conduct its business as currently conducted, to
execute, deliver and perform its obligations under this Agreement and
each other Transaction Document to which the Issuer is a party and to
carry out the terms of each such Transaction Document, and has full
power and authority to sell and assign the Receivables as contemplated
by the Transaction Documents and to consummate the Transaction.

(c) DUE AUTHORIZATION. The execution, delivery and performance
of this Agreement and each other Transaction Document to which the
Issuer is a party has been duly authorized by all necessary action on
the part of the Issuer and does not require any additional approvals or
consents or other action by or any notice to or filing with any Person
by or on behalf of the Issuer, including, without limitation, any
governmental entity.

(d) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement and each other Transaction Document to which the Issuer
is a party, the consummation of the Transaction nor the satisfaction of
the terms and conditions of this Agreement and each other Transaction
Document to which the Issuer is a party,

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<PAGE>

award currently in effect having applicability to the Issuer or any
of its properties, including regulations issued by an
administrative agency or other governmental authority having
supervisory powers over the Issuer,

(ii) constitutes a default by the Issuer under or a breach
of any provision of any loan agreement, mortgage, indenture or
other agreement or instrument to which the Issuer is a party or by
which it or any of its properties is or may be bound or affected, or

(iii) results in or requires the creation of any Lien upon
or in respect of any of the Issuer's assets except as otherwise
expressly contemplated by the Transaction Documents.

(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation pending, or, to the Issuer's best knowledge, threatened,
before any court, regulatory body, administrative agency, arbitrator or
governmental agency or instrumentality having jurisdiction over the
Issuer or its properties: (A) asserting the invalidity of this Agreement
or any other Transaction Document to which the Issuer is a party, (B)
seeking to prevent the issuance of the Securities or the consummation of
the Transaction, (C) seeking any determination or ruling that might
materially and adversely affect the validity or enforceability of this
Agreement or any other Transaction Document to which the Issuer is a
party, (D) which might result in a Material Adverse Change with respect
to the Issuer or (E) which might adversely affect the federal or state
tax attributes of the Securities or the Issuer.

(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction
Documents to which the Issuer is a party, when executed and delivered by
the Issuer, and assuming due authorization, execution and delivery by
the other parties thereto, will constitute the legal, valid and binding
obligation of the Issuer enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general equitable principles. The Securities, when
executed, authenticated and delivered in accordance with the Indenture,
will be validly issued and outstanding and entitled to the benefits of
the Indenture, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles.

(g) NO CONSENTS. No consent, license, approval or
authorization from, or registration, filing or declaration with, any
regulatory body, administrative agency, or other governmental
instrumentality, nor any consent, approval, waiver or notification of
any creditor, lessor or other non-governmental person, is required in
connection with the execution, delivery and performance by the Issuer of
this Agreement or of any other Transaction Document to which the Issuer
is a party, except (in each case) such as have been obtained and are in
full force and effect.

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(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by the Issuer in the conduct of its
business violates any law, regulation, judgment, agreement, order or
decree applicable to the Issuer which, if enforced, would result in a
Material Adverse Change with respect to the Issuer.

(i) ACCURACY OF INFORMATION. None of the Provided Documents
contain any statement of a material fact with respect to the Issuer or
the Transaction that was untrue or misleading in any material respect
when made (except insofar as any such Document was connected or
superseded by a subsequent Provided Document). There is no fact known to
AFL or the Issuer which has a material possibility of causing a Material
Adverse Change with respect to either of them or which has a material
possibility of impairing the value or marketability of the Receivables
and related Other Conveyed Property, taken as a whole, or decreasing the
profitability that amounts due in respect of the Receivables and related
Other Conveyed Property will be collected as due. Since the furnishing
of the Provided Documents, there has been no change, or any development
or event involving a prospective change known to AFL or the Issuer that
would render any representation or warranty or other statement made by
either of them in any of the Provided Documents untrue or misleading in
any material respect.

(j) ERISA. The Issuer does not maintain or contribute to, or
have any obligation to maintain or contribute to, any Plan.

(k) COMPLIANCE WITH SECURITIES LAWS. The Issuer is not
required to be registered as an "investment company" under the
Investment Company Act and is not subject to the information reporting
requirements of the Exchange Act.

(l) TRANSACTION DOCUMENTS. Each of the representations and
warranties of the Issuer contained in the Transaction Documents is true
and correct in all material respects and the Issuer hereby makes each
such representation and warranty made by it to, and for the benefit of,
Financial Security as if the same were set forth in full herein.

(m) SPECIAL PURPOSE ENTITY.

(i) The capital of the Issuer is adequate for the business
and undertakings of the Issuer.

(ii) Other than as provided in this Agreement, the
Indenture, the Sale and Servicing Agreement, the Security Agreement
and the Trust Agreement, the Issuer is not engaged in any business
transactions with AFL or any affiliate of AFL.

(iii) The Issuer's funds and assets are not, and will not
be, commingled with the funds of any other Person, except as
provided in the Transaction Documents.

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(n) SOLVENCY; FRAUDULENT CONVEYANCE. The Issuer is solvent and
will not be rendered insolvent by the Transaction and, after giving
effect to the Transaction, the Issuer will not be left with an
unreasonably small amount of capital with which to engage in its
business. The Issuer does not intend to incur, or believe that it has
incurred, debts beyond its ability to pay such debts as they mature. The
Issuer does not contemplate the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a
receiver, liquidator, conservator, trustee or similar official in
respect of the Issuer or any of its assets. The Issuer is not entering
into the Transaction Documents or consummating the transactions
contemplated thereby with any intent to hinder, delay or defraud any of
the Issuer's creditors.

(o) NO PRIOR ACTIVITIES. The Issuer has not engaged in any
activities or entered into any agreements prior to this Transaction.

Section 2.05. AFFIRMATIVE COVENANTS OF AFL AND THE ISSUER.

Each of AFL and the Issuer hereby agree that during the Term of this
Agreement, unless Financial Security shall otherwise expressly consent in
writing, as follows:

(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Issuer
shall perform each of its respective obligations under the Transaction
Documents and shall comply with all material requirements of, and the
Securities shall be offered and sold in accordance with, any law, rule
or regulation applicable to it or thereto, or that are required in
connection with its performance under any of the Transaction Documents.
The Issuer will not cause or permit to become effective any amendment to
or modification of any of the Transaction Documents to which it is a
party unless (i) so long as no Insurer Default shall have occurred and
be continuing Financial Security shall have previously approved in
writing the form of such amendment or modification or (ii) if an Insurer
Default shall have occurred and be continuing such amendment would not
adversely affect the interests of Financial Security. The Issuer shall
not take any action or fail to take any action that would interfere with
the enforcement of any rights under the Transaction Documents.

(b) BOOKS AND RECORDS; OTHER INFORMATION. The Issuer shall
keep or cause to be kept in reasonable detail books and records of
account of its assets and business. The Issuer shall furnish or cause
to be furnished to Financial Security promptly upon receipt thereof,
copies of all reports, statements, certifications, schedules, or other
similar items delivered to or by the Issuer pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data as
Financial Security may reasonably request; PROVIDED, HOWEVER, that the
Issuer shall not be required to deliver any such items if provision by
some other party to Financial Security is required under the Transaction
Documents unless such other party wrongfully fails to deliver such item.
The Issuer shall, upon the request of Financial Security, permit
Financial Security or its authorized agents (A) to

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<PAGE>

inspect its books and records as they may relate to the Securities, the
Receivables, the obligations of the Issuer under the Transaction
Documents, the Transaction; (B) to discuss the affairs, finances and
accounts of the Issuer with its officers upon Financial Security's
reasonable request; and (C) upon the occurrence of a Special Event, to
discuss the affairs, finances and accounts of the Issuer with its
independent accountants, PROVIDED that an officer of the Issuer shall
have the right to be present during such discussions. Such inspections
and discussions shall be conducted during normal business hours and
shall not unreasonably disrupt the business of such Person. The books
and records of the Issuer will be maintained at Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware, unless such Person shall otherwise advise the parties hereto
in writing.

(c) COMPLIANCE CERTIFICATE. The Issuer shall deliver to
Financial Security within 90 days after the close of each fiscal year of
the Issuer (and, if a Special Event has occurred, within 45 days after
the close of each of the first three quarters of each fiscal year of the
Issuer), a certificate signed by a President, Vice President or duly
authorized agent stating that:

(i) a review of the Issuer's performance under the
Transaction Documents during such period has been made under such
officer's supervision; and

(ii) to the best of such officer's knowledge following
reasonable inquiry, no Special Event, Default or Event of Default
has occurred with respect to such Person, or if a Special Event,
Default or Event of Default has occurred with respect to such
Person, specifying the nature thereof and, if such Person has a
right to cure any such Default or Event of Default pursuant to
Section 5.01, stating in reasonable detail the steps, if any, being
taken by such Person to cure such Default or Event of Default or to
otherwise comply with the terms of the agreement to which such
Default or Event of Default relates.

(d) NOTICE OF MATERIAL EVENTS. The Issuer shall promptly inform
Financial Security in writing of the occurrence of any of the following:

(i) the submission of any claim or the initiation of any
legal process, litigation or administrative or judicial
investigation (A) against the Issuer pertaining to the Receivables
in general, (B) with respect to a material portion of the
Receivables or (C) in which a request has been made for
certification as a class action (or equivalent relief) that would
involve a material portion of the Receivables;

(ii) any change in the location of such Person's principal
office or any change in the location of the books and records of the
Issuer;

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(iii) the occurrence of any Default or Special Event (which
notice shall also be delivered to the Rating Agencies);

(iv) the commencement or threat of any rule making or
disciplinary proceedings or any proceedings instituted by or
against the Issuer in any federal, state or local court or before
any governmental body or agency, or before any arbitration board,
or the promulgation of any proceeding or any proposed or final rule
which, if adversely determined, would result in a Material Adverse
Change with respect to the Issuer;

(v) the commencement of any proceedings by or against the
Issuer under any applicable bankruptcy, reorganization,
liquidation, rehabilitation, insolvency or other similar law now or
hereafter in effect or of any proceeding in which a receiver,
liquidator, conservator, trustee or similar official shall have
been, or may be, appointed or requested for the Issuer or any of
its assets;

(vi) the receipt of notice that (A) the Issuer is being
placed under regulatory supervision, (B) any license, permit,
charter, registration or approval necessary for the conduct of the
Issuer's business is to be, or may be, suspended or revoked, or (C)
the Issuer is to cease and desist any practice, procedure or policy
employed by the Issuer in the conduct of its business, and such
cessation may result in a Material Adverse Change with respect to
the Issuer; or

(vii) any other event, circumstance or condition that has
resulted, or which such Person reasonably believes might result, in
a Material Adverse Change in respect of the Issuer.

(e) FURTHER ASSURANCES. The Issuer will file all necessary
financing statements, assignments or other instruments, and any
amendments or continuation statements relating thereto, necessary to be
kept and filed in such manner and in such places as may be required by
law to preserve and protect fully the Lien on and security interest in,
and all rights of the Collateral Agent, for the benefit of the Trustee
for the Noteholders and Financial Security, with respect to, the
Receivables, the Collection Account and the Note Distribution Account.
In addition, the Issuer shall, upon the request of Financial Security,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within thirty (30) days of such
request, such amendments hereto and such further instruments and take
such further action as may be reasonably necessary to effectuate the
intention, performance and provisions of the Transaction Documents or to
protect the interest of the Collateral Agent, for the benefit of the
Trustee for the Noteholders and Financial Security, in the Receivables,
free and clear of all Liens and Restrictions on Transferability, except
the Restrictions on Transferability imposed by the Transaction
Documents. In addition, the Issuer agrees to cooperate with the Rating
Agencies in connection

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with any review of the Transaction which may be undertaken by the Rating
Agencies after the date hereof.

(f) REDEMPTION OF SECURITIES. The Issuer shall, upon the
repayment of outstanding Advances and termination of the Issuer's
obligation to make further Advances pursuant to the Sale and Servicing
Agreement or otherwise, furnish to Financial Security a notice of such
repayment and termination, and, upon payment of all of the Securities
and the expiration of the term of the Policy, surrender the Policy to
Financial Security for cancellation.

(g) THIRD-PARTY BENEFICIARY. The Issuer agrees that Financial
Security shall have all rights of a third-party beneficiary in respect
of the Sale and Servicing Agreement and hereby incorporates and restates
its representations, warranties and covenants as set forth therein for
the benefit of Financial Security.

(h) DISCLOSURE DOCUMENT. Any Offering Document delivered with
respect to the Securities shall clearly disclose that the Policy is not
covered by the property/casualty Insurance Security Fund specified in
Article 76 of the New York Insurance Law. In addition, any Offering
Document delivered with respect to the Securities which includes
financial statements of Financial Security prepared in accordance with
generally accepted accounting principles shall include the following
statement immediately preceding such financial statements:

The New York State Insurance Department
recognizes only statutory account practices for
determining and reporting the financial
condition and results of operations of an
insurance company, for determining its solvency
under the New York Insurance Law, and for
determining where its financial condition
warrants the payment of a dividend to its
stockholders. No consideration is given by the
New York State Insurance Department to
financial statements prepared in accordance
with generally accepted accounting principles
in making such determinations.

(i) SPECIAL PURPOSE ENTITY.

(i) The Issuer shall conduct its business solely in its
own name through its duly authorized officers or agents so as not
to mislead others as to the identity of the entity with which those
others are concerned. It particularly will use its best efforts to
avoid the appearance of conducting business on behalf of AFL or any
affiliate thereof or and to avoid the appearance that the assets of
the Issuer are available to pay the creditors of AFL or any
affiliate thereof. Without limiting the generality of the
foregoing, all oral and written communications, including, without
limitation, letters, invoices, purchase orders, contracts,
statements and loan applications, will be made solely in the name
of the Issuer.

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(ii) The Issuer shall maintain trust records and books of
account separate from those of AFL and any affiliate thereof. The
Issuer's books and records shall clearly reflect the transfer of
the Receivables and related Other Conveyed Property to the Issuer.

(iii) The Issuer shall obtain proper authorization from its
equity owners of all trust action requiring such authorization and
copies of such authorization shall be delivered to Financial
Security within two weeks of such authorization.

(iv) Although the organizational expenses of the Issuer
have been paid by AFL, operating expenses and liabilities of the
Issuer shall be paid from its own funds.

(v) The annual financial statements of the Issuer shall
disclose the effects of its transactions in accordance with
generally accepted accounting principles and shall disclose that
the assets of the Issuer are not available to pay creditors of AFL
or any affiliate thereof.

(vi) The resolutions, agreements and other instruments of
the Issuer underlying the transactions described in this Agreement
and in the other Transaction Documents shall be continuously
maintained by the Issuer as official records of the Issuer
separately identified and held apart from the records of AFL and
each affiliate thereof.

(vii) The Issuer shall maintain an arm's-length
relationship with AFL and the affiliates thereof and will not hold
itself out as being liable for the debts of AFL or any affiliate
thereof.

(viii) The Issuer shall keep its assets and liabilities
wholly separate from those of all other entities, including, but
not limited to, AFL and the affiliates thereof.

(ix) The books and records of the Issuer will be
maintained at Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware, unless it shall
otherwise advise the parties hereto in writing. The Issuer shall,
upon the request of Financial Security, permit Financial Security
or its authorized agents to inspect its books and records.

(j) MAINTENANCE OF LICENSES. The Issuer shall maintain all
licenses, permits, charters and registrations which are material to the
performance by of its obligations under this Agreement and each other
Transaction Document to which is a party or by which it is bound.

(k) INCORPORATION OF COVENANTS. The Issuer agrees to comply
with each of the Issuer's covenants set forth in the Transaction
Documents and hereby incorporates such covenants by reference as if each
were set forth herein.

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<PAGE>

(l) TAX MATTERS. The Issuer will not take any action that will
cause the Issuer to be taxable as an association (or publicly traded
partnership) or taxable as a corporation for federal and state income
tax purposes.

Section 2.06. NEGATIVE COVENANTS OF AFL AND THE ISSUER.

Each of AFL and the Issuer hereby agree that during the Term of this
Agreement, unless Financial Security shall otherwise expressly consent in
writing, as follows:

(a) RESTRICTIONS ON LIENS. The Issuer shall not (i) create,
incur or suffer to exist, or agree to create, incur or suffer to exist,
or consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any
Lien or Restriction on Transferability of the Receivables except for (w)
the Lien in favor of the Collateral Agent, for the benefit of the
Trustee for the Noteholders and Financial Security, (x) Liens for taxes
if such taxes shall not at the time be due and payable or if the Issuer
shall currently be contesting the validity thereof in good faith by
appropriate proceedings and shall have set aside on its books adequate
reserves with respect thereto, and (y) the Restrictions on
Transferability imposed by the Transaction Documents or (ii) sign or
file under the Uniform Commercial Code of any jurisdiction any financing
statement which names the Issuer as a debtor, or sign any security
agreement authorizing any secured party thereunder to file such
financing statement, with respect to the Receivables, except in each
case any such instrument solely securing the rights and preserving the
Lien of the Collateral Agent, for the benefit of the Trustee for the
Noteholders and Financial Security.

(b) IMPAIRMENT OF RIGHTS. The Issuer shall not take any
action, or fail to take any action, if such action or failure to take
action may (i) interfere with the enforcement of any rights under the
Transaction Documents that are material to the rights, benefits or
obligations of the Trustee, the Noteholders or Financial Security, (ii)
result in a Material Adverse Change in respect of the Receivables or
(iii) impair the ability of the Issuer to perform its obligations under
the Transaction Documents, including any consolidation, merger with any
Person or any transfer of all or any material amount of the assets of
the Issuer to any other Person if such consolidation, merger or transfer
would materially impair the net worth of the Issuer or any successor
Person obligated, after such event, to perform such Person's obligations
under the Transaction Documents.

(c) WAIVER, AMENDMENTS, ETC. The Issuer shall not waive,
modify or amend, or consent to any waiver, modification or amendment of,
any of the provisions of any of the Transaction Documents unless (i) if
no Insurer Default shall have occurred and be continuing Financial
Security shall have occurred and be continuing Financial Security shall
have consented thereto in writing or (ii) if an Issuer Default shall
have occurred and be continuing which would adversely affect the
interests of Financial Security.

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<PAGE>

(d) SUCCESSORS. The Issuer shall not terminate or designate,
or consent to the termination or designation of, the servicer, back-up
servicer or collateral agent or any successor thereto without the prior
approval of Financial Security.

(e) OTHER ACTIVITIES. The Issuer shall not issue securities
other than the Securities or create, incur, assume or suffer to exist
any Indebtedness or sell, transfer, exchange or otherwise dispose of any
of its assets, or engage in any business or activity, except for the
Transaction and otherwise only if the following conditions are met: (i)
no other securities of the Issuer will be downgraded or listed for
credit review for possible downgrade by reason of such transaction, (ii)
the shadow rating of the Securities is not reduced by reason of such
transaction, (iii) all parties to such transaction enter into agreements
with the Issuer (and satisfactory to Financial Security), with Financial
Security as a named third-party beneficiary, not to commence a
bankruptcy, reorganization or similar proceeding against the Issuer.

(f) SUBSIDIARIES. The Issuer shall not form, or cause to be
formed, any Subsidiaries.

(g) NO MERGERS. The Issuer shall not consolidate with or merge
into any Person or transfer all or any material amount of its assets to
any Person or liquidate or dissolve.

(h) INSOLVENCY. The Issuer shall not commence with respect to
ARFC any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to the
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, corporation or other relief with respect to it or (B)
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, or
make a general assignment for the benefit of its creditors. Neither AFL
nor the Issuer shall take any action in furtherance of, or indicating
the consent to, approval of, or acquiescence in any of the acts set
forth above. The Issuer shall not admit in writing its inability to pay
its debts.

ARTICLE III

THE POLICY; REIMBURSEMENT; INDEMNIFICATION; LIMITED RECOURSE

Section 3.01. ISSUANCE OF THE POLICY.

Financial Security agrees to issue the Policy subject to satisfaction
of each and all of the conditions precedent set forth in Appendix B hereto.

Section 3.02. PAYMENT OF FEES AND PREMIUM.

(a) PREMIUM LETTER FEES AND EXPENSES. On the Date of Issuance,
AFL shall pay or cause to be paid the amounts specified with respect to
fees, expenses

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<PAGE>

and disbursements in the Premium Letter, unless otherwise agreed between
AFL and Financial Security.

(b) LEGAL FEES. On the Date of Issuance, AFL shall pay or
cause to be paid legal fees and disbursements incurred by Financial
Security in connection with the issuance of the Policy, unless otherwise
agreed between AFL and Financial Security.

(c) RATING AGENCY FEES. The initial fees of S&P and Moody's
with respect to the Securities and the Transaction shall be paid by AFL
in full on the Date of Issuance, or otherwise provided for to the
satisfaction of Financial Security. All periodic and subsequent fees of
S&P or Moody's with respect to, and directly allocable to, the
Securities and the Transaction shall be for the account of, and shall be
billed to, AFL. The fees for any other rating agency shall be paid by
the party requesting such other agency's rating, unless such other
agency is a substitute for S&P or Moody's in the event that S&P or
Moody's is no longer determining a capital charge with respect to the
Policy by Financial Security, in which case the cost for such agency
shall be paid by AFL.

(d) AUDITORS' FEES. AFL shall pay on demand any fees of
Financial Security's auditors payable in respect of any Offering
Document that are incurred after the Date of Issuance. It is understood
that Financial Security's auditors shall not incur any additional fees
in respect of future Offering Documents except at the request of or with
the consent of AFL.

(e) PREMIUM. In consideration of the issuance by Financial
Security of the Policy, Financial Security shall be entitled to receive
the Premium as and when due in accordance with the terms of the Premium
Letter. The Premium paid hereunder or under the Sale and Servicing
Agreement shall be nonrefundable without regard to whether Financial
Security makes any payment under the Policy or any other circumstances
relating to the Securities or provision being made for payment of the
Securities prior to maturity.

Section 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION.

AFL agrees to pay to Financial Security the following amounts as and
when incurred:

(a) a sum equal to the total of all amounts paid by Financial
Security under the Policy;

(b) any and all out-of-pocket charges, fees, costs and expenses
which Financial Security may reasonably pay or incur, including, but not
limited to, attorneys' and accountants' fees and expenses, in connection
with (i) in the event of payments under the Policy, any accounts
established to facilitate payments under the Policy, to the extent
Financial Security has not been immediately reimbursed on the date that
any amount is paid by Financial Security under the Policy, or other
administrative expenses relating to such payments under the

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<PAGE>

Policy, (ii) the enforcement, defense or preservation of any rights in
respect of any of the Transaction Documents, including defending,
monitoring or participating in any litigation or proceeding (including
any insolvency or bankruptcy proceeding in respect of any Transaction
participant or any affiliate thereof) relating to any of the Transaction
Documents, any party to any of the Transaction Documents or the
Transaction, (iii) any amendment, waiver or other action with respect
to, or related to, any Transaction Document whether or not executed or
completed, or (iv) any review or investigation made by Financial
Security in those circumstances where its approval or consent is sought
under any of the Transaction Documents;

(c) interest on any and all amounts described in Section
3.03(a) or (b) or Section 3.02(e) from the date due to Financial
Security pursuant to the provisions hereof until payment thereof in
full, payable to Financial Security at the Late Payment Rate per annum;
and

(d) any payments made by Financial Security on behalf of, or
advanced to, AFL, in its capacity as Servicer, or the Trustee,
including, without limitation, any amounts payable by AFL, in its
capacity as Servicer, or the Trustee pursuant to the Securities or any
other Transaction Documents; and any payments made by Financial Security
as, or in lieu of, any servicing, management, trustee, custodial or
administrative fees payable, in the sole discretion of Financial
Security to third parties in connection with the Transaction.

Section 3.04. INDEMNIFICATION.

(a) INDEMNIFICATION BY AFL. In addition to any and all rights
of reimbursement, indemnification, subrogation and any other rights
pursuant hereto or under law or in equity, AFL hereby agrees to pay, and
to protect, indemnify and save harmless, Financial Security and its
officers, directors, shareholders, employees, agents and each Person, if
any, who controls Financial Security within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from
and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or
expenses (including, without limitation, fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any
nature arising out of or relating to the transactions contemplated by
the Transaction Documents by reason of:

(i) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director,
officer, employee or agent of AFL, ARFC or the Issuer;

(ii) the breach by AFL, ARFC or the Issuer of any
representation, warranty or covenant under any of the Transaction
Documents or the occurrence, in respect of AFL, ARFC or the Issuer
under any of the Transaction Documents of any "event of default" or
any event which, with

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<PAGE>

the giving of notice or the lapse of time or both, would constitute
any "event of default"; or

(iii) any untrue statement or alleged untrue statement of a
material fact contained in any Offering Document or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as such claims arise out of or are based
upon any untrue statement or omission in information included in an
Offering Document and furnished by Financial Security in writing
expressly for use therein (all such information so furnished by
Financial Security being referred to herein as "FINANCIAL SECURITY
INFORMATION").

(b) CONDUCT OF ACTIONS OR PROCEEDINGS. If any action or
proceeding (including any governmental investigation) shall be brought
or asserted against Financial Security, any officer, director,
shareholder, employee or agent of Financial Security or any Person
controlling Financial Security (individually, an "INDEMNIFIED PARTY"
and, collectively, the "INDEMNIFIED PARTIES") in respect of which
indemnity may be sought from AFL (the "INDEMNIFYING PARTY") hereunder,
Financial Security shall promptly notify the Indemnifying Party in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel satisfactory to Financial Security
and the payment of all expenses. An Indemnified Party shall have the
right to employ separate counsel in any such action and to participate
in the defense thereof at the expense of the Indemnified Party;
PROVIDED, HOWEVER, that the fees and expenses of such separate counsel
shall only be at the expense of the Indemnifying Party if (i) the
Indemnifying Party has agreed to pay such fees and expenses, (ii) the
Indemnifying Party shall have failed to assume the defense of such
action or proceeding and employ counsel satisfactory to Financial
Security in any such action or proceeding or (iii) the named parties to
any such action or proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party, and the
Indemnified Party shall have been advised by counsel that (A) there may
be one or more legal defenses available to it which are different from
or additional to those available to the Indemnifying Party and (B) the
representation of the Indemnifying Party and the Indemnified Party by
the same counsel would be inappropriate or contrary to prudent practice
(in which case, if the Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or to proceedings
in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for the Indemnified
Parties, which firm shall be designated in writing by Financial
Security). The Indemnifying Party shall not be liable for any settlement
of any such action or proceeding effected without its

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<PAGE>

written consent but, if settled with its written consent, or if there be
a final judgment for the plaintiff in any such action or proceeding with
respect to which the Indemnifying Party shall have received notice in
accordance with this subsection (b), the Indemnifying Party agrees to
indemnify and hold the Indemnified Parties harmless from and against any
loss or liability by reason of such settlement or judgment.

(c) CONTRIBUTION. To provide for just and equitable
contribution if the indemnification provided by the Indemnifying Party
is determined to be unavailable for any Indemnified Party (other than
due to application of this Section), the Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the basis
of the relative fault of the Indemnifying Party, on the one hand, and
the Indemnified Party, on the other hand.

Section 3.05. SUBROGATION.

Subject only to the priority of payment provisions of the Indenture
and the Security Agreement, each of the parties hereto acknowledges that, to the
extent of any payment made by Financial Security pursuant to the Policy,
Financial Security is to be fully subrogated to the extent of such payment and
any additional interest due on any late payment, to the rights of the
Noteholders to any moneys paid or payable in respect of the Securities under the
Transaction Documents or otherwise. Each of the parties hereto agrees to such
subrogation and, further, agrees to execute such instruments and to take such
actions as, in the sole judgment of Financial Security, are necessary to
evidence such subrogation and to perfect the rights of Financial Security to
receive any moneys paid or payable in respect of the Securities under the
Transaction Documents or otherwise.

Section 3.06. CERTAIN OBLIGATIONS NOT RECOURSE TO AFL AND ARFC.

Notwithstanding any provision of this Agreement to the contrary, the
payment obligations provided in Section 3.03(a) and (d), in each case, to the
extent that such payment obligations do not arise from any failure or default in
the performance by AFL or ARFC of any of its obligations under the Transaction
Documents, and any interest on the foregoing in accordance with Section 3.03(c),
shall be non-recourse obligations with respect to AFL and ARFC, respectively,
and shall be payable only from monies available for such payment in accordance
with the provisions of the Sale and Servicing Agreement.

Section 3.07. LIMITED RECOURSE TO ISSUER.

Financial Security covenants and agrees that it shall not look to any
property or assets of the Issuer, other than amounts paid to the Issuer under
the Transaction Documents and to amounts payable to Financial Security pursuant
to the Transaction Documents in respect of the Issuer's obligations hereunder.
To the extent that such funds are insufficient, any payment obligation or claim
arising hereunder shall not constitute a claim against the Issuer.

