ARCADIA FINANCIAL LTD, 10-Q, 1998-11-12

ARCADIA FINANCIAL LTD
10-Q, 1998-11-12
SHORT-TERM BUSINESS CREDIT INSTITUTIONS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-Q

<TABLE>
<S> <C>
/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
</TABLE>

For the quarter ended September 30, 1998 Commission file number 0-20526

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

ARCADIA FINANCIAL LTD.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
MINNESOTA 41-1664848
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization) Number)
</TABLE>

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
October 30, 1998 was 39,166,813.

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<PAGE>

FORM 10-Q INDEX
PAGE

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

SIGNATURES 26

EXHIBIT INDEX 27

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 repossession
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 to the Company's June 30,
1998, Quarterly Report on Form 10-Q filed August 8, 1998.

<PAGE>

ARCADIA FINANCIAL LTD.
CONSOLIDATED BALANCE SHEETS

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

Cash and cash equivalents $ 6,328 $ 17,274
Due from securitization trust 98,384 107,207
Auto loans held for sale 20,045 49,133
Finance income receivable 345,298 371,985
Restricted cash in spread accounts 252,923 250,297
Furniture, fixtures and equipment 17,140 17,371
Other assets 30,328 32,483
-------- --------
Total assets $770,446 $845,750
-------- --------
-------- --------

LIABILITIES AND SHAREHOLDERS' EQUITY

Amounts due under warehouse facilities $ 57,843 $ 30,880
Senior notes 366,403 365,640
Subordinated notes 48,902 50,772
Capital lease obligations 3,735 5,368
Deferred income taxes - 18,846
Accounts payable and accrued liabilities 25,718 26,302
-------- --------
Total liabilities $502,601 $497,808

Commitments and contingencies

Shareholders' equity:
Capital stock, $.01 par value, 100,000,000 shares authorized:
Common stock 39,166,813 and 38,813,735 shares issued
and outstanding, respectively 392 388
Additional paid-in capital 325,143 322,819
Retained earnings (deficit) (57,690) 24,735
-------- --------
Total shareholders' equity 267,845 347,942
-------- --------
Total liabilities and shareholders' equity $770,446 $845,750
-------- --------
-------- --------
</TABLE>

See notes to unaudited consolidated financial statements.

<PAGE>

ARCADIA FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -----------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Net interest margin $ 15,058 $ 17,157 $ 44,107 $ 49,557
Gain (loss) on sale of loans 27,280 28,788 (23,967) (22,640)
Servicing fee income 21,236 17,719 61,086 47,723
----------- ----------- ----------- -----------
Total revenues 63,574 63,664 81,226 74,640

EXPENSES:
Salaries and benefits 15,658 16,230 48,778 45,823
General and administrative and other
operating expenses 27,695 24,471 95,100 74,446
----------- ----------- ----------- -----------
Total operating expenses 43,353 40,701 143,878 120,269
Long-term debt and other interest expense 12,926 10,400 38,619 28,642
----------- ----------- ----------- -----------
Total expenses 56,279 51,101 182,497 148,911
----------- ----------- ----------- -----------
Operating income (loss) before income
taxes and extraordinary item 7,295 12,563 (101,271) (74,271)
Income tax expense (benefit) - 4,774 (18,846) (28,292)
----------- ----------- ----------- -----------
Income (loss) before extraordinary item 7,295 7,789 (82,425) (45,979)
Extraordinary item, net of tax - - - (15,828)
----------- ----------- ----------- -----------
Net income (loss) $ 7,295 $ 7,789 $ (82,425) $ (61,807)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

BASIC EARNINGS PER SHARE:
Net income (loss) per share before
extrordinary item $ 0.19 $ 0.20 $ (2.11) $ (1.19)
Extraordinary item per share - - - (0.41)
----------- ----------- ----------- -----------
Net income (loss) per share $ 0.19 $ 0.20 $ (2.11) $ (1.60)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

DILUTED EARNINGS PER SHARE:
Net income (loss) per share before
extraordinary item $ 0.19 $ 0.20 $ (2.11) $ (1.19)
Extraordinary item per share - - - (0.41)
----------- ----------- ----------- -----------
Net income (loss) per share $ 0.19 $ 0.20 $ (2.11) $ (1.60)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Weighted average shares outstanding:
Basic 39,142,050 38,740,078 39,031,668 38,615,060
Diluted 39,279,813 39,231,962 39,031,668 38,615,060
</TABLE>

See notes to unaudited consolidated financial statements.

<PAGE>

ARCADIA FINANCIAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
(DOLLARS IN THOUSANDS) 1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (82,425) $ (61,807)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 8,044 5,163
(Increase) decrease in assets:
Automobile loans held for sale:
Purchases of automobile loans (1,731,546) (2,323,464)
Sales of automobile loans 1,714,710 2,276,335
Repayments of automobile loans 45,925 27,784
Finance income receivable 26,687 9,897
Restricted cash in spread accounts (2,626) (83,589)
Due from securitization trusts 8,823 27,646
Other assets 340 350
Increase (decrease) in liabilities:
Deferred income taxes (18,846) (37,993)
Accounts payable and accrued liabilities (584) 3,303
----------- -----------

Total cash used in operating activities (31,498) (156,375)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchase of furniture, fixtures and equipment (4,704) (7,064)
Collections on subordinated certificates 758 1,187
----------- -----------

Total cash used in investing activities (3,946) (5,877)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock 1,038 2,976
Proceeds from borrowings under warehouse facilities 2,067,182 2,559,245
Repayment of borrowings under warehouse facilities (2,040,219) (2,544,122)
Unsecured subordinated notes, net (1,870) (2,395)
Repayments of long-term debt - (145,000)
Proceeds from issuance of long term debt - 300,000
Deferred debt issuance cost - (4,870)
Reduction of capital lease obligations (1,633) (1,919)
----------- -----------

Total cash provided by financing activities 24,498 163,915
----------- -----------

Net increase (decrease) in cash and cash equivalents (10,946) 1,663
Cash and cash equivalents at beginning of period 17,274 16,057
----------- -----------

Cash and cash equivalents at end of period $ 6,328 $ 17,720
----------- -----------
----------- -----------

Supplemental disclosures of cash flow information: Non cash activities:
Additions to capital leases - $ 132
Cash paid for:
Interest $ 53,628 $ 36,669
</TABLE>

See notes to unaudited consolidated financial statements.

<PAGE>

ARCADIA FINANCIAL LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------------------------
NUMBER OF COMMON ADDITIONAL RETAINED
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 149,323 2 539 - 541
Issuance of Common Stock:
Benefit plans 203,755 2 495 - 497
Amortization of deferred compensation - - 1,290 - 1,290
Net loss - - - (82,425) (82,425)
---------- ---- -------- -------- --------
BALANCE, SEPTEMBER 30, 1998 39,166,813 $392 $325,143 $(57,690) $267,845
---------- ---- -------- -------- --------
---------- ---- -------- -------- --------
</TABLE>

See notes to unaudited consolidated financial statements.

<PAGE>

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

2. FINANCE INCOME RECEIVABLE

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

<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Estimated cash flows on loans sold, net of
estimated prepayments $ 908,094 $ 735,557
Deferred servicing income (103,515) (88,282)
Reserve for loan losses (413,112) (235,599)
--------- ---------
Undiscounted cash flows on loans sold, net of
estimated prepayments 391,467 411,676
Discount to present value (46,169) (39,691)
--------- ---------
$ 345,298 $ 371,985
--------- ---------
--------- ---------
Reserve for loan losses as a percentage of
servicing portfolio 8.04 % 4.75 %

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

(DOLLARS IN THOUSANDS)
BALANCE, DECEMBER 31, 1997 $ 371,985
Estimated cash flows on loans sold, net of estimated prepayments 191,333
Recognition of present value effect of discounted cash flows 17,007
Less:

Excess cash flows deposited to spread accounts (120,527)
Changes in estimates of charge-offs, recovery rates and prepayments (114,500)
---------
BALANCE, SEPTEMBER 30, 1998 $ 345,298
---------
---------
</TABLE>

<PAGE>

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

3. RESTRICTED CASH IN SPREAD ACCOUNTS

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

<S> <C>
(DOLLARS IN THOUSANDS)
BALANCE, DECEMBER 31, 1997 $ 250,297
Excess cash flows deposited to spread accounts 120,527
Interest earned on spread accounts 10,695
Less:
Spread account recourse reduction amount (1) (25,000)
Excess cash flows released to the Company (2) (103,596)
---------
BALANCE, SEPTEMBER 30, 1998 $ 252,923
---------
---------
</TABLE>

(1) In May 1998, the Company and its provider of asset-backed securities
insurance entered into an arrangement whereby the Company was allowed to
receive $25 million of cash 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 its
provider of assetbacked securities insurance. The Company pays a monthly
fee to its provider of asset-backed securities insurance 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.

(2) Includes $0.6 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 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.

4. OTHER ASSETS

<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Advances due to servicer $ 5,464 $ 6,072
Deferred debt issuance costs 10,462 11,518
Investment in subordinated certificates 2,106 2,864
Servicing fee receivable 4,846 4,389
Prepaid expenses 1,532 1,078
Repossessed assets 132 1,181
Other assets 5,786 5,381
------- -------
$30,328 $32,483
------- -------
------- -------
</TABLE>

<PAGE>

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

5. SUBORDINATED NOTES

<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Senior subordinated notes, Series 1996-A $30,000 $30,000
Junior subordinated notes 18,902 20,772
------- -------
$48,902 $50,772
------- -------
------- -------
</TABLE>

6. EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -----------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss ) before
extraordinary item $ 7,295 $ 7,789 $ (82,425) $ (45,979)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Denominator:
Denominator for basic earnings per
share - weighted average shares 39,142,050 38,740,078 39,031,668 38,615,060
Dilutive effect of options and warrants (1) 137,763 491,884 - -
----------- ----------- ----------- -----------

Denominator for diluted earnings per
share - adjusted weighted average
shares 39,279,813 39,231,962 39,031,668 38,615,060
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Basic earnings (loss) per share before
extraordinary item $ 0.19 $ 0.20 $ (2.11) $ (1.19)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Diluted earnings (loss) per share before
extraordinary item $ 0.19 $ 0.20 $ (2.11) $ (1.19)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

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

(1) For the nine months ended September 30, 1998 and 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 NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

RESULTS OF OPERATIONS

CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING CHARGES

Included in the Company's financial results for the nine months ended
September 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 was 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 at June 30, 1998, 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 at June 30, 1998, 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 at June 30, 1998, 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 1997 and first half of 1998 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 recognized a $10.5 million pre-tax charge through other
operating expenses during the second quarter of 1998 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 nine month period
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 nine months ended September 30 were:

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Interest income on loans, net $ 7,947 $ 9,260 $20,979 $26,391
Interest income on short-term investments
and other cash accounts 2,538 3,273 8,485 8,444
Recognition of present value discount 5,268 5,671 17,007 16,603
Provision for credit losses on loans held for sale (695) (1,047) (2,364) (1,881)
------- ------- ------- -------
Net interest margin $15,058 $17,157 $44,107 $49,557
------- ------- ------- -------
------- ------- ------- -------
</TABLE>

Net interest margin declined 12% and 11% during the three and nine months
ended September 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 partially off-set
by a rise in net interest rate spread.

A decline in loan purchasing volume (see table below) of approximately 25%
and the timing of securitization transactions during the three and nine months
ended September 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 $210.3 million and $189.5 million,
respectively, down from $258.1 million and $254.4 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 and the time needed to
market the Company's refined purchasing focus to its dealer base. The impact of
the lower average balance of loans held for sale on interest income was
partially offset by a rise in net interest rate spreads. During the three and
nine months ended September 30, 1998, the weighted average net interest rate
spread rose to 11.02% and 11.16% respectively, compared with 10.43% and 10.08%,
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") on loans purchased during 1998 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 nine months ended September 30 are set forth in the table below.

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Premier $177,068 $326,087 $ 510,906 $1,087,825
Classic 392,953 434,230 1,215,968 1,192,865
-------- -------- ---------- ----------
Total loans purchased $570,021 $760,317 $1,726,874 $2,280,690
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Automobile loans securitized $554,734 $754,200 $1,714,710 $2,276,335
</TABLE>

GAIN ON SALE OF LOANS. During the three months ended September 30, 1998,
gain on sale of loans declined 5% compared to the same period in 1997. During
the nine months ended September 30, 1998 and 1997, the Company recognized
non-recurring pre-tax charges to gain on sale of loans of $114.5 million and
$98.0 million, respectively, resulting in year to date losses on the sale of
loans of $24.0 million and $22.6 million, respectively. See "CHANGES IN
ACCOUNTING ESTIMATES AND NON-RECURRING CHARGES" for additional discussion.
Securitization volume decreased 26% and 25% during the three and nine months
ended September 30, 1998, respectively, compared with the same periods of 1997
due to lower origination growth. The impact of lower securitization volume

<PAGE>

on revenues from gain on sale of loans was minimized during 1998, however, by
the widening of the gross interest rate spread earned. The following table
summarizes the Company's gross interest rate spreads for each of the three
and nine month periods ended September 30, 1998:

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Weighted average APR of loans securitized 16.81% 16.25% 16.97% 15.85%
Weighted average securitization rate 5.64 6.37 5.87 6.46
----- ----- ----- -----
Gross interest rate spread (1) 11.17% 9.88% 11.10% 9.39
----- ----- ----- -----
----- ----- ----- -----%
</TABLE>

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

(1) Before gains/losses on hedging transactions.

The rise in gross interest rate spread during the three and nine months
ended September 30, 1998 is primarily due to an increased proportion of loan
volume consisting of higher rate Classic loans and general rate increases on the
Company's Premier loans resulting from the Company's continued refinements to
its risk-based pricing strategy. Gross interest rate spreads further benefited
from a reduction in the securitization rate reflecting a general decline in U.S.
Treasury rates compared to the same periods of 1997. During the third quarter of
1998, however, uncertainties in the bond market caused investors in asset-backed
securities to demand higher interest rates. As a result, the spread over the
two-year U.S. Treasury at which the Company sells its loans increased by
approximately 50 basis points compared to its securitization transactions during
1997 and the first two quarters of 1998, partially off-setting the favorable
movement in the U.S. Treasury market and its positive impact on the Company's
gross interest rate spread.

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
2.94% and 2.87% during the three and nine months ended September 30, 1998, from
3.08% and 3.16%, respectively, in the same periods a year ago.

The Company employs hedging strategies, including the use of derivative
financial instruments to manage the gross interest rate spread on securitization
transactions. The Company's securitization rate is indexed to rates on U.S.
Treasury Notes with maturities similar to the average maturities of the assets
being sold. To lock in the indexed rate for a specific anticipated
securitization transaction and protect against changes in the treasury rate, the
Company uses Forward U.S. Treasury Rate Lock agreements that most closely
parallel the average life of its loans held for sale. Such hedging strategy
includes certain risks created by the cash versus non-cash relationship of the
hedging instrument and the related securitization. This relationship arises
because the gain or loss realized from Forward U.S. Treasury Rate Lock
agreements is settled with current cash payments and is subsequently recovered
over time through a higher or lower gross interest rate spread at the time of
securitization. During the three and nine months ended September 30, 1998, the
Company had net realized losses on hedging transactions of $8.4 million and
$16.8 million, respectively, compared with $4.0 million and $4.3 million,
respectively, in the same periods of 1997. These hedging losses have been
charged against gain on sale of loans. The increase in realized hedging losses
during 1998 is primarily due to significant downward movement of treasury rates
during the third quarter of 1998.

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

<PAGE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Contractual servicing fee income $14,577 $12,154 $42,756 $32,679
Other servicing income 6,659 5,565 18,330 15,054
------- ------- ------- -------
Total servicing fee income $21,236 $17,719 $61,086 $47,733
------- ------- ------- -------
------- ------- ------- -------
</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 directly related to an increase in the average servicing portfolio
outstanding and the increase in the contractual servicing rate in September
1997.

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 September 30, 1997 to September 30, 1998:

AT SEPTEMBER 30,
------------------------------
1998 1997
---------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
Principal balance of automobile loans held for sale $ 20,785 $ 57,023
Principal balance of loans serviced under securitizations 5,117,013 4,767,605
---------- ----------
Servicing portfolio $5,137,798 $4,824,628
---------- ----------
---------- ----------
Average unpaid principal balance (actual dollars) $ 11,480 $ 12,248
Number of loans serviced 447,542 393,926
</TABLE>

The principal balance of the Company's servicing portfolio increased 6%
from September 30, 1997 to September 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 nine 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 resulting from the Company's more
selective buying practices.

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 September 30, 1998.

OPERATING EXPENSES. During the three months ended September 30, 1998,
salaries and benefits decreased approximately 4% from the same period in 1997.
This reduction is primarily due to a decrease in the average number of employees
to 1,417 during the third quarter of 1998 compared with 1,545 during the same
period of 1997 resulting primarily from efforts to centralize the Company's
collection operations. 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. The 6% increase in salaries and benefits during the
first nine months of 1998 is primarily due to increased overtime compensation
incurred during the first and second quarter of 1998 migration to the
centralized collection sites.

<PAGE>

Other operating costs, including administrative, occupancy, depreciation
and amortization, origination, servicing and collection expenses, increased 13%
and 28% for the three and nine months ended September 30, 1998, respectively,
compared with the same periods in 1997. Included in operating costs during the
nine months ended September 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 nine 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 22% for the nine months ended
September 30, 1998, compared with the same period in 1997. The increase in other
operating costs during the three and nine months periods 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.

LONG-TERM DEBT AND OTHER INTEREST EXPENSE. Long-term debt and other
interest expense increased 24% and 35% for the three and nine months ended
September 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 due 2007 (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.

INCOME TAXES. The Company did not incur an income tax provision during the
three months ended September 30, 1998, due to the utilization of net operating
loss carryforwards resulting from the non-recurring non-cash charge during the
second quarter of 1998. See "CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING
CHARGES" for additional discussion.

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 $345.3
million at September 30, 1998 from $372.0 million at December 31, 1997. This 7%
decrease reflects a non-recurring $114.5 million pre-tax charge during the
second quarter of 1998 (see "CHANGES IN ACCOUNTING ESTIMATES AND NON-RECURRING
CHARGES") partially offset by amounts capitalized upon completion of the
Company's securitization transactions related to the present value of estimated
cash flows.

DEFERRED INCOME TAX. There were no deferred income taxes at September 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 1998 second 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
September 30, 1998.

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 based applications to
recognize the date change from December 31, 1999 to January 1, 2000, potentially
causing miscalculations, system failures and other operational problems.

One of the Company's most critical operating systems is its loan accounting
system. In July 1997, an internal implementation team along with outside
consultants was assigned to evaluate, select, and implement a new installment
loan accounting system and various sub-systems (the "ILA system") in connection
with an initiative to replace and enhance the Company's key operating systems.
One of the requirements for consideration was that

16
<PAGE>

the new ILA system be Year 2000 compliant. In late 1997, a contract was
signed with a nationally recognized vendor to provide the Company with such a
system. The contract warrants, among other things, that the core software
system being purchased would be fully Year 2000 compliant by mid 1998. The
contract further warrants that the software will be installed and in parallel
testing with the Company's current system in the first quarter of 1999. To
date, the terms of the contract have been met.

In addition, in early 1998 the Company formed a dedicated project team to
conduct an extensive analysis of the impact that the Year 2000 issue would have
on its automated information systems (exclusive of the ILA system), business
support systems and facility operating systems. The project team has been
responsible for the prioritization of Year 2000 tasks, development of
implementation plans, and the establishment of timetables for completion and
testing of all necessary modifications. As a result, the Company has initiated
the replacement, modification or reprogramming of Year 2000 non-compliant
hardware and software and since 1997 has required that all new hardware and
software be certified as Year 2000 compliant prior to purchase. To assist in
this process, the Company has engaged an independent company to aid in the
remediation of non-compliant programs. The modification and reprogramming of
these programs is currently underway and scheduled to be completed and tested by
the end of 1998 with implementation completed during the first quarter of 1999.
All Year 2000 testing will be completed in an isolated systems environment
dedicated for Year 2000 issues. As a contingency to the possibility of an
unplanned delay in the implementation of the new ILA system discussed above, the
Company's current loan accounting system has been included in the programs
provided to the independent company for remediation. This will provide a Year
2000 compliant installment loan accounting system even if the implementation of
the new ILA system should be delayed beyond the end of 1999.

The Company currently expects to have all business critical hardware and
software Year 2000 compliant by the end of the first quarter of 1999 and to
complete a Year 2000 certification process by mid-1999. The Company estimates
that the cost of its Year 2000 project will aggregate approximately $1.5
million, of which approximately $0.3 million has been expended through September
30, 1998. These costs do not include amounts related to the implementation of
the ILA system or other hardware and software purchases which the Company had
planned to acquire and which are not directly related to, or the purchase of
which has not been accelerated because of, the Year 2000 issue. Consistent with
the Company's capitalization policy, the cost of such non-Year 2000 hardware and
software purchases will be capitalized and amortized over their expected useful
lives.

Ultimately, the potential impact of the Year 2000 issue will depend not
only on the success of the corrective measures that the Company undertakes, but
also on the way in which the Year 2000 issue is addressed by its business
partners, service providers, utility providers, governmental agencies and other
entities with which the Company does business. The Company is developing a plan
to contact parties which provide services critical to the successful operation
of its business to heighten their awareness of the Year 2000 issue, to learn how
they are addressing it and to evaluate any likely impact on the Company. For
example, the Company plans to begin a Year 2000 survey of its credit bureaus,
investment bankers and warehouse providers during the fourth quarter of 1998.
The Year 2000 efforts of third parties are not within the Company's control,
however, and their failure to remediate Year 2000 issues successfully could
result in business disruption, increased operating costs and increased credit
risk for the Company. At the current time, it is not possible to determine
whether any such events are likely to occur, or to quantify any potential
negative impact they may have on the Company's future results of operations and
financial condition.

The Company believes that it has an effective plan in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Company has not yet
completed all necessary processes of its Year 2000 plan. In the event that the
Company does not complete any additional phases of its plan, the Company may be
unable to perform its key operating activities such as the purchase of loans and
the invoicing, collecting and application of obligor repayments. In addition,
disruptions in the economy generally resulting for Year 2000 issues could also
materially adversely affect the Company. The Company could be subject to
litigation for computer systems failure, such as improper application of
repayments and resulting incorrect credit reporting to credit bureaus. The
amount of potential liability and lost revenue cannot reasonably be estimated at
this time. The Company currently has no contingency plans in place in the event
it does not complete all phases of its Year 2000 program. The Company plans to
continuously monitor the status of completion of its Year 2000 plan and, based
on such information, will
17
<PAGE>

develop contingency plans as necessary.

The foregoing discussion regarding Year 2000, including the discussion of
the timing and effectiveness of implementation and cost of the Company's Year
2000 project, contains forward-looking statements, which are based on
management's best estimates derived using various assumptions. These
forward-looking statements involve inherent risks and uncertainties, and actual
results could differ materially from those contemplated by such statements.
Factors that might cause material difference include, but are not limited to,
the continued availability of key Year 2000 personnel, the Company's ability to
locate and correct all relevant computer codes, the performance of contractors
and companies retained to provide new software and to remediate existing
hardware and software, and the Company's ability to respond to unforeseen Year
2000 complications. Such material differences could result in, among other
things, business disruption, operational problems, financial loss, legal
liability and similar risks.

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 the collateral are charged
against applicable allowances.

DELINQUENCY EXPERIENCE (1):

SEPTEMBER 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 447,542 $5,137,798 411,429 $4,956,090
Delinquencies:
31-60 days 9,820 $ 114,398 8,297 $ 100,161
61-90 days 3,662 43,666 3,635 45,485
91 days or more 4,363 51,440 3,019 34,047
------- ---------- ------- ----------
Total loans delinquent 31 or more days 17,845 $ 209,504 14,951 $ 179,693
------- ---------- ------- ----------
------- ---------- ------- ----------

Delinquencies as a percentage of
number of loans and amount
outstanding at end of period (2) 3.99% 4.08% 3.63% 3.63%
Amount in repossession 5,912 $ 35,739 6,083 $ 55,300
</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.

<PAGE>

CREDIT LOSS/REPOSSESSION EXPERIENCE (1):

Average number of loans outstanding
during the period 444,285 379,681 431,694 349,480
Number of charge-offs 9,125 6,843 25,399 17,208

Gross charge-offs (2) $ 60,896 $ 38,681 $ 192,322 $ 118,352
Recoveries (3) 5,841 2,468 13,589 6,881
---------- ---------- ---------- ----------

Net losses $ 55,055 $ 36,213 $ 178,733 $ 111,471
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Annualized gross charge-offs as a percentage
of average servicing portfolio 4.75% 3.32% 5.07% 3.65%
Annualized net losses as a percentage
of average servicing portfolio 4.29% 3.11% 4.71% 3.44%
</TABLE>

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

(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 collection amounts received on previously
charged-off loans.

The increase in delinquency rate at September 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 53% of loans
serviced at September 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 thereby shortening the average number of days a
vehicle is in inventory. During the first nine months of 1998 the Company sold
approximately 77% of its repossessed inventory through wholesale channels
compared with 48% in the same period a year ago, resulting in a reduction in the
average number of days vehicles are held in inventory to approximately 64 days
at September 30, 1998 compared with 105 days at December 31, 1997.

The increase in gross charge-offs and net losses during the three and nine
months ended September 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. Annualized gross charge-offs
and net losses during the nine month period ended September 30, 1998, include a
charge of 0.57%, 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 an additional provision
primarily associated with loans originated in connection with retail
dispositions.

<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
purchased $1.7 billion of loans during the first nine months of 1998 compared to
$2.3 billion during the same period in 1997. The Company funds the purchase of
loans primarily through the use of warehouse facilities prior to securitization
of such assets. However, because the warehouse facilities are subject to advance
rate restrictions and do not advance 100% of the loan balances being purchased,
the Company is required to fund the remainder of all purchases with other
available cash resources prior to securitization.

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 nine months ended
September 30, 1998 were $49.5 million, or approximately 2.87% of the principal
balance of loans purchased, compared with $72.1 million, or approximately 3.16%
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
from the relevant securitization trust 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 $252.9 million of restricted
cash in spread accounts at September 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. Restricted cash
in spread accounts was further reduced by $25.0 million during the second
quarter of 1998 under an agreement between the Company and its provider of
asset-backed securities insurance which allowed the Company to receive an early
release from the spread accounts. See "Liquidity - Other Capital Resources" for
additional discussion.

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

<PAGE>

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 over the life of the loan.

REPOSSESSED INVENTORY. At September 30, 1998, repossessed inventory managed
or owned by the Company and held for resale was $35.7 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
September 30, 1998, repossessed inventory was 0.7% 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 began 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 nine months of 1998, the Company
received $103.6 million of excess cash flow (which amount does not include the
$25 million released sooner than would otherwise have been the case pursuant to
an arrangement with the Company's providers of asset-backed securities
performance see "Capital Resources - Other Capital Resources"), compared with
$59.0 million during the same nine months in 1997. Included in the 1998 cash
released from spread accounts is $0.6 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 nine months ended September
30, 1998 and 1997, the Company received cash for such servicing in the amount of
$61.1 million and $47.5 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

<PAGE>

facilities. At September 30, 1998, the Company had three warehouse facilities
in place with various financial institutions and institutional lenders with
an aggregate capacity of $700.0 million, of which $642.2 million was
available. The Company's current warehouse facilities have expiration dates
between July 1999 and October 1999, subject to renewal 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 nine months ended September 30, 1998, all
of which were publicly issued and rated "AAA/Aaa".

REMAINING CURRENT
REMAINING BALANCE AS A CURRENT WEIGHTED GROSS
BALANCE AS OF PERCENTAGE WEIGHTED AVERAGE INTEREST
ORIGINAL SEPTEMBER 30, OF ORIGINAL AVERAGE SECURITIZATION RATE
DATE BALANCE 1998 BALANCE APR RATE SPREAD
- ---------------------- ----------- ------------- ------------ -------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
March 1998 $ 525,000 $ 455,230 86.71% 17.15% 5.93% 11.22%
June 1998 550,000 514,691 93.58% 17.16% 5.97% 11.19%
September 1998 (1) 600,000 536,722 89.45% 16.82% 5.63% 11.19%
---------- ----------
$1,675,000 $1,506,643
---------- ----------
---------- ----------
</TABLE>

(1) As of September 30, 1998, the Company had delivered $541.4 million of
automobile loans and $58.6 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 U.S. Treasury
Locks 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 nine months of 1998, the Company had
net realized losses on hedging transactions of $16.8 million. The Company had
unrealized losses on hedge contracts of $4.7 million that remained outstanding
at September 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.

The Company has a program to sell up to $100.0 million of unsecured
subordinated notes (the "Junior Subordinated Notes") to be offered to the public
from time to time (the "Note Program"). Issuance of Junior Subordinated Notes
under the Note Program is subject to restrictions under the Company's Senior
Note indenture. The Note Program includes Junior Subordinated Notes extendible
by the investor having maturities of 90 and 180 days and one year after the date
of issue and fixed-term Junior Subordinated Notes having maturities of one, two,
three, four, five and 10 years after the date of issue. Interest rates on any
unsold Junior Subordinated Notes are subject to change by the Company from time
to time based on market

<PAGE>

conditions. Interest rates on extendible Junior Subordinated Notes may be
adjusted at any roll-over date. During the first nine months of 1998, the
Company issued $6.2 million of Junior Subordinated Notes.

In May 1998, the Company and its provider of asset-backed securities
insurance entered into an arrangement whereby the Company was allowed to receive
$25 million of cash 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 its provider of asset-backed
securities insurance. The Company pays a monthly fee to its provider of
asset-backed securities insurance 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
beginning in May 1999, unless the terms of the arrangement are extended.

PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

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
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 (incorporated by reference
to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998).
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>

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, National Association, as Rights Agent
(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).

4.3 Amendment No. 2 to Rights Agreement, dated October 5, 1998, to 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 4.1 to the Company's Current
Report on Form 8-K dated September 30, 1998 and filed October 8,
1998).

4.4 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).

4.5 Instrument of Resignation, Appointment and Acceptance, dated as of
August 13, 1998, among the Company, Norwest Bank Minnesota, National
Association, as Resigning Trustee, and Marine Midland Bank, as
Successor Trustee, relating to the Company's Unsecured Extendible
Notes and Fixed Term Notes (incorporated by reference to Exhibit 4.2
to the Company's Registration Statement on Form S-3, File No.
333-60531).

4.6 First Supplemental Indenture dated as of August 13, 1998, to Indenture
dated as of July 1, 1994 as amended and restated by that First
Amendment and Restatement dated as of April 28, 1995 and as further
amended by that Instrument of Resignation, Appointment and Acceptance
dated as of August 13,1998, between the Company and Marine Midland
Bank, as Trustee, relating to the Company's Unsecured Extendible Notes
and Fixed Term Notes (incorporated by reference to Exhibit 4.3 to the
Company's Registration Statement on Form S-3, File No. 333-60531).

4.7 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).

4.8 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).

4.9 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).

4.10 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).

4.11 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).

4.12 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).

4.13 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).

4.14 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).

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>

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-C Supplement, dated as of September 22, 1998, to Spread
Account Agreement dated as of March 25, 1993, as amended and restated,
among the Company, Arcadia Receivables Finance Corp., Financial
Security Assurance, Inc. and Norwest Bank Minnesota, National
Association (filed herewith).

10.2 Insurance and Indemnity Agreement, dated as of September 22, 1998,
among Financial Security Assurance, Inc., Arcadia Automobile
Receivables Trust 1998-C, Arcadia Receivables Finance Corp. and the
Company (filed herewith).

10.3 Receivables Financing Agreement dated as of September 24, 1998 among
Arcadia Receivables Finance Corp. IV, as Borrower, the Company, as
Servicer and Custodian, the Lenders Parties thereto, Credit Suisse
First Boston, New York Branch, as Agent, and Norwest Bank Minnesota,
National Association, as Backup Servicer and Collateral Agent (filed
herewith).

10.4 Receivables Purchase Agreement and Assignment dated as of September
24, 1998, between Arcadia Receivables Finance Corp. IV, as Purchaser,
and the Company, as Seller (filed herewith).

10.5 Receivables Transfer Agreement dated as of October 16, 1998, by and
among Arcadia Receivables Finance Corp. V, as Seller, the Company, as
Servicer, Park Avenue Receivables Corporation, as purchaser, and The
Chase Manhattan Bank, as Funding Agent (filed herewith).

10.6 Receivables Purchase Agreement dated as of October 16, 1998, by and
between Arcadia Receivables Finance Corp. V, as buyer, and the Company
(filed herewith).

10.7 Receivables Purchase Agreement dated as of October 16, 1998, by and
between Arcadia Receivables Finance Corp. V, 10.6 as buyer, and the
Company (filed herewith). Amendments to 1994-1997 Restricted Stock
Election Plan (filed herewith).

10.8 Amendments to 1998-2000 Restricted Stock Election Plan (filed
herewith).

10.9 Amendments to 1992 Director Stock Option Plan (filed herewith).

27.1 Financial Data Schedule (filed herewith).
</TABLE>

(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.

SIGNATURE TITLE DATE
-------- ----- ----
<S> <C> <C>
/s/ Richard A. Greenawalt President, Chief Executive Officer, and Director November 12,1998
- --------------------------
Richard A. Greenawalt

/s/ John A. Witham Executive Vice President and Chief Financial Officer November 12,1998
- -------------------------- (Principal Financial Officer)
John A. Witham

/s/ Brian S. Anderson Senior Vice President, Corporate Controller and November 12,1998
- -------------------------- Assistant Secretary (Principal Accounting Officer)
Brian S. Anderson

</TABLE>

<PAGE>

EXHIBIT INDEX

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 (incorporated by reference
to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998).

<PAGE>

EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>

Company's Current Report on Form 8-K dated March 12, 1997 and filed
March 18, 1997).

4.12 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).

4.13 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).

4.14 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).

4.15 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).

10.4 Receivables Purchase Agreement and Assignment dated as of September
24, 1998, between Arcadia Receivables Finance Corp. IV, as Purchaser,
and the Company, as Seller (filed herewith).

10.6 Receivables Purchase Agreement dated as of October 16, 1998, by and
between Arcadia Receivables Finance Corp. V, as buyer, and the Company
(filed herewith).

10.7 Amendments to 1994-1997 Restricted Stock Election Plan (filed
herewith).

10.8 Amendments to 1998-2000 Restricted Stock Election Plan (filed
herewith).

10.9 Amendments to 1992 Director Stock Option Plan (filed herewith).

27.1 Financial Data Schedule (filed herewith).
</TABLE>

(b) REPORTS ON FORM 8-K

None

<PAGE>

EXECUTION COPY

SERIES 1998-C SUPPLEMENT

dated as of September 22, 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

<PAGE>

TABLE OF CONTENTS

Page
Article I.

DEFINITIONS
<S> <C>
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-C Credit Enhancement Fee. . . . . . . . . . . . 6
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-C Spread Account; Initial Deposit
into Series 1998-C Spread Account.. . . . . . . . . . . . . 7
Section 3.2 Spread Account Additional Deposits. . . . . . . . . . . . . 8

Article IV.

MISCELLANEOUS

Section 4.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . 8
Section 4.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.4 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
Schedule I

<PAGE>

SERIES 1998-C SUPPLEMENT

SERIES 1998-C SUPPLEMENT, dated as of September 22, 1998 (the "Series
1998-C 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 July 21,
1998 (the "Spread Account Agreement"), and, as contemplated by Section 2.02 of
the Spread Account Agreement, this Series 1998-C Supplement constitutes a Series
Supplement to the Spread Account Agreement so that hereafter this Series 1998-C
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-C (the "Series 1998-C
Trust") is being formed contemporaneously herewith pursuant to the Series 1998-C
Trust Agreement (as defined herein).

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

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

5. The Seller has requested that Financial Security issue the Series
1998-C 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-C
Notes.

6. In partial consideration of the issuance of the Series 1998-C 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-C Indenture.

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

<PAGE>

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

8. In order to secure the performance of the Series 1998-C Secured
Obligations, to further effect and enforce the subordination provisions to which
the Series 1998-C Credit Enhancement Fee is subject, and in consideration of the
receipt of the Series 1998-C Credit Enhancement Fee, Arcadia Financial and the
Seller have agreed to pledge the Series 1998-C 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-C Sale and Servicing Agreement shall have the same meaning with
respect to this Series 1998-C Supplement. The following terms shall have the
following meanings:

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

"DEEMED CURED" means with respect to Series 1998-C, (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-C, 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-C
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.

2
<PAGE>

"INITIAL PRINCIPAL AMOUNT" means $600,000,000 with respect to Series
1998-C.

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

"INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series
1998-C and any Distribution Date, an amount equal to the greater of (i) 9% of
the Series 1998-C 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-C BALANCE" means, with respect to Series 1998-C and any
Distribution Date, the aggregate principal amount of the Series 1998-C 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-C COLLATERAL" has the meaning specified in Section 2.3(a)
hereof.

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

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

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

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

"SERIES 1998-C 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-C Trust
Agreement.

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

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

"SERIES 1998-C SALE AND SERVICING AGREEMENT" means the Sale and Servicing
Agreement, dated as of September 1, 1998, among the Series 1998-C 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.

3
<PAGE>

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

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

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

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

"SPREAD ACCOUNT ADDITIONAL DEPOSIT" means, with respect to Series 1998-C
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-C 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-C Notes will be in the
highest category by such Rating Agencies.

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

(i) if no Insurance Agreement Event of Default with respect to Series
1998-C 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-C 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-C and such Distribution Date;

(ii) if an event specified in clause (A) of the definition of Trigger
Event with respect to Series 1998-C 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-C 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) 12% of the Series 1998-C 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-C has occurred and is continuing or (B) a Capture Event has
occurred and is continuing as of the related Determination Date, the Spread
Account

4
<PAGE>

Maximum Amount shall be equal to the greater of (i) 25% of the Series
1998-C 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-C and
any Distribution Date, an amount equal to the greater of:

(i) $100,000, and

(ii) the lesser of:

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

(B) the Series 1998-C Balance.

"TRIGGER EVENT" means, with respect to Series 1998-C 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 8.19% 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-C 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-C 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.

5
<PAGE>

ARTICLE II.

CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL

Section 2.1 SERIES 1998-C CREDIT ENHANCEMENT FEE. The Series
1998-C Sale and Servicing Agreement provides for the payment to the Seller of
the Series 1998-C 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-C Credit Enhancement Fee in the manner and
subject to the conditions set forth herein and in the Series 1998-C Sale and
Servicing Agreement is 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-C) and
pursuant to the Series 1998-C Insurance Agreement. The Seller and Arcadia
Financial hereby agree with the Trustee and with Financial Security that payment
of the Series 1998-C Credit Enhancement Fee to the Seller is expressly
conditioned on subordination of the Series 1998-C 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-C Collateral is intended to
effect and enforce such subordination and to provide security for the Series
1998-C 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-C Supplement with respect to
the Series 1998-C 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-C Collateral"):

6
<PAGE>

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

(ii) the Series 1998-C Spread Account established pursuant to
Section 3.1 of this Series 1998-C 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-C 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 1998-C 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-C 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-C Collateral which
can be perfected by the filing of a financing statement.

ARTCILE III.

SPREAD ACCOUNT

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

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

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

7
<PAGE>

Section 3.2 SPREAD ACCOUNT ADDITIONAL DEPOSITS. On each Subsequent
Transfer Date, the Series 1998-C Trust will, pursuant to Section 2.4 of the
Series 1998-C 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-C Trust into the Series 1998-C
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-C Supplement or to confirm or perfect any transaction described or
contemplated herein.

Section 4.2 GOVERNING LAW. This Series 1998-C 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.

Section 4.3 COUNTERPARTS. This Series 1998-C 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-C Supplement are provided
for convenience only. They form no part of this Series 1998-C Supplement and
shall not affect its construction or interpretation.

8
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Series 1998-C
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: /s/ SCOTT GORDON
----------------------------------------
Authorized Officer

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee

By: /s/ MARIANNA C. STERSHIC
----------------------------------------
Name: Marianna C. Stershic
Title: Assistant Vice President

NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent

By: /s/ MARIANNA C. STERSHIC
----------------------------------------
Name: Marianna C. Stershic
Title: Assistant Vice President

<PAGE>

SCHEDULE I

<TABLE>
<CAPTION>
Determination Date* Cumulative Default Rate Cumulative Net Loss Rate
(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 occuring after the designated calendar months
succeeding Series 1998-C Closing Date appearing first in the column below, and
prior to or during the designated calendar months succeeding the Series 1998-C
Distribution Date appearing second in the column below.

<PAGE>

EXECUTION COPY

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

INSURANCE AND INDEMNITY AGREEMENT

among

FINANCIAL SECURITY ASSURANCE INC.,

ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998C,

ARCADIA RECEIVABLES FINANCE CORP.

and

ARCADIA FINANCIAL LTD.

Dated as of September 22, 1998

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

Arcadia Automobile Receivables Trust, 1998C

$ 66,000,000 C 5.47% Class A-1 Automobile Receivables-Backed Notes

$ 194,000,000 C 5.377% Class A-2 Automobile Receivables-Backed Notes

$ 340,000,000 C 5.67% Class A-3 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. . . . . . . . 22
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. . . . . . . . . . . . . . . . . 34

ARTICLE III. THE NOTE POLICY; REIMBURSEMENT; INDEMNIFICATION. . . . . . . . . . . . . . . . 36

Section 3.01 Conditions Precedent to Issuance of the Note Policy. . . . . . . . . . . 36
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.06 Payment Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 3.07 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

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.. . . . . . . . . . . . . . 47
Section 4.05 Liability of Financial Security. . . . . . . . . . . . . . . . . . . . . 48

ARTICLE V. EVENTS OF DEFAULT; REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . 48

Section 5.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

<PAGE>

Section 6.04 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.05 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.06 Consent of Financial Security. . . . . . . . . . . . . . . . . . . . . . 54
Section 6.07 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.08 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.09 Trial by Jury Waived . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.10 Limited Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 6.11 Limited Liability of Wilmington Trust Company. . . . . . . . . . . . . . 55
Section 6.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

</TABLE>

Schedule 1

ii
<PAGE>

INSURANCE AND INDEMNITY AGREEMENT

INSURANCE AND INDEMNITY AGREEMENT dated as of September 22, 1998,
among FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company
("Financial Security"), ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998C, 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:

<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 1998C. 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, Arcadia
Automobile Receivables Trust, 1998-B 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 September 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 112% Senior Notes due 2007.

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

"SERIES OF NOTES" or "SERIES" means Series 1998C 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 September 22, 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 July 21, 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.

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"TRUST AGREEMENT" means the Trust Agreement, dated as of September 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
Securities, Inc., Chase Securities Inc. and Credit Suisse First Boston
Corporation.

"UNDERWRITING AGREEMENT" means the Pricing Agreement, dated September
11, 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

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<PAGE>

its obligations under this Agreement and each other Transaction Document to
which the Trust is a 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

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<PAGE>

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 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.

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<PAGE>

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

(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

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<PAGE>

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, 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

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<PAGE>

pursuant to Section 2.02(b)(i) and (ii) hereof, a certificate signed by an
Authorized Officer of the Administrator stating that:

(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

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<PAGE>

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;

(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

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<PAGE>

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:

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.

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<PAGE>

(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.

(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 1998C 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.

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<PAGE>

(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.

(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

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<PAGE>

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.

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

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<PAGE>

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

(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.

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(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 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

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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.

(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

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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 he Prospectus at the
time the Registration Statement became effective did not and on the date hereof
does not, contain an untrue statement 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.

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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 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,

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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.

(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;

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<PAGE>

(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

(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:

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<PAGE>

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 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.

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<PAGE>

(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.

(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 1998C 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.

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<PAGE>

(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.

(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 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

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<PAGE>

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.

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

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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.

(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

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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.

(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.

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(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:

(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

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government agency, authority or body which supervises the issuance of
securities by Arcadia Financial or any national securities exchange.

(d) iv. 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 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;

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(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, 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

(vi) 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

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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:

(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

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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.

(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

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<PAGE>

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 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

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<PAGE>

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;

(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

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<PAGE>

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 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;

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(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;

(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

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(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 and the Class A-3 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 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

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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 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

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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
anyof 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,
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.

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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;

(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

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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 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 orliability 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

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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.

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:

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(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;

(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

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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 maers,
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.

(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

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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:

(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

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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) vi. 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 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 1998C
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

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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 8.92%;

(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.

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

50
<PAGE>

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.

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:

51
<PAGE>

(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 900
Minneapolis, Minnesota 55439-2435
Telephone: (612) 942-9888
Telecopier: (612) 942-6730

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, 1998C
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

52
<PAGE>

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 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

53
<PAGE>

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 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.

54
<PAGE>

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 6.012 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 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.

55
<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/ SCOTT GORDON
----------------------------------------
Authorized Officer

ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998C

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

By: /S/ EMMETT R. HARMON
----------------------------------------
Name: Emmett R. Harmon
Title: Vice President

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

<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 toS4 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>

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

<PAGE>

RECEIVABLES FINANCING AGREEMENT

dated as of September 24, 1998

among

ARCADIA RECEIVABLES FINANCE CORP. IV,

as Borrower

ARCADIA FINANCIAL LTD.,

as Servicer and Custodian,

THE LENDERS PARTIES HERETO,

CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,

as Agent,

and

NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,

as Backup Servicer and Collateral Agent

<PAGE>

RECEIVABLES FINANCING AGREEMENT

THIS RECEIVABLES FINANCING AGREEMENT is made and entered into as
of September 24, 1998, among ARCADIA RECEIVABLES FINANCE CORP. IV, a
Delaware corporation having its principal office at 7825 Washington
Avenue South, Suite 901, Minneapolis, Minnesota 55439-2435 (the
"BORROWER"), ARCADIA FINANCIAL, LTD., a Minnesota corporation having its
principal office at 7825 Washington Avenue South, Suite 500, Minneapolis,
Minnesota 55439-2435 ("AFL"), as initial Servicer and Custodian, the
NONCOMMITTED LENDER (as hereinafter defined) party hereto, THE FINANCIAL
INSTITUTIONS SET FORTH ON THE SIGNATURE PAGES HERETO and their permitted
assigns, as committed lenders (the "BANKS" and, together with the
Noncommitted Lender, the "LENDERS"), CREDIT SUISSE FIRST BOSTON, NEW YORK
BRANCH ("CSFB"), as agent (the "AGENT") for the Lenders, and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association
("NORWEST"), as Backup Servicer and Collateral Agent.

BACKGROUND

1. The Borrower desires that the Lenders extend financing to
the Borrower on the terms and conditions set forth herein.

2. The Lenders are willing to provide such financing on the
terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 DEFINED TERMS. As used in this Agreement, the
following terms have the following meanings:

"ACCOUNTANTS' REPORT" has the meaning set forth in SECTION
8.11(a).

"ADVANCE" means any amount disbursed by any Lender to the Borrower
under this Agreement.

"ADVANCE DATE" means the date any Advance is made under
SECTION 2.3.

"ADVANCE REQUEST" has the meaning set forth in SECTION 2.2.

"ADVERSE CLAIM" means any claim of ownership or any Lien, title
retention, trust or other charge or encumbrance, or other type of
preferential arrangement having the effect or

<PAGE>

purpose of creating a Lien, other than the security interest created
under this Agreement.

"AFFECTED PERSON" has the meaning set forth in SECTION 6.1(a).

"AFFILIATE" of any Person means any other Person that directly or
indirectly controls, is controlled by or is under common control with
such Person (excluding any trustee under, or any committee with
responsibility for administering, any employee benefit plan). A Person
shall be deemed to be "controlled by" any other Person if such other
Person controls such Person within the meaning of Section 15 of the
Securities Act of 1933, as amended, or Section 20 of the Securities
Exchange Act of 1934, as amended.

"AFL" has the meaning set forth in the PREAMBLE.

"AGENT" has the meaning set forth in the PREAMBLE.

"AGENT'S ACCOUNT" has the meaning set forth in SECTION 5.1.

"AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, with respect to
any group of Receivables as of any date, the sum of the outstanding
Principal Balances of all such Receivables as at the opening of business
on such date.

"AGREEMENT" shall mean this Receivables Financing Agreement
(including the Fee Letter and the Joinder Supplement hereto), as it may
be amended, supplemented or otherwise modified from time to time.

"ALLOCATIONS" has the meaning set forth in SECTION 3.3(a).

"ALTERNATE BASE RATE" means a fluctuating rate per annum as shall
be in effect from time to time, which rate shall be at all times equal to
the highest of:

(a) the rate of interest announced publicly by CSFB in New
York, New York, from time to time as CSFB's base commercial lending rate;

(b) 1/2 of one percent above the latest three-week moving
average of secondary market morning offering rates in the United States for
three-month certificates of deposit of major United States money market banks,
such three-week moving average being determined weekly on each Monday (or, if
such day is not a Business Day, on the next succeeding Business Day) for the
three-week period ending on the previous Friday by CSFB on the basis of such
rates reported by certificate of deposit dealers to and published by the Federal
Reserve Bank of New York or, if such publication shall be suspended or
terminated, on the basis of quotations for such rates received by CSFB from
three New York, New York certificate of deposit dealers of recognized standing
selected by CSFB, in either case adjusted to the nearest 1/4 of one percent or,
if there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent; and

<PAGE>

"AMOUNT FINANCED" means, with respect to a Receivable, the
aggregate amount of credit extended 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.

"ANNUAL PERCENTAGE RATE" or "APR" means, 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 Purchase Date,
the rate per annum with respect to a Receivable as of such Purchase Date
is reduced as a result of (a) an insolvency proceeding involving the
relevant Obligor or (b) pursuant to the Soldiers' and Sailors' Civil
Relief Act of 1940, the "Annual Percentage Rate" or "APR" shall refer to
such reduced rate.

"AVERAGE SERVICING PORTFOLIO" means as of any date, the average of
the Servicing Portfolio for the six preceding Collection Periods.

"BACKUP SERVICER" means Norwest in its capacity as Backup
Servicer, together with its permitted successors and assigns in such
capacity .

"BACKUP SERVICER FEE" means, for any Distribution Date, the amount
payable to the Backup Servicer as its regular fee on such Distribution
Date pursuant to the Norwest Fee Letter.

"BACKUP SERVICING FEE RATE" has the meaning set forth in the
Norwest Fee Letter.

"BANK RATE" for any Advance means a rate per annum equal to 1.00%
per annum above the Eurodollar Rate for each Advance or portion thereof;
PROVIDED, HOWEVER, that in the case of

(a) any Fixed Period on or prior to the first day of which a Bank
shall have notified the Agent that the introduction of or any change in or in
the interpretation of any law or regulation makes it unlawful, or any central
bank or other governmental authority asserts that it is unlawful, for such Bank
to fund such Advance at the Bank Rate set forth above (and such Bank shall not
have subsequently notified the Agent that such circumstances no longer exist),

(b) any Fixed Period of one to (and including) 29 days, in the event
the Eurodollar Rate is not reasonably available to the Agent for such a Fixed
Period,

(c) any Fixed Period as to which the related Advance will not be
funded by issuance of commercial paper, as determined by the Agent (on behalf of
the Noncommitted Lender) by 12:00 noon (New York City time) on the second
Business Day preceding the first day of such Fixed Period, or

(d) any Fixed Period for an Advance the principal amount of which
allocated to the

<PAGE>

Banks in the aggregate is less than $500,000,

the "BANK RATE" shall be a floating rate per annum equal to the Alternate
Base Rate in effect on each day of such Fixed Period; PROVIDED, FURTHER,
that the Agent (with the consent of the Lenders) and the Borrower may
agree in writing from time to time upon a different "BANK RATE."

"BANK RATE ALLOCATION" has the meaning set forth in SECTION
3.3(a).

"BANKRUPTCY CODE" means the Bankruptcy Code, 11 U.S.C. Section
101, ET SEQ., as amended.

"BANKS" has the meaning set forth in the PREAMBLE.

"BORROWER" has the meaning set forth in the PREAMBLE.

"BORROWER ACCOUNT COLLATERAL" has the meaning set forth in SECTION
9.1(c).

"BORROWER ASSIGNED AGREEMENTS" has the meaning set forth in
SECTION 9.1(b).

"BORROWING BASE" means the excess of (a) (i) if determined on any
day during a Collection Period occurring prior to the Distribution Date
occurring during such Collection Period, an amount equal to (A) with
respect to all Transferred Receivables which are Eligible Receivables on
such day of determination that were purchased by the Borrower prior to
the first day of the Collection Period immediately preceding such
Distribution Date, an amount equal to the Aggregate Outstanding Principal
Balance of all such Eligible Receivables as of the last day of the second
Collection Period preceding such Distribution Date (whether or not such
Receivables were owned by the Borrower on such last day), PLUS (B) with
respect to all Transferred Receivables which are Eligible Receivables on
such day of determination that were purchased by the Borrower on or after
the first day of the Collection Period immediately preceding such
Distribution Date, an amount equal to the Aggregate Outstanding Principal
Balance of such Eligible Receivables as of the date such Transferred
Receivables were purchased by the Borrower, PLUS (C) the amount on
deposit in the Collateral Account on such day; or (ii) if determined on
any day during a Collection Period occurring on or after the Distribution
Date occurring during such Collection Period, an amount equal to (A) with
respect to all Transferred Receivables which are Eligible Receivables on
such day of determination that were purchased by the Borrower prior to
the first day of such Collection Period, an amount equal to the Aggregate
Outstanding Principal Balance of all such Eligible Receivables as of the
last day of the Collection Period immediately preceding such Distribution
Date PLUS (B) with respect to all Transferred Receivables which are
Eligible Receivables on such day of determination that were purchased by
the Borrower on or after the first day of such Collection Period, an
amount equal to the Aggregate Outstanding Principal Balance of such
Eligible Receivables as of the date such Transferred Receivables were
purchased by the Borrower, PLUS (C) the amount on deposit in the
Collateral Account on such day OVER (b) the Required Holdback as of such
date.