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ARTICLE IV

FURTHER AGREEMENTS

Section 4.01. EFFECTIVE DATE; TERM OF AGREEMENT.

This Agreement shall take effect on the Date of Issuance and shall
remain in effect until the later of (a) such time as Financial Security is no
longer subject to a claim under the Policy and the Policy shall have been
surrendered to Financial Security for cancellation and (b) all amounts payable
to Financial Security and the Noteholders under the Transaction Documents and
under the Securities have been paid in full; PROVIDED, HOWEVER, that the
provisions of Sections 3.02, 3.03 and 3.04 hereof shall survive any termination
of this Agreement.

Section 4.02. OBLIGATIONS ABSOLUTE.

(a) The payment obligations of AFL, ARFC and the Issuer
hereunder shall be absolute and unconditional, and shall be paid
strictly in accordance with this Agreement under all circumstances
irrespective of (i) any lack of validity or enforceability of, or any
amendment or other modifications of, or waiver with respect to, any of
the Transaction Documents, the Securities or the Policy; (ii) any
exchange or release of any other obligations hereunder; (iii) the
existence of any claim, setoff, defense, reduction, abatement or other
right which AFL, ARFC or the Issuer may have at any time against
Financial Security or any other Person; (iv) any document presented in
connection with the Policy proving to be forged, fraudulent, invalid or
insufficient in any respect, including any failure to strictly comply
with the terms of the Policy, or any statement therein being untrue or
inaccurate in any respect; (v) any failure of the Issuer to receive the
proceeds from the sale of the Securities; (vi) any breach by AFL, ARFC
or the Issuer of any representation, warranty or covenant contained in
any of the Transaction Documents; or (vii) any other circumstances,
other than payment in full, which might otherwise constitute a defense
available to, or discharge of, AFL, ARFC or the Issuer in respect of any
Transaction Document.

(b) AFL, ARFC and the Issuer and any and all others who are now
or may become liable for all or part of the obligations of such Persons
under this Agreement agree to be bound by this Agreement and (i) to the
extent permitted by law, waive and renounce any and all redemption and
exemption rights and the benefit of all valuation and appraisement
privileges against the indebtedness, if any, and obligations evidenced
by any Transaction Document or by any extension or renewal thereof, (ii)
waive presentment and demand for payment, notices of nonpayment and of
dishonor, protest of dishonor and notice of protest; (iii) waive all
notices in connection with the delivery and acceptance hereof and all
other notices in connection with the performance, default or enforcement
of any payment hereunder except as required by the Transaction
Documents; (iv) waive all rights of abatement, diminution, postponement
or deduction, or to any defense other than payment, or to any right of
setoff or recoupment arising out of any

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<PAGE>

breach under any of the Transaction Documents, by any party thereto or
any beneficiary thereof, or out of any obligation at any time owing to
AFL, ARFC or the Issuer; (v) agree that any consent, waiver or
forbearance hereunder with respect to an event shall operate only for
such event and not for any subsequent event; (vi) consent to any and all
extensions of time that may be granted by Financial Security with
respect to any payment hereunder or other provisions hereof and to the
release of any security at any time given for any payment hereunder, or
any part thereof, with or without substitution, and to the release of
any Person or entity liable for any such payment; and (vii) consent to
the addition of any and all other makers, endorsers, guarantors and
other obligors for any payment hereunder, and to the acceptance of any
and all other security for any payment hereunder, and agree that the
addition of any such obligors or security shall not affect the liability
of the parties hereto for any payment hereunder.

(c) Nothing herein shall be construed as prohibiting AFL, ARFC
or the Issuer from pursuing any rights or remedies it may have against
any Person other than Financial Security in a separate legal proceeding.

Section 4.03. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS.

(a) This Agreement shall be a continuing obligation of the
parties hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
None of AFL, ARFC nor the Issuer may assign its rights under this
Agreement, or delegate any of its duties hereunder, without the prior
written consent of Financial Security. Any assignment made in violation
of this Agreement shall be null and void.

(b) Financial Security shall have the right to give
participations in its rights under this Agreement and to enter into
contracts of reinsurance with respect to the Policy upon such terms and
conditions as Financial Security may in its discretion determine;
PROVIDED, HOWEVER, that no such participation or reinsurance agreement
or arrangement shall relieve Financial Security of any of its
obligations hereunder or under the Policy.

(c) In addition, Financial Security shall be entitled to assign
or pledge to any bank or other lender providing liquidity or credit with
respect to the Transaction or the obligations of Financial Security in
connection therewith any rights of Financial Security under the
Transaction Documents or with respect to any real or personal property
or other interests pledged to Financial Security, or in which Financial
Security has a security interest, in connection with the Transaction.

(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any
Noteholder, other than Financial Security, against AFL, ARFC or the
Issuer, and all the terms, covenants, conditions, promises and
agreements contained herein shall be for the

32
<PAGE>

sole and exclusive benefit of the parties hereto and their successors
and permitted assigns. Neither the Trustee nor any Noteholder shall have
any right to payment from any premiums paid or payable hereunder or from
any other amounts paid by AFL or the Issuer pursuant to Section 3.02,
3.03 or 3.04 hereof.

Section 4.04. LIABILITY OF FINANCIAL SECURITY.

Neither Financial Security nor any of its officers, directors or
employees shall be liable or responsible for: (a) the use which may be made of
the Policy by the Trustee or for any acts or omissions of the Trustee in
connection therewith or (b) the validity, sufficiency, accuracy or genuineness
of documents delivered to Financial Security (or its Fiscal Agent) in connection
with any claim under the Policy, or of any signatures thereon, even if such
documents or signatures should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged (unless Financial Security had
actual knowledge thereof). In furtherance and not in limitation of the
foregoing, Financial Security (or its Fiscal Agent) may accept documents that
appear on their face to be in order, without responsibility for further
investigation.

ARTICLE V

EVENTS OF DEFAULT; REMEDIES

Section 5.01. EVENTS OF DEFAULT.

The occurrence of any of the following events shall constitute an
Event of Default hereunder:

(a) any demand for payment shall be made under the Policy;

(b) any representation or warranty made by AFL, ARFC or the
Issuer under any of the Transaction Documents, or in any certificate or
report furnished under any of the Transaction Documents, shall prove to
be untrue or incorrect in any material respect; PROVIDED, HOWEVER, that
if AFL, ARFC or the Issuer effectively cures any such defect in any
representation or warranty under any Transaction Document, or
certificate or report furnished under any Transaction Document, within
the time period specified in the relevant Transaction Document as the
cure period therefor, such defect shall not in and of itself constitute
an Event of Default hereunder;

(c) (i) AFL, ARFC or the Issuer shall fail to pay when due any
amount payable by it, shall fall to effect any purchase or repurchase
required to be made by it, in each case, hereunder or under any of the
Transaction Documents unless such amounts are paid in full within any
applicable cure period explicitly provided for under the relevant
Transaction Document; (ii) AFL, ARFC or the Issuer shall have asserted
that any material provision of the Transaction Documents to which it is
a party is not valid and binding on the parties thereto; or (iii) any
court, governmental authority or agency having jurisdiction over any of
the parties to any of the Transaction Documents or any property thereof
shall find

33
<PAGE>

or rule that any material provision of any of the Transaction
Documents is not valid and binding on the parties thereto;

(d) AFL, ARFC or the Issuer shall fail to perform or observe
any other covenant or agreement contained in any of the Transaction
Documents (except for the obligations described under clause (c) above)
and such failure shall continue beyond any applicable cure period
explicitly provided for under the relevant Transaction Document;

(e) any of AFL, ARFC or the Issuer shall fail to pay its debts
generally as they come due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the
benefit of creditors, or shall institute any proceeding seeking to
adjudicate it insolvent or seeking a liquidation, or shall take
advantage of any insolvency act, or shall commence a case or other
proceeding naming it as debtor under the United States Bankruptcy Code
or similar law, domestic or foreign, or a case or other proceeding shall
be commenced against any of AFL, ARFC or the Issuer under the United
States Bankruptcy Code or similar law, domestic or foreign, or any
proceeding shall be instituted against any of AFL, ARFC or the Issuer
seeking liquidation of its assets and such Person shall fail to take
appropriate action resulting in the withdrawal or dismissal of such
proceeding within 30 days or there shall be appointed or any of AFL,
ARFC or the Issuer shall consent to, or acquiesce in, the appointment of
a receiver, liquidator, conservator, trustee or similar official in
respect of such Person or the whole or any substantial part of its
properties or assets or such Person shall take any corporate action in
furtherance of any of the foregoing;

(f) the occurrence of an Insurance Agreement Event of Default
with respect to any Term Transaction, which Insurance Agreement Event of
Default is not defined as a "Portfolio Performance Event of Default" in
the related Insurance Agreement;

(g) ARFC shall fall to make a deposit with respect to any WAC
Deficiency Amount in accordance with the provisions of Section 4.1(f) of
the Sale and Servicing Agreement, and such failure shall continue for
one Business Day;

(h) it shall be determined on any Determination Date that the
Collateral Test shall fail to have been satisfied as of the immediately
preceding Accounting Date, after taking into account any deposit made by
ARFC to the Collection Account on such Determination Date and such
failure shall continue for one Business Day;

(i) a Servicer Termination Event shall occur;

(j) the occurrence of an "Event of Default" under the Sale and
Servicing Agreement and either (x) the Repurchase Date or the
Amortization Date (each as defined in the Sale and Servicing Agreement)
shall have been deemed to automatically occur or (y) the Issuer shall
have exercised its option to have the

34
<PAGE>

Repurchase Date or the Amortization Date, as the case may be,
immediately occur pursuant to Section 2.6(a) of the Sale and Servicing
Agreement; or

(k) if on any Distribution Date, after giving effect to
distributions made on such Distribution Date, the amount on deposit in
the Spread Account is less than the Spread Account Minimum Amount.

Section 5.02. REMEDIES; WAIVERS.

(a) Upon the occurrence of an Event of Default, Financial
Security may exercise any one or more of the rights and remedies set
forth below:

(i) declare the Premium Supplement to be immediately due
and payable, and the same shall thereupon be immediately due and
payable, whether or not Financial Security shall have declared an
"Event of Default" or shall have exercised, or be entitled to
exercise, any other rights or remedies hereunder;

(ii) exercise any rights and remedies available under the
Transaction Documents in its own capacity or in its capacity as the
Person entitled to exercise the rights of the Noteholders in
respect of the Securities; or

(iii) take whatever action at law or in equity may appear
necessary or desirable in its judgment to enforce performance of
any obligation of AFL, ARFC or the Issuer under the Transaction
Documents.

(b) Unless otherwise expressly provided, no remedy herein
conferred upon or reserved is intended to be exclusive of any other
available remedy, but each remedy shall be cumulative and shall be in
addition to other remedies given under the Transaction Documents or
existing at law or in equity. No delay or failure to exercise any right
or power accruing under any Transaction Document upon the occurrence of
any Event of Default or otherwise shall impair any such right or power
or shall be construed to be a waiver thereof, but any such right and
power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle Financial Security to exercise any remedy
reserved to Financial Security in this Article, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Article.

(c) If any proceeding has been commenced to enforce any right
or remedy under this Agreement and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to
Financial Security, then and in every such case the parties hereto
shall, subject to any determination in such proceeding, be restored to
their respective former positions hereunder, and, thereafter, all rights
and remedies of Financial Security shall continue as though no such
proceeding had been instituted.

35
<PAGE>

(d) Financial Security shall have the right, to be exercised in
its complete discretion, to waive any covenant, Default or Event of
Default by a writing setting forth the terms, conditions and extent of
such waiver signed by Financial Security and delivered to AFL, ARFC and
the Issuer. Any such waiver may only be effected in writing duly
executed by Financial Security, and no other course of conduct shall
constitute a waiver of any provision hereof. Unless such writing
expressly provides to the contrary, any waiver so granted shall extend
only to the specific event or occurrence so waived and not to any other
similar event or occurrence.

(e) Upon the declaration of an Event of Default by Financial
Security, Financial Security shall provide written notice of such Event
of Default to the Rating Agencies.

ARTICLE VI

MISCELLANEOUS

Section 6.01. AMENDMENTS, ETC.

This Agreement may be amended, modified or terminated only by written
instrument or written instruments signed by the parties hereto. No act or course
of dealing shall be deemed to constitute an amendment, modification or
termination hereof.

Section 6.02. NOTICES.

All demands, notices and other communications to be given hereunder
shall be in writing (except as otherwise specifically provided herein) and shall
be mailed by registered mail or personally delivered or telecopied to the
recipient as follows:

36
<PAGE>

(a) To Financial Security: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department

Re: Arcadia Automobile Receivables
Warehouse Trust, Floating Rate
Variable Funding Automobile
Receivables-Backed Notes/Arcadia
Structured Warehouse Facility
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518
(212) 339-3529
(in each case in which notice or other
communication to Financial Security
refers to an Event of Default, a
claim on the Policy or with respect
to which failure on the part of
Financial Security to respond shall
be deemed to constitute consent or
acceptance, then a copy of such
notice or other communication should
also be sent to the attention of each
of the General Counsel and the
Head--Financial Guaranty Group and
shall be marked to indicate "URGENT
MATERIAL ENCLOSED.")

(b) To AFL: Arcadia Financial Ltd.
Arcadia Financial Center
7825 Washington Avenue South
Minneapolis, MN 55439-2444
Attention: Treasurer

(c) To ARFC: Arcadia Receivables Finance Corp.
Arcadia Financial Center
7825 Washington Avenue South, Suite 900
Minneapolis, MN 55439-2444
Attention: Treasurer

37
<PAGE>

(d) To the Issuer: Arcadia Automobile Receivables Warehouse
Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust
Administration

with a copy to

Arcadia Financial Ltd.
Arcadia Financial Center
7825 Washington Avenue South
Minneapolis, MN 55439-2444
Attention: Treasurer

A party may specify an additional or different address or addresses by
writing mailed or delivered to the other party as aforesaid. All such notices
and other communications shall be effective upon receipt.

Section 6.03. PAYMENT PROCEDURE.

In the event of any payment by Financial Security for which it is
entitled to be reimbursed or indemnified as provided herein, each party
obligated hereunder to make such reimbursement or provide such indemnification
agrees to accept the voucher or other evidence of payment as prima facie
evidence of the propriety thereof and the liability therefor to Financial
Security. All payments to be made to Financial Security under this Agreement
shall be made to Financial Security in lawful currency of the United States of
America in immediately available funds to the account number provided in the
Premium Letter before 1:00 p.m. (New York, New York time) on the date when due
or as Financial Security shall otherwise direct by written notice to AFL. In the
event that the date of any payment to Financial Security or the expiration of
any time period hereunder occurs on a day which is not a Business Day, then such
payment or expiration of time period shall be made or occur on the next
succeeding Business Day with the same force and effect as if such payment was
made or time period expired on the scheduled date of payment or expiration date.
Payments to be made to Financial Security under this Agreement shall bear
interest at the Late Payment Rate from the date due to the date paid.

Section 6.04. SEVERABILITY.

In the event that any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, the parties
hereto agree that such holding shall not invalidate or render unenforceable any
other provision hereof. The parties hereto further agree that the holding by any
court of competent jurisdiction that any remedy pursued by any party hereto is
unavailable or unenforceable shall not affect in any way the ability of such
party to pursue any other remedy available to it.

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<PAGE>

Section 6.05. GOVERNING LAW.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

Section 6.06. CONSENT TO JURISDICTION.

(a) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED IN
THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR
IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE
HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OF, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT A
FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO
ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER OR THAT THE TRANSACTION DOCUMENTS OR THE SUBJECT
MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS.

(b) To the extent permitted by applicable law, the parties
hereto shall not seek and hereby waive the right to any review of the
judgment of any such court by any court of any other nation or
jurisdiction which may be called upon to grant an enforcement of such
judgment.

(c) Each of AFL, ARFC and the Issuer hereby irrevocably
appoints and designates CT Corporation System, whose address is 1633
Broadway, New York, New York 10019, as its true and lawful attorney and
duly authorized agent for acceptance of service of legal process. Each
of AFL, ARFC and the Issuer agrees that service of such process upon
such Person shall constitute personal service of such process upon it.

39
<PAGE>

(d) Nothing contained in the Agreement shall limit or affect
Financial Security's right to serve process in any other manner
permitted by law or to start legal proceedings relating to any of the
Transaction Documents against AFL, ARFC or the Issuer or its property in
the courts of any jurisdiction.

Section 6.07. CONSENT OF FINANCIAL SECURITY.

In the event that Financial Security's consent is required under any
of the Transaction Documents, the determination whether to grant or withhold
such consent shall be made by Financial Security in its sole discretion without
any implied duty towards any other Person, except as otherwise expressly
provided therein.

Section 6.08. COUNTERPARTS.

This Agreement may be executed in counterparts by the parties hereto,
and all such counterparts shall constitute one and the same instrument.

Section 6.09. TRIAL BY JURY WAIVED.

EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY
OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH ANY OF THE TRANSACTION
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREUNDER. EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY
BY, AMONG OTHER THINGS, THIS WAIVER.

Section 6.10. LIMITED LIABILITY.

No recourse under any Transaction Document shall be had against, and
no personal liability. shall attach to, any officer, employee, director,
affiliate or shareholder of any party hereto, as such, by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any statute or
otherwise in respect of any of the Transaction Documents, the Securities or the
Policy, it being expressly agreed and understood that each Transaction Document
is solely a corporate obligation of each party hereto, and that any and all
personal liability, either at common law or in equity, or by statute or
constitution, of every such officer, employee, director, affiliate or
shareholder for breaches by any party hereto of any obligations under any
Transaction Document is hereby expressly waived as a condition of and in
consideration for the execution and delivery of this Agreement.

Section 6.11. ENTIRE AGREEMENT.

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<PAGE>

This Agreement, the Premium Letter and the Policy set forth the entire
agreement between the parties with respect to the subject matter thereof, and
this Agreement supersedes and replaces any agreement or understanding that may
have existed between the parties prior to the date hereof in respect of such
subject matter.

Section 6.12. HEADINGS.

The headings of articles and sections and the table of contents
contained in this Agreement are provided for convenience only. They form no
part of this Agreement and shall not affect its construction or interpretation.
Unless otherwise indicated, all references to articles and sections in this
Agreement refer to the corresponding articles and sections of this Agreement.

41
<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.

FINANCIAL SECURITY ASSURANCE INC.

By:
------------------------------------------
Authorized Officer

ARCADIA FINANCIAL LTD.

By:
------------------------------------------
Name: John A. Witham
Title: Executive Vice President and Chief
Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By:
------------------------------------------
Name: John A. Witham
Title: Senior Vice President and Chief
Financial Officer

ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST

By: Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee

By:
------------------------------------------
Name:
Title:

<PAGE>

APPENDIX A

DEFINITIONS

"ACCUMULATED FUNDING DEFICIENCY" shall have the meaning provided in
Section 412 of the Code and Section 302 of ERISA, whether or not waived.

"ASSIGNMENT AGREEMENT" means, with respect to any Receivables, the
assignment agreement between AFL and ARFC pursuant to which AFL sells and
assigns Receivables to ARFC, in such form as is attached to the Receivables
Purchase Agreement and Assignment as Exhibit A.

"BUSINESS DAY" means any day other than (a) a Saturday or Sunday or
(b) a day on which banking institutions in the City of New York, New York or
the City of Minneapolis, Minnesota are authorized or obligated by law or
executive order to be closed.

"CODE" means the Internal Revenue Code of 1986, including, unless
the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.

"COMMISSION" means the Securities and Exchange Commission.

"COMMONLY CONTROLLED ENTITY" means ARFC and each entity, whether or
not incorporated, which is affiliated with such Person pursuant to Section
414(b), (c), (m) or (o) of the Code.

"CUSTODIAN AGREEMENT" means any Custodian Agreement as defined in
the Sale and Servicing Agreement.

"DATE OF ISSUANCE" means the date on which the Policy is issued as
specified therein.

"DEFAULT" means any event which results, or which with the giving
of notice or the lapse of time or both would result, in an Event of Default.

"ERISA" means the Employee Retirement Income Security Act of 1974,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

"EVENT OF DEFAULT" means any event of default specified in Section
5.01 of the Insurance Agreement.

"EXPIRATION DATE" means the final date of the Term of the Policy,
as specified in the Policy.

"FINANCIAL SECURITY" means Financial Security Assurance Inc., a New
York stock insurance company, its successors and assigns.

A-1
<PAGE>

"FINANCIAL STATEMENTS" means with respect to each of AFL and ARFC
the balance sheets as of December 31, 1997 and the statements of income,
retained earnings and cash flows for the 12-month period then ended and the
notes thereto and the balance sheets as of June 30, 1998 and the statements
of income, retained earnings and cash flows for the fiscal quarter then ended.

"FISCAL AGENT" means the Fiscal Agent, if any, designated pursuant
to the terms of the Policy.

"INDEBTEDNESS" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising
in the ordinary course of business, (iv) all obligations of such Person as
lessee under any capital leases, (v) all Indebtedness of others secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person, (vi) all Indebtedness of others guaranteed by such Person or
with respect to which such Person shall agree to become directly or
contingently liable by, and (vii) all obligations of such Person in
connection with the repurchase of motor vehicle retail installment sales
contracts.

"INSURANCE AGREEMENT" means this Insurance and Indemnity Agreement,
as the same may be amended from time to time, and, with respect to a Term
Transaction, any Insurance and Indemnity Agreement entered into in connection
with such Term Transaction.

"INSURANCE AGREEMENT EVENT OF DEFAULT" means an "Event of Default"
under any Insurance and Indemnity Agreement among Financial Security, AFL and
ARFC entered into with respect to a Term Transaction.

"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

"IRS" means the Internal Revenue Service.

"LATE PAYMENT RATE" means the lesser of (a) the greater of (i) the
per annum rate of interest, publicly announced from time to time by Chemical
Bank at its principal office in the City of New York, as its prime or base
lending rate (any change in such rate of interest to be effective on the date
such change is announced by Chemical Bank) plus 3%, and (ii) the then
applicable highest rate of interest on the Securities and (b) the maximum
rate permissible under applicable usury or similar laws limiting interest
rates. The Late Payment Rate shall be computed on the basis of the actual
number of days elapsed over the actual number of days in the current calendar
year.

A-2
<PAGE>

pledge, attachment, charge, lease, conditional sale or other title retention
agreement, or other security interest or encumbrance of any kind or (b) any
arrangement, express or implied, under which such property or assets are
transferred, sequestered or otherwise identified for the purpose of
subjecting or making available the same for the payment of debt or
performance of any other obligation in priority to the payment of the
general, unsecured creditors of such Person.

"LOCKBOX AGREEMENT" means the Lockbox Agreement, as defined in the
Sale and Servicing Agreement.

"MATERIAL ADVERSE CHANGE" means, (a) in respect of any Person, a
material adverse change in (i) the business, financial condition, results of
operations or properties of such Person or any of its Subsidiaries or (ii)
the ability of such Person to perform its obligations under any of the
Transaction Documents to which it is a party and (b) in respect of the
Receivables, a material adverse change in (i) the value or marketability of
the Receivables, taken as a whole, or (ii) the probability that amounts now
or hereafter due in respect of a material portion of the Receivables will be
collected on a timely basis,

"MOODY'S" means Moody's Investors Service, Inc., a Delaware
corporation, and any successor thereto, and, if such corporation shall for
any reason no longer perform the functions of a securities rating agency,
"Moody's" shall be deemed to refer to any other nationally recognized rating
agency designated by Financial Security.

"MULTIEMPLOYER PLAN" means a multiemployer plan (within the meaning
of Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled
Entity makes contributions or has liability.

"NOTEHOLDERS" means registered holders of the Securities.

"NOTICE OF CLAIM" means a Notice of Claim and Certificate in the
form attached as Exhibit A to Endorsement No. 1 to the Policy.

"OFFERING DOCUMENT" means any offering document in respect of the
Securities that makes reference to the Policy.

"OTHER CONVEYED PROPERTY" has the meaning provided in the
Receivables Purchase Agreement and Assignment.

"PERSON" means an individual, joint stock company, trust,
unincorporated association, joint venture, corporation, business or owner
trust, partnership or other organization or entity (whether governmental or
private).

A-3
<PAGE>

"POLICY" means the financial guaranty insurance policy, including
any endorsements thereto, issued by Financial Security with respect to the
Securities, substantially in the form attached as Exhibit I to this Agreement.

"PREMIUM" means the premium payable in accordance with Section 3.02
of the Insurance Agreement and the Premium Supplement, if any.

"PREMIUM LETTER" means the side letter between Financial Security,
AFL, ARFC, the Issuer and the Trustee dated July 21, 1998, in respect of the
premium payable by AFL in consideration of the issuance of the Policy.

"PREMIUM SUPPLEMENT" means a non-refundable premium, in addition to
the premium payable in accordance with Section 3.02 of the Insurance
Agreement, payable to Financial Security in monthly installments commencing
on the first Distribution Date following an Event of Default and on each
monthly anniversary thereof in accordance with the terms set forth in the
Premium Letter.

"PROVIDED DOCUMENTS" means the Transaction Documents and any
documents, agreements, instruments, schedules, certificates, statements, cash
flow schedules, number runs or other writings or data furnished to Financial
Security by or on behalf of AFL, ARFC or the Issuer with respect to
themselves, their Subsidiaries or the Transaction.

"RECEIVABLE" has the meaning provided in the Sale and Servicing
Agreement.

"RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT" means the Amended
and Restated Receivables Purchase Agreement and Assignment dated as of July
21, 1998 between ARFC and AFL, as the same may be amended from time to time.

"REPORTABLE EVENT" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.

"SALE AND SERVICING AGREEMENT" means the Amended and Restated Sale
and Servicing Agreement dated as of July 21, 1998, among the Issuer, Arcadia

A-4
<PAGE>

Receivables Conduit Corp., ARFC, AFL, BofA, as Administrative Agent and RCC
Agent, Morgan Guaranty Trust Company of New York, as DFC Agent and the
Trustee, as Backup Servicer, Collateral Agent and Indenture Trustee, as the
same may be amended from time to time.

"SECURITIES" means the Issuer's Floating Rate Variable Funding
Automobile Receivables-Backed Note issued under the Amended and Restated
Indenture, dated as of even date herewith, between the Issuer, the Original
Issuer and the Trustee, in an aggregate principal amount at any one time
outstanding not exceeding $400 million.

"SECURITIES ACT" means the Securities Act of 1933, including,
unless the context otherwise requires, the rules and regulations thereunder,
as amended from time to time.

"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.

"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., and any successor thereto, and, if such entity shall for
any reason no longer perform the functions of a securities rating agency,
"S&P" shall be deemed to refer to any other nationally recognized rating
agency designated by Financial Security.

"SPECIAL EVENT" means the occurrence of any one of the following:
(a) an Event of Default under the Insurance Agreement has occurred and is
continuing, (b) any legal proceeding or binding arbitration is instituted
with respect to the Transaction or with respect to AFL, ARFC or the Issuer
that would result in a Material Adverse Change in respect of AFL, ARFC, the
Issuer or the Receivables, (c) any governmental or administrative
investigation, action or proceeding is instituted that would, if adversely
decided, result in a Material Adverse Change in respect of ARFC, the Issuer
or the Receivables, or (d) Financial Security pays a claim under the Policy.

"SPREAD ACCOUNT AGREEMENT" means the Spread Account Agreement,
dated as of March 26, 1993, as amended and restated as of June 23, 1998 among
ARFC, AFL, the Collateral Agent named therein and the trustees specified
therein, as the same may be further amended, supplemented or otherwise
modified in accordance with the terms thereof.

"SPREAD ACCOUNT MINIMUM AMOUNT" means, with respect to the
Warehousing Series and any Determination Date: (i) if no Amortization Event
with respect to the Warehousing Series has occurred as of the related
Determination Date, one percent of the Principal Balance as of such
Determination Date of the Receivables (as defined in the Sale and Servicing
Agreement); or (ii) if an Amortization Event with respect to the Warehousing
Series has occurred as of the related Determination Date, one percent of the
Principal Balance of the Receivables (as defined in the Sale and Servicing
Agreement) as of the date of the occurrence of such Amortization Event.

A-5
<PAGE>

"STOCK PLEDGE AGREEMENT" means the Stock Pledge Agreement, as
amended and restated, dated as of December 3, 1996, among Financial Security,
AFL and the Collateral Agent named therein, as the same may be amended from
time to time.

"TERM OF THE AGREEMENT" shall be determined as provided in Section
4.01 of the Insurance Agreement.

"TERM OF THE POLICY" has the meaning provided in the Policy.