<PAGE>

"BORROWING BASE CONFIRMATION" has the meaning set forth in
SECTION 7.2(g).

"BORROWING BASE DEFICIENCY" has the meaning set forth in SECTION
14.1(e).

"BORROWER COLLATERAL" has the meaning set forth in SECTION 9.1.

"BUSINESS DAY" shall mean any day on which (a) commercial banks in
New York City or Minneapolis, Minnesota are not authorized or required to
be closed, and (b) in the case of a Business Day which relates to a
Eurodollar Advance, dealings are carried on in the London interbank
Eurodollar market.

"CLEAN-UP PERIOD" shall mean the period commencing on the date of
the initial Advance hereunder and ending on SEPTEMBER 23, 1999 and
thereafter, each period commencing on the last day of the preceding
Clean-Up Period and ending 364 days thereafter.

"CLEAN-UP REQUIREMENT" means the obligation of the Borrower to
reduce to zero the outstanding principal amount of all Advances for 30
consecutive days during each Clean-Up Period.

"CLOSING DATE" means the Effective Date.

"COLLATERAL" means the Transferred Receivables in the Total
Receivables Pool together with the Other Conveyed Property.

"COLLATERAL ACCOUNT" means the account designated as the
Collateral Account in, and which is established and maintained pursuant
to, SECTION 8.17(c).

"COLLATERAL AGENT" means Norwest in its capacity as Collateral
Agent under the Collateral Agent Agreement, and its permitted successors
and assigns in such capacity.

"COLLATERAL AGENT AGREEMENT" means the Collateral Agent Agreement
dated as of the date hereof among the Collateral Agent, the Agent, AFL
and the Borrower, including all amendments, modifications and supplements
thereto.

"COLLATERAL AGENT FEE" means, for any Distribution Date, the
amount payable to the Collateral Agent as its regular fee on such
Distribution Date pursuant to the Norwest Fee Letter.

"COLLATERAL AGENT FEE RATE" has the meaning set forth in the
Norwest Fee Letter.

"COLLATERAL INSURANCE" means a vendor's single interest or other
collateral protection insurance policy with respect to Financed Vehicles,
which policy by its terms insures against physical damage in the event
any Obligor fails to maintain physical damage insurance with respect to
the related Financed Vehicle.

<PAGE>

"COLLATERAL RECEIPT" means a Certificate of Custodian in the form
of EXHIBIT A to the Custodial Agreement.

"COLLECTED FUNDS" means, with respect to any Determination Date,
the amount of funds in the Collection Account representing collections on
the Total Receivables Pool during the related Collection Period,
including all Recoveries with respect thereto collected during the
related Collection Period (but excluding any Purchase Amounts).

"COLLECTION ACCOUNT" means the account designated as the
Collection Account in, and which is established and maintained pursuant
to, SECTION 8.17(a).

"COLLECTION PERIOD" means any calendar month and, with respect to
a Determination Date or a Distribution Date, the calendar month preceding
the month in which such Determination Date or Distribution Date occurs
(such calendar month being referred to as the "related" Collection Period
with respect to such Determination Date or Distribution Date) or, in the
case of the initial Distribution Date and Determination Date, the period
commencing at the opening of business on the Closing Date and ending at
the end of the calendar month following the calendar month in which the
Closing Date occurs. Any amount stated "as of the close of business of
the last day of a Collection Period" shall give effect to the following
calculations as determined as of the end of the day on such last day:
(i) all applications of collections, and (ii) all distributions.

"COLLECTION RECORDS" means all manually prepared or computer
generated records relating to collection efforts or payment histories
with respect to the Transferred Receivables.

"COMMERCIAL PAPER RATE" for Advances means, to the extent the
Noncommitted Lender funds such Advances by issuing commercial paper, the
sum of (a) the weighted average of the rates at which commercial paper
notes of such Noncommitted Lender issued to fund such Advances may be
sold by any placement agent or commercial paper dealer selected by the
Agent on behalf of such Noncommitted Lender, as agreed in good faith
between each such agent or dealer and the Agent; PROVIDED if the rate (or
rates) as agreed between any such agent or dealer and the Agent is a
discount rate (or rates), then such rate shall be the rate (or if more
than one rate, the weighted average of the rates) resulting from
converting such discount rate (or rates) to an interest-bearing
equivalent rate per annum PLUS (b) any and all commissions of placement
agents and commercial paper dealers in respect of commercial paper issued
to fund the making or maintenance of any Advance not to exceed an
annualized rate of .05% of the Face Amount of such commercial paper PLUS
(c) any and all reasonable costs and expenses of any issuing and paying
agent or other Person responsible for the administration of such
Noncommitted Lender's commercial paper program in connection with the
preparation, completion, issuance, delivery or payment of commercial
paper issued to fund the making or maintenance of any Advance.

"COMMITMENT" means, for any Bank, the maximum amount of such
Bank's commitment to fund Advances hereunder, as set forth on the
signature pages hereof or in assignment documentation by which such Bank
became a party to this Agreement or assumed the Commitment (or a portion
thereof) of another Bank, as such amount may be

<PAGE>

adjusted from time to time pursuant to SECTION 2.7 or pursuant to
assignment documentation executed by such Bank and its assignee and
delivered pursuant to SECTION 16.2 of this Agreement.

"COMMITMENT PERCENTAGE" means, for a Bank, such Bank's Commitment
as a percentage of the aggregate Commitments of all Banks.

"COMMITMENT TERMINATION DATE" means September 23, 1999, as such
date may be extended from time to time as agreed in writing between the
Borrower, the Servicer, the Agent and the Lenders.

"CONTINGENT LIABILITY" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes
or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds
to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the indebtedness, obligation or any other
liability of any other Person (other than by endorsements of instruments
in the course of collection), or guarantees the payment of dividends or
other distributions upon the shares of any other Person. The amount of
any Person's obligation under any Contingent Liability shall (subject to
any limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum outstanding principal amount, if larger) of
the debt, obligation or other liability guaranteed thereby.

"CP ALLOCATION" has the meaning set forth in SECTION 3.3(a).

"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 amount owed on such Receivable or otherwise
modifying or restructuring the scheduled payments to be made on such
Receivable, an amount equal to the excess of the principal balance of
such Receivable immediately prior to such order, minus the principal
balance of such Receivable as so reduced. A "Cram Down Loss" shall be
deemed to have occurred on the date of issuance of such order.

"CSFB" has the meaning set forth in the PREAMBLE.

"CSFB ROLES" has the meaning set forth in SECTION 18.11.

"CUSTODIAL AGREEMENT" means the Custodian Agreement dated as of
the date hereof among the Custodian, the Agent, the Borrower and the
Collateral Agent, including all permitted amendments, modifications and
supplements thereto.

"CUSTODIAL FEE RATE" means (a) if AFL is the Custodian, 0% and
(b) if a Person other than AFL is the Custodian, a rate agreed to by such
Person and the Agent.

"CUSTODIAN" means AFL in its capacity as Custodian under the
Custodial Agreement, and its permitted successors and assigns in such
capacity.

"DEALER" means a seller of new or used automobiles, light duty
trucks, minivans or

<PAGE>

sport utility vehicles that originated one or more of the Receivables in
the Total Receivables Pool and sold the respective Receivable, directly
or indirectly, to AFL.

"DEALER AGREEMENT" means an agreement by and among AFL and a
Dealer relating to the sale of Receivables to AFL and all documents and
instruments relating thereto.

"DEALER ASSIGNMENT" means, with respect to a Transferred
Receivable, the executed assignment executed by a Dealer conveying such
Receivable to AFL.

"DEALER UNDERWRITING GUIDES" means, collectively, the underwriting
guidelines used by AFL in the purchase of Receivables as amended from
time to time.

"DEFAULT RATE" means a rate PER ANNUM equal to the Alternate Base
Rate (but not less than the Yield (if any) in effect for the related
monetary obligation), PLUS a margin of 2%.

"DEFAULTED RECEIVABLE" means, with respect to a Transferred
Receivable as of any date, a Receivable with respect to which (i) all or
any portion in excess of $10 of a Scheduled Payment is more than 60 days
past due, (ii) the Servicer has repossessed the related Financed Vehicle
(and any applicable redemption period has expired), (iii) the Obligor has
been identified in the records of the Servicer as being the subject of a
current bankruptcy proceeding or (iv) such Receivable is in default and
the Servicer has charged-off such Receivable in accordance with its
standard policies or otherwise has determined in good faith that payments
thereunder are not likely to be resumed.

"DEFICIENCY AMOUNT" means, as of any date, an amount equal to the
product of (x) the Deficiency Percentage, (y) the Aggregate Outstanding
Principal Balance of Eligible Receivables as of such date and (z) 2.0.

"DEFICIENCY PERCENTAGE" means, as of any date, the positive
excess, if any, of (a) the sum of (i) 8.3% PLUS (ii) the Total Expense
Percentage PLUS (iii) the Maximum Interest Rate Cap Strike Price PLUS
(iv) 0.75%, OVER (b) the weighted average APR for all Receivables in the
Total Receivables Pool.

"DELINQUENCY RATIO" means, as of any date, the ratio (expressed as
a percentage) computed by dividing:

(a) the sum of (i) the Aggregate Outstanding Principal
Balance of Receivables in the Total Receivables Pool which became Defaulted
Receivables during the last full Collection Period preceding such date PLUS (ii)
the Aggregate Outstanding Principal Balance of Receivables in the Total
Receivables Pool which were Delinquent Receivables on the last day of the
immediately preceding Collection Period

(b) the sum of the Aggregate Outstanding Principal
Balance of all Receivables in the Total Receivables Pool on the last day of the
immediately preceding

<PAGE>

Collection Period PLUS, without duplication, if a Take-Out Securitization has
occurred during such preceding Collection Period, the Aggregate Outstanding
Principal Balance of all Transferred Receivables which were included in such
Take-Out Securitization.

The Delinquency Ratio shall be determined on each Determination Date and
shall remain in effect until recalculated on the next succeeding
Determination Date.

"DELINQUENT RECEIVABLE" means a Receivable (other than a Defaulted
Receivable) with respect to which more than $10 of a Scheduled Payment is
more than 30 days past due.

"DETERMINATION DATE" means, with respect to a Collection Period,
the FOURTH Business Day prior to the related Distribution Date.

"DISTRIBUTION DATE" means the 15th day of each calendar month, or
if such 15th day is not a Business Day, the next succeeding Business Day,
commencing October 15, 1998.

"DOLLAR(S)" and the sign "$" mean lawful money of the United
States of America.

"EFFECTIVE DATE" has the meaning set forth in SECTION 7.1.

"ELIGIBLE ACCOUNT" means (i) a segregated trust account or (ii) 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 Servicer.

"ELIGIBLE ASSIGNEE" has the meaning set forth in SECTION 16.1.

"ELIGIBLE RECEIVABLE" means a Receivable that (i) was originated
directly by AFL with the consumer or was originated 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 a Dealer Agreement with AFL and was validly
assigned by such Dealer to AFL, (ii) 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
(iii) is a Simple Interest Receivable or Pre-Computed 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; and

(a) that is a Dollar obligation of an Obligor domiciled in the United
States of America and that was originated and, if originated by a Dealer, that
was sold by the Dealer to AFL, without any fraud or material misrepresentation
on the part of such originator or Dealer in either

<PAGE>

case or on the part of the Obligor;

(b) with respect to which 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 Financed 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 such Receivable, the sale
of the Financed Vehicle related thereto and the sale of credit life and credit
accident and health insurance and any extended service contracts, if any, in
connection with such Receivable, have been complied with in all material
respects;

(c) that was originated in the United States of America and, at the
time of origination, materially conformed to all requirements of the Dealer
Underwriting Guides applicable to such Receivable;

(d) which 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 equitable limitations on
the availability of specific remedies, 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 of the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended; and all parties to such
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;

(e) which is not due from the United States of America or any State or
from any agency, department, subdivision or instrumentality thereof;

(f) which (i) as of the related Advance Date, (A) had an original
maturity of at least 6 months but not more than 84 months, PROVIDED that, after
giving effect to the inclusion of such RECEIVABLE as an Eligible Receivable, the
Aggregate Outstanding Principal Balance of Eligible Receivables with original
maturities in excess of 72 months shall not exceed 10% of the Aggregate
Outstanding Principal Balance of all Eligible Receivables at such time, (B) had
an original Amount Financed of at least $1,000 and not more than $50,000,
(C) had an Annual Percentage Rate of at least 7.75% and not more than 27.0%, and
(D) was not more than 30 days past due; (ii) no funds have been advanced with
respect to SUCH RECEIVABLE by the Borrower, the Servicer, any Dealer, or anyone
acting on behalf of any of them in order to cause such receivable to qualify
under SUBCLAUSE (i)(D) of this CLAUSE (f); and (iii) had no provision thereof
waived, altered or modified in any respect since its origination other than any
provision requiring vendor single interest insurance and those waivers,
alterations or modifications specifically permitted pursuant to SECTION 8.2 of
this Agreement;

(g) with respect to which the information pertaining to such
Receivable set forth in each

<PAGE>

Schedule of Receivables submitted to the Agent and the Custodian is true and
correct in all material respects;

(h) with respect to which, by the related Advance Date and on each
relevant date thereafter, AFL will have caused the portions of AFL's servicing
records relating to such Receivable to be clearly and unambiguously marked to
show that such Receivable constitutes part of the Collateral and is subject to
the Lien of the Collateral Agent on behalf of the Secured Parties;

(i) with respect to which the Monthly Tape delivered by the Servicer
to the Backup Servicer from time to time was complete and accurate as of the
date delivered and consistent with the information set forth in the Schedule of
Receivables with respect to such Receivable;

(j) which constitutes chattel paper within the meaning of the UCC;

(k) of which there is only one original executed copy;

(l) with respect to each of which a Receivable File is in the
possession of the Custodian and such Receivable File contains (i) the fully
executed original of such Receivable, (ii) a certificate of insurance, an
application form for insurance signed by the related Obligor, or a signed
representation letter from the Obligor named in such Receivable pursuant to
which such Obligor has agreed to obtain physical damage insurance for the
related Financed Vehicle, or copies thereof, or a documented verbal confirmation
by an insurance agent for such Obligor of a policy number for an insurance
policy for the Financed Vehicle, (iii) the original Lien Certificate (indicating
AFL's interest as first lienholder) 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 the Servicer within 180 days
(PROVIDED that the Lien Certificate is delivered to the Custodian within 180
days), and (iv) a credit application signed by the Obligor, or a copy thereof;
each of such documents which is required to be signed by the Obligor has been
signed by the Obligor in the appropriate spaces; and all blanks on any form have
been properly filled in and each form has otherwise been correctly prepared;

(m) which has not been satisfied, subordinated or rescinded, and the
Financed Vehicle securing such Receivable has not been released from the Lien of
such Receivable in whole or in part;

(n) which was not originated in, or is subject to the laws of, any
jurisdiction the laws of which would make unlawful, void or voidable the sale,
pledge, transfer and assignment of such Receivable under this Agreement and with
respect to which AFL has not entered into any agreement with any account debtor
that prohibits, restricts or conditions the assignment of any portion of such
Receivable;

(o) which has not been sold, transferred, assigned or pledged by the
Borrower to any Person other than hereunder; and no Dealer has a participation
in, or other right to receive, proceeds of such Receivable and with respect to
which neither AFL nor the Borrower has taken any action to convey any right to
any Person (other than hereunder) that would result in such

<PAGE>

Person having a right to payments received under the related Insurance Policy or
the related Dealer Agreement or Dealer Assignment or to payments due under such
Receivable;

(p) which has created, or will create when all required procedures are
completed by the Servicer, a valid, binding and enforceable first priority
perfected security interest in the related Financed Vehicle in favor of AFL as
secured party, and such security interest is, or will be upon the completion of
all required procedures by the Servicer, prior to all other Liens upon and
security interests in such Financed Vehicle that now exist or may hereafter
arise or be created (except, as to priority, for any tax liens or mechanic's
liens that may arise after the applicable Advance Date for such Receivable);

(q) as to which 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 Collateral Agent, on
behalf of the Secured Parties, a first priority perfected Lien on such
Receivable and the proceeds thereof and the other Collateral related thereto
have been made, taken or performed;

(r) as to which neither AFL nor the Borrower has done anything to
convey any right to any Person that would result in such Person having a right
to payments due under such Receivable or otherwise to impair the rights of the
Collateral Agent on behalf of the Secured Parties in such Receivable or the
proceeds thereof;

(s) which is not assumable by another Person in a manner which would
release the Obligor thereof from such Obligor's obligations to the Borrower with
respect to such Receivable;

(t) which is not subject to any right of rescission, setoff,
counterclaim or defense and no such right has been asserted or threatened with
respect thereto;

(u) (i) if determined on any day during a Collection Period prior to
the Distribution Date occurring during such Collection Period, as of the last
day of the second preceding Collection Period, or (ii) if determined on any day
during a Collection Period after the Distribution Date occurring during such
Collection Period, as of the last day of the immediately preceding Collection
Period: as to which there has been no default, breach, violation or event
permitting acceleration under the terms of such Receivables (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 such Receivables, and there has been no waiver of any of the
foregoing, and with respect to which the related Financed Vehicle had not been
repossessed;

(v) at the time of the origination of which the related Financed
Vehicle was covered by a comprehensive and collision insurance policy (i) in an
amount at least equal to the lesser of (a) its maximum insurable value and
(b) the Amount Financed, (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 and with respect
to which the Obligor is required to maintain physical loss and damage insurance,
naming AFL and its successors and assigns as an additional insured party, and
such Receivable permits the holder

<PAGE>

thereof to obtain physical loss and damage insurance at the expense of the
Obligor if the Obligor fails to do so unless otherwise prohibited by the law of
the state in which the related contract was entered into;

(w) with respect to which the following is true:

The Lien Certificate for the related Financed Vehicle shows, 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, AFL named as the original secured party
under such Receivable and, accordingly, AFL will be 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
or the Obligor that such Lien Certificate showing AFL as first lienholder has
been applied for. If the Receivable was originated in a state in which a filing
or recording is required of the secured party to perfect a security interest in
motor vehicles, such filings or recordings have been duly made to show AFL named
as the original secured party under the related Receivable;

(x) as to which no selection procedures adverse to the Investors
have been utilized in selecting such Receivable from all other similar
Receivables owned or originated by AFL;

(y) that, if determined on any day during a Collection Period prior
to the Distribution Date occurring during such Collection Period, was not a
Defaulted Receivable as of the last day of the second preceding Collection
Period, or, if determined on any day during a Collection Period after the
Distribution Date occurring during such Collection Period, was not a Defaulted
Receivable as of the last day of the immediately preceding Collection Period;

(z) that, if determined on any day during a Collection Period prior to
the Distribution Date occurring during such Collection Period, was not a
Delinquent Receivable as of the last day of the second preceding Collection
Period, or, if determined on any day during a Collection Period after the
Distribution Date occurring during such Collection Period, was not a Delinquent
Receivable as of the last day of the immediately preceding Collection Period;
and

(aa) that is not secured by vehicles which are financed repossessions.

For purposes of this definition, the eligibility of
Receivables will be determined from time to time, such that a Receivable
that was an Eligible Receivable at one time but that subsequently fails
to meet all applicable eligibility requirements will no longer be an
Eligible Receivable (unless and until it again meets all applicable
eligibility requirements).

"ELIGIBLE SERVICER" means 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 and/or
motor vehicle installment loans, (ii) is legally qualified and has the
capacity to service the Transferred Receivables, (iii) has demonstrated
the ability professionally and competently to service a portfolio of
motor vehicle retail installment sales
<PAGE>

contracts and/or motor vehicle installment loans similar to the
Transferred 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.

"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended from time to time.

"EUROCURRENCY LIABILITIES" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.

"EURODOLLAR ADVANCE" means any Advance (or portion thereof) that
bears Yield computed by reference to the Eurodollar Rate.

"EURODOLLAR RATE" means, for any Fixed Period, a rate per annum
equal to the rate for deposits in Dollars for a term equal to such Fixed
Period (commencing on the first day of such Fixed Period) which appears
on Telerate Page 3750 as of 11:00 A.M. (London time) on the second
Business Day prior to the commencement of such Fixed Period. If such
rate does not appear on Telerate Page 3750, a rate per annum at which
deposits in Dollars are offered by the principal office of CSFB in
London, England to prime banks in the London interbank market at 11:00
A.M. (London time) two Business Days before the first day of such Fixed
Period in an amount substantially equal to the principal amount of the
Advance associated with such Fixed Period on such first day and for a
period equal to such Fixed Period.

"EURODOLLAR RATE RESERVE PERCENTAGE" of any Lender for any Fixed
Period in respect of which Yield is computed by reference to the
Eurodollar Rate means the reserve percentage applicable two Business Days
before the first day of such Fixed Period under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or
any successor) (or if more than one such percentage shall be applicable,
the daily average of such percentages for those days in such Fixed Period
during which any such percentage shall be so applicable) for determining
the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for such
Lender with respect to liabilities or assets consisting of or including
Eurocurrency liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the yield rate
on Eurocurrency liabilities is determined) having a term equal to such
Fixed Period.

"EVENT OF BANKRUPTCY" shall be deemed to have occurred with
respect to a Person if either:

(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the liquidation,
reorganization, debt arrangement, dissolution, winding up, or composition or
readjustment of debts of such Person, the appointment of a trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for such Person or all
or

<PAGE>

substantially all of its assets, or any similar action with respect to such
Person under any law relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60 consecutive
days; or an order for relief in respect of such Person shall be entered in an
involuntary case under the federal bankruptcy laws or other similar laws now or
hereafter in effect; or

(b) such Person shall commence a voluntary case or other proceeding
under any applicable bankruptcy, insolvency, reorganization, debt arrangement,
dissolution or other similar law now or hereafter in effect, or shall consent to
the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) for such Person or
for any substantial part of its property, or shall make any general assignment
for the benefit of creditors, or shall fail to, or admit in writing its
inability to, pay its debts generally as they become due, or, if a corporation
or similar entity, its board of directors shall vote to implement any of the
foregoing.

"FACE AMOUNT" means, with respect to outstanding commercial paper,
(i) the face amount of any such commercial paper issued on a discount
basis, and (ii) the principal amount of, plus the amount of all interest
accrued and to accrue thereon to the stated maturity date of, any
commercial paper issued on an interest-bearing basis.

"FACILITY" has the meaning set forth in SECTION 2.1.

"FACILITY LIMIT" means $150,000,000, as such amount may be
reduced pursuant to SECTION 2.7. References to the unused portion of
the Facility Limit shall mean, at any time, the Facility Limit, as
then reduced pursuant to SECTION 2.7, MINUS the sum of the then
outstanding principal amount of Advances under this Agreement.

"FACILITY TERMINATION DATE" means the earliest to occur of (i) the
date of any termination of the Facility, in whole, by the Borrower
pursuant to SECTION 2.7, (ii) the effective date on which the Facility is
terminated pursuant to SECTION 14.2, and (iii) the Commitment Termination
Date.

"FACILITY TERMINATION EVENT" means any of the events described in
SECTION 14.1.

"FEDERAL FUNDS RATE" means, for any period, a fluctuating rate per
annum equal for each day during such period 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 such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
the Agent from three federal funds brokers of recognized standing
selected by it.

<PAGE>

"FEE LETTER" has the meaning set forth in SECTION 3.4.

"FEES" means all fees and other amounts payable to the Agent, on
behalf of itself, the Lenders and the Liquidity Providers, pursuant to
the Fee Letter.

"FINANCED VEHICLE" means any automobile, light duty truck, van,
minivan or sport utility vehicle, together with all accessories,
additions and parts constituting a part thereof and all accessions
thereto.

"FIXED PERIOD" means with respect to any Advance (or portion
thereof):

(a) the period commencing on the date of the initial funding of such
Advance (or such portion) and ending such number of days (not to exceed 90 days)
thereafter as the Agent shall select, after consultation to the extent
practicable with the Borrower; and

(b) thereafter, each period commencing on the last day of the
immediately preceding Fixed Period for such Advance (or such portion) and ending
such number of days (not to exceed 90 days) thereafter as the Agent shall then
select, after consultation to the extent practicable with the Borrower;

PROVIDED, HOWEVER, that:

(i) any Fixed Period in respect of which Yield is computed by
reference to the Bank Rate shall be a period of from one to and including 29
days (if reasonably available to the Agent), or a period of one, two or three
months, as the Borrower may select, as herein provided;

(ii) any such Fixed Period (other than a Fixed Period consisting of one
day) that would otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day (unless the related Advance shall
be accruing Yield at a rate determined by reference to the Eurodollar Rate, in
which case if such succeeding Business Day is in a different calendar month,
such Fixed Period shall instead be shortened to the next preceding Business
Day);

(iii) in the case of Fixed Periods of one day, (A) the initial Fixed
Period shall be the day of the initial funding of such Advance, and (B) any
subsequently occurring Fixed Period that is one day shall, if the immediately
preceding Fixed Period is more than one day, be the last day of such immediately
preceding Fixed Period, and if the immediately preceding Fixed Period is one
day, shall be the next day following such immediately preceding Fixed Period;
and

(iv) if any Fixed Period for any Advance that commences before the
Facility Termination Date would otherwise end on a date occurring after the
Facility Termination Date, such Fixed Period shall end on the Facility
Termination Date and the duration of each such Fixed Period that commences on or
after the Facility Termination Date, IF ANY, shall be of such duration as shall
be selected by the Agent.

"FORCE-PLACED INSURANCE" has the meaning set forth in
SECTION 8.4(b).

<PAGE>

"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a significant
segment of the accounting profession, which are applicable to the
circumstances as of any date of determination.

"INDEBTEDNESS" of any Person means, without duplication:

(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;

(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's acceptances
issued for the account of such Person;

(c) all obligations of such Person as lessee under leases that have
been or should be, in accordance with GAAP, recorded as capitalized lease
liabilities;

(d) all other items that, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such Person as of
the date at which Indebtedness is to be determined;

(e) whether or not so included as liabilities in accordance with GAAP,
all obligations of such Person to pay the deferred purchase price of property or
services, and indebtedness (excluding prepaid interest thereon) secured by a
lien on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether or
not such indebtedness shall have been assumed by such Person or is limited in
recourse; and

(f) all Contingent Liabilities of such Person in respect of any of the
foregoing.

"INDEMNIFIED AMOUNTS" has the meaning set forth in SECTION 17.1.

"INDEMNIFIED PARTY" has the meaning set forth in SECTION 17.1.

"INDEPENDENT ACCOUNTANTS" has the meaning set forth in SECTION
8.11(a).

"INSURANCE ADD-ON AMOUNT" means the premium charged to the Obligor
if the Servicer obtains Force-Placed Insurance pursuant to SECTION 8.4.

"INSURANCE POLICIES" means, with respect to a Receivable, any
insurance policy (including the insurance policies described in
subsection (v) of the definition of "ELIGIBLE RECEIVABLE") 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.

<PAGE>

"INTEREST RATE HEDGE" means any interest rate cap or other hedging
mechanism which satisfies the requirements of SECTION 11.6.

"INTEREST RATE HEDGE ASSIGNMENT ACKNOWLEDGMENT" means an
acknowledgment in substantially the form of EXHIBIT C hereto executed by
a counterparty to an Interest Rate Hedge (if other than CSFB) in favor of
the Agent and the Collateral Agent.

"INTERIM DISTRIBUTION DATE" means any Settlement Date, other than
a Distribution Date, on which the Collateral Agent shall pay principal,
Yield and certain other amounts in accordance with this Agreement and the
Collateral Agent Agreement.

"INVESTOR" means (i) all Lenders, (ii) all other owners by
assignment or participation of an Advance and, to the extent of the
undivided interests so purchased, shall include any Participants and
(iii) all holders of the Note.

"JOINDER SUPPLEMENT" means an agreement among the Noncommitted
Lender, the Borrower, AFL and the Agent in the form of EXHIBIT F hereto.

"LENDERS" has the meaning set forth in the PREAMBLE.

"LEVEL I TRIGGER EVENT" means, as of any date, the existence of a
Portfolio Trigger Event on such date. A "Level I Trigger Event" shall be
deemed to exist so long as the underlying Portfolio Trigger Event is not
cured (including cure by an amendment to the terms of the relevant
Portfolio Trigger Event) or waived in accordance with the related
transaction documents.

"LEVEL II TRIGGER EVENT" means, as of any date, the existence of a
Portfolio Default on such date. A "Level II Trigger Event" shall be
deemed to exist so long as the underlying Portfolio Default is not cured
(including cure by an amendment to the terms of the relevant Portfolio
Default) or waived in accordance with the related transaction documents.

"LEVEL III TRIGGER EVENT" means, on any date, that the Servicer
Delinquency Ratio exceeds 5% on such date and a Level IV Trigger Event is
not in effect on such date.

"LEVEL IV TRIGGER EVENT" means, on any date, that the Servicer
Delinquency Ratio exceeds 6% on such date.

"LEVEL V TRIGGER EVENT" means, on any date, that the Portfolio Net
Loss Ratio exceeds 5% on such date and a Level VI Trigger Event is not in
effect on such date.

"LEVEL VI TRIGGER EVENT" means, on any date, that the Portfolio
Net Loss Ratio exceeds 5.5% on such date.

"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.

<PAGE>

"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 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" means a Defaulted Receivable as to which
(i) 91 days have elapsed since the date the Servicer repossessed the
Financed Vehicle (following the expiration of any applicable redemption
period), (ii) the Servicer has charged-off such Receivable in accordance
with its standard policies or otherwise has determined in good faith that
all amounts it expects to recover have been received or (iii) all or any
portion in excess of $10 of a Scheduled Payment shall have become more
than 180 days delinquent.

"LIQUIDITY PROVIDER" means each Person who provides liquidity,
credit enhancement or a "back-stop" purchase facility to the Noncommitted
Lender under a Noncommitted Lender Liquidity Arrangement.

"LOCKBOX ACCOUNT" has the meaning given such term in SECTION
8.2(e).

"LOCKBOX AGREEMENT" means 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 the date hereof, among Harris Trust and Savings Bank, AFL, the
Borrower and the Collateral Agent, as such agreements may be amended from
time to time, unless the Collateral Agent 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 Agent, among the
Servicer, the Borrower, the Collateral Agent and the Lockbox Bank.

"LOCKBOX BANK" means Harris Trust and Savings Bank or any other
depository institution named by the Servicer and acceptable to the Agent.

"MARKET RATE SERVICING FEE RATE" has the meaning specified in
SECTION 13.3(c).

"MAXIMUM INTEREST RATE CAP STRIKE PRICE" means 6.5% per annum.

"MINIMUM RESERVE ACCOUNT AMOUNT" means, on any date, the greater
of (a) $200,000 and (b) the product of 2.0% and the sum of (i) the
aggregate unpaid principal amount of all Advances on such date PLUS (ii)
the Required Holdback in effect on such date.

"MONTHLY EXCESS SPREAD PERCENTAGE" means, as of the last day of
any Collection Period, (i) the weighted average APR with respect to all
Eligible Receivables in the Total

<PAGE>

Receivables Pool for such Collection Period MINUS (ii) the ratio
(expressed as a percentage) of (A) 12 times the sum of (I) the aggregate
amount of Yield, Fees (to the extent such Fees accrued during any period
during such Collection Period while any Advance was outstanding),
Custodian Fees, Servicer Fees, Collateral Agent Fees and Backup Servicer
Fees incurred by the Borrower under the Transaction Documents during such
Collection Period and (II) the aggregate principal amount of Receivables
in the Total Receivables Pool which became Liquidated Receivables during
such Collection Period (net of any Recoveries) to (B) the average
Aggregate Outstanding Principal balance of all Receivables in the Total
Receivables Pool during such Collection Period.

"MONTHLY RECORDS" means all records and data maintained by the
Servicer with respect to the Transferred Receivables, including the
following with respect to each Transferred Receivable: the account
number; 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; origination date; first 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 of Scheduled Payment; and, once available,
current remaining term and current Insurance Policy expiration date and
past due late charges.

"MONTHLY TAPE" means the computer tape or listing generated on
behalf of the Borrower which contains the information set forth in the
definition of "Monthly Records" above and in a format acceptable to the
Backup Servicer.

"MOODY'S" means Moody's Investors Service, Inc.

"NET YIELD" means, as of the last day of any Collection Period,
the average of the Monthly Excess Spread Percentages as of the last day
of such Collection Period and as of the last day of the two immediately
preceding Collection Periods.

"NONCOMMITTED LENDER" means the Structured Lender which shall
become a party hereto pursuant to a Joinder Supplement duly executed by
all parties thereto on or prior to the Closing Date.

"NONCOMMITTED LENDER LIQUIDITY ARRANGEMENT" means each liquidity,
credit enhancement or "back-stop" purchase or loan facility for the
Noncommitted Lender relating to this Agreement.

"NORWEST" has the meaning set forth in the PREAMBLE.

"NORWEST FEE LETTER" means (a) that certain letter agreement,
dated as of the date hereof, among Norwest, AFL and the Borrower, and
consented to by the Agent, as the same may be amended, supplemented or
otherwise modified by the parties thereto with the consent of the Agent
and (b) any letter agreement(s) entered into by AFL and the Borrower,
with the consent of the Agent, with a substitute Backup Servicer and/or
Collateral Agent in replacement of the letter agreement referred to in
clause (a) above relating to fees payable to such substitute Backup
Servicer and/or Collateral Agent.

<PAGE>

"NOTE" means the promissory grid note, in the form of EXHIBIT B,
made payable to the order of the Agent, on behalf of the Investors.

"NOTE REGISTER" has the meaning set forth in SECTION 16.5(a).

"NOTE REGISTRAR" has the meaning set forth in SECTION 16.5(a).

"OBLIGATIONS" means all obligations (monetary or otherwise) of the
Borrower to the Lenders, the Collateral Agent, the Agent or any other
Affected Person arising under or in connection with this Agreement, the
Note and each other Transaction Document.

"OBLIGOR" means a Person obligated to make payments with respect
to a Transferred Receivable.

"OFFICER'S CERTIFICATE" means, with respect to any Person which is
not an individual, a certificate signed by the President, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer or any Vice
President of such Person.

"OFFICIAL BODY" means any government or political subdivision or
any agency, authority, regulatory body, bureau, central bank, commission,
department or instrumentality of any such government or political
subdivision, or any court, tribunal, grand jury or arbitrator, in each
case whether foreign or domestic.

"OPINION OF COUNSEL" means a written opinion of counsel reasonably
acceptable to the Agent which, unless otherwise provided herein, may be
an employee of the Person delivering such opinion.

"OTHER CONVEYED PROPERTY" has the meaning set forth in the
Purchase Agreement.

"PARTICIPANT" has the meaning set forth in SECTION 16.9.

"PERMITTED INVESTMENT" means 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 thereof (including
any federal or state branch or agency of a foreign depository institution or
trust company) and subject to supervision and examination by federal and/or
state

<PAGE>

banking authorities (including, if applicable, the Collateral Agent or any agent
thereof 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 Collateral
Agent has taken actual or constructive delivery of such obligation, and (ii)
entered into with (x) CSFB or (y) 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 Collateral Agent or any agent thereof 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 Permitted 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 Collection Account and the
Reserve Account to exceed 10% of the value of Permitted Investments held in such
accounts (with Permitted Investments held in such 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) units of money market funds rated in the highest credit rating
category by each Rating Agency; or

(g) any other demand or time deposit, obligation, security or
investment (including, without limitation, a hedging arrangement) as may be
acceptable to the Agent, as evidenced by a writing to that effect, as may from
time to time be confirmed in writing to the Collateral Agent by the Agent.

Permitted Investments may be purchased by or through the Collateral Agent
or any of its Affiliates. All Permitted Investments shall be held in the
name of the Collateral Agent.

"PERSON" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated
association, joint venture, government or any agency or political
subdivision thereof or any other entity.

"PORTFOLIO DEFAULT" means the occurrence, with respect to
securities issued on or after June 1, 1998 which are backed by
automobile installment sales contracts ("receivables") and with respect
to which AFL or any Affiliate of AFL is the servicer, of an "event of
default" or

<PAGE>

similar event under any applicable enhancement or insurance agreement or
an "amortization event", "pay-out event" or similar event under any
applicable sale and servicing agreement or indenture which event has the
potential consequence, INTER ALIA, under the related agreements of
requiring the acceleration or early amortization of the related
securities or permitting the realization upon the receivables and/or
other collateral.

"PORTFOLIO NET LOSSES" means with respect to any Collection
Period, the aggregate amount of gross charge-offs of Receivables in the
Servicing Portfolio during such Collection Period net of all Recoveries
with respect to any such Receivables (including post-disposition amounts
received on previously charged-off Receivables), calculated in a manner
consistent with the calculations of net losses in AFL's Annual Report on
Form 10-K for the year ended December 31, 1997.

"PORTFOLIO NET LOSS RATIO" means, as of any date, a fraction,
expressed as a percentage, the numerator of which equals the product of
2.0 times the Portfolio Net Losses for the six (6) preceding Collection
Periods (excluding the June 1998 Collection Period) and the denominator
of which equals the Average Servicing Portfolio as of such date. The
Portfolio Net Loss Ratio shall be determined on each Determination Date
and shall remain in effect until recalculated on the next succeeding
Determination Date.

"PORTFOLIO TRIGGER EVENT" means the occurrence of a "trigger
event" or any other event however denominated, with respect to securities
issued on or after June 1, 1998 which are backed by automobile
installment sales contracts ("receivables") and with respect to which AFL
or any Affiliate of AFL is the servicer, which event is based on the
performance of such receivables and has the potential consequence under
the related agreements of causing the amount required to be retained in
any related spread or reserve account or the level of any other
enhancement to be increased.

"PRE-COMPUTED RECEIVABLE" means any Receivable under which the
portion of a payment allocable to earned interest (which may be referred
to in the related Receivable as an add-on finance charge) and the portion
allocable to the Amount Financed is determined according to the sum of
periodic balances or the sum of monthly balances or any equivalent method
or are monthly actuarial receivables.

"PRINCIPAL BALANCE" means, with respect to any Receivable, as of
any date, the Amount Financed MINUS (i) that portion of all amounts
received by the Servicer with respect to such Receivable on or prior to
such date and allocable to principal in accordance with the terms of such
Receivable, and (ii) any Cram Down Loss in respect of such Receivable.

"PURCHASE AMOUNT" means, with respect to a Receivable purchased by
the Servicer pursuant to SECTION 8.4 or 8.7, the Principal Balance of
such Receivable and all accrued and unpaid interest on such Receivable as
of the date of such purchase.

"PURCHASE AGREEMENT" means the Receivables Purchase Agreement and
Assignment dated as of the date hereof by and between the Borrower and
AFL, including all permitted amendments, modifications and supplements
thereto.

<PAGE>

"PURCHASE DATE" has the meaning assigned to the term "Transfer
Date" in the Purchase Agreement.

"RATING AGENCIES" means Standard & Poor's and Moody's.

"RECEIVABLE" means any right to payment from a Person, and
includes without limitation the right to payment of any interest or
finance charges and other obligations of such Person with respect
thereto.

"RECEIVABLE FILE" means, with respect to each Receivable in the
Total Receivables Pool, the documents, electronic entries, instruments
and writings set forth in paragraph (l) of the definition of "Eligible
Receivable" herein.

"RECORD DATE" means, with respect to any Determination Date or
Distribution Date, the last day of the immediately preceding calendar
month.

"RECOVERIES" means, with respect to any Liquidated Receivable,
monies collected in respect thereof, from whatever source, during any
Collection Period, net of the sum of any reasonable expenses incurred by
the Servicer in connection with the collection, repossession and
disposition of the related Financed Vehicle and any amounts required by
law to be remitted to the Obligor; PROVIDED that Recoveries with respect
to any Liquidated Receivable shall in no event be less than zero.

"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.

"REPLACEMENT PERSON" has the meaning set forth in SECTION 6.4.

"REQUIRED HOLDBACK" means, as of any date, the sum of (i) the
greater of (a) the product of (1) the Required Percentage and (2) the
Aggregate Outstanding Principal Balance of Eligible Receivables in the
Total Receivables Pool on such date and (b)$1,000,000, PROVIDED that the
amount set forth in this clause (b) shall be deemed to be zero during
(x) any period that no Advances are outstanding and (y) the two Business
Day period following the date of the making of each Advance; PLUS (ii)
the Deficiency Amount for such date.

"REQUIRED LENDERS" means, at any time, (a) the Noncommitted Lender
to the extent (i) such time is during any period that no Advances are
outstanding hereunder or (ii) all or any portion of the Advances are
owing to it at such time, and (b) Banks having Commitments aggregating at
least 66% of the aggregate Commitments of all Banks.

"REQUIRED PERCENTAGE" means 8% or such lower percentage (but in no
event less than 6%) as may be agreed to by S&P and Moody's to rate this
Agreement and the Advances hereunder "A/A2".

<PAGE>

"REQUIRED RESERVE ACCOUNT AMOUNT" means, on any date, the greater
of (a) $200,000 and (b) the product of the Stated Percentage in effect on
such date and the sum of (i) the aggregate unpaid principal amount of all
Advances on such date PLUS (ii) the Required Holdback in effect on such
date.

"RESERVE ACCOUNT" means the account designated as the Reserve
Account in, and which is established and maintained pursuant to, SECTION
8.17(b).

"RESERVE ACCOUNT SHORTFALL" means, as of any date, an amount (if
positive) equal to the Required Reserve Account Amount on such date MINUS
the amount on deposit in the Reserve Account on such date.

"RESPONSIBLE OFFICER" means, with respect to any Person that is
not an individual, the President, any Vice-President or Assistant
Vice-President, Corporate Trust Officer, the Treasurer or Assistant
Treasurer, or the Controller or Assistant Controller or Warehouse Manager
of such Person, or any other officer or employee having similar
functions.

"SCHEDULE OF RECEIVABLES" means the Schedule of Receivables in the
form prescribed by the Purchase Agreement in Schedule A thereto, as
supplemented from time to time in connection with the transfer of
Receivables by AFL to the Borrower.

"SCHEDULED PAYMENT" means, with respect to any Receivable, the
periodic payment set forth in such Receivable (excluding, however, any
portion of such payment that represents late payment charges and payments
in respect of taxes, licenses or similar items).

"SECURED PARTIES" means, collectively, the Collateral Agent, the
Agent, each Lender, each other Affected Person and their respective
successors and assigns.

"SERVICER" means AFL or, as applicable, any successor servicer
appointed pursuant to SECTION 13.3.

"SERVICER DELINQUENCY RATIO" means, as of the last day of a
Collection Period, the ratio, expressed as a percentage, computed by
dividing (i) the Aggregate Outstanding Principal Balance on such date of
all Receivables in the Servicing Portfolio that are Delinquent
Receivables or Defaulted Receivables by (ii) the Aggregate Outstanding
Principal Balance of all Receivables in the Servicing Portfolio on the
last day of such Collection Period.

"SERVICER EXTENSION NOTICE" has the meaning set forth in SECTION
8.14.

"SERVICER TERMINATION EVENT" has the meaning set forth in SECTION
13.1.

"SERVICER'S CERTIFICATE" means, with respect to each Determination
Date, a certificate, completed by and executed on behalf of the Servicer,
in accordance with SECTION 8.9, substantially in the form attached hereto
as EXHIBIT E.

"SERVICING FEE" means, as of any Distribution Date, an amount
equal to the product of

<PAGE>

(i) 1/12 of the Servicing Fee Rate and (ii) the average Aggregate
Outstanding Principal Balance of Receivables in the Total Receivables
Pool for each day during the Collection Period immediately preceding such
Distribution Date.

"SERVICING FEE RATE" means 1.25% or, following the appointment of
the Backup Servicer hereunder pursuant to SECTION 13.3 hereof, as
provided in SECTION 13.3(c).

"SERVICING PORTFOLIO" means as of any date, the Aggregate
Outstanding Principal Balance of all Receivables (whether or not
thereafter sold or disposed of) which are serviced by the Servicer or any
of its Affiliates at such time, calculated in a manner consistent with
the calculation of the components of Average Servicing Portfolio in the
Servicer's most recent Annual Report on Form 10-K to the extent such
calculation is consistent with the calculation of the components of
Average Servicing Portfolio in AFL's most recent Annual Report on
Form 10-K.

"SERVICING PROCEDURES MANUAL" means the collections procedures
manual used by AFL in the servicing of Receivables, as amended from time
to time.

"SETTLEMENT DATE" means, with respect to any Advance, (a) each
Distribution Date, (b) at the option of the Agent or the Borrower, the
last day of the current Fixed Period of such Advance or (c) the date on
which the Borrower shall prepay such Advance pursuant to SECTION 4.1
hereof.

"SIMPLE INTEREST METHOD" means the method of allocating a fixed
level payment on an obligation between principal and interest, pursuant
to which the portion of such payment that is allocated to interest is
equal to the product of the fixed rate of interest on such obligation
multiplied by the period of time (expressed as a fraction of a year,
based on the actual number of days in the calendar month and 365 days in
the calendar year) elapsed since the preceding payment under the
obligation was made.

"SIMPLE INTEREST RECEIVABLE" means a Receivable under which the
portion of the payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.

"STANDARD & POOR'S" OR "S&P" means Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc.

"STATED PERCENTAGE" means, on any date, the sum of (a) 4% PLUS (b)
the LESSER of (x) 6% and (y) the aggregate of each Percentage Add-On in
effect on such date as computed below:

If on such date (i) a Level I Trigger Event exists, the Percentage Add-On
related thereto shall be 2%; (ii) a Level II Trigger Event exists, the
Percentage Add-On related thereto shall be 6%; (iii) a Level III Trigger Event
exists, the Percentage Add-On related thereto shall be 2%; (iv) a Level IV
Trigger Event exits, the Percentage Add-On related thereto shall be 6%; (v) a
Level V Trigger Event exists, the Percentage Add-On related thereto shall be 2%;
and (vi) a Level VI Trigger Event exists, the Percentage Add-On related thereto
shall be 6%.

<PAGE>

"STRUCTURED LENDER" shall mean any Person whose principal business
consists of issuing commercial paper, medium term notes or other
securities to fund its acquisition and maintenance of receivables,
accounts, instruments, chattel paper, general intangibles and other
similar assets or interests therein and which is required by any
nationally recognized rating agency which is rating such securities to
obtain from its principal debtors an agreement such as that set forth in
SECTION 8.12(a) of this Agreement in order to maintain such rating.

"SUBSIDIARY" means, with respect to any Person, a corporation of
which such Person and/or its other Subsidiaries own, directly or
indirectly, such number of outstanding shares as have more than 50% of
the ordinary voting power for the election of directors.

"TAKE-OUT SECURITIZATION" means (a) a financing transaction of any
sort undertaken by the Borrower or any Affiliate of the Borrower secured,
directly or indirectly, by any Transferred Receivables or (b) any other
asset securitization, secured loans or similar transactions involving any
Transferred Receivables or any beneficial interest therein.

"TANGIBLE NET WORTH" means, with respect to the Borrower, the net
worth of the Borrower calculated in accordance with GAAP after
subtracting therefrom the aggregate amount of the Borrower's intangible
assets, including, without limitation, goodwill, franchises, licenses,
patents, trademarks, tradenames, copyrights and service marks.

"TAXES" has the meaning set forth in SECTION 5.1(b).

"TOTAL EXPENSE PERCENTAGE" means, as of any date, the sum of
(a) the Servicing Fee Rate PLUS (b) the Custodial Fee Rate PLUS (c) the
Backup Servicing Fee Rate PLUS (d) the Collateral Agent Fee Rate.

"TOTAL RECEIVABLES POOL" means all Receivables owned by the
Borrower.

"TRANSACTION DOCUMENTS" means this Agreement, the Note, the Fee
Letter, the Custodial Agreement, the Purchase Agreement, the Lockbox
Agreement, the Collateral Agent Agreement, each Interest Rate Hedge, and
the other documents to be executed and delivered in connection with this
Agreement.

"TRANSFERRED RECEIVABLE" means each Receivable which appears on
any Schedule of Receivables at any time hereafter submitted to and
accepted by the Borrower pursuant to Section 2.2 of the Purchase
Agreement, whether purchased by the Borrower or contributed to the
capital of the Borrower. Once a Receivable appears on any such Schedule
of Receivables it shall remain a Transferred Receivable; PROVIDED,
HOWEVER, that with respect to any Receivable that is purchased or
repurchased by AFL or the Servicer, following the Borrower's receipt of
the purchase price for such Receivable, "TRANSFERRED RECEIVABLE" shall
not include the Receivable so purchased or repurchased.

"TRANSFER REQUEST" has the meaning set forth in SECTION 9.5(a).

<PAGE>

"TRANSITION COSTS" means any documented expenses and allocated
cost of personnel reasonably incurred by the Backup Servicer in
connection with a transfer of servicing from the Servicer to the Backup
Servicer as the successor Servicer in an amount not to exceed $100,000.

"UCC" means the Uniform Commercial Code as from time to time in
effect in the applicable jurisdiction or jurisdictions.

"UNMATURED FACILITY TERMINATION EVENT" means any event that, if it
continues uncured, will, with lapse of time or notice or lapse of time
and notice, constitute a Facility Termination Event.

"WARRANTY RECEIVABLE" means, with respect to any Collection
Period, a Receivable that the Servicer has become obligated to repurchase
pursuant to SECTION 8.7.

"WRITTEN" or "IN WRITING" (and other variations thereof) means any
form of written communication or a communication by means of telex,
telecopier device, telegraph or cable.

"YEAR 2000 COMPLIANT" means, with regard to any Person, that all
software, embedded microchips, and other processing capabilities utilized
by, and material to the business or servicing operations or financial
condition of such Person, are able to interpret and manipulate data
involving all calendar dates correctly and without causing any abnormal
ending scenario, including dates in and after the year 2000.

"YIELD" means, with respect to any period, the sum of the
following:

(i) without duplication of the amount set forth in the immediately
following clause (ii), the sum of the daily interest accrued on the commercial
paper issued to fund or maintain any Advance outstanding on each day during such
period equal, for any such day, to the product of (x) the outstanding principal
amount of such commercial paper on such day, (y) the Commercial Paper Rate and
(z) 1/360, PLUS

(ii) if any commercial paper has been issued during such period to fund
the interest component on any other commercial paper maturing on a date other
than a Settlement Date, the sum of the daily interest accrued on such additional
commercial paper outstanding on each day during such period equal, for any such
day, to the product of (x) the outstanding principal amount of such additional
commercial paper on such day, (y) the Commercial Paper Rate and (z) 1/360, PLUS

(iii) the sum of the daily interest accrued on Advances funded or
maintained other than through the issuance of commercial paper on each day
during such period equal, for any such day, to the product of (x) the
outstanding principal amount of such Advances on such day, (y) the Bank Rate and
(z) the applicable computation period determined in accordance with SECTION 3.5
of this Agreement, MINUS

(iv) the amount of Yield paid on all Interim Distribution Dates during
such period.

<PAGE>

Notwithstanding clauses (i), (ii) and (iii) above, after the date any
principal amount of any Advance is due and payable (whether on the
Facility Termination Date, upon acceleration or otherwise) or after any
other monetary obligation of the Borrower or the Servicer arising under
this Agreement shall become due and payable, the Borrower or the
Servicer, as the case may be, shall pay (to the extent permitted by law,
if in respect of any unpaid amounts representing Yield) Yield (after as
well as before judgment) on such amounts, payable on demand, at a rate
PER ANNUM equal to the Default Rate.

SECTION 1.2 OTHER DEFINITIONAL PROVISIONS.

(a) Unless otherwise specified therein, all terms defined in
this Agreement have the meanings as so defined herein when used in the
Note or any other Transaction Document, certificate, report or other
document made or delivered pursuant hereto.

(b) Each term defined in the singular form in SECTION 1.1 or
elsewhere in this Agreement shall mean the plural thereof when the plural
form of such term is used in this Agreement, the Note or any other
Transaction Document, certificate, report or other document made or
delivered pursuant hereto, and each term defined in the plural form in
SECTION 1.1 shall mean the singular thereof when the singular form of
such term is used herein or therein.

(c) The words "hereof," "herein," "hereunder" and similar terms
when used in this Agreement shall refer to this agreement as a whole and
not to any particular provision of this Agreement, and article, section,
subsection, schedule and exhibit references herein are references to
articles, sections, subsections, schedules and exhibits to this Agreement
unless otherwise specified.