"TERM TRANSACTION" means any transaction other than the Transaction
in connection with which Financial Security has issued a financial guaranty
insurance policy to guarantee principal and/or interest on certificates or
notes representing an interest in receivables originated by AFL.

"TRANSACTION" means the transactions contemplated by the
Transaction Documents.

"TRANSACTION DOCUMENTS" means the Insurance Agreement, the
Indenture, the Sale and Servicing Agreement, the Trust Agreement, the
Receivables Purchase Agreement and Assignment (with respect to the
Receivables), any Assignment Agreement (with respect to the Receivables), any
Custodian Agreement, the Security Agreement, the Premium Letter, the Stock
Pledge Agreement, the Lockbox Agreement and the Spread Account Agreement.

"TRUST AGREEMENT" means the Trust Agreement dated as of July 21,
1998 between ARFC and Wilmington Trust Company, as Owner Trustee.

"TRUSTEE" means Norwest Bank Minnesota, National Association, a
national banking association, as trustee under the Indenture, and any
successor thereto as trustee under the Indenture.

"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

"UNDERFUNDED PLAN" means any Plan that has an Underfunding.

A-6
<PAGE>

APPENDIX B

CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICY

(a) PAYMENT OF INITIAL PREMIUM AND EXPENSES, PREMIUM LETTER. Financial
Security shall have been paid, by or on behalf of AFL and ARFC, a
nonrefundable Premium and shall have been reimbursed, by or on behalf of AFL
and ARFC, for other fees and expenses identified in Section 3.02 of the
Insurance Agreement as payable at closing and Financial Security shall have
received a fully executed copy of the Premium Letter.

(b) TRANSACTION DOCUMENTS. Financial Security shall have received a
copy of each of the Transaction Documents (other than the Policy), in form
and substance satisfactory to Financial Security, duly authorized, executed
and delivered by each party thereto. Without limiting the foregoing, the
provisions of the Sale and Servicing Agreement and the Indenture relating to
the payment to Financial Security of Premium due on the Policy and the
reimbursement to Financial Security of amounts paid under the Policy shall be
in form and substance acceptable to Financial Security in its sole discretion.

(c) CERTIFIED DOCUMENTS AND RESOLUTIONS. Financial Security shall have
received a copy of (i) the certificate of incorporation and bylaws of each of
AFL, ARFC and the Original Issuer and (ii) the resolutions of the Board of
Directors of each of AFL, ARFC and the Original Issuer authorizing the
execution, delivery and performance by AFL, ARFC and the Original Issuer of
the Transaction Documents to which it is a party and the transactions
contemplated thereby, including, as to the Issuer, the authorization of the
issuance of the Securities, certified by the Secretary or an Assistant
Secretary of AFL, ARFC or the Original Issuer, as the case may be (which
certificate shall state that such certificate of incorporation, bylaws and
resolutions are in full force and effect without modification on December 3,
1996.

(d) INCUMBENCY CERTIFICATE. Financial Security shall have received a
certificate of the Secretary or an Assistant Secretary of each of AFL, ARFC
and the Original Issuer certifying the name and signatures of the officers of
AFL, ARFC or the Original Issuer, as the case may be, authorized to execute
and deliver the Transaction Documents and, if applicable, that shareholder
consent to the execution and delivery of such documents is not necessary or
has been obtained.

(e) REPRESENTATIONS AND WARRANTIES; CERTIFICATE. The representations
and warranties of AFL, ARFC or the Issuer, as the case may be, in the
Insurance Agreement shall be true and correct as of the Date of Issuance with
respect to such Person as if made on the Date of Issuance and Financial
Security shall have received a certificate of appropriate officers of AFL,
ARFC or the Issuer, as the case may be, to that effect.

(f) OPINIONS OF COUNSEL. Financial Security shall have received
opinions of counsel addressed to Financial Security, Moody's and S&P in
respect of AFL, ARFC, the Issuer, the other parties to the Transaction
Documents and the Transaction in form and

B-1
<PAGE>

substance satisfactory to Financial Security, addressing such matters as
Financial Security may reasonably request, and the counsel providing each
such opinion shall have been instructed by its client to deliver such opinion
to the addressees thereof.

(g) APPROVALS, ETC. Financial Security shall have received true and
correct copies of all approvals, licenses and consents, if any, including,
without limitation, the approval of the shareholders of AFL and ARFC and the
Original Issuer, required in connection with the Transaction.

(h) NO LITIGATION, ETC. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with any of the Transaction Documents or the consummation of the
Transaction.

(i) LEGALITY. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court which would make the transactions contemplated
by any of the Transaction Documents illegal or otherwise prevent the
consummation thereof.

(j) ISSUANCE OF RATINGS. Financial Security shall have received
confirmation that the risk secured by the Policy constitutes an investment
grade risk by S&P and an insurable risk by Moody's.

(k) NO DEFAULT. No Default or Event of Default shall have occurred.

(l) ADDITIONAL ITEMS. Financial Security shall have received such
other documents, instruments, approvals or opinions requested by Financial
Security as may be reasonably necessary to effect the Transaction, including
but not limited to evidence satisfactory to Financial Security that all
conditions precedent, if any, in the Transaction Documents have been
satisfied.

B-2
<PAGE>

EXHIBIT I

FORM OF FINANCIAL GUARANTY INSURANCE POLICY

I-1

<PAGE>

WAREHOUSING SERIES SUPPLEMENT

dated as of December 3, 1996

amended and restated as of July 21, 1998

SPREAD ACCOUNT AGREEMENT,

dated as of March 25, 1993,

as amended and restated

as of July 21, 1998

among

ARCADIA FINANCIAL LTD.

ARCADIA RECEIVABLES FINANCE CORP.

FINANCIAL SECURITY ASSURANCE INC.

and

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,

as Trustee and as Collateral Agent

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WAREHOUSING SUPPLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .1

RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . .2
Section 1.2. Rules of Interpretation. . . . . . . . . . . . . . . . . .3

ARTICLE II SERIES SUPPLEMENTS; THE COLLATERAL . . . . . . . . . . . . . . .4

Section 2.1. Series Supplement. . . . . . . . . . . . . . . . . . . . .4
Section 2.2. Grant of Security Interest by AFL and the Seller.. . . . .4

ARTICLE III SPREAD ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . .5

Section 3.1. Establishment of Warehousing Series Spread Account . . . .5
Section 3.2. Release of Funds Upon Repurchase . . . . . . . . . . . . .5

ARTICLE IV MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . .5

Section 4.1. Further Assurances . . . . . . . . . . . . . . . . . . . .5
Section 4.2. Governing Law. . . . . . . . . . . . . . . . . . . . . . .6
Section 4.3. Counterparts . . . . . . . . . . . . . . . . . . . . . . .6
Section 4.4. Headings . . . . . . . . . . . . . . . . . . . . . . . . .6
</TABLE>

<PAGE>

WAREHOUSING SERIES SUPPLEMENT

WAREHOUSING SERIES SUPPLEMENT, dated as of December 3, 1996,
amended and restated as of July 21, 1998 (the "Warehousing Series
Supplement"), by and among ARCADIA FINANCIAL LTD., a Minnesota corporation
("AFL"), ARCADIA RECEIVABLES FINANCE CORP., a Delaware corporation (the
"Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance
company ("Financial Security") and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association, in its capacity as Indenture
Trustee under the Indenture referred to below, for the Noteholders with
respect to the related Series (in each of such capacities, the "Trustee") and
as Collateral Agent hereunder.

RECITALS

1. The parties hereto have previously entered into a Spread
Account Agreement, dated as of March 25, 1993, as amended and restated as of
June 23, 1998 (the "Spread Account Agreement"), and, as contemplated by
Section 2.02 of the Spread Account Agreement, this Warehousing Series
Supplement constitutes a Series Supplement to the Spread Account Agreement so
that hereafter this Warehousing Series Supplement shall form a part of the
Spread Account Agreement for all purposes thereof, and all references herein
and hereafter to the Spread Account Agreement shall mean the Spread Account
Agreement, as supplemented hereby.

2. Pursuant to the Amended and Restated Sale and Servicing
Agreement dated as of July 21, 1998 among Arcadia Automobile Receivables
Warehouse Trust, a Delaware business trust (the "Issuer"), Arcadia
Receivables Conduit Corp. (the "Original Issuer"), a Delaware corporation,
AFL, Bank of America National Trust and Savings Association, as
Administrative Agent and RCC Agent, Morgan Guaranty Trust Company of New
York, as DFC Agent, Norwest Bank Minnesota National Association, as Backup
Servicer, Collateral Agent and Indenture Trustee, and the Seller (the
"Warehousing Series Sale and Servicing Agreement"), the Seller intends to
sell from time to time to the Issuer all of its right, title and interest in
and to Receivables and certain other Seller Conveyed Property (as defined in
the Warehousing Series Sale and Servicing Agreement).

3. Pursuant to the Amended and Restated Indenture dated as of July
21, 1998 between the Original Issuer, the Issuer and the Trustee (the
"Warehousing Series Indenture"), the Issuer is issuing the Warehousing Notes.

4. The Seller has requested that Financial Security issue the Note
Policy to the Trustee to guarantee payment of the Scheduled Payments (as
defined in such Policy) on each Payment Date in respect of the Warehousing
Notes.

5. In partial consideration of the issuance of the Note Policy,
the Seller has agreed that Financial Security shall have certain rights as
Controlling Party, to the extent set forth herein and in the Transaction
Documents.

<PAGE>

6. The Seller is a wholly owned special purpose subsidiary of AFL.
The Issuer has agreed to pay the amount earned on the Receivables, net of
certain amounts as set forth in the Warehousing Series Sale and Servicing
Agreement, to the Seller pursuant to the Warehousing Series Sale and
Servicing Agreement. The Warehousing Series Insurer Secured Obligations form
part of the consideration to Financial Security for its issuance of the Note
Policy.

7. In order to secure the performance of the Warehousing Series
Secured Obligations, the Seller have agreed to pledge the Warehousing Series
Collateral as Collateral to the Collateral Agent for the benefit of Financial
Security and for the benefit of the Trustee on behalf of the Noteholders,
upon the terms and conditions set forth herein.

AGREEMENTS

In consideration of the premises, and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. DEFINITIONS. All terms defined in Section 1.1 of the
Warehousing Series Sale and Servicing Agreement shall have the same meaning
with respect to this Warehousing Series Supplement. The following terms shall
have the following respective meanings:

"COLLECTION ACCOUNT SHORTFALL" means, with respect to the
Warehousing Series, (I) with respect to any Distribution Date prior to the
occurrence of an Amortization Event, the excess, if any, of (A) the amount
required to be distributed on such Distribution Date pursuant to priorities
(i) through (vi) of Section 4.6(a) of the Warehousing Series Sale and
Servicing Agreement over (B) Spread Account Available Funds with respect to
the immediately preceding Deficiency Claim Date and (II) with respect to any
Distribution Date following the occurrence of an Amortization Event, the
excess, if any, of (A) the amount required to be distributed on such
Distribution Date pursuant to priorities (i) through (vi) of Section 4.6(b)
of the Warehousing Series Sale and Servicing Agreement over (B) the Spread
Account Available Funds with respect to such Distribution Date.

"SPREAD ACCOUNT MAXIMUM AMOUNT," with respect to the Warehousing
Series and any Distribution Date:

(i) if no Insurance Agreement Event of Default with respect to the
Warehousing Series has occurred and is continuing and no Capture Event
has occurred and is continuing as of the related Determination Date, is
equal to 1.5 percent of the principal balance of the Receivables (as
defined in the Warehousing Series Sale and Servicing Agreement); or

2
<PAGE>

(ii) if (A) an Insurance Agreement Event of Default with respect to
the Warehousing Series has occurred and is continuing, or (B) a Capture
Event has occurred and is continuing as of the related Determination
Date, the Spread Account Maximum Amount shall not be limited.

"WAREHOUSING SERIES COLLATERAL" has the meaning specified in
Section 2.2(a) hereof.

"WAREHOUSING SERIES INDENTURE" means the Amended and Restated
Indenture, dated as of July 21, 1998 among the Original Issuer, the Issuer
and the Trustee.

"WAREHOUSING SERIES NOTE POLICY" means the financial guaranty
insurance policy issued by Financial Security with respect to the Warehousing
Series Notes.

"WAREHOUSING SERIES NOTES" means the Notes issued pursuant to the
Warehousing Series Indenture.

"WAREHOUSING SERIES SALE AND SERVICING AGREEMENT" means Amended and
Restated Sale and Servicing Agreement dated as of July 21, 1998 among the
Issuer, the Original Issuer, AFL, Bank of America National Trust and Savings
Association, as Administrative Agent and RCC Agent, Morgan Guaranty Trust
Company of New York, as DFC Agent, Norwest Bank National Association, as
Backup Servicer, Collateral Agent and Indenture Trustee, and the Seller.

"WAREHOUSING SHORTFALL" means, with respect to the Warehousing
Series and any Distribution Date following the occurrence of an Amortization
Event, the sum of (1) the excess, if any, of (A) the amount required to be
distributed on such Distribution Date pursuant to priorities (i) through
(viii) of Section 4.6(b) of the Warehousing Series Sale and Servicing
Agreement over (B) the Warehousing Shortfall Available Funds with respect to
such Distribution Date.

"WAREHOUSING SERIES SUPPLEMENT" means this Warehousing Series
Supplement which constitutes a Series Supplement to the Spread Account
Agreement.

Section 1.2. RULES OF INTERPRETATION. The terms "hereof, "herein",
"hereto" or "hereunder," unless otherwise modified by more specific
reference, shall refer to this Warehousing Series Supplement. Unless
otherwise indicated in context, the terms "Article," "Section," or "Exhibit"
shall refer to an Article or Section of, or Exhibit to, this Warehousing
Series Supplement. The definition of a term shall include the singular, the
plural, the past, the present, the future, the active and the passive forms
of such term. A term defined herein and used herein preceded by a Series
designation or defined in the Servicing Agreement, shall mean such term as it
relates to the Warehousing Series.

ARTICLE II

SERIES SUPPLEMENTS; THE COLLATERAL

3
<PAGE>

Section 2.1. SERIES SUPPLEMENT. As provided in and subject to the
conditions specified in Section 2.02 of the Spread Account Agreement, the
parties hereto are entering into this Warehousing Series Supplement with
respect to the Warehousing Series.

Section 2.2. GRANT OF SECURITY INTEREST BY AFL AND THE SELLER.

(a) In order to secure the performance of the Secured Obligations
with respect to each Series, the Seller (and AFL, to the extent it may have
any rights therein) hereby pledges, assigns, grants, transfers and conveys to
the Collateral Agent, on behalf of and for the benefit of the Secured Parties
to secure the Secured Obligations (as defined in the Spread Account
Agreement), a lien on and security interest in (which lien and security
interest is intended to be prior to all other liens, security interest or
other encumbrances), all of its right, title and interest in and to the
following (all being collectively referred to herein as the "Warehousing
Series Collateral"):

(i) all amounts distributable pursuant to Sections
4.6(a)(x) and 4.6(b)(x) of the Warehousing Series Sale and Servicing
Agreement (the "Receivables Income") and all rights and remedies that
the Seller may have to enforce payment of the Receivables Income whether
under the Warehousing Series Servicing Agreement or otherwise;

(ii) the Warehousing Series Spread Account established
pursuant to Section 3.1 of this Series Supplement and Section 3.01 of
the Spread Account Agreement, and each other account owned by the Seller
and maintained by the Collateral Agent (including, without limitation,
all monies, checks, securities, investments and other documents from
time to time held in or evidencing any such accounts);

(iii) all of the Seller's right, title and interest in and
to investments made with proceeds of the property described in clauses
(i) and (ii) above, or made with amounts on deposit in the Warehousing
Series Spread Account; and

(iv) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the
foregoing.

(b) In order to effectuate the provisions and purposes of this
Series Supplement, including for the purpose of perfecting the security
interests granted hereunder, the Seller represents and warrants that it has,
prior to the execution of this Series Supplement, executed and filed an
appropriate Uniform Commercial Code financing statement in Minnesota
sufficient to ensure that the Collateral Agent, as agent for the Secured
Parties, has a first priority perfected security interest in all Warehousing
Series Collateral which can be perfected by the filing of a financing
statement.

4
<PAGE>

ARTICLE III

SPREAD ACCOUNT

Section 3.1. ESTABLISHMENT OF WAREHOUSING SERIES SPREAD ACCOUNT.
On or prior to the Closing Date relating to the Warehousing Series, the
Collateral Agent shall establish with respect to the Warehousing Series, at
its office or at another depository institution or trust company, an Eligible
Account, designated "Spread Account - Warehousing Series - Norwest Bank
Minnesota, National Association, as Collateral Agent for Financial Security
Assurance Inc. and another Secured Party" (the "Warehousing Series Spread
Account").

Section 3.2. RELEASE OF FUNDS UPON REPURCHASE. On the Repurchase
Date for any Purchased Receivables in respect of which the Collateral Agent
has received a Notice of Repurchase in the form of Exhibit F to the
Warehousing Series Sale and Servicing Agreement for Purchased Receivables
with an aggregate principal balance equal to or greater than $20,000,000 and
a corresponding executed reconveyance in the form of Exhibit G to the
Warehousing Series Sale and Servicing Agreement pursuant to Section 2.1(d)
thereof, the Collateral Agent, upon reconveyance of such Purchased
Receivables, shall recalculate the Spread Account Maximum Amount for the
Warehousing Series Spread Account and release funds from the Warehousing
Series Spread Account in excess of the recalculated Spread Account Maximum
Amount to the Seller. In addition, on (i) the closing date of any
Securitized Offering or (ii) the date on which the Issuer transfers all or
substantially all of the Seller Conveyed Property to another Person and in
connection therewith, the outstanding principal balance of the Notes is
reduced to zero, the Collateral Agent shall recalculate the Spread Account
Maximum Amount for the Warehousing Series Spread Account and release funds
from the Warehousing Series Spread Account in excess of the recalculated
Spread Account Maximum Amount to the Seller, PROVIDED, in each case, that no
Insurance Agreement Event of Default shall have occurred and be outstanding
as of such date.

ARTICLE IV

MISCELLANEOUS

Section 4.1. FURTHER ASSURANCES. EACH PARTY HERETO SHALL TAKE
SUCH ACTION AND DELIVER SUCH INSTRUMENTS TO ANY OTHER PARTY HERETO, IN
ADDITION TO THE ACTIONS AND INSTRUMENTS SPECIFICALLY PROVIDED FOR HEREIN, AS
MAY BE REASONABLY REQUESTED OR REQUIRED TO EFFECTUATE THE PURPOSE OR
PROVISIONS OF THIS WAREHOUSING SERIES SUPPLEMENT OR TO CONFIRM OR PERFECT ANY
TRANSACTION DESCRIBED OR CONTEMPLATED HEREIN.

Section 4.2. GOVERNING LAW. THIS WAREHOUSING SERIES SUPPLEMENT
SHALL BE GOVERNED BY AND CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.

5
<PAGE>

Section 4.3. COUNTERPARTS. This Warehousing Series Supplement
may be executed in two or more counterparts by the parties hereto, and each
such counterpart shall be considered an original and all such counterparts
shall constitute one and the same instrument.

Section 4.4. HEADINGS. The headings of sections and paragraphs
and the Table of Contents contained in this Warehousing Series Supplement are
provided for convenience only. They form no part of this Warehousing Series
Supplement and shall not affect its construction or interpretation.

6
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this
Warehousing Series Supplement as of the date set forth on the first page
hereof.

ARCADIA FINANCIAL LTD.

By:
------------------------------------------
Name: John A. Witham
Title: Executive Vice President and
Chief Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By:
------------------------------------------
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer

FINANCIAL SECURITY ASSURANCE INC.

By:
------------------------------------------
Authorized Officer

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee

By:
------------------------------------------
Name:
Title:

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Collateral Agent

By:
------------------------------------------
Name:
Title:

<PAGE>

SPREAD ACCOUNT AGREEMENT

dated as of March 25, 1993,

as amended and restated

as of July 21, 1998

among

ARCADIA FINANCIAL LTD.,

ARCADIA RECEIVABLES FINANCE CORP.,

FINANCIAL SECURITY ASSURANCE INC.

THE CHASE MANHATTAN BANK

and

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION

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TABLE OF CONTENTS

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ARTICLE I

DEFINITIONS

Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Rules of Interpretation . . . . . . . . . . . . . . . . . . .15

ARTICLE II

CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL

Section 2.01. Series 1993-A Credit Enhancement Fee. . . . . . . . . . . . .15
Section 2.02. Series Supplements. . . . . . . . . . . . . . . . . . . . . .15
Section 2.03. Grant of Security Interest by OFL and the Seller . . . . . .16
Section 2.04. Priority. . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 2.05. Seller and OFL Remain Liable. . . . . . . . . . . . . . . . .17
Section 2.06. Maintenance of Collateral.. . . . . . . . . . . . . . . . . .17
Section 2.07. Termination and Release of Rights.. . . . . . . . . . . . . .18
Section 2.08. Non-Recourse Obligations of Seller. . . . . . . . . . . . . .19
Section 2.09. Program Spread Account and Tag Accounts . . . . . . . . . . .19

ARTICLE III

SPREAD ACCOUNTS

Section 3.01. Establishment of Spread Accounts; Initial Deposits into
Spread Accounts . . . . . . . . . . . . . . . . . . . . . . .21
Section 3.02. Investments.. . . . . . . . . . . . . . . . . . . . . . . . .22
Section 3.03. Distributions: Priority of Payments.. . . . . . . . . . . . .24
Section 3.04. General Provisions Regarding Spread Accounts. . . . . . . . .27
Section 3.05. Reports by the Collateral Agent . . . . . . . . . . . . . . .29

ARTICLE IV

THE COLLATERAL AGENT

Section 4.01. Appointment and Powers. . . . . . . . . . . . . . . . . . . .29
Section 4.02. Performance of Duties . . . . . . . . . . . . . . . . . . . .30
Section 4.03. Limitation on Liability . . . . . . . . . . . . . . . . . . .30
Section 4.04. Reliance upon Documents . . . . . . . . . . . . . . . . . . .31
Section 4.05. Successor Collateral Agent. . . . . . . . . . . . . . . . . .31
Section 4.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . .32
Section 4.07. Compensation and Reimbursement. . . . . . . . . . . . . . . .33
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Section 4.08. Representations and Warranties of the Collateral Agent. . . .33
Section 4.09. Waiver of Setoffs . . . . . . . . . . . . . . . . . . . . . .34
Section 4.10. Control by the Controlling Party. . . . . . . . . . . . . . .34

ARTICLE V

COVENANTS OF THE SELLER

Section 5.01. Preservation of Collateral. . . . . . . . . . . . . . . . . .34
Section 5.02. Opinions as to Collateral . . . . . . . . . . . . . . . . . .34
Section 5.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Section 5.04. Waiver of Stay or Extension Laws; Marshalling of Assets . . .35
Section 5.05. Noninterference, etc. . . . . . . . . . . . . . . . . . . . .35
Section 5.06. Seller Changes. . . . . . . . . . . . . . . . . . . . . . . .35

ARTICLE VI

CONTROLLING PARTY; INTERCREDITOR PROVISIONS

Section 6.01. Appointment of Controlling Party. . . . . . . . . . . . . . .36
Section 6.02. Controlling Party's Authority.. . . . . . . . . . . . . . . .36
Section 6.03. Rights of Secured Parties . . . . . . . . . . . . . . . . . .38
Section 6.04. Degree of Care. . . . . . . . . . . . . . . . . . . . . . . .39

ARTICLE VII

REMEDIES UPON DEFAULT

Section 7.01. Remedies upon a Default . . . . . . . . . . . . . . . . . . .39
Section 7.02. Waiver of Default . . . . . . . . . . . . . . . . . . . . . .39
Section 7.03. Restoration of Rights and Remedies. . . . . . . . . . . . . .40
Section 7.04. No Remedy Exclusive . . . . . . . . . . . . . . . . . . . . .40

ARTICLE VIII

MISCELLANEOUS

Section 8.01. Further Assurances. . . . . . . . . . . . . . . . . . . . . .40
Section 8.02. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Section 8.03. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . .40
Section 8.04. Severability. . . . . . . . . . . . . . . . . . . . . . . . .41
Section 8.05. Nonpetition Covenant. . . . . . . . . . . . . . . . . . . . .41
Section 8.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Section 8.07. Term of this Agreement. . . . . . . . . . . . . . . . . . . .43
Section 8.08. Assignments: Third-Party Rights; Reinsurance.. . . . . . . .43
Section 8.09. Consent of Controlling Party. . . . . . . . . . . . . . . . .44
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Section 8.10. Trial by Jury Waived. . . . . . . . . . . . . . . . . . . . .44
Section 8.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . .44
Section 8.12. Consents to Jurisdiction. . . . . . . . . . . . . . . . . . .45
Section 8.13. Limitation of Liability . . . . . . . . . . . . . . . . . . .45
Section 8.14. Determination of Adverse Effect . . . . . . . . . . . . . . .45
Section 8.15. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .45
Section 8.16. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . .45
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SPREAD ACCOUNT AGREEMENT, dated as of March 25, 1993, as amended and restated
as of July __, 1998 (the "Agreement"), by and among ARCADIA FINANCIAL LTD., a
Minnesota corporation ("Arcadia Financial"), ARCADIA RECEIVABLES FINANCE
CORP., a Delaware corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE
INC., a New York stock insurance company ("Financial Security"), NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION ("Norwest"), a national banking association
in its capacities as Trustee under each Pooling and Servicing Agreement
and/or as Trustee under each Indenture with respect to those Series specified
in the related Series Supplement (as defined below), THE CHASE MANHATTAN BANK
("Chase"), as Trustee under each Indenture with respect to those Series
specified in the related Series Supplement, each in such respective
capacities as agent for the Certificateholders and/or Noteholders with
respect to the related Series (Norwest or Chase, as Trustee as indicated in
the related Sales and Servicing Agreement or the related Series Supplement,
as the case may be, the "Trustee") and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent (as defined below).

RECITALS

1. Olympic Automobile Receivables Trust, 1993-A (the "Series
1993-A Trust") was formed pursuant to a Pooling and Servicing Agreement,
dated as of March 1, 1993 (the "Series 1993-A Pooling and Servicing
Agreement"), among OFL, as Servicer, the Seller, the Trustee and the Backup
Servicer.

2. Pursuant to Pooling and Servicing Agreements or Sale and
Servicing Agreements, the Seller from time to time sells all of its right,
title and interest in and to Receivables and certain other Trust Property.

3. The Seller has requested that Financial Security issue
Policies to guarantee payment of the Guaranteed Distributions or Scheduled
Payments (as defined in the relevant Policy) on each Distribution Date in
respect of asset-backed securities backed by such Receivables and Other Trust
Property.

4. In partial consideration of the issuance of the Policies, the
Seller has agreed that Financial Security shall have certain rights as
Controlling Party, to the extent set forth herein.

5. The Seller is a wholly-owned special purpose subsidiary of
OFL. Certain of the purchasers of Receivables and Other Trust Property have
agreed to pay a Credit Enhancement Fee to the Seller in consideration of the
obligations of the Seller and OFL pursuant hereto and in consideration of
the obligations of OFL pursuant to the Insurance Agreements (such
obligations forming part of the Insurer Secured Obligations referred to
herein). The Insurer Secured Obligations form part of the consideration to
Financial Security for its issuance of the Policies.

6. In order to secure the performance of the Secured Obligations,
to further effect and enforce the subordination provisions to which the
Credit Enhancement Fee is subject,

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and in consideration of the receipt of the Credit Enhancement Fee, OFL and
the Seller agreed to pledge the Collateral as Collateral to the Collateral
Agent for the benefit of Financial Security and for the benefit of the
Trustees on behalf of the Trusts, upon the terms and conditions set forth
herein.

7. In connection with the issuance of Policies subsequent to the
Policy issued with respect to the Series 1993-A Trust, it is contemplated
that Financial Security will obtain certain Controlling Party rights with
respect to the related Series, and that, in connection with each such
additional Series, the parties hereto have entered into or will enter into a
Series Supplement hereto pursuant to which the Seller has pledged or will
pledge additional Collateral pursuant to the terms hereof and such Series
Supplement.

8. The Seller has entered into a Amended and Restated Sale and
Servicing Agreement dated as of July __, 1998 with Arcadia Automobile
Receivables Warehouse Trust., a Delaware business trust (the "Issuer"),
Arcadia Receivables Conduit Corp. (the "Original Issuer"), Arcadia Financial,
Bank of America National Trust and Savings Association, as Administrative
Agent and RCC Agent, Morgan Guaranty Trust Company of New York, as DFC Agent
and Norwest Bank Minnesota, National Association, as Backup Servicer,
Collateral Agent and Indenture Trustee (the "Warehousing Series Sale and
Servicing Agreement") pursuant to which the Seller has sold or will sell all
of its right, title and interest in certain Receivables, and that the Issuer
will issue one or more classes or tranches of Warehousing Notes pursuant to
an Amended and Restated Indenture among the Original Issuer, the Issuer, the
Indenture Trustee and the Collateral Agent, and that Financial Security in
its discretion may issue one or more Policies with respect to certain
scheduled payments on the corresponding Notes.