ARTICLE II

THE FACILITY, ADVANCE PROCEDURES AND NOTE

SECTION 2.1 FACILITY. On the terms and subject to the conditions
set forth in this Agreement, the Noncommitted Lender may, in its sole
discretion, make Advances to the Borrower on a revolving basis from time
to time during the period commencing on the Effective Date and ending on
the Facility Termination Date and, if the Noncommitted Lender elects not
to, each of the Banks shall make Advances to the Borrower (to the extent
of the unutilized Commitment of each Bank and PRO RATA among the Banks in
accordance with their respective Commitment Percentages) on a revolving
basis from time to time during the period commencing on the Effective
Date and ending on the Commitment Termination Date, in each case in such
amounts as may be from time to time requested by the Borrower pursuant to
SECTION 2.2 (the "FACILITY"); PROVIDED, HOWEVER, that the aggregate
principal amount of all Advances from time to time outstanding hereunder
shall not exceed the lesser of (a) the Facility Limit and (b) the
Borrowing Base. Within the limits of the Facility, the Borrower may
borrow, prepay and reborrow under this SECTION 2.1. Under no
circumstances shall any Lender make any such Advance if after giving
effect thereto the aggregate outstanding principal balance of all
Advances would exceed the Facility Limit.

<PAGE>

SECTION 2.2 ADVANCE PROCEDURES. The Borrower may request an
Advance hereunder by giving notice to the Agent and the Collateral Agent
of a proposed Advance not later than 1:00 P.M., New York time, one
Business Day prior to the proposed date of such Advance. Each such
notice (herein called an "ADVANCE REQUEST") shall be in the form of
EXHIBIT A and shall include the date and amount of such proposed Advance,
the desired duration of the Fixed Period for such Advance and the
supplement to the Schedule of Receivables setting forth the information
required therein with respect to the Receivables to be acquired by the
Borrower with the proceeds of the proposed Advance. Any Advance Request
given by the Borrower pursuant to this SECTION 2.2 shall be irrevocable
and binding on the Borrower.

SECTION 2.3 FUNDING. Subject to the satisfaction of the
conditions precedent set forth in ARTICLE VII with respect to such
Advance and the limitations set forth in SECTION 2.1, the Lenders shall
make the proceeds of such requested Advance available as follows: FIRST,
to the extent the amount on deposit in the Reserve Account is less than
the Minimum Reserve Account Amount (computed after giving effect to the
proposed Advance) on the proposed date of the Advance, an amount equal to
such deficiency shall be deposited by the Lenders in the Reserve Account
(by wire to account no. 1038377 maintained at Norwest (ABA # 091000019)
for further credit to account no. 13464102); and SECOND, all amounts of
the Advance in excess of the required deposit in the Reserve Account
shall be made available to the Borrower by deposit to account no.
104755881059 maintained at U.S. Bank National Association (ABA#
091000022) in same day funds no later than 3:00 p.m., New York City time,
on the proposed date of the Advance. Each Advance shall be on a Business
Day and shall be in an amount of at least $5,000,000 (or an integral
multiple of $1,000 in excess thereof).

SECTION 2.4 REPRESENTATION AND WARRANTY. Each request for an
Advance pursuant to SECTION 2.2 shall automatically constitute a
representation and warranty by the Borrower to the Agent and the Lenders
that, on the requested date of such Advance, (a) the representations and
warranties contained in ARTICLE X will be true and correct as of such
date as though made on such date, (b) no Facility Termination Event or
Unmatured Facility Termination Event has occurred and is continuing or
will result from the making of such Advance, and (c) after giving effect
to such requested Advance, the aggregate principal balance of the
outstanding Advances hereunder will not exceed the Borrowing Base.

SECTION 2.5 [Intentionally left blank]

SECTION 2.6 [Intentionally left blank]

SECTION 2.7 VOLUNTARY TERMINATION OF FACILITY; REDUCTION OF
FACILITY LIMIT. The Borrower may, in its sole discretion for any reason
upon at least five Business Days' notice to the Agent, terminate the
Facility in whole or reduce in part the unused portion of the Facility
Limit; PROVIDED, HOWEVER, that (a) each such partial reduction will be in
a minimum amount of $5,000,000 or a higher integral multiple of
$1,000,000, (b) in the event of a partial reduction and after giving
effect to any such partial reduction and any prior partial reduction,

<PAGE>

the remaining Facility Limit will not be less than $50,000,000, and (c)
in connection therewith the Borrower complies with SECTION 3.2(b),
SECTION 4.l(b) and SECTION 6.3. The amount of such reduction shall be
applied to reduce the Commitment of each Bank PRO RATA on the basis of
the Commitment Percentage of each such Bank. The Agent shall promptly
provide copies of any such notice of termination or reduction received by
it to each Lender together with a computation of the amount by which its
Commitment (if any) has been reduced.

SECTION 2.8 NOTE. All Advances shall be evidenced by a Note,
with appropriate insertions, payable to the order of the Agent, on behalf
of the Investors. The Borrower hereby irrevocably authorizes the Agent
to make (or cause to be made) appropriate notations on the grid attached
to the Note (or on any continuation of such grid, or at the Agent's
option, in its records), which notations, if made, shall evidence, INTER
ALIA, the date of, the outstanding principal of, and the yield rate and
Fixed Period applicable to the Advances evidenced thereby. Such
notations shall be rebuttably presumptive evidence of the subject matter
thereof absent manifest error; PROVIDED, HOWEVER, that the failure to
make any such notations shall not limit or otherwise affect any of the
Obligations.

ARTICLE III

YIELD, FEES, ETC.

SECTION 3.1 YIELD. The Borrower hereby promises to pay Yield on
the unpaid principal amount of each Advance (or each portion thereof) for
the period commencing on the date of such Advance until such Advance is
paid in full. No provision of this Agreement or the Note shall require
the payment or permit the collection of Yield in excess of the maximum
permitted by applicable law.

SECTION 3.2 YIELD PAYMENT DATES. Yield accrued on each Advance
shall be payable, without duplication:

(a) on the Facility Termination Date;

(b) on the date of any payment or prepayment, in whole or in part, of
principal outstanding on such Advance; and

(c) on each Distribution Date; PROVIDED that Yield relating to such
Advance may be payable, at the option of the Agent or the Borrower, on the
related Interim Distribution Date.

SECTION 3.3 YIELD ALLOCATIONS; SELECTION OF FIXED PERIODS, ETC.

(a) The Agent shall, from time to time, in its sole discretion
exercised in good faith, determine whether Yield in respect of the
Advances then outstanding, or any portion thereof, shall be calculated by
reference to the Commercial Paper Rate (such portion being herein called
a "CP ALLOCATION") or the Bank Rate (such portion being herein called a
"BANK RATE ALLOCATION", and together with a CP Allocation individually
called an "ALLOCATION", and

<PAGE>

collectively, "ALLOCATIONS"); PROVIDED, HOWEVER, that the Agent may
determine, at any time and in its sole discretion exercised in good
faith, that the Commercial Paper Rate is unavailable or otherwise not
desirable, in which case the Advances will be allocated to a Bank Rate
Allocation (unless the Default Rate is in effect). The Agent shall
provide the Borrower with reasonably prompt notice of the Allocations
made by it pursuant to this SECTION 3.3(a).

(b) The Agent, in its sole discretion exercised in good faith
after consultation with the Borrower, shall select the duration of the
initial and each subsequent Fixed Period relating to each Advance. In
selecting such Fixed Period, the Agent shall use reasonable efforts,
taking into consideration market conditions, to accommodate the
Borrower's preferences; PROVIDED, HOWEVER, that the Agent shall have the
ultimate authority to make all such selections. Unless consented to or
directed by the Agent, the aggregate number of Fixed Periods for all
Advances outstanding at any one time hereunder shall not exceed 25, it
being understood that if necessary to match the funding requirement of
the Noncommitted Lender, any Advance may be divided into portions having
different Fixed Periods.

SECTION 3.4 FEES. The Borrower agrees to pay to the Agent, on
behalf of itself, the Lenders and the Liquidity Providers, certain fees
in the amounts and on the dates set forth in the letter agreement among
CSFB, AFL and the Borrower dated as of the date hereof (as the same may
be amended, supplemented or otherwise modified, the "FEE LETTER").

SECTION 3.5 COMPUTATION OF YIELD AND FEES. All Yield and Fees
shall be computed on the basis of the actual number of days (including
the first day but excluding the last day) occurring during the period for
which such Yield or Fee is payable over a year comprised of 360 days (or,
in the case of Yield on an Advance bearing Yield at the Alternate Base
Rate, 365 days or, if appropriate, 366 days).

ARTICLE IV

REPAYMENTS AND PREPAYMENTS

SECTION 4.1 REPAYMENTS AND PREPAYMENTS. The Borrower shall repay
in full the unpaid principal amount of each Advance on the Facility
Termination Date. Prior thereto, the Borrower:

(a) may, from time to time on any Business Day, make a
prepayment, in whole or in part, of the outstanding principal amount of
any Advance; PROVIDED, HOWEVER, that

(i) all such voluntary prepayments shall require at
least two but no more than five Business Days' prior written notice to the
Agent; and

(ii) all such voluntary partial prepayments shall be in a
minimum amount of $1,000,000 and an integral multiple of $500,000;

(b) shall, on each date when any reduction in the Facility
Limit shall become

<PAGE>

effective pursuant to SECTION 2.7, make a prepayment of the Advances in
an amount equal to the excess, if any, of the aggregate outstanding
principal amount of the Advances over the Facility Limit as so reduced;

(c) shall, immediately upon any acceleration of the maturity
date of the Advances pursuant to SECTION 14.2, repay all Advances in
full, unless, pursuant to SECTION 14.2(a), only a portion of all Advances
is so accelerated, in which event the Borrower shall repay the
accelerated portion of the Advances;

(d) shall, on the date the Borrower receives any proceeds from
any Take-Out Securitization (after deducting all costs and expenses of
such Take-Out Securitization), make a prepayment of the Advances in an
amount substantially equal to such net proceeds or, if less, the total
outstanding amount of Advances; and

(e) shall prepay the Advances in full (in the manner set forth
in SECTION 4.1(a)) in order to comply with the Clean-Up Requirement
during each Clean-Up Period.

Each such prepayment or payment shall be subject to the
payment of any amounts required by SECTION 6.3 resulting from a
prepayment or payment of an Advance prior to the end of the Fixed Period
with respect thereto.

ARTICLE V

PAYMENTS; TAXES

SECTION 5.1 MAKING OF PAYMENTS; TAXES.

(a) Subject to, and in accordance with, the provisions of the
Collateral Agent Agreement, all payments of principal of, or Yield on,
the Advances and of all Fees and other amounts shall be made by the
Borrower no later than 2:00 p.m., New York time, on the day when due in
lawful money of the United States of America in immediately available
funds to the Agent (ABA #0260-0917-9), at its special account (account
number 93053921) maintained at the office of CSFB at Eleven Madison
Avenue, New York, New York or such other account as the Agent shall
designate in writing to the Borrower and the Collateral Agent (the
"AGENT'S ACCOUNT"). Funds received by the Agent after 2:00 p.m., New
York time, on the date when due, will be deemed to have been received by
the Agent on its next following Business Day.

(b) All payments described in SECTION 5.1(a) and all other
payments made by or on behalf of the Borrower, AFL or the Servicer to the
Agent for the benefit of itself or the Lenders or to any other Affected
Person under this Agreement and any other Transaction Document shall be
made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Official Body (EXCLUDING (i) taxes imposed on the net income of the Agent
or such other Affected Person, however denominated, and (ii) franchise
taxes
<PAGE>
imposed on the net income of the Agent or such other Affected Person in
each case imposed: (1) by the United States or any political subdivision
or taxing authority thereof or therein; (2) by any jurisdiction under the
laws of which the Agent or such Affected Person or its applicable lending
office is organized or located, managed or controlled or in which its
principal office is located or any political subdivision or taxing
authority thereof or therein; or (3) by reason of any connection between
the jurisdiction imposing such tax and the Agent, such Affected Person or
such lending office other than a connection arising solely from this
Agreement or any other Transaction Document or any transaction hereunder
or thereunder) (all such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, collectively or individually,
"TAXES"). If any such Taxes are required to be withheld from any amounts
payable to the Agent or any other Affected Person hereunder or under any
other Transaction Document, the amounts so payable to the Agent or such
Affected Person shall be increased to the extent necessary to yield to
the Agent or such Affected Person (after payment of all Taxes) all
amounts payable hereunder or thereunder at the rates or in the amounts
specified in this Agreement and the other Transaction Documents. The
Borrower (or the party required to "gross-up" the applicable payment)
shall indemnify the Agent or any such Affected Person for the full amount
of any such Taxes on the Settlement Date occurring after the date of
written demand therefor by the Agent; PROVIDED that no Person shall be
indemnified pursuant to this SECTION 5.1(b) to the extent the reason for
such indemnification relates to, or arises from, the failure by such
Person to comply with the provisions of SECTION 5.1(c).

(c) Each Affected Person that is not incorporated under the
laws of the United States of America or a state thereof or the District
of Columbia shall:

(i) prior to becoming a party to any Transaction
Document, deliver to the Borrower and the Agent (A) two duly completed copies of
IRS Form 1001 or Form 4224, or successor applicable form, as the case may be,
and (B) an IRS Form W-8 or W-9, or successor applicable form, as the case may
be;

(ii) deliver to the Borrower and the Agent two (2)
further copies of any such form or certification on or before the date that any
such form or certification expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recent form previously delivered by
it to the Borrower and the Agent; and

(iii) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be requested by the
Borrower or the Agent;

UNLESS, in any such case, an event (including, without limitation, any
change in treaty, law or regulation) has occurred after the Closing Date
and prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent
such Affected Person from duly completing and delivering any such form
with respect to it, and such Affected Person so advises the Borrower and
the Agent. Each such Affected Person so organized shall certify (i) in
the case of an IRS Form 1001 or IRS Form 4224, that it is entitled to
receive payments under the this Agreement and the other Transaction
Documents without deduction or withholding of any United States federal

<PAGE>

income taxes and (ii) in the case of an IRS Form W-8 or IRS Form W-9,
that it is entitled to an exemption from United States backup withholding
tax. Each Person that desires to become an additional party to a
Noncommitted Lender Liquidity Arrangement, shall prior to the
effectiveness of such addition, be required to provide all of the forms
and statements required pursuant to this SECTION 5.1(c).

SECTION 5.2 APPLICATION OF CERTAIN PAYMENTS. Each payment of
principal of the Advances shall be applied to such Advances as the
Borrower shall direct or, in the absence of such notice or during the
existence of a Facility Termination Event or after the Facility
Termination Date, as the Agent shall determine, in its discretion.

SECTION 5.3 DUE DATE EXTENSION. If any payment of principal or
Yield with respect to any Advance falls due on a day which is not a
Business Day, then such due date shall be extended to the next following
Business Day, and additional Yield shall accrue and be payable for the
period of such extension at the rate applicable to such Advance.

ARTICLE VI

INCREASED COSTS, ETC.

SECTION 6.1 INCREASED COSTS.

(a) If due to the introduction of or any change in or in the
interpretation of any law or regulation occurring or issued after the
date hereof, the Agent, any Lender or other Investor, any Liquidity
Provider, any Participant, or any of their respective Affiliates (each an
"AFFECTED PERSON") determines that compliance with any law or regulation
or any guideline or request from any central bank or other Official Body
(whether or not having the force of law) 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 its obligations or
commitments hereunder or with respect hereto or to the funding thereof
and other obligations or commitments of the same type, THEN, upon demand
by such Affected Person (with a copy to the Agent) (which demand shall be
accompanied by a statement setting forth the basis for the calculations
of the amount being claimed), the Borrower shall immediately pay to the
Agent, for the account of such Affected Person (as a third-party
beneficiary), 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 obligations, commitments or fundings. Such
written statement shall, in the absence of manifest error, be rebuttably
presumptive evidence of the subject matter thereof. Any Affected Person
claiming any additional amounts payable pursuant to this SECTION 6.1(a)
agrees to use reasonable efforts (consistent with legal and regulatory
restrictions) to designate a different office or branch of such Affected
Person as its lending office if the making of such a designation would
avoid the need for, or reduce the amount of, any such additional amounts
and would not, in the reasonable judgment of such Affected Person, be
otherwise disadvantageous to such Affected Person.

<PAGE>

(b) If, due to either (i) the introduction of or any change
(other than any change by way of imposition or increase of reserve
requirements referred to in SECTION 6.2) in or in the interpretation of
any law or regulation or (ii) compliance with any guideline or request
from any central bank or other Official Body (whether or not having the
force of law) issued after the date hereof, there shall be any increase
in the cost to a Lender of agreeing to make Advances in respect of which
Yield is computed by reference to the Eurodollar Rate, THEN, upon demand
by such Lender (with a copy to the Agent) (which demand shall be
accompanied by a statement setting forth the basis for the amount being
claimed), the Borrower shall immediately pay to the Agent, for the
account of such Lender (as a third-party beneficiary), from time to time
as specified by such Lender, additional amounts sufficient to compensate
such Lender for such increased costs. Such written statement shall, in
the absence of manifest error, be rebuttably presumptive evidence of the
subject matter thereof. Any Affected Person claiming any additional
amounts payable pursuant to this SECTION 6.1(b) agrees to use reasonable
efforts (consistent with legal and regulatory restrictions) to designate
a different office or branch of such Affected Person as its lending
office if the making of such a designation would avoid the need for, or
reduce the amount of, any such additional amounts and would not, in the
reasonable judgment of such Affected Person, be otherwise disadvantageous
to such Affected Person.

SECTION 6.2 ADDITIONAL YIELD ON ADVANCES BEARING A EURODOLLAR
RATE. The Borrower shall pay to any Lender, so long as such Lender shall
be required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency liabilities, additional Yield on
the unpaid Advances of such Lender during each Fixed Period in respect of
which Yield is computed by reference to the Eurodollar Rate, for such
Fixed Period, at a rate per annum equal at all times during such Fixed
Period to the remainder obtained by subtracting (i) the Eurodollar Rate
for such Fixed Period from (ii) the rate obtained by dividing such
Eurodollar Rate referred to in clause (i) above by that percentage equal
to 100% MINUS the Eurodollar Rate Reserve Percentage of such Lender for
such Fixed Period, payable on each date on which Yield is payable on such
Advances. Such additional Yield shall be determined by such Lender and
notice thereof (accompanied by a statement setting forth the basis for
the amount being claimed) given to the Borrower through the Agent within
30 days after any Yield payment is made with respect to which such
additional Yield is requested. Such written statement shall, in the
absence of manifest error, be rebuttably presumptive evidence of the
subject matter thereof. Any Affected Person claiming any additional
amounts payable pursuant to this SECTION 6.2 agrees to use reasonable
efforts (consistent with legal and regulatory restrictions) to designate
a different office or branch of such Affected Person as its lending
office if the making of such a designation would avoid the need for, or
reduce the amount of, any such additional amounts and would not, in the
reasonable judgment of such Affected Person, be otherwise disadvantageous
to such Affected Person.

SECTION 6.3 FUNDING LOSSES. The Borrower hereby agrees that upon
demand by any Affected Person (which demand shall be accompanied by a
statement setting forth the basis for the calculations of the amount
being claimed) the Borrower will indemnify such Affected Person against
any net loss or expense which such Affected Person may sustain or

<PAGE>

incur (including, without limitation, any net loss or expense incurred by
reason of or resulting from interest to accrue on the related commercial
paper after the date of any payment or prepayment of an Advance or from
the liquidation or reemployment of deposits or other funds acquired by
such Affected Person to fund or maintain any Advance to the Borrower), as
reasonably determined by such Affected Person, as a result of any failure
to borrow an Advance on the date specified therefor in an Advance Request
(other than due to a default by a Lender) or as a result of any payment
or prepayment (including any mandatory prepayment) of any Advance on a
date other than the last day of the Fixed Period for such Advance. Such
written statement shall, in the absence of manifest error, be rebuttably
presumptive evidence of the subject matter thereof.

SECTION 6.4 REPLACEMENT OF AFFECTED PERSON. Upon the receipt by
the Borrower of a claim for reimbursement or compensation under SECTION
6.1 OR 6.2 hereof by an Affected Person, if payment thereof shall not be
waived by such Affected Person, the Borrower may (a) request such
Affected Person or the Lender that has assigned an interest in its
Advances to such Affected Person to use reasonable efforts to assist the
Borrower in its attempt to obtain a replacement bank, financial
institution or Structured Lender, as applicable, satisfactory to the
Borrower (in the case of a replacement Lender) and the Agent (which
consent shall not be unreasonably withheld), to acquire and assume all or
a ratable part of such Affected Person's commitment to make Advances,
Advances, or interests therein (a "REPLACEMENT PERSON"), or (b) request
one or more of the other Lenders or Investors to acquire and assume all
or a part of such Affected Person's commitment to make Advances, Advances
or interests therein. Upon notice from the Borrower, such Affected
Person shall, or the Lender that has assigned an interest in its Advances
to such Affected Person shall cause such Affected Person to, assign,
without recourse, its commitment to make Advances, Advances or interests
therein and its other rights and obligations (if any) hereunder, or a
ratable share thereof, to the Replacement Person or Replacement Persons
designated by the Borrower and consented to by the Agent for a purchase
price equal to the sum of the principal amount of the Advances or
interests therein so assigned, all accrued and unpaid Yield thereon and
any other amounts (including Fees and any amounts owing under this
ARTICLE VI) to which such Affected Person is entitled hereunder;
PROVIDED, that the Borrower shall provide such Affected Person with an
Officer's Certificate stating that such Replacement Person has advised
the Borrower that it is not subject to, or has agreed not to seek, such
increased amount.

ARTICLE VII

EFFECTIVENESS; CONDITIONS TO ADVANCES

SECTION 7.1 EFFECTIVENESS. This Agreement shall become effective
on the first day (the "EFFECTIVE DATE") on which the Agent, on behalf of
the Lenders, shall have received the following, each in form and
substance satisfactory to the Agent, PROVIDED that the Effective Date may
not occur later than October 31, 1998 without the prior written consent
of the Agent and the Lenders:

(a) AGREEMENT. This Agreement and the Joinder Supplement
executed by each party thereto;

<PAGE>

(b) RESOLUTIONS. A copy of the resolutions of the Board of
Directors of each of the Borrower and AFL approving the Transaction
Documents to be delivered by it hereunder and the transactions
contemplated hereby, certified by its Secretary or Assistant Secretary;

(c) CHARTERS. The Certificate or Articles of Incorporation of
each of Borrower and AFL certified by the Secretary of State of Delaware
and Minnesota, respectively;

(d) GOOD STANDING CERTIFICATE. Good Standing Certificates for
the Borrower issued by the Secretaries of State of Delaware and Minnesota
and a Good Standing Certificate for AFL issued by the Secretary of State
of Minnesota;

(e) INCUMBENCY. A certificate of the Secretary or Assistant
Secretary of each of the Borrower and AFL certifying (i) the names and
true signatures of the officers authorized on its behalf to sign this
Agreement and the other Transaction Documents to be delivered by it (on
which certificate the Agent and the Lenders may conclusively rely until
such time as the Agent shall receive a revised certificate meeting the
requirements of this subsection (e)) and (ii) a copy of the Borrower's
and AFL's by-laws;

(f) FILINGS. Acknowledgment copies of proper UCC-1 Financing
Statements (executed by AFL and/or Borrower, as applicable), as may be
necessary or, in the opinion of the Agent, desirable under the UCC of all
appropriate jurisdictions or any comparable law to perfect the security
interest of the Collateral Agent on behalf of the Secured Parties in all
Borrower Collateral in which an interest may be pledged hereunder;

(g) SEARCHES. Certified copies of Requests for Information or
Copies (Form UCC-11) (or a similar search report certified by a party
acceptable to the Agent), dated a date reasonably near to the Effective
Date, listing all effective financing statements which name AFL or the
Borrower (under their respective present names and any previous names) as
debtor and which are filed in the jurisdictions in which filings were
made pursuant to SECTION 7.1(f), together with copies of such financing
statements;

(h) OPINIONS. Legal opinion(s) of Dorsey & Whitney LLP,
special counsel for the Borrower and AFL, in form and substance
satisfactory to the Agent covering such matters as the Agent may
reasonably request;

(i) FEE LETTER. The Fee Letter, duly executed and delivered by
the parties thereto, and all amounts required to be paid on the Effective
Date thereunder shall have been paid;

(j) ACCOUNTS. Evidence that the Reserve Account, the
Collateral Account and the Collection Account have been established and
the Borrower shall have caused to be deposited in the Reserve Account an
amount equal to the Minimum Reserve Account Amount;

(k) TRANSACTION DOCUMENTS. Executed counterparts of each of
the other Transaction Documents, duly executed by each of the parties
thereto, and all conditions to the

<PAGE>

effectiveness thereof set forth therein shall have been satisfied in all
respects;

(l) PROCEDURES LETTER. An "agreed upon procedures" letter
approved and accepted by the Independent Accountants, AFL and the Agent
relating to the reviews described in SECTION 8.12(b); and

(m) OTHER. Such other approvals, documents, opinions,
certificates and reports as the Agent may reasonably request.

SECTION 7.2 ALL ADVANCES. The making of each Advance is subject
to the condition that the Effective Date shall have occurred and to the
following further conditions precedent that:

(a) NO FACILITY TERMINATION EVENT, ETC. (i) No Facility
Termination Event or Unmatured Facility Termination Event has occurred
and is continuing or will result from the making of such Advance, (ii)
the representations and warranties of the Borrower contained in ARTICLE X
and the Servicer contained in SECTION 8.6(b) are true and correct as of
the date of such requested Advance, with the same effect as though made
on the date of (and after giving effect to) such Advance, and (iii) after
giving effect to such Advance, the aggregate outstanding principal
balance of the Advances hereunder will not exceed the lesser of the
Facility Limit and the Borrowing Base;

(b) ADVANCE REQUEST, ETC. The Agent shall have received the
Advance Request for such Advance in accordance with SECTION 2.2, together
with all items required to be delivered in connection therewith;

(d) MINIMUM ADVANCE AMOUNT. The amount of such Advance is not
less than $5,000,000;

(e) COLLATERAL RECEIPT. The Agent shall have received a duly
completed and executed Collateral Receipt in respect of each Receivable
identified as an "Eligible Receivable" in the Schedule of Receivables
(or, in the case of any Advance after the initial Advance, the supplement
thereto) submitted with the Advance Request for such Advance;

(f) WEEKLY REVIEW. The Agent shall have received the results
of the most recent review required to be made by the Independent
Accountants pursuant to SECTION 8.12(b), which review shall contain no
exceptions unacceptable to the Agent in its reasonable discretion;

(g) BORROWING BASE CONFIRMATION. The Agent shall have received
a duly completed and executed certificate regarding the Borrowing Base in
the form attached hereto as EXHIBIT D (a "BORROWING BASE CONFIRMATION"),
computed as of the date of such Advance and after giving effect thereto
and to the purchase by the Borrower of any Receivables to be

<PAGE>

purchased by it under the Purchase Agreement on such date;

(h) INTEREST RATE HEDGES. The Agent shall have received
evidence, in form and substance satisfactory to the Agent, that the
Borrower has entered into Interest Rate Hedges to the extent required by,
and satisfying the requirements of, SECTION 11.6 (together with an
Interest Rate Hedge Assignment Acknowledgment duly executed by the
counterparty thereto and concurrently delivered to the Agent);

(i) RESERVE ACCOUNT. After giving effect to such Advance and
the application of the proceeds thereof in accordance with SECTION 2.3,
the amount on deposit in the Reserve Account is not less than the Minimum
Reserve Account Amount;

(j) CERTIFICATES. The Agent shall have received a certificate
duly executed by a Responsible Officer of the Borrower to the effect that
the conditions set forth in SECTION 7.2(a) have been satisfied with
respect to the proposed Advances; and

(k) REPORTS. The Agent shall have received such other
approvals, documents, opinions, certificates and reports as it may
reasonably request.