9. The parties have previously executed, amended and restated
this Agreement, and now wish to further amend and restate this Agreement to
supplement certain provisions therein in order to reflect the intent of the
parties.

AGREEMENTS

In consideration of the premises, and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged the parties hereto agree as follows:

Article I

DEFINITIONS

Section 1.01. DEFINITIONS. All terms defined in the document
entitled " OFL Grantor Trusts Standard Terms and Conditions of Agreement
Effective March 1, 1993" (the "Standard Terms and Conditions") shall have the
same meaning with respect to each Series in this Agreement. If the related
Series was issued pursuant to a Pooling and Servicing Agreement, all terms
defined in Section 1.01 of such Pooling and Servicing Agreement shall have
the same

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meaning with respect to the related Series in this Agreement. If the related
Series was issued pursuant to a Trust Agreement, Sale and Servicing Agreement
and Indenture, all terms defined in the related Sale and Servicing Agreement
shall have the same meaning with respect to the related Series in this
Agreement. If the related Series was issued pursuant to an Indenture and the
related Receivables were sold to the Issuer pursuant to a Warehousing Series
Sale and Servicing Agreement, all terms defined in the Warehousing Series
Sale and Servicing Agreement shall have the same meaning with respect to the
related Series in this Agreement. If a term is defined herein with respect
to one or more Series, if applicable, such term shall be defined with respect
to any other Series in the Series Supplement related thereto. The following
terms shall have the following respective meanings:

"AUTHORIZED OFFICER" means, (i) with respect to Financial Security,
the Chairman of the Board, the President, the Executive Vice President or any
Managing Director of Financial Security, (ii) with respect to the Trustee or
the Collateral Agent, any Vice President or Trust Officer thereof, (iii) with
respect to OFL, the President or any Vice President thereof, and (iv) with
respect to the Seller, the President or any Vice President thereof.

"AVERAGE DELINQUENCY RATIO" means, with respect to any Series
(other than the Warehousing Series) and any Determination Date, the
arithmetic average of the Delinquency Ratios for such Determination Date and
the two immediately preceding Determination Dates.

"CAPTURE EVENT" means the occurrence of an "Event of Default," as
defined in the Indenture dated as of March 12, 1997 between Arcadia Financial
(f/k/a Olympic Financial Ltd.) and Norwest Bank Minnesota, National
Association, as amended or supplemented (including that First Supplemental
Indenture dated as of March 12, 1997 and that Second Supplemental Indenture
dated as of October 8, 1997), relating to $375,000,000 principal amount of
Arcadia Financial's currently outstanding 11 1/2% Senior Notes due 2007, with
respect to which a permanent waiver has not been effected in accordance with
the terms of such agreement.

"COLLATERAL" means the Series 1993-A Collateral, any property
pledged pursuant to Section 2.09(d), and, with respect to any Series, all
collateral delivered hereunder with respect to each of the Series, as
specified in the related Series Supplement.

"COLLATERAL AGENT" means, initially, Norwest Bank Minnesota,
National Association, in its capacity as collateral agent on behalf of the
Secured Parties, including its successors in interest, until a successor
Person shall have become the Collateral Agent pursuant to Section 4.05
hereof, and thereafter "Collateral Agent" shall mean such successor Person.

"COLLECTION ACCOUNT SHORTFALL" means (A), with respect to any
Series created pursuant to a Pooling and Servicing Agreement, any
Distribution Date, and a time of determination, the excess, if any, of the
amount required to be distributed on such Distribution Date pursuant to
subsections (i) through (vi) of Section 4.6(a) of the Standard Terms and
Conditions over the amount on deposit in and available for distribution (or,
for the purposes of Section 3.03(a), calculated on a pro forma basis to be on
deposit in and available for distribution) on such Distribution Date from the
Collection Account related to such Series, and (B) with respect to any Series
created pursuant to a Trust Agreement, Sale and Servicing Agreement and

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Indenture, or with respect to any Series issued by the Issuer, the meaning
assigned in the related Series Supplement.

"CONTROLLING PARTY" means with respect to a Series, at any time,
the Person designated as the Controlling Party at such time pursuant to
Section 6.01 hereof.

"CRAM DOWN LOSS" means, if a court of appropriate jurisdiction in
an insolvency proceeding shall have issued an order reducing the Principal
Balance of a Receivable, the amount of such reduction. A "Cram Down Loss"
shall be deemed to have occurred on the date of issuance of such order.

"CUMULATIVE DEFAULT RATE" means, with respect to any Determination
Date and any Series (other than the Warehousing Series), the fraction,
expressed as a percentage, the numerator of which is equal to the sum of (a)
the Principal Balance of all Receivables which became Spread Account
Liquidated Receivables since the Cutoff Date as of the related Accounting
Date plus (b) the Principal Balance of all Receivables with respect to which
all or any portion of a Scheduled Payment has become 91 or more days
delinquent as of the related Accounting Date (not including those Receivables
included in clause (a) above) and the denominator of which is equal to the
sum of (i) the original Aggregate Principal Balance as of the Initial Cutoff
Date plus (ii) the Prefunded Amount as of the Series Closing Date.

"CUMULATIVE NET LOSS RATE" means, with respect to any Determination
Date and any Series (other than the Warehousing Series), the fraction,
expressed as a percentage, the numerator of which is equal to the sum of (a)
Net Losses for such Determination Date plus (b) with respect to Series
1994-A, Series 1994-B, Series 1994-C, Series 1994-D, Series 1995-A, Series
1995-B, Series 1995-C, Series 1995-D, Series 1996-A, Series 1996-B, Series
1996-C, Series 1996-D, Series 1997-A, Series 1997-B, Series 1997-C, Series
1997-D and Series 1998-A, 40%, and with respect to any other Series (other
than the Warehousing Series), 50%, of the Principal Balance of all
Receivables with respect to which all or any portion of a Scheduled Payment
has become 91 or more days delinquent (not including Receivables included
under the definition of Net Losses in clause (a) above) as of the related
Accounting Date and the denominator of which is equal to the sum of (i) the
original Aggregate Principal Balance as of the Initial Cutoff Date plus (ii)
the Prefunded Amount as of the Series Closing Date.

"DEEMED CURED" means, with respect to Series 1994-B, Series 1994-A,
Series 1993-D, Series 1993-C, Series 1993-B or Series 1993-A and each other
Spread Account for which "Deemed Cured" is not defined in the related Series
Supplement, (a) with respect to the occurrence of the events specified in
clause (A)(i) or (ii) of the definition of Trigger Event, as of a
Determination Date that no such event specified in clause (A)(i) or clause
(A)(ii) with respect to such Series shall have occurred as of such
Determination Date or as of any of the two consecutively preceding
Determination Dates, and (b) with respect to the occurrence of the events
specified in clause (A)(iii) or clause (A)(iv) of the definition thereof, as
of the next Determination Date which occurs in a calendar month which is a
multiple of three months succeeding the Closing Date, that no such event
specified in clause (A)(iii) or clause (A)(iv) with respect to such Series
shall have occurred as of such Determination Date.

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"DEFAULT" means, with respect to any Series, at any time, (i) if
Financial Security is then the Controlling Party with respect to such Series,
any Insurance Agreement Event of Default with respect to such Series, and
(ii) if the Trustee is then the Controlling Party with respect to such
Series, any Servicer Termination Event with respect to such Series.

"DELINQUENCY RATIO" means, with respect to any Determination Date
and any Series (other than the Warehousing Series), the fraction, expressed
as a percentage, the numerator of which is equal to the sum of the Principal
Balances (as of the related Accounting Date) of all Receivables that were
delinquent with respect to all or any portion of a Scheduled Payment more
than 30 days as of the related Accounting Date or that became a Purchased
Receivable as of the related Accounting Date and that were delinquent with
respect to all or any portion of a Scheduled Payment more than 30 days as of
such Accounting Date and the denominator of which is equal to the Aggregate
Principal Balance as of the related Accounting Date.

"DELIVERY" means, when used with respect to Spread Account Eligible
Investments, the actions to be taken with respect to the delivery thereof to
the Collateral Agent and the holding thereof by the Collateral Agent as
follows:

(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC (other
than certificated securities) and are susceptible of physical delivery,
transfer thereof to the Collateral Agent by physical delivery to the
Collateral Agent, indorsed to, or registered in the name of, the Collateral
Agent or its nominee or indorsed in blank and such additional or alternative
procedures as may hereafter become appropriate to effect the complete
transfer of ownership of any such Eligible Investment to the Collateral Agent
free and clear of any adverse claims, consistent with changes in applicable
law or regulations or the interpretation thereof;

(b) with respect to a "certificated security" (as defined in
Section 8-102(a)(4) of the UCC), transfer thereof:

1. by physical delivery of such certificated security to the
Collateral Agent, provided that if the certificated security is in
registered form, it shall be indorsed to, or registered in the name of, the
Collateral Agent or indorsed in blank;

2. by physical delivery of such certificated security in registered
form to a "securities intermediary" (as defined in Section 8-102(a)(14) of
the UCC) acting on behalf of the Collateral Agent, if the certificated
security has been specially endorsed to the Collateral Agent by an
effective endorsement.

(c) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following procedures,
all in accordance with applicable law, including applicable federal
regulations and Articles 8 and 9 of the UCC: book-entry registration of such
property to an appropriate book-entry account maintained with a Federal
Reserve Bank by a securities

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intermediary which is also a "depositary" pursuant to applicable federal
regulations and issuance by such securities intermediary of a deposit advice
or other written confirmation of such book-entry registration to the
Collateral Agent of the purchase by the securities intermediary on behalf of
the Collateral Agent of such book-entry security; the making by such
securities intermediary of entries in its books and records identifying such
book-entry security held through the Federal Reserve System pursuant to
Federal book-entry regulations as belonging to the Collateral Agent and
indicating that such securities intermediary holds such book-entry security
solely as agent for the Collateral Agent; and such additional or alternative
procedures as may hereafter become appropriate to effect complete transfer of
ownership of any such Eligible Investments to the Collateral Agent free of
any adverse claims, consistent with changes in applicable law or regulations
or the interpretation thereof;

(d) with respect to an "uncertificated security" (as defined in
Section 8-102(a)(18) of the UCC) and that is not governed by clause (c)
above, transfer thereof:

1. (A) by registration to the Collateral Agent as the registered
owner thereof, on the books and records of the issuer thereof.

(B) another Person (not a securities intermediary) either
becomes the registered owner of the uncertificated security on behalf of the
Collateral Agent, or having become the registered owner acknowledges that it
holds for the Collateral Agent.

2. the issuer thereof has agreed that it will comply with
instructions originated by the Collateral Agent without further consent of
the registered owner thereof.

(e) with respect to a "security entitlement" (as defined in
Section 8-102(a)(17) of the UCC) if a securities intermediary (A) indicates
by book-entry that a "financial asset" (as defined in Section 8-102(a)(9) of
the UCC) has been credited to the Collateral Agent's "securities account" (as
defined in Section 8-501(a) of the UCC), (B) receives a financial asset (as
so defined) from the Collateral Agent or acquires a financial asset for the
Collateral Agent, and in either case, accepts it for credit to the Collateral
Agent's securities account (as so defined), (C) becomes obligated under other
law, regulation or rule to credit a financial asset to the Collateral Agent's
securities account, or (D) has agreed that it will comply with "entitlement
orders" (as defined in Section 8-102(a)(8) of the UCC) originated by the
Collateral Agent without further consent by the "entitlement holder" (as
defined in Section 8-102(a)(7) of the UCC), of a confirmation of the purchase
and the making by such securities intermediary of entries on its books and
records identifying as belonging to the Collateral Agent of (I) a specific
certificated security in the securities intermediary's possession, (II) a
quantity of securities that constitute or are part of a fungible bulk of
certificated securities in the securities intermediary's possession, or (III)
a quantity of securities that constitute or are part of a fungible bulk of
securities shown on the account of the securities intermediary on the books
of another securities intermediary.

(f) in each case of delivery contemplated herein, the Collateral
Agent shall make appropriate notations on its records, and shall cause the
same to be made of the records of its nominees, indicating that securities
are held in trust pursuant to and as provided in this

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Agreement.

"ELIGIBLE ACCOUNT" means a segregated trust account that (i) is
either (x) maintained with a depository institution or trust company the
long-term unsecured debt obligations of which are rated "AA" or higher by
Standard & Poor's and "Aa2" or higher by Moody's, or (y) maintained with a
depository institution or trust company the commercial paper or other
short-term unsecured debt obligations of which are rated "A-1+" by Standard &
Poor's and "P-1" by Moody's and (ii) in either case, such depository
institution or trust company shall have been specifically approved by the
Controlling Party, acting in its discretion, by written notice to the
Collateral Agent.

"FINAL TERMINATION DATE" means, with respect to a Series, the date
that is the later of (i) the Insurer Termination Date with respect to such
Series and (ii) the Trustee Termination Date with respect to such Series.

"FINANCIAL SECURITY DEFAULT" means, with respect to any Series, any
one of the following events shall have occurred and be continuing:

(a) Financial Security shall have failed to make a payment required
under a related Policy;

(b) Financial Security shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (ii) made a general assignment for the
benefit of its creditors, or (iii) had an order for relief entered against
it under the United States Bankruptcy Code, the New York State Insurance
Law, or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization which is final
and nonappealable; or

(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for Financial Security or for all or
any material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent or receiver of Financial Security
(or the taking of possession of all or any material portion of the property
of Financial Security).

"INITIAL PRINCIPAL AMOUNT" means $59,222,640.38 with respect to
Series 1993-A.

"INITIAL SPREAD ACCOUNT DEPOSIT" means $2,368,906 for Series 1993-A.

"INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to
Series 1993-A and any Distribution Date, an amount equal to the greater of
(i) 7% of the Certificate Balance as of such Distribution Date (after giving
effect to the distribution in respect of principal made on such Distribution
Date) and (ii) the Spread Account Minimum Amount as of such Distribution Date.

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"INSURANCE AGREEMENT" means, with respect to any Series, the
Insurance and Indemnity Agreement among Financial Security, the Seller, OFL
and such other parties as may be named therein.

"INSURER SECURED OBLIGATIONS" means, with respect to a Series, all
amounts and obligations which OFL, the Seller and such other parties as may
be named therein may at any time owe or be required to perform to or on
behalf of Financial Security (or any agents, accountants or attorneys for
Financial Security) under the Insurance Agreement related to such Series or
under any Transaction Document in respect of such Series, regardless of
whether such amounts are owed or performance is due now or in the future,
whether liquidated or unliquidated, contingent or non-contingent.

"INSURER TERMINATION DATE" means, with respect to any Series, the
date which is the latest of (i) the date of the expiration of all Policies
issued in respect of such Series, (ii) the date on which Financial Security
shall have received payment and performance in full of all Insurer Secured
Obligations with respect to such Series and (iii) the latest date on which
any payment referred to above could be avoided as a preference or otherwise
under the United States Bankruptcy Code or any other similar federal or state
law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, as specified in an Opinion of Counsel delivered to the
Collateral Agent and the Trustee.

"ISSUER" means Arcadia Automobile Receivables Warehouse Trust., a
Delaware business trust.

"LIEN" means, as applied to the property or assets (or the income,
proceeds, products, rents or profits therefrom) of any Person, in each case
whether the same is consensual or nonconsensual or arises by contract,
operation of law, legal process or otherwise: (a) any mortgage, lien, pledge,
attachment, charge, lease, conditional sale or other title retention
agreement, or other security interest or encumbrance of any kind; or (b) any
arrangement, express or implied, under which such property or assets (and/or
such income, proceeds, products, rents or profits) are transferred,
sequestered or otherwise identified for the purpose of subjecting or making
available the same for payment of debt or performance of any other obligation
in priority to the payment of the general, unsecured creditors of such Person.

"NET LOSSES " means, with respect to any Determination Date and any
Series (other than the Warehousing Series), the positive difference of (A)
the sum of (i) the aggregate of the Principal Balances as of the related
Accounting Date (plus accrued and unpaid interest to the end of the related
Monthly Period, at the applicable APR) of all Receivables that became Spread
Account Liquidated Receivables since the Cutoff Date, plus (ii) the Purchase
Amount of all Receivables that became Purchased Receivables as of the related
Accounting Date and that were delinquent with respect to all or any portion
of a Scheduled Payment more than 30 days as of such Accounting Date, plus
(iii) the aggregate of all Cram Down Losses as of the related Accounting Date
that occurred since the Cutoff Date, over (B) the Liquidation Proceeds
received by the Trust as of the related Accounting Date since the Cutoff Date.

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"NON-CONTROLLING PARTY" means, with respect to a Series, at any
time, the Secured Party that is not the Controlling Party at such time.

"OBLIGOR" means, with respect to any Receivable, the purchaser or
the co-purchasers of the Financed Vehicle and any other Person or Persons who
are primarily or secondarily obligated to make payments under a Receivable.

"OFL" means Arcadia Financial Ltd., a Minnesota corporation
(formerly known as Olympic Financial Ltd.).

"OPINION OF COUNSEL" means a written opinion of counsel acceptable,
as to form, substance and issuing counsel, to the Controlling Party.

"PAYMENT PRIORITIES" means the priority of PRO RATA distributions
described in clause (iii) of priority THIRD of Section 3.03(a).

"POLICY" means the Series 1993-A Policy and any insurance policy
subsequently issued by Financial Security with respect to a Series.

"POOLING AND SERVICING AGREEMENT" means, with respect to Series
1993-A, the Series 1993-A Pooling and Servicing Agreement and, for each other
Series created pursuant to a Pooling and Servicing Agreement, the Pooling and
Servicing Agreement related to such Series.

"PROGRAM SPREAD ACCOUNT" has the meaning specified in Section
2.09(a) hereof.

"SECURED OBLIGATIONS" means, with respect to each Series, the
Insurer Secured Obligations with respect to such Series and the Trustee
Secured Obligations with respect to such Series.

"SECURED PARTIES" means, with respect to a Series and the related
Collateral, each of the Trustee, in respect of the Trustee Secured
Obligations with respect to such Series, and Financial Security, in respect
of the Insurer Secured Obligations with respect to such Series.

"SECURITY INTERESTS" means, with respect to Series 1993-A
Certificates, the security interests and Liens in the Series 1993-A
Collateral granted pursuant to Section 2.03 hereof, and, with respect to any
other Series, the security interests and Liens in the related Collateral
granted pursuant to the related Series Supplement.

"SERIES 1993-A CERTIFICATES" means the Series of Certificates
issued on the date hereof pursuant to the Series 1993-A Pooling and Servicing
Agreement.

"SERIES 1993-A COLLATERAL" has the meaning specified in Section
2.03(a) hereof.

"SERIES 1993-A CREDIT ENHANCEMENT FEE" means the amount
distributable on each Distribution Date pursuant to Section 4.6(a)(vi) and
(vii) of the Standard Terms and Conditions as incorporated by reference in
the Series 1993-A Pooling and Servicing Agreement.

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"SERIES 1993-A POOLING AND SERVICING AGREEMENT" means the Pooling
and Servicing Agreement, dated as of the date hereof, among OFL, in its
individual capacity and as Servicer, the Seller, the Trustee and the Backup
Servicer, as such agreement may be supplemented, amended or modified from
time to time.

"SERIES 1993-A RECEIVABLE" means each Receivable referenced on the
Schedule of Receivables attached to the Series 1993-A Pooling and Servicing
Agreement.

"SERIES OF SECURITIES" or "SERIES" means the Series 1993-A
Certificates or, as the context may require, any other series of Certificates
and/or Notes issued as described in Section 2.02 hereof, or collectively, all
such series; PROVIDED, HOWEVER, Series, as used collectively shall not
include any Series of Warehousing Notes when such term is used in, or with
respect to, the definitions "Cumulative Default Rate," "Average Delinquency
Ratio," "Cumulative Net Loss Rate," "Deemed Cured," "Delinquency Ratio," "Net
Losses," "Spread Account Shortfall" and "Spread Account Default Level."

"SERIES SUPPLEMENT" means a supplement hereto executed by the
parties hereto in accordance with Section 2.02 hereof.

"SPREAD ACCOUNT" has the meaning specified in Section 3.01(a)
hereof.

"SPREAD ACCOUNT ADDITIONAL DEPOSIT" with respect to any Series
created pursuant to a Trust Agreement, Sale and Servicing Agreement and
Indenture, has the meaning assigned in the related Series Supplement.

"SPREAD ACCOUNT LIQUIDATED RECEIVABLE" means, with respect to any
Monthly Period, a Receivable as to which (i) 91 days have elapsed since the
Servicer repossessed the related Financed Vehicle, (ii) the Servicer has
determined in good faith that all amounts it expects to recover have been
received, or (iii) all or any portion of a Scheduled Payment shall have
become more than 180 days past due.

"SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series
1993-A and any Distribution Date:

(i) if no Insurance Agreement Event of Default with respect to such
Series has occurred and is continuing as of the related Determination Date,
no Capture Event has occurred and is continuing as of the related
Determination Date, no Trigger Event has occurred as of the related
Determination Date, and any Trigger Event with respect to such Series is
Deemed Cured as of the related Determination Date, then the Initial Spread
Account Maximum Amount with respect to such Series and such Distribution
Date;

(ii) if (A) a Trigger Event with respect to Series 1993-A has occurred
as of the Determination Date or (B) a Trigger Event with respect to Series
1993-A has occurred as of a prior Distribution Date and is not Deemed Cured
as of the related Determination Date, and no Insurance Agreement Event of
Default with respect to Series 1993-A has occurred and is continuing and no
Capture Event has occurred and is continuing, the

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Spread Account Maximum Amount shall be equal to the greater of (i) 10% of
the Series 1993-A Balance as of the close of business on such Distribution
Date and (ii) the Spread Account Minimum Amount as of the close of business
on such Distribution Date; or

(iii)if (A) an Insurance Agreement Event of Default with respect to
such Series has occurred and is continuing or (B) a Capture Event has
occurred and is continuing as of the related Determination Date, the Spread
Account Maximum Amount shall be equal to the greater of (i) 25% of the
Series 1993-A Balance as of the close of business on such Distribution Date
and (ii) the Spread Account Minimum Amount as of the close of business on
such Distribution Date.

"SPREAD ACCOUNT MINIMUM AMOUNT" means, with respect to Series
1993-A and any Distribution Date, an amount equal to the greater of:

(i) $100,000, and

(ii) the lesser of:

(A) 1% of the Initial Principal Amount of such Series, but in
no event less than $500,000, and

(B) the Certificate Balance as of such Distribution Date
(after giving effect to the distribution in respect of
principal made on such Distribution Date).

"SPREAD ACCOUNT RECOURSE MAXIMUM ADJUSTMENT AMOUNT" means, with
respect to a Distribution Date and any Spread Account in which amounts on
deposit include a Spread Account Recourse Reduction Amount, the maximum
amount by which such Spread Account Recourse Reduction Amount is permitted to
decrease, as reported to the Collateral Agent in the Servicer's Certificate
delivered with respect to the related Determination Date, so long as
Financial Security does not deliver a written objection to such amount prior
to such Distribution Date.

"SPREAD ACCOUNT RECOURSE REDUCTION AMOUNT" means, with respect to a
Spread Account and Distribution Date, the specified amount deemed to be on
deposit in such Spread Account which is not cash, which amount is specified
in the Servicer's Certificate delivered with respect to the related
Determination Date, so long as Financial Security does not deliver a written
objection to such amount prior to such Distribution Date, and which amount
shall be treated fungibly with all other amounts on deposit in such Spread
Account, EXCEPT that such amount shall not be treated as a deposit in the
related Tag Account, and EXCEPT FURTHER, as provided in Section 3.03(b) and
3.04(e).

"SPREAD ACCOUNT SHORTFALL" means, with respect to any Distribution
Date and any Series (other than the Warehousing Series) with respect to which
an Insurance Agreement Event of Default has occurred and is continuing, or a
Capture Event has occurred and is continuing, the excess, if any, of the
Spread Account Maximum Amount for such Series and such Distribution

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Date and the amount on deposit in such Spread Account as of such Distribution
Date after giving effect to distributions made on such Distribution Date
pursuant to priority SECOND of Section 3.03(b).

"STOCK PLEDGE AGREEMENT" means the Third Amended and Restated Stock
Pledge Agreement, dated as of December 3, 1996, between OFL, Financial
Security and the Collateral Agent, as amended from time to time.

"TAG ACCOUNT" has the meaning specified in Section 2.09(c).

"TRANSACTION DOCUMENTS" means, with respect to a Series, this
Agreement, each of the Pooling and Servicing Agreement or Trust Agreement,
Sale and Servicing Agreement and Indenture, or Warehousing Series Sale and
Servicing Agreement, Indenture and Security Agreement, as applicable, the
Insurance Agreement, the Custodian Agreement, the Purchase Agreement, any
Subsequent Purchase Agreements and Subsequent Transfer Agreements, any
Underwriting Agreement, the Lockbox Agreement, and the Stock Pledge Agreement
related to such Series.

"TRIGGER EVENT" means, with respect to Series 1993-A and as of a
Determination Date, the occurrence of any of the events specified in clause
(A) together with the occurrence of the event specified in clause (B):

(A) (i) [reserved];

(ii) the Average Delinquency Ratio for such Determination Date
shall be equal to or greater than 5.00%;

(iii) the Cumulative Default Rate shall be equal to or greater
than (A) 3.15%, with respect to any Determination Date
occurring prior to or during the sixth calendar month
succeeding the Series 1993-A Closing Date, (B) 5.50%,
with respect to any Determination Date occurring after
the sixth, and prior to or during the 12th, calendar
month succeeding the Series 1993-A Closing Date, (C)
7.0%, with respect to any Determination Date occurring
after the 12th, and prior to or during the 18th,
calendar month succeeding the Series 1993-A Closing
Date, (D) 7.5%, with respect to any Determination Date
occurring after the 18th, and prior to or during the
24th, calendar month succeeding the Series 1993-A
Closing Date, (E) 8.15%, with respect to any
Determination Date occurring after the 24th, and prior
to or during the 30th, calendar month succeeding the
Series 1993-A Closing Date, (F) 8.75%, with respect to
any Determination Date occurring after the 30th, and
prior to or during the 36th, calendar month succeeding
the Series 1993-A Closing Date, (G) 3 9.0%, with respect
to any Determination Date occurring after the 36th, and
prior to or during the 42nd, calendar month succeeding
the Series 1993-A Closing

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<PAGE>

Date, (H) 9.25%, with respect to any Determination Date
occurring after the 42nd, and prior to or during the
48th, calendar month succeeding the Series 1993-A
Closing Date, (I) 9.50%, with respect to any
Determination Date occurring after the 48th, and prior
to or during the 54th, calendar month succeeding the
Series 1993-A Closing Date, (J) 9.75%, with respect to
any Determination Date occurring after the 54th, and
prior to or during the 60th calendar month succeeding
the Series 1993-A Closing Date, (K) 9.9%, with respect
to any Determination Date occurring after the 60th, and
prior to or during the 66th, calendar month succeeding
the Series 1993-A Closing Date, or (L) 10.0%, with
respect to any Determination Date occurring after the
66th, and prior to or during the 72nd, calendar month
succeeding the Series 1993-A Closing Date; or

(iv) the Cumulative Net Loss Rate shall be equal to or
greater than (A) 1.25%, with respect to any
Determination Date occurring prior to or during the
sixth calendar month succeeding the Series 1993-A
Closing Date, (B) 2.0%, with respect to any
Determination Date occurring after the sixth, and prior
to or during the 12th, calendar month succeeding the
Series 1993-A Closing Date, (C) 2.75%, with respect to
any Determination Date occurring after the 12th, and
prior to or during the 18th, calendar month succeeding
the Series 1993-A Closing Date, (D) 3.0%, with respect
to any Determination Date occurring after the 18th, and
prior to or during the 24th, calendar month succeeding
the Series 1993-A Closing Date, (E) 3.25%, with respect
to any Determination Date occurring after the 24th, and
prior to or during the 30th, calendar month succeeding
the Series 1993-A Closing Date, (F) 3.5%, with respect
to any Determination Date occurring after the 30th, and
prior to or during the 36th, calendar month succeeding
the Series 1993-A Closing Date, (G) 3.6%, with respect
to any Determination Date occurring after the 36th, and
prior to or during the 42nd, calendar month succeeding
the Series 1993-A Closing Date, (H) 3.7%, with respect
to any Determination Date occurring after the 42nd, and
prior to or during the 48th, calendar month succeeding
the Series 1993-A Closing Date, (I) 3.8%, with respect
to any Determination Date occurring after the 48th, and
prior to or during the 54th, calendar month succeeding
the Series 1993-A Closing Date, (J) 3.9%, with respect
to any Determination Date occurring after the 54th, and
prior to or during the 60th, calendar month succeeding
the Series 1993-A Closing Date, (K) 3.95%, with respect
to any Determination Date occurring after the 60th, and
prior to or during the 66th, calendar month succeeding
the Series 1993-A Closing Date, or (L) 4.0%, with
respect to any Determination Date

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occurring after the 66th, and prior to or during the
72nd, calendar month succeeding the Series 1993-A
Closing Date.