ARTICLE VIII

ADMINISTRATION AND SERVICING OF RECEIVABLES

SECTION 8.1 DUTIES OF THE SERVICER. The Servicer is hereby
authorized to act for the Borrower and in such capacity shall manage,
service, administer and make collections on the Transferred Receivables,
and perform the other actions required by the Servicer under this
Agreement for the benefit of the Investors and other Secured Parties.
The Servicer agrees that its servicing of the Transferred 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 accordance with AFL's Servicing Procedures Manual as in effect
from time to time for servicing all its other comparable motor vehicle
receivables. The Servicer's duties shall include, without limitation,
collection and posting of all payments, responding to inquiries of
Obligors on the Transferred Receivables, investigating delinquencies,
sending payment statements or payment books 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 Agent and the Collateral
Agent 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 Transferred
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 Transferred Receivables, the related Financed Vehicles or
the related Obligors.

<PAGE>

To the extent consistent with the standards, policies and
procedures otherwise required hereby, the Servicer shall follow its
customary standards, policies, and procedures with respect to the
Transferred Receivables 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 Borrower to execute
and deliver, on behalf of the Borrower, the Investors, the Collateral
Agent, the Custodian or any of them, 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 Transferred
Receivables and with respect to the related Financed Vehicles. The
Servicer is authorized to release Liens on Financed Vehicles in order to
collect insurance proceeds with respect thereto and to liquidate such
Financed Vehicles in accordance with its customary standards, policies
and procedures; 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 Transferred Receivable or waive the right to collect the
unpaid balance of any Transferred 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 Borrower, the Collateral
Agent or the Lenders (PROVIDED that if the Servicer is acting in the name
of the Borrower, the Collateral Agent or the Lenders, the Servicer shall
have obtained the Borrower's, the Collateral Agent's and the Agent's
consent, as the case may be, which consent shall not be unreasonably
withheld), a legal proceeding to enforce a Transferred Receivable
pursuant to SECTION 8.3 or to commence or participate in any other legal
proceeding (including, without limitation, a bankruptcy proceeding)
relating to or involving a Transferred Receivable, an Obligor or a
Financed Vehicle. If the Servicer commences or participates in such a
legal proceeding in its own name, the Borrower or the Collateral Agent
(on behalf of the Secured Parties), as the case may be, shall thereupon
be deemed to have automatically assigned such Transferred Receivable to
the Servicer solely for purposes of commencing or participating in any
such proceeding as a party or claimant, and the Servicer is authorized
and empowered by the Borrower or the Collateral Agent (on behalf of the
Secured Parties), as the case may be, 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 Borrower and the Collateral Agent (on behalf of the
Secured Parties), as the case may be, shall furnish the Servicer with any
powers of attorney and other documents which the Servicer may reasonably
request in writing 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 8.2 COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATION AND
AMENDMENT 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

<PAGE>

the terms and provisions of the Transferred 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
Transferred Receivables, the Dealer Agreements, the Dealer Assignments
and the Insurance Policies in such manner as will, in the reasonable
judgment of the Servicer, maximize the amount to be received by the
Borrower and the Secured Parties 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 Transferred Receivable.

(b) The Servicer may at any time agree to a modification or
amendment of a Transferred Receivable in order to (i) change the
Obligor's regular due date to another date within the Collection Period
in which such due date occurs, (ii) re-amortize the amount of the
scheduled payments on the Transferred Receivable following a partial
prepayment of principal or (iii) convert a Pre-Computed Receivable to a
Simple Interest Receivable.

(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Transferred Receivable (including those
modifications permitted by SECTION 8.2(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 Transferred Receivable, will maximize the amount to be received by
the Borrower and the Secured Parties with respect to such Transferred
Receivable, and is otherwise in the best interests of the Borrower and
the Investors; PROVIDED, HOWEVER, that:

(i) in no event may a Transferred Receivable be extended
more than twice during any twelve month period or more than six times during the
full term of such Transferred Receivable;

(ii) any such extension shall not extend beyond 84 months
after the Facility Termination Date;

(iii) the Servicer shall not amend or modify a Transferred
Receivable (except as provided in SECTION 8.2(b) and this SECTION 8.2(c))
without the written consent of the Agent; and

(iv) the terms of each Transferred Receivable may only be
amended once.

PROVIDED, THAT any such amendment, modification or extension shall be
delivered by the Servicer to the Custodian (with a copy to the Agent)
promptly after execution thereof.

(d) The Servicer shall use its best efforts to cause Obligors
to make all payments on the Transferred 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 (on
behalf of the Secured Parties) pursuant to a Lockbox Agreement. Amounts
received by a Lockbox Bank in respect of the Transferred Receivables may
initially be deposited into a demand deposit account maintained by the
Lockbox Bank as agent for the

<PAGE>

Collateral Agent (on behalf of the Secured Parties) and for other owners
of automobile receivables serviced by the Servicer. The Servicer shall
use its best efforts to cause the Lockbox Banks, pursuant to the Lockbox
Agreement, to deposit all payments on the Transferred Receivables in the
Lockbox Account no later than the Business Day after receipt and shall
transfer all amounts credited to the Lockbox Account on account of such
payments 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 Agent,
an Eligible Account satisfying clause (i) of the definition thereof.

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 Agent, the Collateral
Agent and the Investors for servicing and administering the Transferred
Receivables 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 Backup Servicer or successor Servicer shall thereupon
assume all of the rights and, from the date of assumption, all of the
obligations of the outgoing Servicer under the Lockbox Agreement, if
applicable. The Backup Servicer or any other successor Servicer shall
not be liable for any acts, omissions or obligations of the Servicer
prior to such succession. 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 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 Agent, but
at the expense of the outgoing Servicer, deliver to the successor
Servicer all documents and records relating to each such 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 Agent elects to change the identity of the Lockbox Bank,
the Servicer, at its expense, shall cause the Lockbox Bank to deliver, at
the direction of the Agent, to the Collateral Agent or a successor
Lockbox Bank all documents and records relating to the Transferred
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 Lockbox Account,
without deposit into any intervening account as soon as practicable, but
in no event later than the Business Day after receipt thereof.

SECTION 8.3 REALIZATION UPON RECEIVABLES.

<PAGE>

(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 Transferred 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
Transferred Receivable but in no event later than the date on which all
or any portion of a Scheduled Payment has become 91 or more 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 8.1, which
practices and procedures may include reasonable efforts to realize upon
any recourse to Dealers, selling 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 Transferred
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 and/or repossession shall increase the
proceeds of liquidation of the related Transferred Receivable by an
amount greater than the amount of such expenses. All Recoveries shall be
remitted directly by the Servicer to the Lockbox 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 repossessing and liquidating a Financed Vehicle, but only out of the
cash proceeds of such Financed Vehicle, any deficiency obtained from the
Obligor or any amounts received from the related Dealer, which amounts
may be retained by the Servicer (and shall not be required to be
deposited in the Lockbox Account) to the extent of such expenses. The
Servicer shall pay on behalf of the Borrower any personal property taxes
assessed on repossessed Financed Vehicles; and the Servicer shall be
entitled to reimbursement of any such tax from Recoveries with respect to
the related Transferred 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 Borrower and the
Collateral Agent (on behalf of the Secured Parties) 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 Borrower, at the Servicer'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. All
amounts recovered shall be remitted directly by the Servicer to the
Lockbox Account without deposit into any intervening account as soon as
practicable, but in no event later than the Business Day after receipt
thereof.

SECTION 8.4 INSURANCE.

(a) The Servicer shall monitor the status of the Insurance
Policies in accordance with its customary servicing procedures. If the
Servicer shall determine that an Obligor has

<PAGE>

failed to obtain or maintain a physical loss and damage insurance policy
covering the related Financed Vehicle which satisfies the conditions set
forth in subsection (v) of the definition of "Eligible Receivable"
(including during the repossession of such Financed Vehicle) the Servicer
shall enforce the rights of the holder of the Receivable thereunder to
require that the Obligor obtains such physical loss and damage insurance.

(b) The initial Servicer may, if an Obligor fails to obtain or
maintain a physical loss and damage 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 Collateral
Agent. Any cost incurred by the Servicer in maintaining such
Force-Placed Insurance shall only be recoverable out of premiums paid by
the Obligors or Recoveries with respect to the Transferred Receivable, as
provided in paragraph (c) of this SECTION 8.4.

(c) In connection with any Force-Placed Insurance obtained
hereunder, the Servicer may, in the manner and to the extent permitted by
applicable law, require the Obligors to repay the entire premium to the
Servicer. In no event shall the Servicer 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
in respect of the Obligations. The Servicer shall retain and separately
administer the right to receive payments from Obligors with respect to
Insurance Add-On Amounts or rebates of Force-Placed Insurance premiums.
If an Obligor makes a payment with respect to a Receivable having
Force-Placed Insurance, but the Servicer 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. Recoveries 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 the
Servicer has placed Force-Placed Insurance fails to make scheduled
payments of such Insurance Add-On Amount as due, and the Servicer has
determined that eventual payment of the Insurance Add-On Amount is
unlikely, the Servicer may, but shall not be required to, purchase such
Receivable from the Borrower for the Purchase Amount on any subsequent
Distribution Date. Any such Receivable, and any Receivable with respect
to which the Servicer has placed Force-Placed Insurance which has been
paid in full (excluding any Insurance Add-On Amounts) will be assigned by
the Borrower to the Servicer.

(d) The Servicer may sue to enforce or collect upon the
Insurance Policies, in its own name, if possible, or as agent of the
Borrower and the Collateral Agent (on behalf of the Secured Parties). 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 Borrower and the Collateral
Agent (on behalf of the Secured Parties) under such Insurance Policy to
the Servicer for purposes of collection only. If, however, in

<PAGE>

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 Borrower shall take such steps as the Servicer deems necessary to
enforce such Insurance Policy, including bringing suit in its name.

(e) The Servicer shall maintain Collateral Insurance. Costs
incurred by the Servicer in maintaining such insurance shall be paid by
the Servicer. The Servicer will cause itself to be named as named
insured and the Collateral Agent to be named a loss payee under all such
Collateral Insurance. The Servicer may, with the consent of the Agent,
elect not to maintain such Collateral Insurance but in such event will be
obligated to indemnify the Borrower, the Collateral Agent and the Secured
Parties against any losses arising from an Obligor's failure to maintain
physical loss and damage insurance with respect to the related Financed
Vehicle.

SECTION 8.5 MAINTENANCE OF SECURITY INTERESTS IN FINANCED
VEHICLES.

(a) Consistent with its obligations under this Agreement, the
Collateral Agent Agreement and the Custodial Agreement, the Servicer
shall take such steps as are necessary to maintain perfection of the
security interest created by each Transferred Receivable in the related
Financed Vehicle on behalf of the Borrower and the Collateral Agent for
the benefit of the Secured Parties, 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 Transferred Receivables. The Borrower and the Collateral Agent (on
behalf of the Secured Parties) each 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 Borrower and the Collateral Agent
(on behalf of the Secured Parties) as necessary because of the relocation
of a Financed Vehicle or for any other reason. In the event that the
assignment of a Transferred Receivable to the Borrower and the pledge
thereof to the Collateral Agent (on behalf of the Secured Parties), and
the filing of UCC financing statements all as provided herein, 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 Borrower and the pledge thereof to the Collateral Agent
(on behalf of the Secured Parties), the parties hereto agree that AFL's
designation as the secured party on the certificate of title is, with
respect to each secured party, as applicable, in its capacity as agent of
the Borrower and the Secured Parties.

(b) Upon the occurrence and during the continuance of a
Facility Termination Event, the Agent may instruct the Borrower and the
Servicer to take or cause to be taken such reasonable action as may, in
the opinion of counsel to the Agent, be necessary or desirable to perfect
or re-perfect the security interests in the Financed Vehicles securing
the Transferred Receivables in the name of the Borrower and the
Collateral Agent (on behalf of the Secured Parties) (as lienholder) by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Agent, be
necessary or prudent. AFL hereby agrees to pay all expenses related to
such perfection or re-perfection

<PAGE>

and to take all action necessary therefor. In addition, prior to the
occurrence of a Facility Termination Event, the Agent may instruct the
Borrower and the Servicer to take or cause to be taken such reasonable
action as may, in the opinion of counsel to the Agent, be necessary to
perfect or re-perfect the security interest in the Financed Vehicles
underlying the Transferred Receivables in the name of the Borrower and
the Collateral Agent (on behalf of the Secured Parties), 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 Agent, be
necessary or prudent; PROVIDED, HOWEVER, that if the Agent requests that
the title documents be amended prior to the occurrence of a Facility
Termination Event or Unmatured Facility Termination Event, the
out-of-pocket expenses of the Servicer or the Borrower in connection with
such action shall be reimbursed to the Servicer or the Borrower, as
applicable, by the Banks.

SECTION 8.6 COVENANTS, REPRESENTATIONS AND WARRANTIES OF
SERVICER. The Servicer hereby makes the following representations,
warranties and covenants to the other parties hereto on which the Lenders
shall rely in making the Advances.

(a) The Servicer covenants to the Borrower, the Agent and the
Investors as follows:

(i) LIENS IN FORCE. The Financed Vehicle securing each
Transferred Receivable shall not be released in whole or in part from the
security interest granted by such Receivable, except upon payment in full of
such Receivable or as otherwise contemplated herein;

(ii) NO IMPAIRMENT. The Servicer shall do nothing to
impair the rights of the Borrower or the Secured Parties in the Transferred
Receivables, the Dealer Agreements, the Dealer Assignments or the Insurance
Policies;

(iii) NO AMENDMENTS. The Servicer shall not extend or
otherwise amend the terms of any Transferred Receivable, except in accordance
with SECTION 8.2;

(iv) SERVICING OF RECEIVABLES. The Servicer shall
service the Transferred Receivables as required by the terms of this Agreement
and in material compliance with the current Servicing Procedures Manual for
servicing all its other comparable motor vehicle receivables and the Servicer
shall not change the manner in which it services the Receivables in any way that
can have a material adverse effect on the Transferred Receivables;

(v) COMPLIANCE WITH LAWS. The Servicer shall comply in
all material respects with the laws of each state in which a Transferred
Receivable is located, including, without limitation, all federal and state laws
regarding the collection and enforcement of consumer debt;

(vi) NOTICE OF RELOCATION. The Servicer shall give the
Agent 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 the
Collateral and its principal executive office within the United States of
America;

<PAGE>

(vii) MAINTENANCE OF COMPUTER SYSTEMS, ETC. The Servicer
shall maintain its computer systems so that, from and after the time of the
first Advance under this Agreement, the Servicer's master computer records
(including archives) that shall refer to the Collateral indicate clearly that
such Collateral is subject to first priority security interest in favor of the
Collateral Agent for the benefit of the Secured Parties. Indication of the
Collateral Agent's security interest shall be deleted from or modified on the
Servicer's computer systems when, and only when, the Collateral in question
shall have been paid in full or sold by the Borrower in accordance herewith; and

(viii) OTHER SALES, GRANTS OR TRANSFERS. If at any time
the Servicer 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, the Servicer 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 Collateral, shall indicate clearly that such Collateral is
subject to a first priority security interest in favor of the Collateral Agent
for the benefit of the Secured Parties.

(b) The Servicer represents and warrants to the Borrower, the
Agent and the Investors, as of the Closing Date and as of each Advance
Date as to itself that:

(i) ORGANIZATION AND GOOD STANDING. The Servicer has
been duly organized and is validly existing and in good standing under the laws
of the State of Minnesota or, in the case of a successor Servicer, 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 and the other Transaction Documents to which it is party
(in any capacity);

(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 where the failure to do
so would have a material adverse effect on its ability to perform its
obligations hereunder or under any other Transaction Document to which it is
party (in any capacity);

(iii) POWER AND AUTHORITY. The Servicer has the power and
authority to execute and deliver this Agreement and the Transaction Documents to
which it is a party (in any capacity) and to carry out its terms and their
terms, respectively, and the execution, delivery and performance of this
Agreement and the Transaction Documents to which it is a party (in any capacity)
have been duly authorized by the Servicer by all necessary corporate action;

(iv) BINDING OBLIGATION. This Agreement and the
Transaction Documents to which it is a party (in any capacity) 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

<PAGE>

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 Transaction Documents to which it is a
party (in any capacity), and the fulfillment of the terms of this Agreement and
the Transaction Documents to which it is a party (in any capacity), 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
certificate or 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 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 this Agreement, or violate any
law, order, rule or regulation applicable to the Servicer of any court other
Official Body, having jurisdiction over the Servicer or any of its properties,
or in any way materially adversely affect the interest of the Borrower, the
Collateral Agent or the Secured Parties in any Transferred Receivable, or affect
the Servicer's ability to perform its obligations under this Agreement;

(vi) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Servicer's knowledge, threatened against the
Servicer, before any court or other Official Body having jurisdiction over the
Servicer or its properties (A) asserting the invalidity of this Agreement or any
of the Transaction Documents, (B) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement or any of the Transaction
Documents, (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 Transaction
Documents, or (D) that could have a material adverse effect on the Transferred
Receivables;

(vii) YEAR 2000 COMPLIANCE. The Servicer and its
Subsidiaries have (i) undertaken a detailed review and assessment of all areas
within its business and operations (including its servicing operations) that
could be adversely affected by the failure of the Servicer or its Subsidiaries
to be Year 2000 Compliant on a timely basis, (ii) developed a detailed plan and
timetable for becoming Year 2000 Compliant on a timely basis, and
(iii) implemented and will implement that plan in accordance with that timetable
in all material respects;

(viii) NO CONSENTS. The Servicer is not required to obtain
the consent of any other Person or any consent, license, approval or
authorization of, or registration or declaration with, any Official Body in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement and the Transaction Documents to which it is party (in any
capacity); and

(ix) CHIEF EXECUTIVE OFFICE. The chief executive office
of AFL is located at 7825 Washington Avenue South, Suite 500, Minneapolis,
Minnesota 55439-2435.

SECTION 8.7 PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT OR
REPRESENTATION AND WARRANTY. The Borrower or the Servicer, as the case
may be, shall inform the other

<PAGE>

parties to this Agreement promptly, in writing, upon the discovery of any
breach of the Servicer's representations and warranties and covenants
pursuant to SECTION 8.5(a) or 8.6; PROVIDED, HOWEVER, that the failure to
give any such notice shall not derogate from any obligation of the
Servicer hereunder to repurchase any Transferred Receivable; PROVIDED,
FURTHER that, the Backup Servicer shall have no duty to inquire into or
to investigate the breach of any such representations and warranties and
covenants. Unless the breach shall have been cured by the last day of
the first full calendar month following the discovery by or notice to the
Servicer of the breach, the Servicer shall have an obligation, and the
Borrower and the Agent shall (PROVIDED that it either has made such
discovery or has received such notice thereof) enforce such obligation of
the Servicer, to repurchase any Transferred Receivable materially and
adversely affected by the breach. The Borrower shall notify the Agent
promptly, in writing, of any failure by the Servicer to so repurchase any
Transferred Receivable. In consideration of the purchase of the
Transferred Receivable, the Servicer shall remit the Purchase Amount to
the Collection Account on the date of such repurchase.

In addition to the foregoing and notwithstanding whether
the related Transferred Receivable shall have been purchased by the
Servicer, the Servicer shall indemnify the Backup Servicer, the
Collateral Agent, the Borrower, the Agent and the other Secured Parties
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 a breach of the
covenants or representations and warranties set forth in SECTION 8.5(a)
or 8.6.

SECTION 8.8 TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER.

(a) Subject to, and in accordance with, the provisions of the
Collateral Agent Agreement, on each Distribution Date, the Servicer shall
be entitled to receive out of the Collection Account the Servicing Fee
for the related Collection Period.

(b) 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). The Servicer shall be liable for the
fees and expenses of the Backup Servicer, the Lockbox Bank (and any fees
under the Lockbox Agreement), the Custodian, the Collateral Agent and the
Independent Accountants, to the extent such amounts have not been paid in
accordance with the Collateral Agent Agreement.

SECTION 8.9 SERVICER'S CERTIFICATE.

(a) No later than 5:00 p.m., New York City time, on each
Determination Date, the Servicer shall deliver to the Backup Servicer,
the Collateral Agent, the Borrower and the Agent a Servicer's Certificate
executed by a Responsible Officer of the Servicer in the form attached
hereto as EXHIBIT E. Transferred Receivables purchased by the Servicer
or AFL and each Transferred Receivable which became a Warranty Receivable
or a Defaulted Receivable or a Delinquent Receivable or which was paid in
full during the related Collection Period shall be identified by account
number (as set forth in the Schedule of Receivables).

<PAGE>

(b) In addition to the information required by SECTION 8.9(a),
the Servicer shall include in the copy of the Servicer's Certificate
delivered to the Borrower and the Agent (i) whether any Facility
Termination Event or Unmatured Facility Termination Event has occurred as
of such Determination Date, (ii) whether any Facility Termination Event
or Unmatured Facility Termination Event that may have occurred as of a
prior Determination Date is deemed cured as of such Determination Date,
(iii) the Delinquency Ratio and Portfolio Net Loss Ratio for such
Determination Date and the Servicer Delinquency Ratio, Monthly Excess
Spread Percentage and Net Yield as of the last day of the preceding
Collection Period, (iv) whether a Level I-VI Trigger Event has occurred
(specifying same) and the Stated Percentage and Required Reserve Account
Amount for such Determination Date and (v) the Borrowing Base, Required
Holdback and Deficiency Percentage for such Determination Date.

SECTION 8.10 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF
SERVICER TERMINATION EVENT.

(a) The Servicer shall deliver to the Backup Servicer, the
Borrower, the Collateral Agent and the Agent, 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, 1999, an Officer's
Certificate, dated as of December 31 (or other applicable date) of the
immediately preceding 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 Borrower or the Servicer shall deliver to the Backup
Servicer, the Borrower, the Collateral Agent and the Agent, 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 is, or with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under SECTION 13.1.

SECTION 8.11 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 AFL, to deliver
to the Servicer, the Backup Servicer, the Borrower, the Collateral Agent
and the Agent, 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, 1999, 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 "ACCOUNTANTS' REPORT") addressed to
the Servicer, the Collateral Agent and the Agent, to the effect that
such firm has audited the financial statements of the Servicer and issued
its report thereon and that (i) such audit was made in

<PAGE>

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,
(ii) certain agreed upon procedures were applied to three randomly
selected Servicer's Certificates (which procedures shall be submitted for
approval to the Agent, which approval shall not be unreasonably withheld)
and (iii) the firm is independent of AFL and the Servicer within the
meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.

(b) The Servicer shall deliver a copy of the Accountants'
Report, within 15 days of receipt, to the Agent and the Backup Servicer.

(c) In the event such Independent Accountants require the
Collateral Agent or the Backup Servicer to agree to the procedures to be
performed by such firm in any of the reports required to be prepared
pursuant to this SECTION 8.11, the Servicer shall direct the Collateral
Agent or the Backup Servicer, in writing to so agree; it being understood
and agreed that the Collateral Agent and/or the Backup Servicer will
deliver such letter of agreement in conclusive reliance upon the
direction of the Servicer, and neither the Collateral Agent nor the
Backup Servicer has made any independent inquiry or investigation as to,
and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.

SECTION 8.12 ACCESS TO CERTAIN DOCUMENTATION; WEEKLY REVIEW.

(a) The Servicer shall provide to representatives of the Backup
Servicer, the Borrower, the Collateral Agent and the Agent reasonable
access to the documentation regarding the Transferred Receivables
including, without limitation, copies of the Dealer Underwriting Guides
and the Servicing Procedures Manual. Nothing in this SECTION 8.12 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
8.12 as a result of such obligation shall not constitute a breach of this
SECTION 8.12.

(b) The Agent shall have the right to direct Independent
Accountants approved by the Agent to review information regarding the
Transferred Receivables in accordance with the agreed upon procedures
described in SECTION 7.1(l) or otherwise approved by the Agent. The
reviews will be performed weekly (commencing with the week following the
date of the initial Advance); PROVIDED that if following the date of the
most recent review under this SECTION 8.12(b) new Advances in excess of
$50,000,000 are made, the Agent may direct the Independent Accountants to
make an interim review under this SECTION 8.12(b) prior to the due date
of the next weekly review. The fees and expenses of the Independent
Accountants shall be paid by the Servicer.

SECTION 8.13 MONTHLY TAPE. 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 Backup Servicer the Monthly Tape in a format
acceptable to the Backup Servicer containing the information with respect
to the Transferred Receivables as of the last day of the immediately

<PAGE>

preceding calendar month necessary for preparation of the Servicer's
Certificate relating to the immediately succeeding Determination Date .
Based solely on the information contained in the Monthly Tape and the
Servicer's Certificate, the Backup Servicer shall verify the Aggregate
Outstanding Principal Balance of the Total Receivables Pool. The Backup
Servicer shall recalculate the information contained in the Servicer's
Certificate delivered by the Servicer, and shall certify to the Agent
that it is correct on its face or shall notify the Servicer and the
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 Distribution 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
Agent, deliver to the Backup Servicer its Collection Records and its
Monthly Records as soon as practicable and in any event within one
Business Day after demand therefor (which demand may be made at any time
after the occurrence of a Facility Termination Event or a Servicer
Termination Event or the occurrence of any event which, if uncured, with
lapse of time or notice or lapse of time and notice, would constitute a
Facility Termination Event or a Servicer Termination Event) 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 Transferred 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 8.14 RETENTION OF SERVICER. AFL hereby covenants and
agrees to act as such under this Agreement for an initial term,
commencing on the Closing Date and ending on December 31, 1998, which
term shall be extendible by the Agent for successive quarterly terms
ending on each successive March 31, June 30, September 30 and December 31
(or, pursuant to revocable written standing instructions from time to
time to the Servicer, for any specified number of terms greater than
one). 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 Agent to the
Servicer. AFL hereby agrees that, as of the date hereof
<PAGE>

and upon its receipt of any such Servicer Extension Notice, AFL shall
become bound, for the initial term beginning on the Closing Date and for
the duration of the term covered by such notice, to continue as the
Servicer subject to and in accordance with the other provisions of this
Agreement.

SECTION 8.15 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 8.16 INSURANCE. The Servicer shall maintain customary
amounts of insurance coverage, including, without limitation, commercial
crime coverage, employee dishonesty coverage, commercial auto coverage,
valuable papers and records coverage, coverage for fire, theft, workers
compensation, public liability, property damage and errors and omissions
coverage. The Servicer shall be entitled to self-insure with respect to
such insurance so long as the long-term unsecured debt obligations of the
Servicer are rated in the second highest long-term debt category by each
of the Rating Agencies.

SECTION 8.17 ACCOUNTS.

(a) The Servicer shall establish the Collection Account in the
name of the Collateral Agent for the benefit of the Secured Parties. The
Collection Account shall be an Eligible Account and initially shall be a
segregated trust account established and maintained with the Collateral
Agent. Amounts on deposit in the Collection Account shall be invested by
the Collateral Agent in Permitted Investments pursuant to written
instructions from the Servicer. If the Collateral Agent does not receive
written direction from the Servicer any such amounts on deposit shall be
invested in the investment described in subclause (f) of the definition
of Permitted Investments.

(b) The Servicer shall establish the Reserve Account in the
name of the Collateral Agent for the benefit of the Secured Parties. The
Reserve Account shall be an Eligible Account and initially shall be a
segregated trust account established and maintained with the Collateral
Agent. Amounts on deposit in the Reserve Account shall be invested by
the Collateral Agent in Permitted Investments pursuant to written
instructions from the Servicer. If the Collateral Agent does not receive
written direction from the Servicer any such amounts on deposit shall be
invested in the investment described in subclause (f) of the definition
of Permitted Investments.

(c) The Servicer shall establish the Collateral Account in the
name of the Collateral Agent for the benefit of the Secured Parties. The
Collateral Account shall be an Eligible Account and initially shall be a
segregated trust account established and maintained with the Collateral
Agent. The Collateral Agent shall deposit to the Collateral Account any
amount delivered to it by the Borrower and designated in writing to be
deposited in the Collateral Account.

SECTION 8.18 COLLECTIONS.

<PAGE>

(a) Pursuant to the Lockbox Agreement, the Lockbox Bank shall
remit to the Collection Account within two Business Days of receipt
thereof (i) all payments by or on behalf of the Obligors and (ii) all
Recoveries, each as collected during the Collection Period. In addition,
the Servicer shall remit, or cause to be remitted, all payments by or on
behalf of the Obligors received by the Servicer or the Borrower with
respect to the Transferred Receivables, all Recoveries, the purchase
price paid by AFL or the Servicer with respect to any Transferred
Receivables and all payments made to the Borrower under the Interest Rate
Hedges, no later than the Business Day following receipt directly
(without deposit into any intervening account) into the Collection
Account.

(b) The Servicer will be entitled to be reimbursed from amounts
on deposit in the Collection Account with respect to a Collection Period
for amounts previously deposited in the Collection Account but later
determined by the Servicer 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 upon certification by the Servicer of such amounts and
the provision of such information to the Collateral Agent and the Agent
as may be necessary in the opinion of the Agent to verify the accuracy of
such certification. In the event that the Agent has not received
evidence satisfactory to it of the Servicer's entitlement to
reimbursement pursuant to this SECTION 8.18, the Agent shall give the
Collateral Agent written notice to such effect, following receipt of
which the Collateral Agent shall not make a distribution to the Servicer
in respect of such amount, or if the Servicer prior thereto has been
reimbursed, the Collateral Agent shall withhold such amounts from amounts
otherwise distributable to the Servicer on the next succeeding
Distribution Date.

SECTION 8.19 APPLICATION OF COLLECTIONS. For the purposes of
this Agreement, all collections for a Collection Period shall be applied
by the Servicer with respect to each Transferred Receivable as follows:
(i) in the case of a Pre-Computed Receivable, FIRST, with respect to the
Scheduled Payment of such Pre-Computed Receivable, to interest and
principal in accordance with the actuarial method, and, SECOND, to any
late fees accrued with respect to such Pre-Computed Receivable, and
(ii) in the case of a Simple Interest Receivable, to interest and
principal in accordance with the Simple Interest Method. With respect to
Simple Interest Receivables, any prepayment of principal during each
Collection Period shall be immediately applied to reduce the Principal
Balance of such Receivable during such Collection Period.

ARTICLE IX

GRANT OF SECURITY INTERESTS

SECTION 9.1 BORROWER'S GRANT OF SECURITY INTEREST. As security
for the prompt payment or performance in full when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations, the Borrower
hereby assigns and pledges to the Collateral Agent, for the benefit of
the Secured Parties, and grants to the Collateral Agent, for the benefit
of the Secured Parties, a security interest in and lien upon, all of the
Borrower's right, title and interest in and to the following, in each
case whether now or hereafter existing or in which Borrower now has or
hereafter acquires an interest and wherever the same may be

<PAGE>

located (collectively, the "BORROWER COLLATERAL"):

(a) all Collateral;

(b) the Purchase Agreement, each Lockbox Agreement and all other
documents now or hereafter in effect relating to the purchase, servicing or
processing of Transferred Receivables (collectively, the "BORROWER ASSIGNED
AGREEMENTS"), including (i) all rights of the Borrower to receive moneys due and
to become due under or pursuant to the Borrower Assigned Agreements, (ii) all
rights of the Borrower to receive proceeds of any insurance, indemnity, warranty
or guaranty with respect to the Borrower Assigned Agreements, (iii) the
Borrower's right of foreclosure as lienholder of the vehicles underlying the
Receivables, (iv) claims of the Borrower for damages arising out of or for
breach of or default under the Borrower Assigned Agreements, and (v) the right
of the Borrower to amend, waive or terminate the Borrower Assigned Agreements,
to perform under the Borrower Assigned Agreements and to compel performance and
otherwise exercise all remedies and rights under the Borrower Assigned
Agreements; PROVIDED, that to the extent the foregoing applies to the
Transferred Receivables as well as other receivables originated and/or serviced
by AFL, the foregoing shall apply only to the Transferred Receivables;

(i) the Lockbox Account and all funds held in the
Lockbox Account and all certificates and instruments, if any, from time to time
representing or evidencing the Lockbox Account or such funds,

(ii) the Collection Account, all funds held in the
Collection Account, and all certificates and instruments, if any, from time to
time representing or evidencing the Collection Account or such funds,

(iii) the Reserve Account, all funds held in the Reserve
Account, and all certificates and instruments, if any, from time to time
representing or evidencing the Reserve Account or such funds,

(iv) the Collateral Account, all funds held in the
Collateral Account, and all certificates and instruments, if any, from time to
time evidencing the Collateral Account or such funds,

(v) all investments from time to time of amounts in the
Collection Account, Reserve Account and Collateral Account, and all certificates
and instruments, if any, from time to time representing or evidencing such
investments,

(vi) all notes, certificates of deposit and other
instruments from time to time delivered to or otherwise possessed by the
Collateral Agent or any Secured Party or any assignee or agent on behalf of the
Collateral Agent or any Secured Party in substitution for or in addition to any
of the then existing Borrower Account Collateral, and

<PAGE>

(vii) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any and all of the then existing Borrower Account
Collateral;

(d) each Interest Rate Hedge including all rights of the Borrower to
receive moneys due and to become due thereunder;

(e) all additional property that may from time to time hereafter be
granted and pledged by the Borrower or by anyone on its behalf under this
Agreement, including the deposit with the Collateral Agent or the Agent of
additional moneys by the Borrower; and

(f) all proceeds, accessions, substitutions, rents, Recoveries and
profits of, or with respect to, any and all of the foregoing Borrower Collateral
(including proceeds that constitute property of the types described in SECTIONS
9.1(a) through (e) above) and, to the extent not otherwise included, all
payments under insurance (whether or not the Collateral Agent or a Secured Party
or any assignee or agent on behalf of the Collateral Agent or a Secured Party is
an additional insured thereunder or a loss payee thereof) or any indemnity,
warranty or guaranty payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Borrower Collateral.

SECTION 9.2 DELIVERY OF COLLATERAL. All documents in the
Receivables File shall be delivered to and held by or on behalf of the
Custodian pursuant to the Custodial Agreement, and shall be in suitable
form for transfer by delivery.

SECTION 9.3 BORROWER REMAINS LIABLE. Notwithstanding anything in
this Agreement, (a) except to the extent of the Servicer's duties
hereunder, the Borrower shall remain liable under the Transferred
Receivables, Borrower Assigned Agreements and other agreements (including
each Interest Rate Hedge) included in the Borrower Collateral to perform
all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Agent, a
Secured Party or the Collateral Agent of any of its rights under this
Agreement, the Custodial Agreement or the Collateral Agent Agreement
shall not release the Borrower, AFL or the Servicer from any of their
respective duties or obligations under the Transferred Receivables,
Borrower Assigned Agreements or other agreements included in the Borrower
Collateral, (c) the Agent, the Secured Parties, the Collateral Agent and
the Custodian shall not have any obligation or liability under the
Transferred Receivables, Borrower Assigned Agreements or other agreements
included in the Borrower Collateral by reason of this Agreement, the
Custodial Agreement or the Collateral Agent Agreement, and (d) neither
the Agent, the Collateral Agent, the Custodian nor any of the Secured
Parties shall be obligated to perform any of the obligations or duties of
the Borrower, AFL or the Servicer under the Transferred Receivables,
Borrower Assigned Agreements or other agreements included in the Borrower
Collateral or to take any action to collect or enforce any claim for
payment assigned under this Agreement.

SECTION 9.4 COVENANTS OF THE BORROWER AND SERVICER REGARDING THE
COLLATERAL.

(a) OFFICES AND RECORDS. The Borrower shall keep its chief
place of business and

<PAGE>

chief executive offices and the office where it keeps its records at the
location specified in SECTION 10.9 or, upon 60 days prior written notice
to the Collateral Agent and the Agent, at such other location in a
jurisdiction where all action required by SECTION 9.4(e) shall have been
taken with respect to the Borrower Collateral. The Borrower and the
Servicer shall, for not less than three years or for such longer period
as may be required by law, from the date on which any Transferred
Receivable arose, maintain the records with respect to each Transferred
Receivable, including records of all payments received, credits granted
and merchandise returned. The Borrower and the Servicer will permit
representatives of the Agent, the Backup Servicer, the Collateral Agent
and the Custodian at any time and from time to time during normal
business hours, and at such times outside of normal business hours as the
Agent, the Backup Servicer, the Collateral Agent and the Custodian shall
reasonably request, (i) to inspect and make copies of and abstracts from
such records, and (ii) to visit the properties of the Borrower or the
Servicer utilized in connection with the collection, processing or
servicing of the Transferred Receivables for the purpose of examining
such records, and to discuss matters relating to the Receivables or the
Borrower's or Servicer's performance under this Agreement with any
officer or employee of the Borrower or Servicer having knowledge of such
matters. In connection therewith, the Agent, the Backup Servicer, the
Collateral Agent or the Custodian may institute procedures to permit it
to confirm the Obligor balances in respect of any Transferred
Receivables. Each of the Borrower and the Servicer agrees to render to
the Agent, the Backup Servicer, the Collateral Agent and the Custodian
such clerical and other assistance as may be reasonably requested with
regard to the foregoing. Without duplication of any obligations of the
Servicer set forth in clause (b) below, if a Facility Termination Event
shall have occurred and be continuing, promptly upon request therefor,
the Borrower or the Servicer shall deliver to the Collateral Agent and
the Agent records reflecting activity through the close of business on
the immediately preceding Business Day.

(b) MAINTAIN RECORDS OF TRANSFERRED RECEIVABLES. The Servicer
shall, at its own cost and expense, maintain satisfactory and complete
records of the Collateral, including a record of all payments received
and all credits granted with respect to the Collateral and all other
dealings with the Collateral. Each of the Borrower and the Servicer will
mark conspicuously with a legend, in form and substance satisfactory to
the Agent, its records, computer tapes, computer disks and credit files
pertaining to the Collateral, and its storage facilities where it
maintains information pertaining to the Collateral, to evidence this
Agreement and the assignment and security interest granted by this
ARTICLE IX. Upon the occurrence and during the continuation of a
Facility Termination Event, the Borrower and Servicer shall (i) deliver
and turn over to the Backup Servicer or to its representatives, or at the
option of the Backup Servicer, shall provide the Backup Servicer or its
representatives with access to, after the occurrence of a Facility
Termination Event, at any time, and during all other times, during
ordinary business hours, on demand of the Backup Servicer, all of the
Borrower's and Servicer's facilities, personnel, books and records
pertaining to the Collateral, including all records, and (ii) allow the
Backup Servicer to occupy the premises of the Borrower and the Servicer
where such books and records are maintained, and utilize such premises,
the equipment thereon and any personnel of the Borrower or the Servicer
that the Backup Servicer may wish to employ to administer, service and
collect the Transferred Receivables. The Backup Servicer will reimburse
the Servicer for the cost of the use of the

<PAGE>

portion of such premises, equipment and personnel used by the Backup
Servicer in accordance with the Facilities Management Agreement, dated as
of March 9, 1998 by and between Norwest and AFL.

(c) PERFORMANCE OF BORROWER ASSIGNED AGREEMENTS. The Borrower
shall (i) perform and observe all the terms and provisions of the
Borrower Assigned Agreements and the Interest Rate Hedges to be performed
or observed by it, maintain the Borrower Assigned Agreements and the
Interest Rate Hedges in full force and effect, enforce the Borrower
Assigned Agreements and the Interest Rate Hedges in accordance with their
terms and take all such action to such end as may be from time to time
requested by the Agent, and (ii) upon request of the Agent, make to any
other party to the Borrower Assigned Agreements and the Interest Rate
Hedges such demands and requests for information and reports or for
action as the Borrower is entitled to make under the Borrower Assigned
Agreements and the Interest Rate Hedges.

(d) NOTICE OF ADVERSE CLAIM. Each of the Borrower and the
Servicer shall advise the Agent and the Collateral Agent promptly, in
reasonable detail, (i) of any Adverse Claim known to it made or asserted
against any of the Borrower Collateral, and (ii) of the occurrence of any
event which would have a material adverse effect on the aggregate value
of the Borrower Collateral or on the assignments and security interests
granted by the Borrower in this Agreement.

(e) FURTHER ASSURANCES; FINANCING STATEMENTS.

(i) Each of the Borrower and the Servicer severally
agrees that at any time and from time to time, at its expense, it shall promptly
execute and deliver all further instruments and documents, and take all
reasonable further action, that may be necessary or desirable or that the Agent
or the Collateral Agent may reasonably request to perfect and protect the
assignments and security interests granted or purported to be granted by this
ARTICLE IX or to enable the Agent or the Collateral Agent to exercise and
enforce its rights and remedies under this Agreement and the Collateral Agent
Agreement with respect to any Borrower Collateral. Without limiting the
generality of the foregoing, the Borrower shall execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices as may be necessary or desirable or that the Agent or the Collateral
Agent may reasonably request to protect and preserve the assignments and
security interests granted by this Agreement and the Collateral Agent Agreement.

(ii) The Borrower, the Agent and each Secured Party
hereby severally authorize the Collateral Agent to execute and file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Borrower Collateral without the signature of the Borrower, the
Agent or the Secured Parties where permitted by law. A carbon, photographic or
other reproduction of this Agreement or any financing statement covering the
Borrower Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law. The Collateral Agent will promptly send to
the Borrower and the Agent any financing or continuation

<PAGE>

statements thereto which it files without the signature of the Borrower and will
promptly send to the Agent and the Borrower any financing or continuation
statements thereto which it files without the signature of the Agent except, in
the case of filings of copies of this Agreement as financing statements, the
Collateral Agent will promptly send the Borrower and the Agent, as the case may
be, the filing or recordation information with respect thereto.

(iii) Each of the Borrower and the Servicer shall furnish
to the Collateral Agent and the Agent from time to time such statements and
schedules further identifying and describing the Borrower Collateral and such
other reports in connection with the Borrower Collateral as the Collateral Agent
or the Agent may reasonably request, all in reasonable detail.

SECTION 9.5 RELEASE OF BORROWER COLLATERAL.

(a) GENERALLY. For purposes of selling and transferring
Receivables to third parties in connection with any Take-Out
Securitization, to the extent that (immediately after giving effect to
any requested release) there exists no Borrowing Base Deficiency and,
unless all Advances, Yield thereon and other amounts due hereunder have
been paid in full, there is no Facility Termination Event or Unmatured
Facility Termination Event, or, in connection with the purchase by the
Servicer of a Receivable pursuant to SECTION 8.4 or 8.7 or by AFL under
the Purchase Agreement, the Borrower may obtain releases of the
Collateral Agent's (for the benefit of the Secured Parties) security
interest in all or any part of the Borrower Collateral and from time to
time. Each request (a "TRANSFER REQUEST") for a partial release of
Collateral, except in connection with the repurchase by the Servicer of a
Receivable pursuant to SECTION 8.4 or 8.7 or by AFL under the Purchase
Agreement, shall be addressed to the Agent (with a copy thereof sent by
the Borrower or the Servicer to the Collateral Agent), demonstrating
compliance with the immediately preceding sentence and acknowledging that
the receipt of proceeds from such sale or transfer shall be deposited
into the Collection Account.

(b) TRANSFERS. With respect to each Transfer Request that is
received by the Agent by 12:00 noon, New York time, on a Business Day,
the Agent shall use due diligence and reasonable efforts to review such
Transfer Requests and instruct the Custodian (if AFL is not the
Custodian) to prepare the files, identified in each Transfer Request, for
shipment by 12:00 noon, New York time on the second succeeding Business
Day.

(c) CONTINUATION OF LIEN. Unless released in writing by the
Collateral Agent, as herein provided, the security interest in favor of
the Collateral Agent, for the benefit of the Secured Parties, in all
Borrower Collateral shall continue in effect until such time as the
Collateral Agent shall have received payment in full of the proceeds from
the sale or transfer of such Borrower Collateral to third parties in
accordance with this SECTION 9.5.

(d) APPLICATION OF PROCEEDS; NO DUTY. Neither of the Agent,
nor the Collateral Agent, nor any Secured Party shall be under any duty
at any time to credit Borrower for any amount due from any third party in
respect of any purchase of any Borrower Collateral contemplated above,
until the Collateral Agent has actually received such amount in
immediately available funds for deposit to the Collection Account.
Neither the Collateral Agent nor any Secured Party nor the Agent shall be
under any duty at any time to collect any

<PAGE>

amounts or otherwise enforce any obligations due from any third party in
respect of any such purchase of Receivables covered by the release of
such portion of Borrower Collateral or in respect of a securitization
thereof with a third party.

(e) REPRESENTATION IN CONNECTION WITH RELEASES, SALES AND
TRANSFERS. The Borrower represents and warrants that each request for
any release or transfer in connection with other securitizations pursuant
to SECTION 9.5(a) shall automatically constitute a representation and
warranty to the Secured Parties, the Agent and the Collateral Agent to
the effect that immediately before and after giving effect to such
release or Transfer Request, there is no Facility Termination Event, or
Unmatured Facility Termination Event (including, without limitation a
Borrowing Base Deficiency).

(f) RELEASE OF SECURITY INTEREST. Upon receipt of a Transfer
Request or, in connection with the purchase by the Servicer of a
Receivable pursuant to SECTION 8.4 OR 8.7 or by AFL under the Purchase
Agreement, upon the Servicer's written request, and, in each case upon
receipt in the Collection Account of proceeds from the sale or transfer,
the Collateral Agent shall promptly release, at the Borrower's expense,
such part of Borrower Collateral covered in connection with the Transfer
Request or such Servicer's request and shall deliver, at the Borrower's
expense, the documents and certificates on the released portion of
Borrower Collateral to the trustee or such similar entity in connection
with any Take-Out Securitization or, in connection with the purchase by
the Servicer of a Receivable pursuant to SECTION 8.4 OR 8.7 or by AFL
under the Purchase Agreement, the Servicer; PROVIDED that the trustee or
such similar entity in connection with any Take-Out Securitization or the
Servicer, as the case may be, acknowledges and agrees (i) that all
proceeds thereof that it receives are held in trust for the Secured
Parties and (ii) at such time that the Agent shall instruct such trustee
to transfer such proceeds, the trustee shall transfer such funds pursuant
to such instructions.

ARTICLE X

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

In order to induce the other parties hereto to enter into this
Agreement and, in the case of the Lenders, to make Advances hereunder,
the Borrower hereby represents and warrants to the Agent and the
Investors as to itself, as of the Closing Date and as of each Advance
Date, as follows:

SECTION 10.1 ORGANIZATION AND GOOD STANDING. The Borrower 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.
The Borrower had at all relevant times and now has, power, authority and
legal right to acquire and own the Transferred Receivables and the Other
Conveyed Property, and to grant to the Collateral Agent a security
interest in the Transferred Receivables, the Other Conveyed Property and
the other Borrower Collateral and to enter into and perform its
obligations under this Agreement.

<PAGE>

SECTION 10.2 DUE QUALIFICATION. The Borrower is duly qualified
to do business as a foreign entity 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.

SECTION 10.3 POWER AND AUTHORITY. The Borrower has the power and
authority to execute and deliver this Agreement and the other Transaction
Documents to which it is a party and to carry out its terms and their
terms, respectively; the Borrower has full power and authority to grant
to the Collateral Agent, for the benefit of the Secured Parties, a
perfected first priority security interest in the Transferred Receivables
and the other Borrower Collateral and has duly authorized such grant by
all necessary corporate action; and the execution, delivery and
performance of this Agreement and the other Transaction Documents to
which it is a party have been duly authorized by the Borrower by all
necessary corporate action.

SECTION 10.4 SECURITY INTEREST; BINDING OBLIGATIONS. This
Agreement and the Transaction Documents to which it is a party have been
duly executed and delivered and shall create a valid first priority
security interest (except, as to priority, for any tax liens or mechanics
liens that may arise after the Closing Date) in the Borrower Collateral
in favor of the Collateral Agent, on behalf of the Secured Parties,
enforceable against the Borrower and creditors of and purchasers from the
Borrower; and this Agreement and the other Transaction Documents to which
it is a party constitute legal, valid and binding obligations of the
Borrower 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.

SECTION 10.5 NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents to
which it is a party, and the fulfillment of the terms of this Agreement
and the other Transaction Documents to which it is a party, 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 certificate of incorporation or bylaws of the Borrower, or any
indenture, agreement, mortgage, deed of trust or other instrument to
which the Borrower is a party or by which it is bound or 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 this Agreement, or violate any law, order, rule or regulation
applicable to the Borrower of any Official Body having jurisdiction over
the Borrower or any of its properties, or in any way adversely affect the
Borrower's ability to perform its obligations under this Agreement or the
other Transaction Documents to which it is a party.

SECTION 10.6 NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Borrower's knowledge, threatened
against the Borrower, before any court or other Official Body having
jurisdiction over the Borrower or its properties (A) asserting the

<PAGE>

invalidity of this Agreement or any of the other Transaction Documents,
(B) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any of the other Transaction Documents,
(C) seeking any determination or ruling that might materially and
adversely affect the performance by the Borrower of its obligations
under, or the validity or enforceability of, this Agreement or any of the
other Transaction Documents, (D) involving the Borrower or (E) that could
have a material adverse effect on the Transferred Receivables.

SECTION 10.7 NO CONSENTS. The Borrower is not required to obtain
the consent of any other Person or any consent, license, approval or
authorization of, or registration or declaration with, any Official Body
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or the other Transaction Documents to
which it is a party.

SECTION 10.8 USE OF PROCEEDS. No proceeds of any Advance will be
used by the Borrower to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as
amended.

SECTION 10.9 CHIEF EXECUTIVE OFFICE. The chief executive office
of the Borrower is located at 7825 Washington Avenue South, Suite 901,
Minneapolis, Minnesota 55439-2435.

SECTION 10.10 SOLVENCY. The Borrower is solvent and will not
become insolvent after giving effect to the transactions contemplated by
this Agreement and the Transaction Documents. The Borrower has no
Indebtedness to any Person other than pursuant to this Agreement and the
other Transaction Documents. The Borrower, after giving effect to the
transactions contemplated by this Agreement and the other Transaction
Documents, will have an adequate amount of capital to conduct its
business in the foreseeable future.

SECTION 10.11 TAX TREATMENT. For federal income tax purposes,
each Transferred Receivable and the related Other Conveyed Property will
be treated as owned by AFL and its consolidated subsidiaries, including
the Borrower. For accounting purposes, the Borrower will treat the
purchase or absolute assignment of each Transferred Receivable and Other
Conveyed Property pursuant to the Purchase Agreement as a purchase or
absolute assignment of AFL's full right, title and ownership interest in
such Transferred Receivable and Other Conveyed Property (and those
Transferred Receivables and Other Conveyed Property contributed to the
Borrower by AFL pursuant to the Purchase Agreement shall be accounted for
as an increase in the stated capital of the Borrower) and the Borrower
has not in any other manner accounted for or treated the transfer to it
of Transferred Receivables and Other Conveyed Property.

SECTION 10.12 COMPLIANCE WITH LAWS. The Borrower has complied
and will comply in all material respects with all applicable laws, rules,
regulations, judgments, agreements, decrees and orders with respect to
its business and properties and all Borrower Collateral.

SECTION 10.13 TAXES. The Borrower has filed on a timely basis
all tax returns

<PAGE>

(including, without limitation, foreign, federal, state, local and
otherwise) required to be filed, is not liable for taxes payable by any
other Person and has paid or made adequate provisions for the payment of
all taxes, assessments and other governmental charges due from the
Borrower. No tax lien or similar adverse claim has been filed, and no
claim is being asserted, with respect to any such tax, assessment or
other governmental charge. Any taxes, fees and other governmental
charges payable by the Borrower in connection with the execution and
delivery of this Agreement and the other Transaction Documents and the
transactions contemplated hereby or thereby including the transfer of
each Transferred Receivable and Other Conveyed Property to the Borrower
have been paid or shall have been paid if and when due at or prior to the
Closing Date and the relevant Purchase Date, as the case may be.

SECTION 10.14 CERTIFICATES. Each Servicer's Certificate and
Borrowing Base Confirmation is accurate in all material respects as of
the date thereof.