(B) The amount specified with respect to such Series in the last
sentence of Section 2.09(f) hereof is positive on such
Determination Date, and such amount has not been deposited in the
related Tag Account on such Determination Date.

"TRUST" means a trust formed pursuant to a Pooling and Servicing
Agreement or a Trust Agreement, as the case may be.

"TRUST PROPERTY," with respect to any Series (other than the
Warehousing Series), has the meaning specified in the related Pooling and
Servicing Agreement or Trust Agreement, as the case may be, and with respect
to the Warehousing Series, means the Seller Conveyed Property (as defined in
the Warehousing Series Sale and Servicing Agreement).

"TRUSTEE" means (A) with respect to any Series created pursuant to
a Pooling and Servicing Agreement, the Trustee named in such Pooling and
Servicing Agreement, or (B) with respect to any Series issued pursuant to an
Indenture, the Trustee named in such Indenture in its capacity as agent for
the Noteholders and, if applicable, the Certificateholders.

"TRUSTEE SECURED OBLIGATIONS" means, with respect to a Series, all
amounts and obligations which OFL or the Seller may at any time owe or be
required to perform to or on behalf of (i) the Trustee, the Trust or the
Certificateholders under the Pooling and Servicing Agreement with respect to
such Series, (ii) the Trustee, the Owner Trustee, the Trust, the
Certificateholders or the Noteholders under the Trust Agreement, the Sale and
Servicing Agreement or the Indenture with respect to such Series or (iii) the
Trustee and the Noteholders under the Indenture with respect to the
Warehousing Series.

"TRUSTEE TERMINATION DATE" means, with respect to any Series, the
date which is the later of (i) the date on which the Trustee shall have
received, as Trustee for the holders of the Certificates of such Series, or
as Indenture Trustee on behalf of (and as agent for) the Noteholders and/or
Certificateholders of such Series, payment and performance in full of all
Trustee Secured Obligations arising out of or relating to such Series or (ii)
except with respect to the Warehousing Series, the date on which all payments
in respect of the Certificates shall have been made and the related Trust
shall have been terminated pursuant to the terms of the related Pooling and
Servicing Agreement or Trust Agreement.

"UNDERWRITING AGREEMENT" means, with respect to any Series (other
than the Warehousing Series), the Underwriting Agreement among OFL, the
Seller and the Underwriters named therein.

"UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial
Code in effect in the relevant jurisdiction, as the same may be amended from
time to time.

"WAREHOUSING SERIES" means all notes issued by the Issuer.

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Section 1.02. RULES OF INTERPRETATION. The terms "hereof," "herein"
or "hereunder, " unless otherwise modified by more specific reference, shall
refer to this Agreement in its entirety. Unless otherwise indicated in
context, the terms "Article," "Section," "Appendix," "Exhibit" or "Annex"
shall refer to an Article or Section of, or Appendix, Exhibit or Annex to,
this Agreement. The definition of a term shall include the singular, the
plural, the past, the present, the future, the active and the passive forms
of such term. A term defined herein and used herein preceded by a Series
designation, shall mean such term as it relates to the Series designated.

Article II

CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL

Section 2.01. SERIES 1993-A CREDIT ENHANCEMENT FEE. The Series
1993-A Pooling and Servicing Agreement provides for the payment to the Seller
of a Series 1993-A Credit Enhancement Fee, to be paid to the Seller by
distribution of such amounts to the Collateral Agent for deposit and
distribution pursuant to this Agreement. The Seller and OFL hereby agree
that payment of the Series 1993-A Credit Enhancement Fee in the manner and
subject to the conditions set forth herein and in the Series 1993-A Pooling
and Servicing Agreement is adequate consideration and the exclusive
consideration to be received by the Seller or OFL for the obligations of the
Seller pursuant hereto and the obligations of OFL pursuant hereto
(including, without limitation, the transfer by the Seller to the Collateral
Agent of the Initial Spread Account Deposit) and pursuant to the Series
1993-A Insurance Agreement. The Seller and OFL hereby agree with the
Trustee and with Financial Security that payment of the Series 1993-A Credit
Enhancement Fee to the Seller is expressly conditioned on subordination of
the Series 1993-A Credit Enhancement Fee to payments on the Certificates of
any Series, payments on the Notes of any Series, payments of amounts due to
Financial Security and the other obligations of the Trusts, in each case to
the extent provided in Section 4.6 of the Standard Terms and Conditions and
Section 3.03 hereof; and the Security Interest of the Secured Parties in the
Series 1993-A Collateral is intended to effect and enforce such subordination
and to provide security for the Series 1993-A Secured Obligations and the
Secured Obligations with respect to each other Series.

Section 2.02. SERIES SUPPLEMENTS. The parties hereto intend to
enter into a Series Supplement hereto with respect to any Series other than
the Series 1993-A Certificates. The parties will enter into a Series
Supplement only if the following conditions shall have been satisfied:

(i) The Seller shall have sold or will sell Receivables to a
Trust or to a corporation pursuant to (A) a Pooling and Servicing
Agreement under which the Trustee shall act as trustee, (B) a Sale and
Servicing Agreement in form and substance satisfactory to Financial
Security, with respect to which the Trustee shall act as Indenture
Trustee, and which Sale and Servicing Agreement may provide for the sale
of Subsequent Receivables to the related Trust or (C) a Warehousing
Series Sale and Servicing

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Agreement in form and substance satisfactory to Financial Security, with
respect to which the Trustee shall act as Indenture Trustee with respect
to the related Notes;

(ii) Financial Security shall have issued (A) one or more Policies
in respect of the Guaranteed Distributions on Certificates issued
pursuant to the related Pooling and Servicing Agreement or Trust
Agreement, and/or (B) one or more Note Policies in respect of the
Scheduled Payments on the Notes issued pursuant to the related
Indenture; and

(iii) Pursuant to the related Series Supplement any and all right,
title and interest of the Seller, OFL or any affiliate of either of
them in the Collateral specified herein shall be pledged to the Secured
Parties substantially on the terms set forth in Section 2.03 hereof.

Section 2.03. GRANT OF SECURITY INTEREST BY OFL AND THE SELLER.
(a) In order to secure the performance of the Secured Obligations with
respect to each Series, the Seller (and OFL, to the extent it may have any
rights therein) hereby pledges, assigns, grants, transfers and conveys to the
Collateral Agent, on behalf of and for the benefit of the Secured Parties to
secure the Secured Obligations with respect to each Series, a lien on and
security interest in (which lien and security interest is intended to be
prior to all other liens, security interest or other encumbrances), all of
its right, title and interest in and to the following (all being collectively
referred to herein as the "Series 1993-A Collateral"):

(i) the Series 1993-A Credit Enhancement Fee and all rights and
remedies that the Seller may have to enforce payment of the Series
1993-A Credit Enhancement Fee whether under the Series 1993-A Pooling
and Servicing Agreement or otherwise;

(ii) the Series 1993-A Spread Account established pursuant to
Section 3.01 hereof, and each other account owned by the Seller and
maintained by the Collateral Agent (including, without limitation, all
monies, checks, securities, investments and other documents from time to
time held in or evidencing any such accounts);

(iii) all of the Seller's right, title and interest in and to
investments made with proceeds of the property described in clauses (i)
and (ii) above, or made with amounts on deposit in the Series 1993-A
Spread Account; and

(iv) all distributions, revenues, products, substitutions, benefits,
profits and proceeds, in whatever form, of any of the foregoing.

(b) In order to effectuate the provisions and purposes of this
Agreement, including for the purpose of perfecting the security interests
granted hereunder, the Seller represents and warrants that it has, prior to
the execution of this Agreement, executed and filed an appropriate Uniform
Commercial Code financing statement in Minnesota sufficient to assure that
the Collateral Agent, as agent for the Secured Parties, has a first priority
perfected security interest in all Series 1993-A Collateral which can be
perfected by the filing of a financing statement.

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Section 2.04. PRIORITY. The Seller (and OFL, to the extent it may
have any rights in the Collateral) intends the security interests in favor of
the Secured Parties to be prior to all other Liens in respect of the
Collateral, and OFL and the Seller shall take all actions necessary to
obtain and maintain, in favor of the Collateral Agent, for the benefit of the
Secured Parties, a first lien on and a first priority, perfected security
interest in the Collateral. Subject to the provisions hereof specifying the
rights and powers of the Controlling Party from time to time to control
certain specified matters relating to the Collateral, each Secured Party
shall have all of the rights, remedies and recourse with respect to the
Collateral afforded a secured party under the Uniform Commercial Code of the
State of New York and all other applicable law in addition to, and not in
limitation of, the other rights, remedies and recourse granted to such
Secured Parties by this Agreement or any other law relating to the creation
and perfection of liens on, and security interests in, the Collateral.

Section 2.05. SELLER AND OFL REMAIN LIABLE The Security Interests
are granted as security only and shall not (i) transfer or in any way affect
or modify, or relieve either the Seller or OFL from, any obligation to
perform or satisfy, any term, covenant, condition or agreement to be
performed or satisfied by the Seller or OFL under or in connection with this
Agreement, the Insurance Agreement or any other Transaction Document to which
it is a party or (ii) impose any obligation on any of the Secured Parties or
the Collateral Agent to perform or observe any such term, covenant, condition
or agreement or impose any liability on any of the Secured Parties or the
Collateral Agent for any act or omission on its part relative thereto or for
any breach of any representation or warranty on its part contained therein or
made in connection therewith, except, in each case, to the extent provided
herein and in the other Transaction Documents.

Section 2.06. MAINTENANCE OF COLLATERAL.

(a) SAFEKEEPING. The Collateral Agent agrees to maintain the
Collateral received by it (or evidence thereof, in the case of book-entry
securities in the name of the Collateral Agent) and all records and documents
relating thereto at the office of the Collateral Agent specified in Section
8.06 hereof or such other address within the State of Minnesota (unless all
filings have been made to continue the perfection of the security interest in
the Collateral to the extent such security interest can be perfected by
filing a financing statement, as evidenced by an Opinion of Counsel delivered
to the Controlling Party), as may be approved by the Controlling Party. The
Collateral Agent shall keep all Collateral and related documentation in its
possession separate and apart from all other property that it is holding in
its possession and from its own general assets and shall maintain accurate
records pertaining to the Eligible Investments and Spread Accounts included
in the Collateral in such a manner as shall enable the Collateral Agent and
the Secured Parties to verify the accuracy of such record-keeping. The
Collateral Agent's books and records shall at all times show that the
Collateral is held by the Collateral Agent as agent of the Secured Parties
and is not the property of the Collateral Agent. The Collateral Agent will
promptly report to each Secured Party and the Seller any failure on its part
to hold the Collateral as provided in this Section 2.06(a) and will promptly
take appropriate action to remedy any such failure.

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<PAGE>

(b) ACCESS. The Collateral Agent shall permit each of the Secured
Parties, or their respective duly authorized representatives, attorneys,
auditors or designees, to inspect the Collateral in the possession of or
otherwise under the control of the Collateral Agent pursuant hereto at such
reasonable times during normal business hours as any such Secured Party may
reasonably request upon not less than one Business Day's prior written notice.

Section 2.07. TERMINATION AND RELEASE OF RIGHTS.

(a) On the Insurer Termination Date relating to a Series, the
rights, remedies, powers, duties, authority and obligations conferred upon
Financial Security pursuant to this Agreement in respect of the Collateral
related to such Series shall terminate and be of no further force and effect
and all rights, remedies, powers, duties, authority and obligations of
Financial Security with respect to such Collateral shall be automatically
released; PROVIDED that any indemnity provided to or by Financial Security
herein shall survive such Insurer Termination Date. If Financial Security is
acting as Controlling Party with respect to a Series on the related Insurer
Termination Date, Financial Security agrees, at the expense of the Seller, to
execute and deliver such instruments as the successor Controlling Party may
reasonably request to effectuate such release, and any such instruments so
executed and delivered shall be fully binding on Financial Security and any
Person claiming by, through or under Financial Security.

(b) On the Trustee Termination Date related to a Series, the
rights, remedies, powers, duties, authority and obligations, if any,
conferred upon the Trustee pursuant to this Agreement in respect of the
Collateral related to such Series shall terminate and be of no further force
and effect and all such rights, remedies, powers, duties, authority and
obligations of the Trustee with respect to such Collateral shall be
automatically released; PROVIDED that any indemnity provided to the Trustee
herein shall survive such Trustee Termination Date. If the Trustee is acting
as Controlling Party with respect to a Series on the related Trustee
Termination Date, the Trustee agrees, at the expense of the Seller, to
execute and deliver such instruments as the Seller may reasonably request to
effectuate such release, and any such instruments so executed and delivered
shall be fully binding on the Trustee.

(c) On the Final Termination Date with respect to a Series, the
rights, remedies, powers, duties, authority and obligations conferred upon
the Collateral Agent and each Secured Party pursuant to this Agreement with
respect to such Series shall terminate and be of no further force and effect
and all rights, remedies, powers, duties, authority and obligations of the
Collateral Agent and each Secured Party with respect to the Collateral
related to such Series shall be automatically released. On the Final
Termination Date with respect to a Series, the Collateral Agent agrees, and
each Secured Party agrees, at the expense of the Seller, to execute such
instruments of release, in recordable form if necessary, in favor of the
Seller as the Seller may reasonably request, to deliver any Collateral in its
possession to the Seller, and to otherwise release the lien of this Agreement
and release and deliver to the Seller the Collateral related to such Series.

Section 2.08. NON-RECOURSE OBLIGATIONS OF SELLER. Notwithstanding
anything herein or in the other Transaction Documents to the contrary, the
parties hereto agree that the

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obligations of the Seller hereunder (without limiting the obligation to apply
distributions of the respective Credit Enhancement Fees in accordance with
Section 3.03(b)) shall be recourse only to the extent of amounts released to
the Seller pursuant to priority EIGHTH of Section 3.03(b) and retained by the
Seller in accordance with the next sentence. The Seller agrees that it shall
not declare or make payment of (i) any dividend or other distribution on or
in respect of any shares of its capital stock or (ii) any payment on account
of the purchase, redemption, retirement or acquisition of (x) any shares of
its capital stock or (y) any option, warrant or other right to acquire shares
of its capital stock, or (iii) any payment of any loan made by OFL to the
Seller, or of any deferred portion of the purchase price payable by the
Seller to OFL with respect to any Receivable unless (in each case) at the
time of such declaration or payment (and after giving effect thereto) no
amount payable by Seller under any Transaction Document is then due and owing
but unpaid. Nothing contained herein shall be deemed to limit the rights of
the Certificateholders (or Certificate Owners) or Noteholders (or Note
Owners) under any other Transaction Document.

Section 2.09. PROGRAM SPREAD ACCOUNT AND TAG ACCOUNTS. (a) On or
prior to the date of any transfer of cash by the Seller pursuant to Section
2.09(b)(i), the Collateral Agent at the direction of the Seller shall
establish at an institution at which one or more Spread Accounts established
hereunder are then maintained an Eligible Account, designated "Program Spread
Account--Norwest Bank Minnesota, National Association" (the "Program Spread
Account"). The Program Spread Account shall continuously be maintained at an
institution at which one or more Spread Accounts are established hereunder.

(b) The Collateral Agent shall hold, for the benefit of the
Seller, the following property in the Program Spread Account:

(i) all cash amounts from time to time on deposit in the Program
Spread Account which at the Seller's election it has delivered to the
Collateral Agent from (x) the proceeds of the sale of securities of a
Series or (y) amounts released to the Seller from the Lien of this
Agreement; and

(ii) investments made with the proceeds of the property described
in clause (i) above, or made with amounts on deposit in the Program
Spread Account.

Notwithstanding anything herein or in any Series Supplement to the
contrary, the property held by the Collateral Agent under this Section
2.09(b) shall not constitute Collateral hereunder.

(c) With respect to each Series for which the Seller has made an
election pursuant to Section 2.09(f) in connection with such Series, on or
prior to the date of any transfer of cash from the Program Spread Account in
connection with such election, the Collateral Agent at the direction of the
Seller shall establish at the same institution at which the related Spread
Account established hereunder is then maintained an Eligible Account,
designated "Tag Account Series [series designation] - Norwest Bank Minnesota,
National Association, as Collateral Agent for Financial Security Assurance
Inc. and another Secured Party" (each such account, a "Tag Account"). Each
Tag Account shall continue to be maintained at the same institution as the

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related Spread Account established hereunder.

(d) In order to secure the performance of the Secured Obligations
with respect to each Series, the Seller hereby pledges, assigns, grants,
transfers and conveys to the Collateral Agent, on behalf of and for the
benefit of the Secured Parties, a lien on and a security interest on (which
lien and security interest is intended to be prior to all other liens,
security interests and other encumbrances), all of its right, title and
interest in and to the following:

(i) each Tag Account established pursuant to Section 2.09(c)
hereof, (including, without limitation, all monies, checks, securities,
investments and other documents held in or evidencing any such accounts);

(ii) all of the Seller's right, title and interest in and to
investments made with proceeds of the property described in clause (i)
above; and

(iii) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the
foregoing.

In order to effectuate the provisions and purposes of this
Agreement, including for the purpose of perfecting the security interests
granted hereunder, the Seller represents and warrants that it shall, prior to
the deposit of amounts in any Tag Account, execute and file an appropriate
Uniform Commercial Code financing statement in Minnesota sufficient to assure
that the Collateral Agent, as agent for the Secured Parties, has a first
priority perfected security interest on the Collateral pledged or to be
pledged pursuant to Section 2.09(d) which can be perfected by the filing of a
financing statement.

(e) The Program Spread Account and each Tag Account shall be
separate from each respective Trust or Issuer and amounts on deposit therein
will not constitute a part of the Trust Property of any Trust or the assets
of any Issuer. Except as specifically provided herein, the Program Spread
Account and each Tag Account shall be maintained by the Collateral Agent at
all times separate and apart from any other account of the Seller, OFL, the
Servicer, the Trust or the Issuer. All income or loss on investments of
funds in the Program Spread Account and any Tag Account shall be reported by
the Seller as taxable income or loss of the Seller.

(f) Upon the occurrence of an event specified in clause (A) of the
definition of Trigger Event with respect to a Series and until such event is
Deemed Cured, at the election of the Seller amounts on deposit in the Program
Spread Account may be withdrawn on the related Determination Date by the
Collateral Agent from the Program Spread Account and irrevocably deposited
into one or more Tag Accounts for each Series with respect to which an event
specified in such clause (A) shall have occurred (and which event is not
Deemed Cured) and with respect to which the Seller has made such election.
In the event of such election, the Collateral Agent shall deposit from the
Program Spread Account into the related Tag Account, on such related
Determination Date, an amount equal to the excess, if any, of amounts on
deposit in the Spread Account (excluding from the calculation of the amount
on deposit in such Spread Account any amount in any related Tag Account, and
taking into account any deposits thereto to be made pursuant to the first
paragraph of Section 3.03(b) and taking into account any withdrawals

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therefrom to be made pursuant to priority FIRST of Section 3.03(b) on the
related Distribution Date, but not taking into account any other changes in
the amount on deposit in such account pursuant to Section 3.03(b)) over the
amount specified in clause (i) of the definition of Spread Account Maximum
Amount with respect to such Series (taking into account the decline in the
related Series Balance to be effected on the related Distribution Date).

(g) Amounts on deposit in the Program Spread Account shall be
released from such account at any time upon the request of the Seller. Funds
in the Program Spread Account shall not be commingled with funds in any
Spread Account, any Tag Account or with any other moneys. Amounts on deposit
in a Spread Account and released from the Lien of this Agreement pursuant to
Section 3.03(b) shall, at the direction of the Seller, be deposited into
either the Program Spread Account or the related Tag Account.

(h) Upon deposit pursuant to Section 2.09(f) of amounts into a Tag
Account for a Series such amounts shall be treated fungibly with all amounts
on deposit in the Spread Account with respect to the same Series, except
that, amounts deposited into a Spread Account pursuant to Section 3.03(b)
shall be deemed to be deposited into the Spread Account, and amounts
withdrawn from a Spread Account pursuant to Section 3.03(b) shall be
withdrawn first from the related Tag Account and second from the Spread
Account. Except as otherwise explicitly specified, all references herein to
a Series Spread Account hereunder shall be deemed to include reference to any
Tag Account created with respect to such Series, and all references herein to
amounts on deposit in a Series Spread Account shall be deemed to include
reference to amounts on deposit in the related Tag Account, if any, created
with respect to such Series.

Article III

SPREAD ACCOUNTS

Section 3.01. ESTABLISHMENT OF SPREAD ACCOUNTS; INITIAL DEPOSITS INTO
SPREAD ACCOUNTS.

(a) On or prior to the Closing Date relating to a Series, the
Collateral Agent shall establish with respect to such Series, at its office
or at another depository institution or trust company an Eligible Account,
designated, "Spread Account--Series [insert Series designation] --Norwest
Bank Minnesota, National Association, as Collateral Agent for Financial
Security Assurance Inc. and another Secured Party" (the "Spread Account").
The Spread Accounts established under this Agreement may be maintained at one
or more depository institutions (which depository institutions may be changed
from time to time in accordance with this Agreement). If any Spread Account
established with respect to a Series ceases to be an Eligible Account, the
Collateral Agent shall, within five Business Days, establish a new Eligible
Account for such Series.

(b) No withdrawals may be made of funds in any Spread Account
except as provided in Section 3.03 of this Agreement and in the Warehousing
Series Supplement. Except as specifically provided in this Agreement, funds
in a Spread Account established with respect to

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a Series shall not be commingled with funds in a Spread Account established
with respect to another Series or with any other moneys. All moneys
deposited from time to time in such Spread Account and all investments made
with such moneys shall be held by the Collateral Agent as part of the
Collateral with respect to such Series.

(c) On the Closing Date with respect to a Series (other than the
Warehousing Series), the Collateral Agent shall deposit the Initial Spread
Account Deposit with respect to such Series, if any, received from the Seller
into the related Spread Account. On each Subsequent Transfer Date (if any)
with respect to a Series (other than the Warehousing Series), the Collateral
Agent shall deposit the Spread Account Additional Deposit delivered by the
related Trust on behalf of the Seller into the related Spread Account.

(d) Each Spread Account shall be separate from each respective
Trust and amounts on deposit therein will not constitute a part of the Trust
Property of any Trust. Except as specifically provided herein, each Spread
Account shall be maintained by the Collateral Agent at all times separate and
apart from any other account of the Seller, OFL, the Servicer or the Trust
or the Issuer, as the case may be. All income or loss on investments of
funds in any Spread Account shall be reported by the Seller as taxable income
or loss of the Seller.

Section 3.02. INVESTMENTS.

(a) Funds which may at any time be held in the Spread Account
established with respect to a Series or in the Program Spread Account shall
be invested and reinvested by the Collateral Agent, at the written direction
(which may include, subject to the provisions hereof, general standing
instructions) of the Seller (unless a Default shall have occurred and be
continuing, in which case at the written direction of the Controlling Party)
or its designee received by the Collateral Agent by 1:00 P.M. New York City
time on the Business Day prior to the date on which such investment shall be
made, in one or more Eligible Investments in the manner specified in Section
3.02(c). If no written direction with respect to any portion of such Spread
Account or the Program Spread Account is received by the Collateral Agent,
the Collateral Agent shall invest such funds overnight in such Eligible
Investments as the Collateral Agent may select, provided that the Collateral
Agent shall not be liable for any loss or absence of income resulting from
such investments.

(b) Each investment made pursuant to this Section 3.02 on any date
shall mature not later than the Business Day immediately preceding the
Distribution Date next succeeding the day such investment is made, except
that any investment made on the day preceding a Distribution Date shall
mature on such Distribution Date; PROVIDED that any investment of funds in
any Account maintained with the Collateral Agent in any investment as to
which the Collateral Agent is the obligor, if otherwise qualified as an
Eligible Investment (including any repurchase agreement on which the
Collateral Agent in its commercial capacity is liable as principal), may
mature on the Distribution Date next succeeding the date of such investment.

(c) Subject to the other provisions hereof, the Collateral Agent
shall have sole control over each such investment and the income thereon, and
any certificate or other instrument

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evidencing any such investment, if any, shall be delivered directly to the
Collateral Agent or its agent, together with each document of transfer, if
any, necessary to transfer title to such investment to the Collateral Agent
in a manner which complies with Section 2.06 and this subsection.

(d) If amounts on deposit in any Spread Account are at any time
invested in an Eligible Investment payable on demand, the Collateral Agent
shall (i) consistent with any notice required to be given thereunder, demand
that payment thereon be made on the last day such Eligible Investment is
permitted to mature under the provisions hereof and (ii) demand payment of
all amounts due thereunder promptly upon receipt of written notice from the
Controlling Party to the effect that such investment does not constitute an
Eligible Investment.

(e) All moneys on deposit in a Spread Account together with any
deposits or securities in which such moneys may be invested or reinvested,
and any gains from such investments, shall constitute Collateral hereunder
with respect to the related Series, subject to the Security Interests of the
Secured Parties.

(f) Subject to Section 4.03 hereof, the Collateral Agent shall not
be liable by reason of any insufficiency in any Spread Account resulting from
any loss on any Eligible Investment included therein except for losses
attributable to the Collateral Agent's failure to make payments on Eligible
Investments as to which the Collateral Agent, in its commercial capacity, is
obligated.

(g) With respect to Spread Account Eligible Investments, the
Collateral Agent agrees that:

(1) any Spread Account Eligible Investment that is a bankers
acceptance or is commercial paper, negotiable certificates of deposit or
another obligation that constitutes "instruments" within the meaning of
Section 9-105(1)(i) of the UCC or that is a "certificated security" as
defined in Section 8-102 of the UCC shall be delivered to the Collateral
Agent in accordance with paragraph (a) or (b), as applicable, of the
definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Collateral Agent or its securities
intermediary as described in such paragraphs (a) and (b);

(2) any Spread Account Eligible Investment that is a book-entry
security held through the Federal Reserve System pursuant to Federal
book-entry regulations shall be delivered in accordance with paragraph
(c), as applicable, of the definition of "Delivery" and shall be
maintained by the Collateral Agent, pending maturity or disposition,
through continued book-entry registration of such Spread Account
Eligible Investment as described in such paragraph; and

(3) any Eligible Investment that is an uncertificated security as
defined in Section 8-102(1)(b) of the UCC and that is not governed by
clause (2) above shall be delivered to the Collateral Agent in
accordance with paragraph (d) of the definition of "Delivery" and shall
be maintained by the Collateral Agent, pending maturity or

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disposition, through continued registration of the Collateral Agent's
(or its nominee's) ownership of such security.

Section 3.03. DISTRIBUTIONS: PRIORITY OF PAYMENTS.

(a) On or before each Deficiency Claim Date, the Collateral Agent
will make the following calculations on the basis of information (including,
without limitation, the amount of any Collection Account Shortfall with
respect to any Series) received pursuant to (x) Section 3.9 of the Standard
Terms and Conditions, Section 5.03 of the Pooling and Servicing Agreements,
or (y) Section 3.9 of the Sale and Servicing Agreements, or (z) Section 3.11
of the Servicing Agreement, as applicable, with respect to each Series;
provided, however, that if the Collateral Agent receives notice from
Financial Security of the occurrence of an Insurance Agreement Event of
Default with respect to any Series, or of the occurrence of a Capture Event,
such notice shall be determinative for the purposes of determining the Spread
Account Default Level and Spread Account Maximum Amount for such Series:

FIRST, determine the amounts to be on deposit in the respective
Spread Accounts (taking into account amounts in respect of the
respective Credit Enhancement Fees to be deposited into the related
Spread Accounts) on the next succeeding Distribution Date which will be
available to satisfy any Collection Account Shortfall and any
Warehousing Shortfall;

SECOND, determine (i) the amounts, if any, to be distributed from
each Spread Account related to each Series with respect to which there
exists a Collection Account Shortfall and (ii) whether, following
distribution from the related Spread Accounts to the respective Trustees
for deposit into the respective Collection Accounts with respect to
which there exist Collection Account Shortfalls, a Collection Account
Shortfall will continue to exist with respect to one or more Series;

THIRD, (i) if a Collection Account Shortfall will continue to exist
with respect to one or more Series following the distributions from the
related Spread Accounts contemplated by paragraph SECOND above,
determine the amount, if any, to be distributed to the Trustee with
respect to each Series from unrelated Spread Accounts in respect of such
Collection Account Shortfall(s). This determination shall be made as
follows: (i) of the aggregate of the amounts to be on deposit in the
respective Spread Accounts for such Distribution Date (as determined
pursuant to paragraph FIRST above, after making the withdrawals pursuant
to paragraph SECOND above), up to the aggregate of the Collection
Account Shortfalls for such Distribution Date, (ii) drawn from each
Spread Account PRO RATA in accordance with amounts on deposit therein,
and (iii) distributed to the respective Trustees in the following order
of priority and PRO RATA within each priority (1) in the same priority
as amounts are to be distributed pursuant to Section 4.6 of the Standard
Terms and Conditions included in the respective Pooling and Servicing
Agreements and pursuant to Section 4.6 of the respective Sale and
Servicing Agreements, and pursuant to Section 3.6(a) or 3.6(b) of the
Servicing Agreement, as applicable, so that any shortfalls with

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respect to priority (i) of each such Section are to be covered first,
any shortfalls with respect to priority (ii) of each such Section are to
be covered second, and so forth, until priority (v) of such Section, so
that priority (v) of Section 4.6 of the Standard Terms and Conditions
and of the Sale and Servicing Agreement and priority (v) of Section
3.6(a) or priority (v) of Section 3.6(b) of the Servicing Agreement are
to be covered fifth, (2) if Section 4.6 of one or more Sale and
Servicing Agreements provides for distribution in respect of interest or
principal on Notes or Certificates with priorities numerically greater
than (v), in the same priority as amounts are to be distributed pursuant
to each such Section 4.6, so that any shortfalls with respect to
priority (vi) of each such Section 4.6 are covered first, and so forth
through all priorities relating to interest or principal on Notes or
Certificates and (3) amounts to be distributed to the Security Insurer;

On such Deficiency Claim Date, the Collateral Agent shall deliver a
certificate to each Trustee in respect of which the Collateral Agent has
received notice pursuant to (i) Section 3.9 of the Standard Terms and
Conditions of a Collection Account Shortfall or (ii) Section 3.9 of the Sale
and Servicing Agreement of a Collection Account Shortfall or (iii) Section
3.11 of the Servicing Agreement of a Collection Account Shortfall or
Warehousing Shortfall stating the amount (which, in the case of (i) and (ii)
above, shall be the sum of the amount, if any, to be withdrawn from the
related Spread Account, as calculated pursuant to paragraph SECOND of this
Section 3.03(a), plus, the amount, if any, to be withdrawn from unrelated
Spread Accounts, as calculated pursuant to paragraph THIRD of this Section
3.03(a), and which, in the case of a Collection Account Shortfall or
Warehousing Shortfall referred to in clause (iii) shall be the respective
amounts, if any, withdrawn from unrelated Spread Accounts, as calculated
pursuant to paragraph THIRD of this Section 3.03(a) or calculated to be
available pursuant to priority SEVENTH of Section 3.03(b)), if any, to be
distributed to such Trustee on the next Distribution Date in respect of such
Collection Account Shortfall or Warehousing Shortfall, as the case may be.

(b) On each Distribution Date, following delivery by the Trustee
of the respective Credit Enhancement Fees for deposit into the respective
Spread Accounts pursuant to Section 4.6 of the Standard Terms and Conditions
included in the respective Pooling and Servicing Agreements or Section 4.6 of
the respective Sale and Servicing Agreements, or the amount deposited into
the Spread Account for the Warehousing Series pursuant to Section 4.6 or
Section 4.10 of the Warehousing Series Sale and Servicing Agreement, as
applicable, and upon receipt of a Deficiency Notice with respect to one or
more such Series, or with respect to priorities FIFTH and SIXTH to the extent
the amounts referred to therein are due and owing, the Collateral Agent shall
make the following distributions in the following order of priority.
References herein to a Spread Account shall include references to the related
Tag Account and such amounts shall be treated fungibly, except that amounts
deposited into a Spread Account pursuant to Section 3.03(b) shall be deemed
to be deposited into a Spread Account, and amounts withdrawn from a Spread
Account pursuant to Section 3.03(b) shall be withdrawn first from the related
Tag Account and second from the Spread Account.

FIRST, if with respect to any Series there exists a Collection
Account Shortfall from the Spread Account related to such Series, to the
Trustee for deposit in the related

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Collection Account the amount of such Collection Account Shortfall (subject,
in the case of withdrawals from a Spread Account containing Spread Account
Recourse Reduction Amounts, to Section 3.04(e)(i));

SECOND, if with respect to any Series there exists a Collection
Account Shortfall after deposit into the Collection Account of amounts
distributed pursuant to priority FIRST, from each Spread Account, PRO RATA in
accordance with amounts on deposit therein (but in no event shall a
withdrawal from a Spread Account pursuant to this priority SECOND cause the
cash amount on deposit in such Spread Account to be below the Spread Account
Withdrawal Floor for such Spread Account if a Spread Account Withdrawal Floor
is specified in the Series Supplement establishing such Spread Account), an
amount up to the aggregate of the Collection Account Shortfalls for all
Series, to the respective Trustees in accordance with the Payment Priorities
for deposit in the respective Collection Accounts with respect to which there
exist Collection Account Shortfalls, (subject, in the case of withdrawals
from a Spread Account containing Spread Account Recourse Reduction Amounts,
to Section 3.04(e));

THIRD, if with respect to one or more Series (excluding the
Warehousing Series) there exists a Spread Account Shortfall, from amounts, if
any, on deposit in each Spread Account (excluding the Warehousing Series) in
excess of the related Spread Account Maximum Amount (after making any
withdrawals therefrom required by priority FIRST or SECOND of this Section
3.03(b) and only from cash amounts and not from amounts representing a Spread
Account Recourse Reduction Amount), an amount in the aggregate up to the
aggregate of the Spread Account Shortfalls for all Series for deposit into
each Spread Account PRO RATA in accordance with their respective Spread
Account Shortfalls;

FOURTH, if with respect to one or more Series, amounts have been
withdrawn from the related Spread Account pursuant to priority FIRST or
SECOND of this Section 3.03(b) on such Distribution Date and/or on prior
Distribution Dates and such amounts have not been redeposited in full into
such Spread Account pursuant to this priority FOURTH (such amounts in the
aggregate for a Series "Unreimbursed Amounts"), from amounts, if any, on
deposit in each Spread Account in excess of the related Spread Account
Maximum Amount (after making any withdrawals therefrom required by priority
FIRST, SECOND or THIRD of this Section 3.03(b) and only from cash amounts and
not from amounts representing a Spread Account Recourse Reduction Amount), an
amount up to the aggregate of the Unreimbursed Amounts for all such Series
for deposit into each Spread Account with respect to which there exist
Unreimbursed Amounts PRO RATA in accordance with the excess of the Spread
Account Maximum Amount of each such Spread Account over the amount on deposit
in such Spread Account;

FIFTH, if any amounts are owed to a successor Servicer pursuant to
Section 9.3(c) of the Standard Terms and Conditions included in a Pooling and
Servicing Agreement or Section 8.3(c) of a Sale and Servicing Agreement and
such amounts are not payable pursuant to Section 4.6(a)(i) of the Standard
Terms and Conditions included in such Pooling and Servicing Agreement or
Section 4.6(i) of such Sale and Servicing Agreement, as applicable, from
amounts on deposit in the related Spread Account (but only from cash amounts
and not from amounts

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<PAGE>

representing a Spread Account Recourse Reduction Amount), an amount up to the
amount so owed, to such Servicer;

SIXTH, if any amounts are owed by OFL or the Seller to a Trustee,
Indenture Trustee, Owner Trustee, Lockbox Bank, Custodian, Backup Servicer,
Administrator, Collateral Agent, the Indenture Collateral Agent or other
service provider to either the Trust or the Issuer for expenses that have not
been reimbursed by OFL or the Seller, from amounts on deposit in the related
Spread Account (but only from cash amounts and not from amounts representing
a Spread Account Recourse Reduction Amount), an amount up to the amount so
owed, to such Person;

SEVENTH, if with respect to the Warehousing Series there exists a
Warehousing Shortfall, from the aggregate of all amounts on deposit in the
Warehousing Series Spread Account and from the aggregate of all amounts in
unrelated Spread Accounts in excess of the related Spread Account Maximum
Amount (except that such limitation shall not exist with respect to a Spread
Account Maximum Amount which is unlimited), an amount up to the amount of
such Warehousing Shortfall (to the extent not distributed on such
Distribution Date pursuant to a prior priority of this Section 3.03(b) and
only from cash amounts and not from amounts representing a Spread Account
Recourse Reduction Amount), to the Trustee for the Warehousing Series for
deposit in the Warehousing Series Collection Account; and

EIGHTH, to the extent there are any funds in a Spread Account in
excess of the applicable Spread Account Maximum Amount and any funds in a
Spread Account with respect to a Series for which the Final Termination Date
shall have occurred, such amount shall be distributed in the following order
of priority: FIRST, for deposit into each Spread Account containing Spread
Account Recourse Reduction Amounts, an amount up to the related Spread
Account Recourse Maximum Adjustment Amount, if any, PRO RATA on the basis of
the respective Spread Account Recourse Reduction Amounts, and SECOND, any
remaining funds to the Seller.

Section 3.04. GENERAL PROVISIONS REGARDING SPREAD ACCOUNTS.

(a) Promptly upon the establishment (initially or upon any
relocation) of a Spread Account hereunder, the Collateral Agent shall advise
the Seller and each Secured Party in writing of the name and address of the
depository institution or trust company where such Spread Account has been
established (if not Norwest Bank Minnesota, National Association or any
successor Collateral Agent in its commercial banking capacity), the name of
the officer of the depository institution who is responsible for overseeing
such Spread Account, the account number and the individuals whose names
appear on the signature cards for such Spread Account. The Seller shall
cause each such depository institution or trust company to execute a written
agreement, in form and substance satisfactory to the Controlling Party,
waiving, and the Collateral Agent by its execution of this Agreement hereby
waives (except to the extent expressly provided herein), in each case to the
extent permitted under applicable law, (i) any banker's or other statutory or
similar Lien, and (ii) any right of set-off or other similar right under
applicable law with respect to such Spread Account and any other Spread
Account and agreeing, and the Collateral Agent by its execution of this
Agreement hereby agrees, to notify the Seller,

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<PAGE>

the Collateral Agent, and each Secured Party of any charge or claim against
or with respect to such Spread Account. The Collateral Agent shall give the
Seller and each Secured Party at least ten Business Days' prior written
notice of any change in the location of such Spread Account or in any related
account information. If the Collateral Agent changes the location of any
Spread Account, it shall change the location of the other Spread Accounts, so
that all Spread Accounts shall at all times be located at the same depository
institution. Anything herein to the contrary notwithstanding, unless
otherwise consented to by the Controlling Party in writing, the Collateral
Agent shall have no right to change the location of any Spread Account.

(b) Upon the written request of the Controlling Party or the
Seller and at the expense of the Seller, the Collateral Agent shall cause, at
the expense of the Seller, the depository institution at which any Spread
Account is located to forward to the requesting party copies of all monthly
account statements for such Spread Account.

(c) If at any time any Spread Account ceases to be an Eligible
Account, the Collateral Agent shall notify the Controlling Party of such fact
and shall establish within 5 Business Days of such determination, in
accordance with paragraph (a) of this Section, a successor Spread Account
thereto, which shall be an Eligible Account, at another depository
institution acceptable to the Controlling Party and shall establish successor
Spread Accounts with respect to all other Spread Accounts, each of which
shall be an Eligible Account at the same depository institution.

(d) No passbook, certificate of deposit or other similar
instrument evidencing a Spread Account shall be issued, and all contracts,
receipts and other papers, if any, governing or evidencing a Spread Account
shall be held by the Collateral Agent.

(e) A Spread Account Recourse Reduction Amount with respect to a
Spread Account shall be treated fungibly with all other amounts on deposit in
such Spread Account, EXCEPT THAT:

(i) if with respect to any Series, there exists a Collection
Account Shortfall and cash amounts available pursuant to priority FIRST
of Section 3.03(b) are not sufficient to satisfy such Collection Account
Shortfall, the Collateral Agent shall next withdraw cash amounts
available pursuant to priority SECOND of Section 3.03(b) up to the
amount of any remaining Collection Account Shortfall; if such amounts
are not sufficient to satisfy such Collection Account Shortfall, Spread
Account Recourse Reduction Amounts, if any, shall be deemed to be made
available pursuant to priority FIRST of Section 3.03(b) up to the amount
of any remaining Collection Account Shortfalls, and if such amounts are
not sufficient to satisfy such Collection Account Shortfall, all other
Spread Account Recourse Reduction Amounts, if any, shall be deemed to be
made available pursuant to priority SECOND of Section 3.03(b);

(ii) if amounts are to be made available from two or more Spread
Accounts pursuant to priority SECOND of Section 3.03(b), such amounts
shall, FIRST, be withdrawn PRO RATA from cash amounts on deposit therein
and, if such amounts are exhausted, SECOND, shall be deemed to be made
available PRO RATA from Spread Account Recourse

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Reduction Amounts, if any (after taking into account amounts deemed to
be made available from Spread Account Recourse Reduction Amounts
pursuant to clause (i) above);

(iii) if amounts are to be made available from a Spread Account
pursuant to priority FIRST or SECOND of Section 3.03(b) and any portion
or all of such amounts represent Spread Account Recourse Reduction
Amounts, the Collateral Agent shall notify the Trustee with respect to
the Series receiving the benefit of such Spread Account Recourse
Reduction Amounts of the amount so to be made available which is
represented by Spread Account Recourse Reduction Amounts;

(iv) if amounts are to be made available from a Spread Account
pursuant to priority THIRD, FOURTH, FIFTH, SIXTH, SEVENTH or EIGHTH of
Section 3.03(b), such amounts shall be withdrawn pro rata from cash
amounts on deposit therein and not from Spread Account Recourse
Reduction Amounts;

(v) any Spread Account Withdrawal Floor requirement for any
Series must be satisfied with cash amounts in the related Spread Account
and not with amounts representing a Spread Account Recourse Reduction
Amount; and

(vi) all references to investments in Eligible Investments in this
Agreement shall apply only to cash amounts in the respective Spread
Accounts and not to amounts representing a Spread Account Recourse
Reduction Amount.

Section 3.05. REPORTS BY THE COLLATERAL AGENT. The Collateral
Agent shall report to the Seller, Financial Security, the Trustee and the
Servicer on a monthly basis no later than each Distribution Date with respect
to the amount on deposit in each Spread Account and the identity of the
investments included therein as of the last day of the related Monthly
Period, and shall provide accountings of deposits into and withdrawals from
the Spread Accounts, and of the investments made therein, to the independent
accountants upon their request for purposes of their reports pursuant to
Section 3.11 of the Pooling and Servicing Agreements and Section 3.11 of the
Sale and Servicing Agreements.

ARTICLE IV

THE COLLATERAL AGENT

Section 4.01. APPOINTMENT AND POWERS. Subject to the terms and
conditions hereof, each of the Secured Parties hereby appoints Norwest Bank
Minnesota, National Association as the Collateral Agent with respect to the
Series 1993-A Collateral and the related Collateral subsequently specified in
a Series Supplement, and Norwest Bank Minnesota, National Association hereby
accepts such appointment and agrees to act as Collateral Agent with respect
to the Series 1993-A Collateral, and upon execution of any Series Supplement,
shall be deemed to accept such appointment, and agree to act as Collateral
Agent with respect to such Collateral, in each case, for the Secured Parties,
to maintain custody and possession of such

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Collateral (except as otherwise provided hereunder) and to perform the other
duties of the Collateral Agent in accordance with the provisions of this
Agreement. Each Secured Party hereby authorizes the Collateral Agent to take
such action on its behalf, and to exercise such rights, remedies, powers and
privileges hereunder, as the Controlling Party may direct and as are
specifically authorized to be exercised by the Collateral Agent by the terms
hereof, together with such actions, rights, remedies, powers and privileges
as are reasonably incidental thereto. The Collateral Agent shall act upon
and in compliance with the written instructions of the Controlling Party
delivered pursuant to this Agreement promptly following receipt of such
written instructions; provided that the Collateral Agent shall not act in
accordance with any instructions (i) which are not authorized by, or in
violation of the provisions of, this Agreement, (ii) which are in violation
of any applicable law, rule or regulation or (iii) for which the Collateral
Agent has not received reasonable indemnity. Receipt of such instructions
shall not be a condition to the exercise by the Collateral Agent of its
express duties hereunder, except where this Agreement provides that the
Collateral Agent is permitted to act only following and in accordance with
such instructions.

Section 4.02. PERFORMANCE OF DUTIES. The Collateral Agent shall
have no duties or responsibilities except those expressly set forth in this
Agreement and the other Transaction Documents to which the Collateral Agent
is a party or as directed by the Controlling Party in accordance with this
Agreement. The Collateral Agent shall not be required to take any
discretionary actions hereunder except at the written direction and with the
indemnification of the Controlling Party.

Section 4.03. LIMITATION ON LIABILITY. Neither the Collateral
Agent nor any of its directors, officers or employees, shall be liable for
any action taken or omitted to be taken by it or them hereunder, or in
connection herewith, except that the Collateral Agent shall be liable for its
negligence, bad faith or willful misconduct; nor shall the Collateral Agent
be responsible for the validity, effectiveness, value, sufficiency or
enforceability against the Seller or OFL of this Agreement or any of the
Collateral (or any part thereof). Notwithstanding any term or provision of
this Agreement, the Collateral Agent shall incur no liability to the Seller,
OFL or the Secured Parties for any action taken or omitted by the Collateral
Agent in connection with the Collateral, except for the negligence or willful
misconduct on the part of the Collateral Agent, and, further, shall incur no
liability to the Secured Parties except for negligence or willful misconduct
in carrying out its duties to the Secured Parties. Subject to Section 4.04,
the Collateral Agent shall be protected and shall incur no liability to any
such party in relying upon the accuracy, acting in reliance upon the
contents, and assuming the genuineness of any notice, demand, certificate,
signature, instrument or other document reasonably believed by the Collateral
Agent to be genuine and to have been duly executed by the appropriate
signatory, and (absent actual knowledge to the contrary) the Collateral Agent
shall not be required to make any independent investigation with respect
thereto. The Collateral Agent shall at all times be free independently to
establish to its reasonable satisfaction, but shall have no duty to
independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Transaction Documents. The Collateral Agent may consult
with counsel, and shall not be liable for any action taken or omitted to be
taken by it hereunder in good faith and in accordance with the written advice
of such counsel. The

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Collateral Agent shall not be under any obligation to exercise any of the
remedial rights or powers vested in it by this Agreement or to follow any
direction from the Controlling Party unless it shall have received reasonable
security or indemnity satisfactory to the Collateral Agent against the costs,
expenses and liabilities which might be incurred by it.

Section 4.04. RELIANCE UPON DOCUMENTS. In the absence of bad
faith or negligence on its part, the Collateral Agent shall be entitled to
rely on any communication, instrument, paper or other document reasonably
believed by it to be genuine and correct and to have been signed or sent by
the proper Person or Persons and shall have no liability in acting, or
omitting to act, where such action or omission to act is in reasonable
reliance upon any statement or opinion contained in any such document or
instrument.

Section 4.05. SUCCESSOR COLLATERAL AGENT.

(a) MERGER. Any Person into which the Collateral Agent may be
converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its trust business and assets as a whole or substantially as
a whole, or any Person resulting from any such conversion, merger,
consolidation, sale or transfer to which the Collateral Agent is a party,
shall (provided it is otherwise qualified to serve as the Collateral Agent
hereunder) be and become a successor Collateral Agent hereunder and be vested
with all of the title to and interest in the Collateral and all of the
trusts, powers, discretions, immunities, privileges and other matters as was
its predecessor without the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding, except to the extent, if
any, that any such action is necessary to perfect, or continue the perfection
of, the security interest of the Secured Parties in the Collateral.

(b) RESIGNATION. The Collateral Agent and any successor
Collateral Agent may resign only (i) upon a determination that by reason of a
change in legal requirements the performance of its duties under this
Agreement would cause it to be in violation of such legal requirements in a
manner which would result in a material adverse effect on the Collateral
Agent, and the Controlling Party does not elect to waive the Collateral
Agent's obligation to perform those duties which render it legally unable to
act or elect to delegate those duties to another Person, or (ii) with the
prior written consent of the Controlling Party. The Collateral Agent shall
give not less than 60 days' prior written notice of any such permitted
resignation by registered or certified mail to the other Secured Party and
the Seller; PROVIDED, that such resignation shall take effect only upon the
date which is the latest of (i) the effective date of the appointment of a
successor Collateral Agent and the acceptance in writing by such successor
Collateral Agent of such appointment and of its obligation to perform its
duties hereunder in accordance with the provisions hereof, (ii) delivery of
the Collateral to such successor to be held in accordance with the procedures
specified in Article II hereof, and (iii) receipt by the Controlling Party of
an Opinion of Counsel to the effect described in Section 5.02.
Notwithstanding the preceding sentence, if by the contemplated date of
resignation specified in the written notice of resignation delivered as
described above no successor Collateral Agent or temporary successor
Collateral Agent has been appointed Collateral Agent or becomes the
Collateral Agent pursuant to subsection (d) hereof, the resigning Collateral
Agent may petition a court of competent

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jurisdiction in New York, New York for the appointment of a successor.

(c) REMOVAL. The Collateral Agent may be removed by the
Controlling Party at any time, with or without cause, by an instrument or
concurrent instruments in writing delivered to the Collateral Agent, the
other Secured Party and the Seller. A temporary successor may be removed at
any time to allow a successor Collateral Agent to be appointed pursuant to
subsection (d) below. Any removal pursuant to the provisions of this
subsection (c) shall take effect only upon the date which is the latest of
(i) the effective date of the appointment of a successor Collateral Agent and
the acceptance in writing by such successor Collateral Agent of such
appointment and of its obligation to perform its duties hereunder in
accordance with the provisions hereof, (ii) delivery of the Collateral to
such successor to be held in accordance with the procedures specified in
Article II hereof and (iii) receipt by the Controlling Party of an Opinion of
Counsel to the effect described in Section 5.02.

(d) ACCEPTANCE BY SUCCESSOR. The Controlling Party shall have the
sole right to appoint each successor Collateral Agent. Every temporary or
permanent successor Collateral Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to each Secured Party and the
Seller an instrument in writing accepting such appointment hereunder and the
relevant predecessor shall execute, acknowledge and deliver such other
documents and instruments as will effectuate the delivery of all Collateral
to the successor Collateral Agent to be held in accordance with the
procedures specified in Article II hereof, whereupon such successor, without
any further act, deed or conveyance, shall become fully vested with all the
estates, properties, rights, powers, duties and obligations of its
predecessor. Such predecessor shall, nevertheless, on the written request of
either Secured Party or the Seller, execute and deliver an instrument
transferring to such successor all the estates, properties, rights and powers
of such predecessor hereunder. In the event that any instrument in writing
from the Seller or a Secured Party is reasonably required by a successor
Collateral Agent to more fully and certainly vest in such successor the
estates, properties, rights, powers, duties and obligations vested or
intended to be vested hereunder in the Collateral Agent, any and all such
written instruments shall, at the request of the temporary or permanent
successor Collateral Agent, be forthwith executed, acknowledged and delivered
by the Seller. The designation of any successor Collateral Agent and the
instrument or instruments removing any Collateral Agent and appointing a
successor hereunder, together with all other instruments provided for herein,
shall be maintained with the records relating to the Collateral and, to the
extent required by applicable law, filed or recorded by the successor
Collateral Agent in each place where such filing or recording is necessary to
effect the transfer of the Collateral to the successor Collateral Agent or to
protect or continue the perfection of the security interests granted
hereunder.

(e) Any resignation or removal of a Collateral Agent and
appointment of a successor Collateral Agent shall be effected with respect to
this Agreement and all Series Supplements simultaneously, so that at no time
is there more than one Collateral Agent acting hereunder and under all Series
Supplements.

Section 4.06. INDEMNIFICATION. The Seller and OFL shall indemnify
the Collateral Agent, its directors, officers, employees and agents for, and
hold the Collateral Agent,

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its directors, officers, employees and agents harmless against, any loss,
liability or expense (including the costs and expenses of defending against
any claim of liability) arising out of or in connection with the Collateral
Agent's acting as Collateral Agent hereunder, except such loss, liability or
expense as shall result from the negligence, bad faith or willful misconduct
of the Collateral Agent or its officers or agents. The obligation of the
Seller and OFL under this Section shall survive the termination of this
Agreement and the resignation or removal of the Collateral Agent. The
Collateral Agent covenants and agrees that the obligations of the Seller
hereunder and under Section 4.07 shall be limited to the extent provided in
Section 2.08, and further covenants not to take any action to enforce its
rights to indemnification hereunder with respect to the Seller and to payment
under Section 4.07 except in accordance with the provisions of Section 8.05,
or otherwise to assert any Lien or take any other action in respect of the
Collateral or the Trust Property of a Series until the applicable Final
Termination Date.

Section 4.07. COMPENSATION AND REIMBURSEMENT. The Seller agrees
for the benefit of the Secured Parties and as part of the Secured Obligations
(a) to pay to the Collateral Agent, from time to time, reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of
a collateral trustee); and (b) to reimburse the Collateral Agent upon its
request for all reasonable expenses, disbursements and advances incurred or
made by the Collateral Agent in accordance with any provision of, or carrying
out its duties and obligations under, this Agreement (including the
reasonable compensation and fees and the expenses and disbursements of its
agents, any independent certified public accountants and independent
counsel), except any expense, disbursement or advances as may be attributable
to negligence, bad faith or willful misconduct on the part of the Collateral
Agent.

Section 4.08. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL
AGENT. The Collateral Agent represents and warrants to the Seller and to each
Secured Party as follows:

(a) DUE ORGANIZATION. The Collateral Agent is a national banking
association, duly organized, validly existing and in good standing under the
laws of the United States and is duly authorized and licensed under
applicable law to conduct its business as presently conducted.

(b) CORPORATE POWER. The Collateral Agent has all requisite
right, power and authority to execute and deliver this Agreement and to
perform all of its duties as Collateral Agent hereunder.

(c) DUE AUTHORIZATION. The execution and delivery by the
Collateral Agent of this Agreement and the other Transaction Documents to
which it is a party, and the performance by the Collateral Agent of its
duties hereunder and thereunder, have been duly authorized by all necessary
corporate proceedings and no further approvals or filings, including any
governmental approvals, are required for the valid execution and delivery by
the Collateral Agent, or the performance by the Collateral Agent, of this
Agreement and such other Transaction Documents.

(d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly
executed and delivered this Agreement and each other Transaction Document to
which it is a party, and each of this Agreement and each such other
Transaction Document constitutes the legal, valid

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<PAGE>

and binding obligation of the Collateral Agent, enforceable against the
Collateral Agent in accordance with its terms, except as (i) such
enforceability may be limited by bankruptcy, insolvency, reorganization and
similar laws relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.

Section 4.09. WAIVER OF SETOFFS. The Collateral Agent hereby
expressly waives any and all rights of setoff that the Collateral Agent may
otherwise at any time have under applicable law with respect to any Spread
Account and agrees that amounts in the Spread Accounts shall at all times be
held and applied solely in accordance with the provisions hereof.

Section 4.10. CONTROL BY THE CONTROLLING PARTY. The Collateral
Agent shall comply with notices and instructions given by the Seller only if
accompanied by the written consent of the Controlling Party, except that if
any Default shall have occurred and be continuing, the Collateral Agent shall
act upon and comply with notices and instructions given by the Controlling
Party alone in the place and stead of the Seller.

Article V

COVENANTS OF THE SELLER

Section 5.01. PRESERVATION OF COLLATERAL. Subject to the rights,
powers and authorities granted to the Collateral Agent and the Controlling
Party in this Agreement, the Seller shall take such action as is necessary
and proper with respect to the Collateral in order to preserve and maintain
such Collateral and to cause (subject to the rights of the Secured Parties)
the Collateral Agent to perform its obligations with respect to such
Collateral as provided herein. The Seller will do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, such
instruments of transfer or take such other steps or actions as may be
necessary, or required by the Controlling Party, to perfect the Security
Interests granted hereunder in the Collateral, to ensure that such Security
Interests rank prior to all other Liens and to preserve the priority of such
Security Interests and the validity and enforceability thereof. Upon any
delivery or substitution of Collateral, the Seller shall be obligated to
execute such documents and perform such actions as are necessary to create in
the Collateral Agent for the benefit of the Secured Parties a valid first
Lien on, and valid and perfected, first priority security interest in, the
Collateral so delivered and to deliver such Collateral to the Collateral
Agent, free and clear of any other Lien, together with satisfactory
assurances thereof, and to pay any reasonable costs incurred by any of the
Secured Parties or the Collateral Agent (including its agents) or otherwise
in connection with such delivery.

Section 5.02. OPINIONS AS TO COLLATERAL. Not more than 90 days
nor less than 30 days prior to (i) each anniversary of the date hereof during
the term of this Agreement and (ii) each date on which the Seller proposes to
take any action contemplated by Section 5.06, the Seller shall, at its own
cost and expense, furnish to each Secured Party and the Collateral Agent an
Opinion of Counsel with respect to each Series either (a) stating that, in
the opinion of such counsel, such action has been taken with respect to the
execution and filing of any financing

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<PAGE>

statements and continuation statements and other actions as are necessary to
perfect, maintain and protect the lien and security interest of the
Collateral Agent (and the priority thereof), on behalf of the Secured
Parties, with respect to such Collateral against all creditors of and
purchasers from the Seller or OFL and reciting the details of such action,
or (b) stating that, in the opinion of such counsel, no such action is
necessary to maintain such perfected lien and security interest. Such
Opinion of Counsel shall further describe each execution and filing of any
financing statements and continuation statements and such other actions as
will, in the opinion of such counsel, be required to perfect, maintain and
protect the lien and security interest of the Collateral Agent, on behalf of
the Secured Parties, with respect to such Collateral against all creditors of
and purchasers from the Seller or OFL for a period, specified in such
Opinion, continuing until a date not earlier than eighteen months from the
date of such Opinion.

Section 5.03. NOTICES. In the event that OFL or the Seller
acquires knowledge of the occurrence and continuance of any Insurance
Agreement Event of Default or Servicer Termination Event or of any event of
default or like event, howsoever described or called, under any of the
Transaction Documents, the Seller shall immediately give notice thereof to
the Collateral Agent and each Secured Party.

Section 5.04. WAIVER OF STAY OR EXTENSION LAWS; MARSHALLING OF
ASSETS. The Seller covenants, to the fullest extent permitted by applicable
law, that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any appraisement,
valuation, stay, extension or redemption law wherever enacted, now or at any
time hereafter in force, in order to prevent or hinder the enforcement of
this Agreement or any absolute sale of the Collateral or any part thereof, or
the possession thereof by any purchaser at any sale under Article VII of this
Agreement; and the Seller, to the fullest extent permitted by applicable law,
for itself and all who may claim under it, hereby waives the benefit of all
such laws, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Collateral Agent, but will
suffer and permit the execution of every such power as though no such law had
been enacted. The Seller, for itself and all who may claim under it, waives,
to the fullest extent permitted by applicable law, all right to have the
Collateral marshalled upon any foreclosure or other disposition thereof.

Section 5.05. NONINTERFERENCE, ETC. The Seller shall not (i)
waive or alter any of its rights under the Collateral (or any agreement or
instrument relating thereto) without the prior written consent of the
Controlling Party; or (ii) fail to pay any tax, assessment, charge or fee
levied or assessed against the Collateral, or to defend any action, if such
failure to pay or defend may adversely affect the priority or enforceability
of the Seller's right, title or interest in and to the Collateral or the
Collateral Agent's lien on, and security interest in, the Collateral for the
benefit of the Secured Parties; or (iii) take any action, or fail to take any
action, if such action or failure 'to take action will interfere with the
enforcement of any rights under the Transaction Documents.

Section 5.06. SELLER CHANGES.

(a) CHANGE IN NAME, STRUCTURE, ETC. The Seller shall not change
its name,

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identity or corporate structure unless it shall have given each Secured Party
and the Collateral Agent at least 60 days' prior written notice thereof,
shall have effected any necessary or appropriate assignments or amendments
thereto and filings of financing statements or amendments thereto, and shall
have delivered to the Collateral Agent and each Secured Party an Opinion of
Counsel of the type described in Section S.02. The parties hereto
acknowledge receipt of prior written notice of the Seller's intent to change
its name on or after January 1, 1997 to Arcadia Receivables Finance Corp.

(b) RELOCATION OF THE SELLER. Neither OFL nor the Seller shall
change its principal executive office unless it gives each Secured Party and
the Collateral Agent at least 90 days' prior written notice of any relocation
of its principal executive office. If the Seller relocates its principal
executive office or principal place of business from Minnesota, the Seller
shall give prior notice thereof to the Controlling Party and the Collateral
Agent and shall effect whatever appropriate recordations and filings are
necessary and shall provide an Opinion of Counsel to the Controlling Party
and the Collateral Agent, to the effect that, upon the recording of any
necessary assignments or amendments to previously-recorded assignments and
filing of any necessary amendments to the previously filed financing or
continuation statements or upon the filing of one or more specified new
financing statements, and the taking of such other actions as may be
specified in such opinion, the security interests in the Collateral shall
remain, after such relocation, valid and perfected.

Article VI

CONTROLLING PARTY; INTERCREDITOR PROVISIONS

Section 6.01. APPOINTMENT OF CONTROLLING PARTY. From and after
the Closing Date of a Series until the Insurer Termination Date related to
such Series, Financial Security shall be the Controlling Party with respect
to such Series and shall be entitled to exercise all the rights given the
Controlling Party hereunder with respect to such Series. From and after the
Insurer Termination Date related to such Series until the Trustee Termination
Date related to such Series, the Trustee shall be the Controlling Party with
respect to such Series. Notwithstanding the foregoing, in the event that a
Financial Security Default shall have occurred and be continuing, the Trustee
shall be the Controlling Party with respect to such Series until the
applicable Trustee Termination Date. If prior to an Insurer Termination Date
the Trustee shall have become the Controlling Party with respect to a Series
as a result of the occurrence of a Financial Security Default and either such
Financial Security Default is cured or for any other reason ceases to exist
or the Trustee Termination Date with respect to a Series occurs, then upon
such cure or other cessation or on such Trustee Termination Date, as the case
may be, Financial Security shall, upon notice thereof being duly given to the
Collateral Agent, again be the Controlling Party with respect to such Series.

Section 6.02. CONTROLLING PARTY'S AUTHORITY.

(a) Each of OFL and the Seller hereby irrevocably appoint the
Controlling Party, and any successor to the Controlling Party appointed
pursuant to Section 6.01, its true and

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<PAGE>

lawful attorney, with full power of substitution, in the name of OFL, the
Seller, the Secured Parties or otherwise, but (subject to Section 2.08) at
the expense of the Seller, to the extent permitted by law to exercise, at any
time and from time to time while any Insurance Agreement Event of Default has
occurred and is continuing, any or all of the following powers with respect
to all or any of the Collateral related to the relevant Series: (i) to
demand, sue for, collect, receive and give acquittance for any and all monies
due or to become due upon or by virtue thereof, (ii) to settle, compromise,
compound, prosecute or defend any action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal with the same or the
proceeds thereof as fully and effectively as if the Collateral Agent were the
absolute owner thereof, and (iv) to extend the time of payment of any or all
thereof and to make any allowance or other adjustments with respect thereto;
PROVIDED that the foregoing powers and rights shall be exercised in
accordance with the provisions of Article VII hereof.

(b) With respect to each Series of Certificates and the related
Collateral, each Secured Party hereby irrevocably and unconditionally
constitutes and appoints the Controlling Party with respect to such Series,
and any successor to such Controlling Party appointed pursuant to Section
6.01 from time to time, as the true and lawful attorney-in-fact of such
Secured Party for so long as such Secured Party is the Non-Controlling Party,
with full power of substitution, to execute, acknowledge and deliver any
notice, document, certificate, paper, pleading or instrument and to do in the
name of the Controlling Party as well as in the name, place and stead of such
Secured Party such acts, things and deeds for and on behalf of and in the
name of such Secured Party under this Agreement with respect to such Series
which such Secured Party could or might do or which may be necessary,
desirable or convenient in such Controlling Party's sole discretion to effect
the purposes contemplated hereunder and, without limitation, exercise full
right, power and authority to take, or defer from taking, any and all acts
with respect to the administration of the Collateral related to such Series,
and the enforcement of the rights of the Secured Parties hereunder with
respect to such Series, on behalf of and for the benefit of such Controlling
Party and such Non-Controlling Party, as their interests may appear.

(c) So long as Financial Security shall be the Controlling Party
with respect to a Series (other than the Warehousing Series), the Trustee
hereby agrees, that if there exists an Insurance Agreement Event of Default
with respect to such Series:

(i) Financial Security shall have the exclusive right to
direct the Trustee as to any and all actions to be taken under the
related Transaction Documents, including, without limitation, all
actions with respect to the giving of directions to the Servicer and any
subservicer with respect to the servicing of the Receivables of such
Series; enforcement of any rights of the Trustee under such Transaction
Documents; and the giving or withholding of any other consents,
requests, notices, directions, approvals, extensions or waivers under or
in respect of any such Transaction Documents; and

(ii) Financial Security shall have the right to control the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee under the related Pooling and Servicing Agreement or under any
other Transaction Document, including the remedies provided in

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Article VII;

PROVIDED, HOWEVER, that the Trustee may decline to follow any of the above
directions from Financial Security, if the Trustee, in accordance with an
opinion of counsel to the Trustee, that is independent of the Trustee,
determines that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith determines that the action or
proceeding so directed would involve it in personal liability for which
adequate indemnity is not reasonably assured to it or, in the case of actions
or directions not specifically permitted to be taken by Financial Security so
long as no Financial Security Default has occurred and is continuing, would
adversely affect the interests of the Certificateholders in any material
respect.

(d) So long as Financial Security shall be the Controlling Party
with respect to a Series (other than the Warehousing Series), the Trustee
shall not, without the prior written consent of Financial Security:

(i) appoint new independent accountants with respect to the Series;

(ii) consent to the amendment of or supplement to any of the
Transaction Documents related to the Series; or

(iii) waive a Servicer Termination Event under the related Pooling and
Servicing Agreement or Sale and Servicing Agreement, as applicable.

(e) So long as Financial Security shall be the Controlling Party
with respect to a Series:

(i) Financial Security shall have the rights provided in Section 5.3
of each Pooling and Servicing Agreement, Section 5.4 of each Sale and
Servicing Agreement and Section 5.19 of each Indenture in respect of the
direction of insolvency proceedings.

(ii) Financial Security shall have the right to direct the Trustee
as to any and all actions to be taken in the event of the occurrence of
a Servicer Termination Event under the related Pooling and Servicing
Agreement and shall have such other rights in respect of the appointment
of a successor servicer as are provided in such Pooling and Servicing
Agreement.

Section 6.03. RIGHTS OF SECURED PARTIES. With respect to each
Series of Certificates and the related Collateral, the Non-Controlling Party
at any time expressly agrees that it shall not assert any rights that it may
otherwise have, as a Secured Party with respect to the Collateral, to direct
the maintenance, sale or other disposition of the Collateral or any portion
thereof, notwithstanding the occurrence and continuance of any Default with
respect to such Series or any non-performance by OFL or the Seller of any
obligation owed to such Secured Party hereunder or under any other
Transaction Document, and each party hereto agrees that the Controlling Party
shall be the only Person entitled to assert and exercise such rights.

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Section 6.04. DEGREE OF CARE.

(a) CONTROLLING PARTY. Notwithstanding any term or provision of
this Agreement, the Controlling Party shall incur no liability to OFL or the
Seller for any action taken or omitted by the Controlling Party in connection
with the Collateral, except for any gross negligence, bad faith or willful
misconduct on the part of the Controlling Party and, further, shall incur no
liability to the Non-Controlling Party except for a breach of the terms of
this Agreement or for gross negligence, bad faith or willful misconduct in
carrying out its duties, if any, to the Non-Controlling Party. The
Controlling Party shall be protected and shall incur no liability to any such
party in relying upon the accuracy, acting in reliance upon the contents and
assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document believed by the Controlling Party to be genuine
and to have been duly executed by the appropriate signatory, and (absent
manifest error or actual knowledge to the contrary) the Controlling Party
shall not be required to make any independent investigation with respect
thereto. The Controlling Party shall, at all times, be free independently to
establish to its reasonable satisfaction the existence or nonexistence, as
the case may be, of any fact the existence or nonexistence of which shall be
a condition to the exercise or enforcement of any right or remedy under this
Agreement or any of the Transaction Documents.

(b) THE NON-CONTROLLING PARTY. The Non-Controlling Party shall
not be liable to the Seller for any action or failure to act by the
Controlling Party or the Collateral Agent in exercising, or failing to
exercise, any rights or remedies hereunder.

Article VII

REMEDIES UPON DEFAULT

Section 7.01. REMEDIES UPON A DEFAULT. If a Default with respect
to a Series has occurred and is continuing, the Collateral Agent shall, at
the direction of the Controlling Party, take whatever action at law or in
equity as may appear necessary or desirable in the judgment of the
Controlling Party to collect and satisfy all Insurer Secured Obligations
(including, but not limited to, foreclosure upon the Collateral and all other
rights available to secured parties under applicable law) or to enforce
performance and observance of any obligation, agreement or covenant under any
of the Transaction Documents related to such Series. Notwithstanding the
foregoing, the Collateral Agent shall not be entitled to take any action and
the Controlling Party shall not be entitled to give any direction with
respect to the Trust Property, except to the extent provided in the
Transaction Documents and Sections 6.02(a), (c), (d) and (e) hereof.

Section 7.02. WAIVER OF DEFAULT. The Controlling Party shall have
the sole right, to be exercised in its complete discretion, to waive any
Default by a writing setting forth the terms, conditions and extent of such
waiver signed by the Controlling Party and delivered to the Collateral Agent,
the other Secured Party and the Seller. Any such waiver shall be binding
upon the Non-Controlling Party and the Collateral Agent. Unless such writing
expressly provides to the contrary, any waiver so granted shall extend only
to the specific event or occurrence which gave rise to the default so waived
and not to any other similar event or occurrence which occurs

39
<PAGE>

subsequent to the date of such waiver.

Section 7.03. RESTORATION OF RIGHTS AND REMEDIES. If the
Collateral Agent has instituted any proceeding to enforce any right or remedy
under this Agreement, and such proceeding has been discontinued or abandoned
for any reason, or has been determined adversely to such Collateral Agent,
then and in every such case the Seller, the Collateral Agent and each of the
Secured Parties shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Secured Parties shall continue as
though no such proceeding had been instituted.

Section 7.04. NO REMEDY EXCLUSIVE. No right or remedy herein
conferred upon or reserved to the Collateral Agent, the Controlling Party or
either of the Secured Parties is intended to be exclusive of any other right
or remedy, and every right or remedy shall, to the extent permitted by law,
be cumulative and in addition to every other right and remedy given hereunder
or now or hereafter existing at law, in equity or otherwise (but, in each
case, shall be subject to the provisions of this Agreement limiting such
remedies), and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the Controlling Party,
and the exercise of or the beginning of the exercise of any right or power or
remedy shall not be construed to be a waiver of the right to exercise at the
same time or thereafter any other right, power or remedy.

Article VIII

MISCELLANEOUS

Section 8.01. FURTHER ASSURANCES. Each party hereto shall take
such action and deliver such instruments to any other party hereto, in
addition to the actions and instruments specifically provided for herein, as
may be reasonably requested or required to effectuate the purpose or
provisions of this Agreement or to confirm or perfect any transaction
described or contemplated herein.

Section 8.02. WAIVER. Any waiver by any party of any provision of
this Agreement or any right, remedy or option hereunder shall only prevent
and estop such party from thereafter enforcing such provision, right, remedy
or option if such waiver is given in writing and only as to the specific
instance and for the specific purpose for which such waiver was given. The
failure or refusal of any party hereto to insist in any one or more
instances, or in a course of dealing, upon the strict performance of any of
the terms or provisions of this Agreement by any party hereto or the partial
exercise of any right, remedy or option hereunder shall not be construed as a
waiver or relinquishment of any such term or provision, but the same shall
continue in full force and effect.

Section 8.03. AMENDMENTS; WAIVERS. No amendment, modification,
waiver or supplement to this Agreement or any provision of this Agreement
shall in any event be effective unless the same shall have been made or
consented to in writing by each of the parties hereto and

40
<PAGE>

each Rating Agency shall have confirmed in writing that such amendment will
not cause a reduction or withdrawal of a rating on any Series; PROVIDED,
HOWEVER, that, for so long as Financial Security shall be the Controlling
Party with respect to a Series, amendments, modifications, waivers or
supplements hereto relating to such Series, the related Collateral or Spread
Account or any requirement hereunder to deposit or retain any amounts in such
Spread Account or to distribute any amounts therein as provided in Section
3.03 shall be effective if made or consented to in writing by Financial
Security, the Seller, OFL and the Collateral Agent (the consent of which
shall not be withheld or delayed with respect to any amendment that does not
adversely affect the Collateral Agent) but shall in no circumstances require
the consent of the Trustee or the Certificateholders related to such Series
or any other Series.

Section 8.04. SEVERABILITY. In the event that any provision of
this Agreement or the application thereof to any party hereto or to any
circumstance or in any jurisdiction governing this Agreement shall, to any
extent, be invalid or unenforceable under any applicable statute, regulation
or rule of law, then such provision shall be deemed inoperative to the extent
that it is invalid or unenforceable and the remainder of this Agreement, and
the application of any such invalid or unenforceable provision to the
parties, jurisdictions or circumstances other than to whom or to which it is
held invalid or unenforceable, shall not be affected thereby nor shall the
same affect the validity or enforceability of any other provision of this
Agreement. The parties hereto further agree that the holding by any court of
competent jurisdiction that any remedy pursued by the Collateral Agent, or
any of the Secured Parties, hereunder is unavailable or unenforceable shall
not affect in any way the ability of the Collateral Agent or any of the
Secured Parties to pursue any other remedy available to it or them (subject,
however, to the provisions of this Agreement limiting such remedies).

Section 8.05. NONPETITION COVENANT. Notwithstanding any prior
termination of this Agreement, each of the parties hereto agrees that it
shall not, prior to one year and one day after the Final Scheduled
Distribution Date with respect to each Series, acquiesce, petition or
otherwise invoke or cause the Seller or OFL to invoke the process of the
United States of America, any State or other political subdivision thereof or
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government for the purpose of
commencing or sustaining a case by or against the Seller, OFL or the Trust
under a Federal or state bankruptcy, insolvency or similar law or appointing
a receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Seller, OFL or the Trust or all or any part of its
property or assets or ordering the winding up or liquidation of the affairs
of the Seller, OFL or the Trust. The parties agree that damages will be an
inadequate remedy for breach of this covenant and that this covenant may be
specifically enforced.

Section 8.06. NOTICES. All notices, demands, certificates,
requests and communications hereunder ("notices") shall be in writing and
shall be effective (a) upon receipt when sent through the U.S. mails,
registered or certified mail, return receipt requested, postage prepaid, with
such receipt to be effective the date of delivery indicated on the return
receipt, or (b) one Business Day after delivery to an overnight courier, or
(c) on the date personally delivered to an Authorized Officer of the party to
which sent, or (d) on the date transmitted by legible telecopier transmission
with a confirmation of receipt, in all cases addressed to the

41
<PAGE>

recipient as follows:

(i) If to OFL:

Arcadia Financial Ltd.
7825 Washington Avenue South, Suite 410
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Telecopier No.: (612) 942-6730

(ii) If to the Seller:

Arcadia Receivables Finance Corp.
7825 Washington Avenue South, Suite 410
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Telecopier No.: (612) 942-6730

(iii) If to Financial Security:

Financial Security Assurance Inc.
350 Park Avenue - 13th Floor
New York, New York 10022
Attention: Surveillance Department
Telecopier No.: (212) 339-3518
(212) 339-3529

(in each case in which notice or other communication to Financial
Security refers to a Default or a claim on the Policy or in which
failure on the part of Financial Security to respond shall be
deemed to constitute consent or acceptance, then with a copy to
the attention of the Senior Vice President Surveillance)

(iv) If to the Trustee:

The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001-2697
Attention: Global Trust Services Group
(with respect to those Series for which Chase serves as
Trustee)

42
<PAGE>

Norwest Bank Minnesota, National Association
6th Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services - Asset Backed
Administration
Telecopier No.: (612) 667-3539
(with respect to those Series for which Norwest serves as
Trustee)

(v) If to the Collateral Agent:

(vi) If to Moody's:

Moody's Investor's Service, Inc.
99 Church Street
New York, New York 10007
Telecopier No.: (212) 553-0344

(vii) If to Standard & Poor's:

Standard & Poor's Ratings Group
26 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582

A copy of each notice given hereunder to any party hereto shall also be given
to (without duplication) Financial Security, the Seller, the Trustee and the
Collateral Agent. Each party hereto may, by notice given in accordance
herewith to each of the other parties hereto, designate any further or
different address to which subsequent notices shall be sent.

Section 8.07. TERM OF THIS AGREEMENT. This Agreement shall take
effect on the Closing Date of the Series 1993-A Certificates and shall
continue in effect until the last Final Termination Date to occur with
respect to each Series. On such Final Termination Date, this Agreement shall
terminate, all obligations of the parties hereunder shall cease and terminate
and the Collateral, if any, held hereunder and not to be used or applied in
discharge of any obligations of the Seller or OFL in respect of the Secured
Obligations or otherwise under this Agreement, shall be released to and in
favor of the Seller; PROVIDED that the provisions of Sections 4.06, 4.07 and
8.05 shall survive any termination of this Agreement and the release of any
Collateral upon such termination.

Section 8.08. ASSIGNMENTS: THIRD-PARTY RIGHTS; REINSURANCE.

43
<PAGE>

(a) This Agreement shall be a continuing obligation of the parties
hereto and shall (i) be binding upon the parties and their respective
successors and assigns, and (ii) inure to the benefit of and be enforceable
by each Secured Party and the Collateral Agent, and by their respective
successors, transferees and assigns. Neither the Seller nor OFL may assign
this Agreement, or delegate any of its duties hereunder, without the prior
written consent of the Controlling Party.

(b) Financial Security shall have the right (unless a Financial
Security Default shall have occurred and be continuing) to give
participations in its rights under this Agreement and to enter into contracts
of reinsurance with respect to any Policy issued in connection with a Series
of Certificates and each such participant or reinsurer shall be entitled to
the benefit of any representation, warranty, covenant and obligation of each
party (other than Financial Security) hereunder as if such participant or
reinsurer was a party hereto and, subject only to such agreement regarding
such reinsurance or participation, shall have the right to enforce the
obligations of each such other party directly hereunder; PROVIDED, HOWEVER,
that no such reinsurance or participation agreement or arrangement shall
relieve Financial Security of its obligations hereunder, under the
Transaction Documents to which it is a party or under any such Policy. In
addition, nothing contained herein shall restrict Financial Security from
assigning to any Person pursuant to any liquidity facility or credit facility
any rights of Financial Security under this Agreement or with respect to any
real or personal property or other interests pledged to Financial Security,
or in which Federal Security has a security interest, in connection with the
transactions contemplated hereby. The terms of any such assignment or
participation shall contain an express acknowledgment by such Person of the
condition of this Section and the limitations of the rights of Financial
Security hereunder.

Section 8.09. CONSENT OF CONTROLLING PARTY. In the event that the
Controlling Party's consent is required under the terms hereof or under the
terms of any Transaction Document, it is understood and agreed that, except
as otherwise provided expressly herein, the determination whether to grant or
withhold such consent shall be made solely by the Controlling Party in its
sole discretion.

Section 8.10. TRIAL BY JURY WAIVED. Each of the parties hereto
waives, to the fullest extent permitted by law, any right it may have to a
trial by jury in respect of any litigation arising directly or indirectly out
of, under or in connection with this Agreement, any of the other Transaction
Documents or any of the transactions contemplated hereunder or thereunder.
Each of the parties hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that
such other party would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it has been induced to enter into
this Agreement and the other Transaction Documents to which it is a party, by
among other things, this waiver.

Section 8.11. GOVERNING LAW. This Agreement shall be governed by
and construed, and the obligations, rights and remedies of the parties
hereunder shall be determined, in accordance with the laws of the State of
New York.

44
<PAGE>

Section 8.12. CONSENTS TO JURISDICTION. Each of the parties
hereto irrevocably submits to the jurisdiction of the United States District
Court for the Southern District of New York, any court in the state of New
York located in the city and county of New York, and any appellate court from
any thereof, in any action, suit or proceeding brought against it and related
to or in connection with this Agreement, the other Transaction Documents or
the transactions contemplated hereunder or thereunder or for recognition or
enforcement of any judgment and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such suit or action
or proceeding may be heard or determined in such New York State court or, to
the extent permitted by law, in such federal court. Each of the parties
hereto agrees that a final judgment in any such action, suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. To the extent permitted by
applicable law, each of the parties hereby waives and agrees not to assert by
way of motion, as a defense or otherwise in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of such courts, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or any of the other Transaction Documents or
the subject matter hereof or thereof may not be litigated in or by such
courts. Each of OFL and the Seller hereby irrevocably appoints and
designates CT Corporation System, whose address is 1633 Broadway, New York,
New York 10019, as its true and lawful attorney and duly authorized agent for
acceptance of service of legal process. Each of OFL and the Seller agrees
that service of such process upon such Person shall constitute personal
service of such process upon it. Nothing contained in this Agreement shall
limit or affect the rights of any party hereto to serve process in any other
manner permitted by law or to start legal proceedings relating to any of the
Transaction Documents against OFL or the Seller or their respective property
in the courts of any jurisdiction.

Section 8.13. LIMITATION OF LIABILITY. It is expressly understood
and agreed by the parties hereto that (a) Norwest Bank Minnesota, National
Association is executing this Agreement (i) not in its individual capacity
but in its capacity as trustee of the Trusts pursuant to the Transaction
Documents and (ii) as Collateral Agent hereunder (b) in no case whatsoever
shall Norwest Bank Minnesota, National Association in its capacity as trustee
of Trusts be personally liable on, or for any loss in respect of, any of the
statements, representations, warranties, covenants, agreements or obligations
of the Trust hereunder, all such liability, if any, being expressly waived by
the parties hereto.

Section 8.14. DETERMINATION OF ADVERSE EFFECT. Any determination
of an adverse effect on the interest of the Secured Parties or the
Certificateholders shall be made without consideration of the availability of
funds under the Policies.

Section 8.15. COUNTERPARTS. This Agreement may be executed in two
or more counterparts by the parties hereto, and each such counterpart shall
be considered an original and all such counterparts shall constitute one and
the same instrument.

Section 8.16. HEADINGS. The headings of sections and paragraphs
and the Table of Contents contained in this Agreement are provided for
convenience only. They form no part of this Agreement and shall not affect
its construction or interpretation.

45
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as amended and restated, as of the date set forth on the first
page hereof.

ARCADIA FINANCIAL LTD.

By:
------------------------------------------
Name: John A. Witham
Title: Executive Vice President and
Chief Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By:
------------------------------------------
Name: John A. Witham
Title: Senior Vice President and
Chief Financial Officer

FINANCIAL SECURITY ASSURANCE INC.

By:
------------------------------------------
Authorized Officer

THE CHASE MANHATTAN BANK, as Trustee

By:
------------------------------------------
Name:
Title:

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee

By:
------------------------------------------

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Collateral Agent

By:
------------------------------------------

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,160
<SECURITIES> 0
<RECEIVABLES> 742,565
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 29,318
<DEPRECIATION> 12,562
<TOTAL-ASSETS> 797,706
<CURRENT-LIABILITIES> 0
<BONDS> 445,196
0
0
<COMMON> 390
<OTHER-SE> 258,790
<TOTAL-LIABILITY-AND-EQUITY> 797,706
<SALES> 0
<TOTAL-REVENUES> 17,652
<CGS> 0
<TOTAL-COSTS> 100,525
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,693
<INCOME-PRETAX> (108,566)
<INCOME-TAX> (18,846)
<INCOME-CONTINUING> (89,720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,720)
<EPS-PRIMARY> (2.30)
<EPS-DILUTED> (2.30)

</TABLE>

<PAGE>
CAUTIONARY STATEMENT

ARCADIA FINANCIAL LTD. (THE "COMPANY"), OR PERSONS ACTING ON BEHALF OF THE
COMPANY, OR OUTSIDE REVIEWERS RETAINED BY THE COMPANY MAKING STATEMENTS ON
BEHALF OF THE COMPANY, OR UNDERWRITERS OF THE COMPANY'S SECURITIES, FROM TIME TO
TIME, MAY MAKE, IN WRITING OR ORALLY, "FORWARD-LOOKING STATEMENTS" AS DEFINED
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "ACT"). THIS
CAUTIONARY STATEMENT, WHEN USED IN CONJUNCTION WITH AN IDENTIFIED
FORWARD-LOOKING STATEMENT, IS FOR THE PURPOSE OF QUALIFYING FOR THE "SAFE
HARBOR" PROVISIONS OF THE ACT AND IS INTENDED TO BE A READILY AVAILABLE WRITTEN
DOCUMENT THAT CONTAINS FACTORS WHICH COULD CAUSE RESULTS TO DIFFER MATERIALLY
FROM SUCH FORWARD-LOOKING STATEMENTS. THESE FACTORS ARE IN ADDITION TO ANY OTHER
CAUTIONARY STATEMENTS, WRITTEN OR ORAL, WHICH MAY BE MADE OR REFERRED TO IN
CONNECTION WITH ANY SUCH FORWARD-LOOKING STATEMENT.

THE FOLLOWING MATTERS, AMONG OTHERS, MAY HAVE A MATERIAL ADVERSE EFFECT ON
THE BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR
PROSPECTS, FINANCIAL OR OTHERWISE, OF THE COMPANY. REFERENCE TO THIS CAUTIONARY
STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE
DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT
OR STATEMENTS.

LIQUIDITY AND ACCESS TO CAPITAL RESOURCES

NEGATIVE OPERATING CASH FLOWS. The Company's business requires substantial
cash to support the payment of dealer participations, the funding of spread
accounts in connection with securitizations, the purchase of loans pending
securitization, the financing of repossessed inventory and other cash
requirements, in addition to debt service. To the extent that increases in the
volume of loan purchases and securitizations provide income, a substantial
portion of such income is received by the Company in cash over the life of the
loans. The Company has operated on a negative operating cash flow basis and
expects to continue to do so in the near future. The Company has historically
funded these negative operating cash flows principally through borrowings from
financial institutions, sales of equity securities and sales of senior and
subordinated notes. The Company may require additional capital in the future to
fund continued negative cash flows, although there can be no assurance that the
Company will have access to the capital markets in the future or that financing
will be available to satisfy the Company's operating and debt service
requirements or to fund its future growth. Factors which could affect the
Company's access to the capital markets, or the costs of such capital, include
changes in interest rates, general economic conditions, the perception in the
capital markets of the Company's business, results of operations, leverage,
financial condition and business prospects, and the performance of the Company's
securitization trusts. In addition, covenants with respect to the Company's debt
securities and credit facilities may significantly restrict the Company's
ability to incur additional indebtedness and to issue new classes of preferred
stock.

POTENTIAL INABILITY TO REFINANCE EXISTING INDEBTEDNESS. The Company's
ability to repay its outstanding indebtedness at maturity may depend on its
ability to refinance such indebtedness, which could be adversely affected if the
Company does not have access to the capital markets for the sale of additional
debt or equity through public offerings or private placements on terms
reasonably satisfactory to the Company. See "--Liquidity and Access to Capital
Resources--Negative Operating Cash Flows" above.

DEPENDENCE ON WAREHOUSE FINANCING. The Company depends on warehouse
facilities with financial institutions or institutional lenders to finance its
purchase of loans on a short-term basis pending securitization. At June 30,
1998, the Company had $875.0 million of warehouse facilities through various
financial institutions and institutional lenders, of which $821.0 million was
available. One of the facilities, with a capacity of $175.0 million, was
terminated by the Company in July 1998. The remaining facilities expire in
October 1998 and July 1999, subject to renewal or extension at the lenders'
option. There can be no assurance that such financing will continue to be
available on terms reasonably satisfactory to the Company. The inability of the
Company to arrange additional warehouse facilities or to extend or replace
existing facilities when they expire would have a material adverse effect on the
Company's business, financial condition and results of operations and on the
Company's outstanding securities.

DEPENDENCE ON SECURITIZATION. The Company has relied upon its ability to
aggregate and sell loans as asset-backed securities in the secondary market to
generate cash proceeds for repayment of warehouse

1
<PAGE>
facilities and to purchase new loans from dealers. Since inception, the Company
has securitized approximately $9.9 billion of automobile loans. At June 30,
1998, approximately $5.1 billion of these loans were outstanding. Accordingly,
adverse changes in the Company's asset-backed securities program or in the
asset-backed securities market for automobile receivables generally could
materially adversely affect the Company's ability to purchase and resell loans
on a timely basis and upon terms reasonably satisfactory to the Company. The
Company endeavors to effect public securitizations of its loans on at least a
quarterly basis. However, market and other considerations, including the
conformity of loans to insurance company and rating agency requirements, could
affect the timing of such transactions. Any delay in the sale of loans beyond a
quarter-end would eliminate the related gain on sale in the given quarter and
adversely affect the Company's reported earnings for such quarter. All of the
Company's securitizations since March 1993 and one of the Company's warehouse
facilities have utilized credit enhancement in the form of financial guaranty
insurance policies issued by FSA to achieve "AAA/Aaa" ratings with respect to
the asset-backed securities. The Company believes that financial guaranty
insurance policies reduce the costs of the securitizations and such warehouse
facility relative to alternative forms of credit enhancements available to the
Company. FSA is not required to insure Company-sponsored securitizations and
there can be no assurance that it will continue to do so or that future
Company-sponsored securitizations will be similarly rated.

LOAN PERFORMANCE RISKS

POTENTIAL NEGATIVE EFFECTS ON FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
LIQUIDITY. The Company's business, financial condition, results of operations
and liquidity depend, to a material extent, on the performance of loans
purchased and sold by the Company. When such loans are sold in securitizations,
the Company recognizes a gain on sale. Finance income receivable, the Company's
principal asset, has been calculated using assumptions concerning future
default, prepayment and net loss rates on securitized loans that are based on
the Company's historical experience, externally-generated industry information,
market conditions and expectations of future performance and present value
discount rates that the Company believes would be requested by an unrelated
purchaser of a similar stream of estimated cash flows. Management believes that
the Company's estimates of excess cash flow were reasonable at the time each
gain on sale of loans and related finance income receivable was recorded.
However, the actual rates of default and/or prepayment and/or net loss on such
loans may exceed those estimated for future valuation of the Company's finance
income receivable and consequently may adversely affect anticipated future
excess cash flow. The Company periodically reviews its default, prepayment and
net loss assumptions in relation to current performance of the loans and market
conditions, and, if necessary, adjusts the balance of finance income receivable.
The Company has made two significant adjustments to its finance income
receivable, one at June 30, 1998 and one at March 31, 1997, both after
completing such reviews. These adjustments resulted in reductions to finance
income receivable of $114.5 million and $98.0 million, respectively. The June
1998 adjustment was due to a change in accounting estimate related to expected
charge off, recovery and prepayment rates. The March 1997 adjustment was the
result of revisions to management's estimate of future recovery rates on the
sale of repossessed inventory. The Company's business, financial condition,
results of operations and liquidity could be materially adversely affected by
additional adjustments in the future. No assurance can be given that loan losses
and prepayments will not exceed the Company's estimates or that finance income
receivable could be sold at its stated value on the balance sheet, if at all.

POSSIBLE RESTRICTIONS ON CASH FLOW FROM SECURITIZATIONS. The Company's
future liquidity and financial condition, and its ability to finance the growth
of its business and to repay or refinance its indebtedness, will depend to a
material extent on distributions of excess cash flow from securitization trusts.
The Company's agreements with FSA provide that the Company must maintain in a
spread account for each insured securitization trust specified levels of excess
cash during the life of the trust. These spread accounts are initially funded
out of initial deposits and/or cash flows from the related trust. Thereafter,
during each month, excess cash flow due to Arcadia Receivables Finance Corp.
("ARFC") from all insured securitization trusts is first used to replenish any
spread account deficiencies and is then distributed to ARFC and from ARFC to the
Company. The timing and amount of distributions of excess cash from
securitization trusts

2
<PAGE>

varies based on a number of factors, including but not limited to, loan
delinquencies, defaults and net losses, the rate of turnover of repossession
inventory and recovery rates, the ages of loans in the portfolio, prepayment
experience and required spread account levels. A deterioration of the Company's
loan delinquencies, cumulative defaults or net losses, a build-up in
repossession inventory, the anticipated increase in the proportion of
repossession inventory sold in the wholesale auction markets resulting from the
Company's decision to discontinue its retail resale of repossession inventory,
or an increase in the proportion of loans in their first and second years, would
reduce excess cash available to the Company. At June 30, 1998, the Company had
an aggregate of $266.7 million of restricted cash in spread accounts. There can
be no assurance that in the future the Company will not experience an
interruption of excess cash flow from ARFC, which could adversely affect the
Company's ability to pay its obligations.

Each insured securitization trust has certain portfolio performance tests
relating to levels of delinquency, defaults and net losses on the loans in such
trust based in part on the relative percentage of Premier and Classic loans.
Portfolio performance tests require that the loan portfolio of each insured
securitization trust (i) have an average delinquency ratio not equal to or in
excess of a specified percentage, (ii) have a cumulative default rate not equal
to or in excess of specified percentages which vary based on the aging of the
loan portfolio, and (iii) have a cumulative net loss rate not equal to or in
excess of specified percentages which vary based on the aging of the loan
portfolio. If any of these tests are exceeded (a "violation"), the amount
required to be retained in the spread account related to such securitization
trust will be increased to an amount generally equal to the greater of 10% of
the outstanding balance of loans or 1% of the original balance of loans held by
the securitization trust. As a consequence, a violation generally will decrease
excess cash flow available from such securitization trust until loan portfolio
performance has returned to the required limits for a specified period,
generally three to five months, unless waived by FSA. FSA and the Company have
an arrangement under which, if any insured securitization trust exceeds the
specified portfolio performance tests, ARFC may, in lieu of retaining the excess
cash from that securitization trust in the related spread account, pledge an
equivalent amount of cash, which has the effect of preventing the violation of
the portfolio performance test. Although certain trusts, primarily those that
contained loans originated in 1995, have exceeded portfolio performance tests
and are still in excess of such tests, this arrangement with FSA has prevented a
violation, although it has reduced the amount of cash that would otherwise have
been available to the Company for use if the Company had sought and received a
waiver of such violation from FSA. A deterioration of the Company's
delinquencies, cumulative defaults or net losses would result in one or more
additional existing securitization trusts exceeding one or more of these tests
in the absence of changes to the trigger levels. There can be no assurance that,
in such event, waivers will be available from FSA permitting payments to ARFC.

Upon the occurrence of certain events with respect to any series of
asset-backed securities insured by FSA, including the failure to meet loan
portfolio performance tests of the nature described above but at
significantly higher levels, or upon a breach of the collateral coverage
requirements of the FSA-insured warehouse facility (an "Insurance Agreement
Event of Default"), the Company will be in default under its insurance
agreement with FSA. Upon an Insurance Agreement Event of Default, unless
waived by FSA, FSA may suspend distributions of cash flow from the related
securitization trust and all other FSA-insured trusts (including the
FSA-insured warehouse facility) until the asset-backed securities have been
redeemed, capture excess cash flow from performing trusts, increase its
premiums and replace the Company as servicer with respect to all FSA-insured
trusts. There can be no assurance that a further deterioration of the
Company's loan delinquencies, gross charge-offs and net losses would not
result in an Insurance Agreement Event of Default, which could adversely
affect the Company's ability to satisfy its obligations. Certain of the
Company's securitization trusts have exceeded such insurance agreement
thresholds and continue to exceed such thresholds and the Company has
obtained waivers from FSA to permit distributions of cash to ARFC. There can
be no assurance that in the future, if such thresholds are exceeded, waivers
will be available.

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In addition, the spread account for each securitization is
cross-collateralized to the spread accounts established in connection with the
Company's other securitization trusts (including the FSA-insured warehouse
facility) such that excess cash flow from a performing securitization trust may
be used to support negative cash flow from, or to replenish a deficient spread
account in connection with, a nonperforming securitization trust, thereby
further restricting excess cash flow available to ARFC. If excess cash flow from
all insured securitization trusts is not sufficient to replenish all such spread
accounts, no cash flow would be available to the Company from ARFC for that
month. Excess cash flow has been interrupted in the past, and there can be no
assurance that in the future the Company will not experience an interruption of
excess cash flow from ARFC which could adversely affect the Company's ability to
pay its obligations, including the Notes offered hereby. FSA also has a
collateral security interest in the stock of ARFC. If FSA were to foreclose on
such security interest following an event of default under an insurance
agreement with respect to a securitization trust (including the FSA-insured
warehouse facility), FSA could preclude payment of dividends by ARFC to the
Company, thereby eliminating the Company's right to receive distributions of
excess cash flow from all the FSA-insured securitization trusts. The Company's
right to service the loans sold in securitizations insured by FSA is also
generally subject to the discretion of FSA. Accordingly, there can be no
assurance that the Company will continue as servicer for such loans and receive
related servicing fees.

Any increase in limitations on cash flow available to the Company from ARFC
(including any increase in the amount of cash pledged under the arrangement with
FSA), inability to obtain any necessary waivers from FSA or termination of
servicing arrangements could materially adversely affect the Company's cash flow
and liquidity, and, ultimately, its business, financial condition and results of
operations and its outstanding securities.

IMPACT OF PORTFOLIO GROWTH AND PRODUCT MIX. Historically, the statistical
incidence of delinquencies and defaults in connection with automobile loans
tends to vary over the age of the loan. For example, statistically, loans that
are between six and fourteen months old have had a higher likelihood of being
delinquent or defaulting than loans with similar credit characteristics that are
three months old. Accordingly, to the extent that the Company's historical
portfolio growth has resulted in a servicing portfolio containing
disproportionately more loans originated within the prior six months, the
current and historical delinquency and default rates of loans in the servicing
portfolio may understate future delinquency and default rates.

In addition, to the extent the Company offers new loan products which
involve different underwriting policies, the delinquency and default rates of
the Company's servicing portfolio may change. The Company has instituted a
tiered pricing system and has consistently increased the amount of loans
purchased under its Classic program, which involves borrowers who do not meet
all of the underwriting standards in the Company's Premier program and are
charged rates of interest higher than those under the Company's Premier program.
The Company increased its purchase of loans under the Classic program from 17%
of the principal amount of loans purchased in 1995 to 36% in 1996, 55% in 1997
and 71% in the first six months of 1998. As a result of the increases in Classic
loans as a proportion of the Company's portfolio, there has been an increase in
the rates of, and reserves for, delinquencies, repossessions and losses
historically reported by the Company. The expansion of the Classic loan program
and seasoning of the Company's existing servicing portfolio will likely continue
to cause the Company's loan performance statistics to show higher delinquencies,
gross charge-offs and net losses when compared with historical performance even
if such loan performance statistics are consistent with the Company's reserves
for loan losses.

To estimate future delinquency, repossession and loss experience on its
loans, the Company uses a combination of factors, including actual Company loan
performance experience and industry experience on loans with similar credit
characteristics. During the second quarter of 1998, the Company implemented
refinements to its method for estimating future delinquency, repossession and
loss experience, which resulted in a significant downward adjustment to finance
income receivable at June 30, 1998. See "--Loan Performance Risks--Potential
Negative Effects on Financial Condition, Results of Operations and Liquidity"
above. However, there can be no assurance that its loans will perform under
varying economic conditions in the manner currently estimated by the Company.
Any increase in delinquency, repossession and loss

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rates related to its loans above the rates estimated by the Company could have a
material adverse effect on the Company's business, financial condition and
results of operations, as well as its liquidity. In addition, certain of the
Company's loan products which produce higher delinquency, repossession and loss
rates than expected may continue to have an impact on the Company's overall loan
performance, even after being discontinued or modified, until such loans are
repaid or have defaulted. In 1996, the Company discontinued a Classic loan
product directed at first-time credits and modified a Classic program for
financing the sale of its repossessed inventory in retail markets, each of which
had experienced higher than expected delinquency, repossession and loss rates,
but the loans generated under this program have continued to impact the
performance of those securitization pools containing them.

EXTENSIONS AND AMENDMENTS. Like others in the industry, the Company gives
certain obligors extensions or amendments to loan terms in certain
circumstances, including when the Company believes such obligors will thereby be
more likely to repay their loans, and losses on such loans can be reduced. Loans
that have been extended or amended generally present substantially higher
default risks than loans that have neither of these characteristics. Primarily
as a result of the expansion of the Classic program (which involves higher
credit risks than the Premier program), the portion of the Company's servicing
portfolio which exhibits one or both of these characteristics has increased.
Extensions and amendments (in the aggregate) averaged approximately 3.3% of the
servicing portfolio per month in 1997, 2.7% per month in 1996 and 1.9% per month
in 1995, and with seasonal peaks occurring during the Christmas holiday season.
Extensions and amendments (in the aggregate) averaged approximately 3.0% per
month for the first six months of 1998, compared to 3.5% per month for the first
six months of 1997. The Company believes that one reason for the increase in
extensions and amendments as a percentage of the servicing portfolio during 1997
was the slower rate of growth in the size of the Company's portfolio, which
resulted in a higher percentage of loans of the age that are more likely to be
extended or amended. Any continued slowing of growth could contribute to a
further increase in such statistics. The Company considers these characteristics
when establishing its loss reserves. In certain circumstances, loans that have
been extended or amended have the effect of removing the related loan from
delinquent status.

POTENTIAL NEGATIVE IMPACT OF COVENANTS UNDER FINANCING
AGREEMENTS. Increases in loan delinquency and loss rates with respect to any
securitization trust may result in the trust's portfolio exceeding the various
pool performance levels established by FSA, thereby restricting or cutting off
cash distributions from the securitization trust spread accounts to ARFC (and
thus to the Company). See "--Loan Performance Risks-- Possible Restrictions On
Cash Flow from Securitizations" above. In addition, such increases may cause the
Company to exceed certain pool performance tests established in other agreements
governing its indebtedness. If at the end of any month the Portfolio Net Loss
Ratio (as defined) exceeds 6.0%, the Delinquency Ratio (as defined) exceeds
4.5%, the Net Pledged Receivable Loss Ratio for Pledged Receivables (as defined)
exceeds 1.0%, or the Average Excess Spread Percentage (as defined) is less than
5.5% (which level is subject to increase if the Portfolio Net Loss Ratio is
higher than 4.0%), an event of default will occur under one of the Company's
outstanding warehouse facilities. The delinquency level is calculated as a
percentage of outstanding principal balance of all automobile loans owned or
securitized by the Company as to which a payment is more than thirty days past
due. Upon the occurrence of an event of default under such warehouse facility,
the lending banks under such facility would have no further obligation to extend
additional credit. Furthermore, any such event of default or acceleration may
trigger cross-defaults under other outstanding indebtedness of the Company and
may result in the acceleration of amounts due thereunder. The increase in
Classic loans, among other things, has increased the risk that the Company may
trigger its Portfolio Net Loss Ratio covenants in the future.

RESALE AND FINANCING OF REPOSSESSIONS In addition to wholesale distribution
channels, the Company has regularly disposed of repossessed vehicles through
retail markets, primarily retail used car consignment lots. In July 1998 the
Company announced that it has decided to discontinue its retail disposition of
repossessed vehicles and anticipates having eliminated this program by the end
of 1998. The Company's adjustments to finance income receivable at June 30, 1998
and March 31, 1997 both included amounts

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related to a reduction in the estimated recovery rates on then current
repossessed inventory and anticipated future inventory arising from then
existing securitization transactions. During the first six months of 1998,
approximately 26% of repossessed vehicles sold were liquidated through retail
markets, compared with 55% in the first six months of 1997 and 46% in all of
1997.

The Company's repossession inventory has generally increased as a percentage
of its servicing portfolio due in part to the period repossessions have been
held pending retail resale, which is typically a longer period of time than for
wholesale auctions, and also to the increase in the rate of loan defaults and
changes in the number and type of dealers used for retail repossession sales. At
June 30, 1998, the Company had $28.9 million of repossessed inventory, compared
to $55.3 million at December 31 1997, $64.9 million at December 31, 1996, and
$17.7 million at December 31, 1995. The decrease in inventory at June 30, 1998
was primarily the result of the Company's increased use of wholesale
distribution channels during 1998 and the resulting increase in inventory
turnover. There can be no assurance that any further softening of used car
markets or other factors will not cause the Company's recovery rate on
repossessed vehicles to decline further, which could require additional
adjustments to estimated recovery rates and finance income receivable.

In connection with its retail dispositions of repossessions, the Company has
offered to finance the purchase of the resold automobile by a new buyer.
Delinquency, gross charge-off and net loss rates associated with loans on
repossessed automobiles have historically been substantially in excess of the
same statistics associated with the Company's remaining servicing portfolio.

POTENTIAL NEGATIVE IMPACT OF INCREASE IN PERSONAL BANKRUPTCIES. Recent
media reports have suggested an increase in the number of personal bankruptcy
filings and during most of 1997 and the first half of 1998 the Company
experienced a slight increase in the proportion of its servicing portfolio
representing loans to borrowers who have filed for bankruptcy protection. A
continuation or increase in such trend could contribute to greater default and
net loss rates than the Company has historically experienced.

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ECONOMIC CONDITIONS

MARKET CONDITIONS. Periods of economic slowdown or recession, whether
general, regional or industry-related, may increase the risk of default on
automobile loans and may have an adverse effect on the Company's business,
financial condition and results of operations. Such periods also may be
accompanied by decreased consumer demand for automobiles, resulting in reduced
demand for automobile loans and declining values of automobiles securing
outstanding loans, thereby weakening collateral coverage and increasing the
possibility of losses in the event of default. The increased proportion of loans
generated under the Company's Classic program has increased the Company's
sensitivity to changes in economic conditions. In addition, recent reports of
increases in consumer bankruptcy filings and default rates on consumer credit
during a period of economic growth indicate that the impact of consumer behavior
on default rates is not limited to periods of economic slowdown or recession.

Moreover, significant increases in the inventory of used automobiles during
recessionary economies may depress the prices at which repossessed automobiles
may be sold or delay the timing of such sales. A continuation of the recent
softening of the used car market as the result of factors including the recent
start-up of superstore competition or forecasted levels of used lease vehicles
that will be available in the market could have a similar effect on prices for
and timing of sales of repossession inventory. There can be no assurance that
the used automobile markets will be adequate for the sale of the Company's
repossessed automobiles and any material deterioration of such markets could
increase the Company's loan losses or reduce recoveries from the sale of
repossession inventory. Any such event might have an adverse effect on loan loss
levels, and on the Company's financial condition, results of operations and
liquidity. In addition, the Company has channeled a portion of its repossession
inventory through retail resale markets instead of wholesale markets, including
the financing of such retail sales, which has had the effect of reducing the
Company's loan losses while increasing repossession inventory and delaying cash
flow recovered from inventory turnover. In July 1998 the Company announced that
it has decided to discontinue its retail disposition of repossessed vehicles and
anticipates having eliminated this program by the end of 1998.

INTEREST RATES. The Company's profitability may be directly affected by the
level of and fluctuations in interest rates, which affect the Company's gross
interest rate spread. The Company monitors the interest rate environment and
employs prefunding or other hedging strategies designed to mitigate the impact
of changes in interest rates on its gross interest rate spread. However, there
can be no assurance that the profitability of the Company would not be adversely
affected during any period of changes in interest rates.

LABOR MARKET CONDITIONS. The Company's ability to manage portfolio
delinquency, default and loss rates is dependent on its ability to attract and
retain qualified servicing and collection personnel. In recent months, low
unemployment rates driven by economic growth and the continued expansion of the
consumer credit markets have contributed to an increase in employee turnover
rate, especially among the Company's

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collection personnel. Continued high turnover relative to historical levels, or
an inability to attract and retain replacement personnel, could have an adverse
effect on the Company's portfolio delinquency, default and net loss rates and,
ultimately, its financial condition, results of operations and liquidity.

LITIGATION

On March 4, 1997 a shareholder commenced an action against the Company and
certain named directors and officers of the Company entitled Taran v. Olympic
Financial Ltd. et al. in the United States District Court for the District of
Minnesota. Four similar lawsuits, three of them in the United States District
Court for the District of Minnesota (Frank Dibella, on behalf of himself and all
others similarly situated vs. Olympic Financial Ltd. et al., Michael Diemer vs.
Olympic Financial Ltd. et al. and Howard Pisnoy vs. Olympic Financial Ltd. et
al.) and one in the United States District Court for the Eastern District of New
York (North River Trading, LLC, and Allan Farkas, and All Others Similarly
Situated vs. Olympic Financial Ltd. et al.) were filed after that time. These
suits have been consolidated in one suit, In re Olympic Financial Ltd.
Securities Litigation, in the United States District Court for the District of
Minnesota. Plaintiffs in the consolidated action allege that during the period
from July 20, 1995 through March 3, 1997 the defendants, in violation of federal
securities laws, engaged in a scheme that had the effect of artificially
inflating, maintaining and otherwise manipulating the value of the Company's
Common Stock by, among other things, making baseless, false and misleading
statements about the current state and future prospects of the Company,
particularly with respect to the Classic program and the refinancing of
repossessed automobiles. Plaintiffs allege that this scheme included making
false and misleading statements and/or concealing material adverse facts. The
consolidated action is in the preliminary stages and the parties have not begun
discovery. The Company has reviewed the complaint in the consolidated action and
believes that the consolidated action is without merit and intends to defend it
vigorously. There can, however, be no assurance that the Company will prevail in
such defense or that any order, judgment, settlement or decree arising out of
this litigation will not have a material adverse effect on the Company's
financial condition, results of operations or liquidity.

The nature of the Company's business is such that it is routinely a party or
subject to other items of pending or threatened litigation, including litigation
involving actions against borrowers to collect amounts on loans or to repossess
vehicles and litigation challenging the terms of loans purchased by the Company.
Although the ultimate outcome of certain of these matters cannot be predicted,
management of the Company believes, based upon information currently available
and the advice of counsel, that the resolution of those various matters
currently pending will not result in any material adverse effect on the
Company's financial condition, results of operations or liquidity.

MANAGEMENT OF GROWTH

The historical growth of the Company's servicing portfolio and the greater
proportion of Classic loans contained in that portfolio have resulted in
increased demands on the Company's personnel and systems. The Company's ability
to support, manage and control growth is dependent upon, among other things, its
ability to hire, train, supervise and manage its larger workforce. Furthermore,
the Company's ability to manage portfolio delinquency and loss rates is
dependent upon the maintenance of efficient collection and repossession
procedures and adequate staffing therefor. There can be no assurance that the
Company will have trained personnel and systems adequate to support its key
initiatives. Since 1996 the Company has opened four regional collection centers
and taken a number of initiatives to improve its servicing and collection
performance. There can be no assurance that these efforts will be successful.

COMPETITION

The business of financing automobiles is highly competitive. Existing and
potential competitors include well-established financial institutions, such as
banks, other automobile finance companies, small loan companies, thrifts,
leasing companies and captive finance companies owned by automobile
manufacturers, such as General Motors Acceptance Corporation, Chrysler Credit
Corp. and Ford Motor Credit Company.

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Many of these competitors have greater financial, technical and marketing
resources than the Company and from time to time offer special buyer incentives
in the form of below-market interest rates on certain classes of vehicles. Many
of such competitors also have longstanding relationships with automobile dealers
and some of such major competitors provide other forms of financing to
automobile dealers, including dealer floor plan financing and leasing, which are
not provided by the Company. There can be no assurance that the Company will be
able to compete successfully with such competitors.

REGULATION

The Company's business is subject to numerous federal and state consumer
protection laws and regulations, which, among other things: (i) require the
Company to obtain and maintain certain licenses and qualifications; (ii) limit
the interest rates, fees and other charges the Company is allowed to charge;
(iii) limit or prescribe certain other terms of the Company's automobile loan
contracts; (iv) require specific disclosures; and (v) define the Company's
rights to repossess and sell collateral. The Company believes it is in
substantial compliance with all such laws and regulations, and that such laws
and regulations have had no material effect on the Company's ability to operate
its business. Changes in existing laws or regulations, or in the interpretation
thereof, or the promulgation of any additional laws or regulations, could have a
material adverse effect on the Company's business, financial condition and
results of operations and upon its outstanding securities.

UNDESIGNATED SHARES; ANTI-TAKEOVER CONSIDERATIONS

The authorized and unissued stock of the Company, other than shares reserved
for issuance pursuant to options and warrants, consists of undesignated shares.
The Board of Directors, without any action by the Company's shareholders, is
authorized to designate and issue the undesignated shares in such classes or
series as it deems appropriate and to establish the rights, preferences and
privileges of such shares, including dividend, liquidation and voting rights.
The Company has adopted a shareholder rights plan to deter a hostile takeover.
Further, certain provisions of the Minnesota Business Corporation Act may
operate to discourage a negotiated acquisition or unsolicited takeover of the
Company. Each or any of the foregoing could have the effect of entrenching the
Company's directors, impeding or deterring an unsolicited tender offer or
takeover proposal regarding the Company and thereby depriving the then current
shareholders of the ability to sell their shares at a premium over the market
price, or otherwise adversely affecting the voting power, dividend, liquidation
and other rights of holders of Common Stock.