SECTION 10.15 NO LIENS, ETC. The Borrower Collateral and each
part thereof is owned by the Borrower free and clear of any Adverse Claim
or restrictions on transferability and the Borrower has the full right,
corporate power and lawful authority to assign, transfer and pledge the
same and interests therein, and upon the making of each Advance, the
Collateral Agent, for the benefit of the Secured Parties, will have
acquired a perfected, first priority and valid security interest (except,
as to priority, for any tax lien or mechanics liens that may arise after
the Closing Date) in such Borrower Collateral, free and clear of any
Adverse Claim or restrictions on transferability. No effective financing
statement or other instrument similar in effect covering all or any part
of the Borrower Collateral is on file in any recording office, except
such as may have been filed in favor of the Collateral Agent as "Secured
Party" pursuant to ARTICLE IX of this Agreement or, with respect to the
Transferred Receivables, in favor of the Borrower pursuant to the
Purchase Agreement.

SECTION 10.16 PURCHASE AND SALE. Each Transferred Receivable and
Other Conveyed Property was purchased by, or contributed to, the Borrower
on the relevant Purchase Date pursuant to the Purchase Agreement.

SECTION 10.17 INVESTMENT COMPANY ACT OF 1940. Each purchase of
Transferred Receivables and Other Conveyed Property under the Purchase
Agreement will constitute a purchase or other acquisition of notes,
drafts, acceptances, open accounts receivable or other obligations
representing part or all of the sales price of merchandise, insurance or
services within the meaning of Section 3(c)(5) of the Investment Company
Act of 1940, as amended.

SECTION 10.18 INFORMATION TRUE AND CORRECT. All information
heretofore or hereafter furnished by or on behalf of the Borrower to any
Lender, the Agent or the Collateral Agent in connection with this
Agreement or any transaction contemplated hereby is and will be true and
complete in all material respects and does not and will not omit to state
a material fact necessary to make the statements contained therein not
misleading.

SECTION 10.19 ERISA COMPLIANCE. The Borrower is in compliance
with ERISA and has not incurred and does not expect to incur any
liabilities (except for premium payments arising in the ordinary course
of business) to the Pension Benefit Guaranty

<PAGE>

Corporation (or any successor thereto) under ERISA.

SECTION 10.20 FINANCIAL OR OTHER CONDITION. There has been no
material adverse change in the condition (financial or otherwise),
business, operations, results of operations, or properties of the
Borrower.

SECTION 10.21 INVESTMENT COMPANY STATUS. The Borrower is not an
"investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.

SECTION 10.22 NO TRADE NAMES. The Borrower has no trade names,
fictitious names, assumed names or "doing business as" names.

SECTION 10.23 SEPARATE CORPORATE EXISTENCE. The Borrower is
operated as an entity with assets and liabilities distinct from those of
AFL and any other Affiliates of the Borrower, and the Borrower hereby
acknowledges that the Agent and each of the Lenders are entering into the
transactions contemplated by this Agreement in reliance upon the
Borrower's identity as a separate legal entity from AFL and each such
Affiliate. Since its incorporation, the Borrower has been (and will be)
operated in such a manner as to comply with the covenants set forth in
SECTION 11.5.

There is not now, nor will there be at any time in the
future, any agreement or understanding between AFL and the Borrower
(other than as expressly set forth herein) providing for the allocation
or sharing of obligations to make payments or otherwise in respect of any
taxes, fees, assessments or other governmental charges.
SECTION 10.24 INVESTMENTS. The Borrower does not own or hold,
directly or indirectly, any capital stock or equity security of, or any
equity interest in, any Person.

SECTION 10.25 REPRESENTATION AND WARRANTIES TRUE AND CORRECT.
Each of the representations and warranties of the Borrower contained in
this Agreement and the other Transaction Documents is true and correct in
all material respects and the Borrower hereby makes each such
representation and warranty to, and for the benefit of, the Investors,
the Agent and the Collateral Agent as if the same were set forth in full
herein.

SECTION 10.26 TRANSACTION DOCUMENTS. The Purchase Agreement is
the only agreement pursuant to which the Borrower purchases and receives
contributions of Receivables, and the Transaction Documents delivered to
the Agent represent all material agreements between AFL, on the one hand,
and the Borrower, on the other. The Borrower has furnished to the Agent
true, correct and complete copies of each Transaction Document to which
the Borrower is a party, each of which is in full force and effect.
Neither the Borrower nor any Affiliate party thereto is in default of any
of its obligations thereunder in any material respect. Upon the purchase
and/or contribution of each Receivable pursuant to the Purchase
Agreement, the Borrower shall be the lawful owner of, and have good title
to, such Receivable and all assets relating thereto, free and clear of
any Liens. All such assets are transferred to the Borrower without
recourse to AFL except as described in the Purchase

<PAGE>

Agreement. The purchases of such assets by the Borrower constitute valid
and true sales for consideration (and not merely a pledge of such assets
for security purposes) and the contributions of such assets received by
the Borrower constitute valid and true transfers for consideration, each
enforceable against creditors of AFL, and no such assets shall constitute
property of AFL.

SECTION 10.27 OWNERSHIP OF THE BORROWER. One hundred percent
(100%) of the outstanding capital stock of the Borrower is directly owned
(both beneficially and of record) by AFL free and clear of any Liens.
Such stock is validly issued, fully paid and nonassessable and there are
no options, warrants or other rights to acquire capital stock from the
Borrower.

SECTION 10.28 ELIGIBLE RECEIVABLES. All Receivables included in
the Borrowing Base as of the most recently delivered Servicer's
Certificate or Borrowing Base Confirmation are Eligible Receivables.

ARTICLE XI

COVENANTS OF THE BORROWER

From the date hereof until the first day, following the Commitment
Termination Date, on which all Obligations shall have been finally and
fully paid and performed, the Borrower hereby covenants and agrees with
the Investors and the Agent as follows:

SECTION 11.1 PROTECTION OF SECURITY INTEREST OF THE SECURED
PARTIES.

(a) At or prior to the Closing Date, the Borrower shall have
filed or caused to be filed UCC-1 financing statements, executed by the
Borrower as debtor, naming the Collateral Agent (for the benefit of the
Secured Parties) as secured party and describing the Collateral, with the
office of the Secretary of State of the State of Minnesota and in such
other locations as may be necessary to perfect the security interests
intended to be granted hereby or as the Agent shall have required. From
time to time thereafter, the Borrower 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 the
Collateral Agent and the Secured Parties under this Agreement in the
Borrower Collateral and in the proceeds thereof. The Borrower shall
deliver (or cause to be delivered) to the Agent 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 the Borrower fails to
perform its obligations under this subsection, the Agent or the
Collateral Agent at the direction of the Agent, may do so, in each case
at the expense of the Borrower.

(b) The Borrower 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 the Borrower (or
by the Agent or the Collateral Agent on behalf of the Borrower) in
accordance with paragraph (a) above seriously misleading within the
meaning of Section 9-402(7) of the UCC, unless the Borrower shall have
given the Agent at least 60 days prior written notice

<PAGE>

thereof, and shall promptly file appropriate amendments to all previously
filed financing statements and continuation statements.

(c) The Borrower shall give the Agent 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 Borrower
shall at all times maintain its principal executive office within the
United States of America.

(d) The Borrower shall maintain its computer systems, if any,
so that, from and after the time of the first Advance under this
Agreement, the Borrower's master computer records (including archives)
that shall refer to the Collateral indicate clearly that such Collateral
is subject to first priority security interest in favor of the Collateral
Agent, for the benefit of the Secured Parties. Indication of the
Collateral Agent's (for the benefit of the Secured Parties) security
interest shall be deleted from or modified on the Borrower's computer
systems when, and only when, the Collateral in question shall have been
paid in full.

(e) If at any time the Borrower 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, the
Borrower 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
Collateral shall indicate clearly that such Collateral is subject to a
first priority security interest in favor of the Collateral Agent, for
the benefit of the Secured Parties.

SECTION 11.2 REPORTING REQUIREMENTS. The Borrower shall furnish,
or cause to be furnished, to the Agent and the Collateral Agent:

(a) as soon as available and in any event within 90 days (or next
succeeding Business Day if the last day of such period is not a Business Day)
after the end of each fiscal year, a copy of the audited consolidated financial
statements for such year for AFL and its consolidated Subsidiaries, certified,
without qualification by Independent Accountants acceptable to the Agent and
each other report or statement sent to shareholders or publicly filed by AFL or
the Borrower;

(b) as soon as available and in any event within 45 days (or next
succeeding Business Day if the last day of such period is not a Business Day)
after the end of each of the first three quarters of each fiscal year of AFL, a
consolidated balance sheet of AFL and its consolidated Subsidiaries as of the
end of such quarter and including the prior comparable period, and consolidated
statements of income and retained earnings, of AFL and its consolidated
Subsidiaries for such quarter and for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, certified by the
chief financial officer or chief accounting officer of AFL identifying such
documents as being the documents described in this paragraph (c) and stating
that the information set forth therein fairly presents the financial condition
of AFL and its consolidated Subsidiaries as of and for the periods then ended,
subject to year-end adjustments consisting only of normal, recurring accruals
and confirming that AFL is

<PAGE>

in compliance with all financial covenants in this Agreement;

(c) as soon as possible and in any event within five days after the
occurrence of a Facility Termination Event or an Unmatured Facility Termination
Event, the statement of the chief executive officer of the Borrower setting
forth complete details of such Facility Termination Event or Unmatured Facility
Termination Event and the action which the Borrower has taken, is taking and
proposes to take with respect thereto; and

(d) promptly, from time to time, such other information, documents,
records or reports respecting the Transferred Receivables, the Other Conveyed
Property or the Financed Vehicles related thereto, the other Borrower Collateral
or the condition or operations, financial or otherwise, of the Borrower, or AFL
or any of its Subsidiaries, as the Agent may, from time to time, reasonably
request.

SECTION 11.3 PRESERVATION OF EXISTENCE. The Borrower shall
observe all procedures required by its organizational documents and
by-laws and preserve and maintain its existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and
remain qualified in good standing in each jurisdiction where the failure
to preserve and maintain such existence, rights, franchises, privileges
and qualifications would materially adversely affect (1) the interests
hereunder of the Agent or any Affected Person, (2) the collectibility of
any Receivable or (3) its ability to perform its obligations hereunder or
under any of the other Transaction Documents.

SECTION 11.4 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The
Borrower shall maintain and implement (or cause the Servicer to maintain
and implement) administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing the
Receivables in the event of the destruction of the originals thereof) and
keep and maintain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all Transferred
Receivables (including, without limitation, records adequate to permit
the daily identification of all collections of and adjustments to each
Transferred Receivable).

SECTION 11.5 SEPARATE CORPORATE EXISTENCE. The Borrower shall
take all reasonable steps (including, without limitation, all steps that
the Agent may from time to time reasonably request) to maintain the
Borrower's identity as a separate legal entity from AFL or any of its
Affiliates and to make it manifest to third parties that the Borrower is
an entity with assets and liabilities distinct from those of AFL and each
other Affiliate thereof. Without limiting the generality of the
foregoing, the Borrower shall:

(a) conduct business correspondence in its own name, hold regular
meetings of, or obtain regular written consents from, its Board of Directors and
maintain appropriate books and records;

(b) except as set forth in its certificate of incorporation, not
permit any limitation on the authority of its own directors and officers to
conduct its business and affairs in accordance with their independent business
judgment, and shall not authorize or suffer any Person other than its own
directors and officers to act on its behalf with respect to matters (other than
matters

<PAGE>

customarily delegated to others under powers of attorney) for which a
corporation's own directors and officers would customarily be responsible;

(c) subject to the terms of the Custodial Agreement, maintain or
cause to be maintained by an agent of the Borrower under the Borrower's
control physical possession of all its books and records;

(d) maintain capitalization adequate for the conduct of its business;

(e) account for and manage its liabilities separately from those of
any other Person, including, without limitation, payment of all payroll and
other administrative expenses and taxes from its own assets;

(f) maintain its assets separately from those of any other Person;

(g) maintain offices through which its business is conducted separate
from those of AFL and any Affiliates of AFL (PROVIDED that, to the extent
that AFL and any of its Affiliates have offices in the same location, there
shall be a fair and appropriate allocation of overhead costs and expenses
among them, and each such entity shall bear its fair share of such expenses);

(h) not commingle its funds with those of AFL or any Affiliate of AFL
or any Affiliates of the Borrower except to the extent contemplated herein,
or use its funds for other than the Borrower's uses; and

(i) ensure that any financial reports required of the Borrower shall
comply with GAAP and shall be issued separately from, but may be consolidated
with, any reports prepared by any of its Affiliates.

SECTION 11.6 INTEREST RATE HEDGES. The Borrower shall maintain,
at all times on and after the date of the initial Advance hereunder,
Interest Rate Hedges (a) between the Borrower and (i) CSFB or any of its
Affiliates or (ii) any other bank or other financial institution whose
long-term rating is at least AA- from S&P and Aa3 from Moody's and whose
short-term unsecured debt obligation rating is at least A-1/P-1 by S&P
and Moody's, respectively, and is reasonably acceptable to the Agent,
(b) with a notional principal amount not less than the outstanding
principal amount of the Advances and with a final maturity date no
earlier than the date of the last required Scheduled Payment of any
Receivable in the Total Receivables Pool, (c) which have a strike price
no greater than the Maximum Interest Rate Cap Strike Price and (d) which
are otherwise in form and substance reasonably acceptable to the Agent.

SECTION 11.7 TANGIBLE NET WORTH. The Borrower shall maintain at
all times a positive Tangible Net Worth.

SECTION 11.8 TAKE-OUT SECURITIZATION. The Borrower shall effect
or cause an Affiliate to effect a Take-Out Securitization no more than
six months after the Closing Date and thereafter no more than four months
after the immediately preceding Take-Out

<PAGE>

Securitization.

SECTION 11.9 SALES, LIENS, ETC., AGAINST RECEIVABLES AND RELATED
ASSETS. The Borrower shall not, except as otherwise provided herein,
sell, assign (by operation of law or otherwise) or otherwise dispose of,
or create or suffer to exist, any Lien upon or with respect to, any
Transferred Receivable or any other Borrower Collateral.

SECTION 11.10 STOCK, MERGER, CONSOLIDATION, ETC. The Borrower
shall not

(a) Merge or consolidate with or into, or sell, convey,
transfer, exchange, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereafter acquired) to, acquire all or
substantially all of the assets of, any Person or division of any Person;
or, except as expressly permitted under the terms of this Agreement and
its certificate of incorporation, sell, convey, transfer, exchange, lease
or otherwise dispose of any of its assets; or

(b) Issue or allow the issuance of any shares of its capital
stock or rights, warrants or options in respect of its capital stock,
other than the shares of common stock which are and shall at all times
during the term of this Agreement be legally and beneficially owned by
AFL, free and clear of all Liens.

SECTION 11.11 CHANGE IN CORPORATE NAME. The Borrower shall not
make any change to its corporate name or use any trade names, fictitious
names, assumed names or "doing business as" names.

SECTION 11.12 INDEBTEDNESS. The Borrower shall not incur,
create, assume, suffer to exist or otherwise become liable with respect
to any Indebtedness other than (i) hereunder and under the Purchase
Agreement and (ii) other Indebtedness for operational expenses of the
Borrower in an amount not to exceed $50,000 at any one time outstanding.

SECTION 11.13 GUARANTEES. The Borrower shall not guarantee,
endorse or otherwise be or become contingently liable (including by
agreement to maintain balance sheet tests) in connection with the
obligations of any other Person, except endorsements of negotiable
instruments for collection in the ordinary course of business and
reimbursement or indemnification obligations in favor of the Agent or any
Affected Person as provided for under this Agreement.

SECTION 11.14 LIMITATION ON TRANSACTIONS WITH AFFILIATES. The
Borrower shall not enter into, or be a party to any transaction with any
Affiliate of the Borrower, except for (a) the transactions contemplated
by the Transaction Documents and (b) to the extent not otherwise
prohibited under this Agreement, other transactions in the nature of
employment contracts and directors' fees, upon fair and reasonable terms
materially no less favorable to the Borrower than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate.

SECTION 11.15 DOCUMENTS. The Borrower shall not cancel or
terminate any of the

<PAGE>

Transaction Documents to which it is party (in any capacity), or consent
to or accept any cancellation or termination of any of such agreements,
or amend or otherwise modify any term or condition of any of the
Transaction Documents to which it is party (in any capacity) or give any
consent, waiver or approval under any such agreement, or waive any
default under or breach of any of the Transaction Documents to which it
is party (in any capacity) or take any other action under any such
agreement not required by the terms thereof, unless (in each case) the
Agent shall have consented thereto; PROVIDED that the consent of the
Agent shall not be required to add additional parties to the Lock-Box
Agreement in accordance with paragraph 2 thereof.

SECTION 11.16 CHARTER AND BY-LAWS. The Borrower shall not amend,
modify or otherwise change any of the terms or provisions in its
certificate of incorporation, its by-laws, any document setting forth the
designation, amount, relative rights, limitations and preferences of any
class or series of its capital stock, and in each case, any equivalent
documents, as in effect on the date hereof, without the prior written
consent of the Agent.

SECTION 11.17 ACCOUNTING TREATMENT. The Borrower shall not
prepare any financial statements or other statements (including any tax
filings which are not consolidated with those of AFL) which shall account
for the transactions contemplated by the Purchase Agreement in any manner
other than as the sale of, or a capital contribution of, the Transferred
Receivables and the related assets by AFL to the Borrower.

SECTION 11.18 LIMITATION ON INVESTMENTS. The Borrower shall not
form, or cause to be formed, any Subsidiaries; or make or suffer to exist
any loans or advances to, or extend any credit to, or make any
investments (by way of transfer of property, contributions to capital,
purchase of stock or securities or evidences of indebtedness, acquisition
of the business or assets, or otherwise) in, any Affiliate or any other
Person except as otherwise permitted herein and pursuant to the Purchase
Agreement.

SECTION 11.19 DIVIDENDS. The Borrower shall not declare or make
(a) payment of any dividend or other distribution on or in respect of any
shares of its capital stock, or (b) 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 Facility Termination Event or Unmatured Facility Termination
Event shall occur or be continuing and no amount payable by the Borrower
under any Transaction Document is then due and owing but unpaid.

SECTION 11.20 OTHER LIENS OR INTERESTS. Except for the security
interest granted hereunder, the Borrower will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer
to exist any Lien on the Borrower Collateral or any interest therein, and
the Borrower shall defend the right, title, and interest of the
Collateral Agent (for the benefit of the Secured Parties), in and to the
Borrower Collateral against all claims of third parties claiming through
or under the Borrower.

ARTICLE XII

<PAGE>

THE SERVICER

SECTION 12.1 LIABILITY OF SERVICER; INDEMNITIES.

(a) The Servicer shall be liable hereunder only to the extent
of the obligations in this Agreement and the other Transaction Documents
specifically undertaken by the Servicer and the representations made by
the Servicer.

(b) The Servicer shall defend, indemnify and hold harmless each
Indemnified Party from and against any and all costs, expenses, losses,
damages, claims, liabilities, penalties, fines, forfeitures and
judgments, including reasonable fees and expenses of counsel and expenses
of litigation arising out of or resulting from the use, ownership or
operation of any Financed Vehicle related to a Transferred Receivable.

(c) The Servicer shall indemnify, defend and hold harmless each
Indemnified Party from and against any taxes that may at any time be
asserted against such Indemnified Party 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 income taxes or taxes
asserted with respect to, and as of the date of, the sale of the
Receivables to the Borrower) and costs and expenses in defending against
the same.

(d) The Servicer shall indemnify, defend and hold harmless each
Indemnified Party from and against any and all costs, expenses, losses,
claims, penalties, fines, forfeitures, judgments, damages and liabilities
to the extent that such cost, expense, loss, claim, penalty, fine,
forfeiture, judgment, damage or liability arose out of, or was imposed
upon such Indemnified Party by reason of the breach of this Agreement or
any other Transaction Document to which it is party by the Servicer, the
negligence (other than good faith errors in judgment made in the course
of servicing the Receivables), misfeasance, or bad faith of the Servicer
in the performance of its duties under this Agreement or by reason of
negligent disregard of its obligations and duties under this Agreement.

(e) Indemnification under this SECTION 12.1 shall survive the
termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer has made
any indemnity payments pursuant to this SECTION 12.1 and the recipient
thereafter collects any of such amounts from others, the recipient shall
promptly repay such amounts collected to the Servicer, without interest.

(f) Notwithstanding the indemnity provisions contained in
SECTIONS 12.1(b) through (e), the Servicer shall not be required to
indemnify any Indemnified Party against any costs, expenses, losses,
damages, claims or liabilities to the extent the same shall have been (i)
caused by the misfeasance, bad faith or gross negligence of such party,
or (ii) suffered by reason of uncollectible or uncollected Receivables
not caused by the Servicer's negligence (other than good faith errors in
judgment made in the course of servicing the Receivables), misfeasance or
bad faith.

<PAGE>

(g) If for any reason (other than the exclusions (i) and (ii)
set forth in SECTION 12.1(f)) the indemnification provided above in
SECTION 12.1 is unavailable to an Indemnified Party or is insufficient to
hold an Indemnified Party harmless, then the Servicer shall contribute to
the amount paid or payable by such Indemnified Party as a result of such
loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by such Indemnified
Party, on the one hand, and the Servicer, on the other hand, but also the
relative fault of such Indemnified Party, on the one hand, and the
Servicer, on the other hand, as well as any other relevant equitable
considerations.

(h) Notwithstanding anything to the contrary contained in this
Agreement, the successor Servicer, if Norwest, shall have no liability or
obligation with respect to any Servicer indemnification obligations other
than those set forth in subsection (d) hereof due to the gross
negligence, wilful misfeasance or bad faith of the successor Servicer in
the performance of its duties under this Agreement.

SECTION 12.2 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, shall be acceptable to
the Agent and the Required Lenders and shall be capable of fulfilling the
duties of the Servicer contained in this Agreement. Any Person (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 the other Transaction Documents and, whether or not such
assumption agreement is executed, shall be the successor to the Servicer
under this Agreement and the other Transaction Documents 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 hereunder. The
Servicer shall provide notice of any merger, consolidation or succession
pursuant to this SECTION 12.2(a) to the Agent, the Backup Servicer and
the Collateral Agent. Notwithstanding the foregoing, as a condition to
the consummation of the transactions referred to in CLAUSES (i), (ii),
(iii) and (iv) above, (x) immediately after giving effect to such
transaction, no representation or warranty made pursuant to SECTION 8.6
shall have been breached in any material respect (for purposes hereof,
such representations and warranties shall speak as of the date of the
consummation of such transaction) and no Facility Termination Event or
Unmatured Facility Termination Event shall have occurred and be
continuing, (y) the Servicer shall have delivered to the Agent 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 12.2(a), and (z) the Servicer shall have
delivered to the Agent an Opinion of Counsel, stating, in the opinion of
such counsel, either

<PAGE>

(A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and
protect the security interest of the Collateral Agent (for the benefit of
the Secured Parties) in the Transferred Receivables and other Borrower
Collateral and reciting the details of the filings or (B) no such action
shall be necessary to preserve and protect such interest.

(b) Any Person (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 12.3 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 Borrower, the Investors or
the Agent, 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 (other than good faith errors in
judgment made in the course of servicing the Receivables) in the
performance of duties. 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 written 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. The Backup
Servicer shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if
the repayment of such funds or adequate written indemnity against such
risk or liability is not reasonably assured to it in writing prior to the
expenditure or risk of such funds or incurrence of financial liability.

(b) Unless acting as Servicer hereunder, the Backup Servicer
shall not be liable for any obligation of the Servicer contained in this
Agreement, and the Agent, the Borrower and the Investors shall look only
to the Servicer to perform such obligations.

(c) The parties hereto and each Investor, by its acceptance of
any interest in the Note or any Advance, or in any portion of any
Lender's commitment to make Advances, expressly acknowledge and consent
to Norwest acting in the dual capacity of Backup Servicer or successor
Servicer and in the capacity as Collateral Agent. Norwest may, in such
dual capacity, discharge its separate functions fully, without hindrance
or regard to conflict of

<PAGE>

interest principles, duty of loyalty principles or other breach of
fiduciary duties to the extent that any such conflict or breach arises
from the performance by Norwest of express duties set forth in this
Agreement in any of such capacities, all of which defenses, claims or
assertions are hereby expressly waived by the other parties hereto except
in the case of gross negligence and willful misconduct by Norwest.

(d) The Backup Servicer shall have no responsibility and shall
not be in default hereunder nor incur any liability for any failure,
error, malfunction or any delay in carrying out any of its duties under
this Agreement if any such failure or delay results from the Backup
Servicer acting in accordance with information prepared or supplied by a
Person other than the Backup Servicer or the failure of any such Person
to prepare or provide such information. The Backup Servicer shall have
no responsibility, shall not be in default and shall incur no liability
(i) for any act or failure to act by any third party, including the
Servicer or for any inaccuracy or omission in a notice or communication
received by the Backup Servicer from any third party or (ii) that is due
to or results from the invalidity, unenforceability of any Receivable
under applicable law or the breach or the inaccuracy of any
representation or warranty made with respect to any Receivable.

SECTION 12.4 DELEGATION OF DUTIES. So long as AFL is the
Servicer, the Servicer may delegate duties under this Agreement to an
Affiliate of AFL with the prior written consent of the Agent and the
Backup Servicer. The Servicer also may at any time perform the specific
duties of (a) repossession of Financed Vehicles, (b) tracking the
insurance on Financed Vehicles and (c) pursuing the collection of
deficiency balances on Delinquent Receivables through sub-contractors who
are in the business of servicing automotive receivables, without the
consent of the Agent, the Lenders or the Backup Servicer. The Servicer
may also perform other non-material specific duties through such
sub-contractors in accordance with customary servicing policies and
procedures without the prior consent of the Agent; PROVIDED, HOWEVER,
that no such delegation or subcontracting of duties by the Servicer shall
relieve the Servicer of its responsibility with respect to such duties.
Neither AFL nor any other party acting as Servicer hereunder shall
appoint any subservicer hereunder without the prior written consent of
the Agent and the Backup Servicer. If the Backup Servicer assumes the
role of successor Servicer, such successor Servicer may delegate its
duties under this Agreement to any Person or appoint a subservicer with
the prior consent of the Agent.

SECTION 12.5 SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject
to the provisions of SECTION 12.2, 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 result in a material adverse
effect on the Servicer or the Backup Servicer, as the case may be, and
the Agent 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 Agent. No resignation of the
Servicer shall become effective until the Backup Servicer or an entity
acceptable to the

<PAGE>

Agent and the Required Lenders shall have assumed the responsibilities
and obligations of the Servicer. No resignation of the Backup Servicer
shall become effective until an entity acceptable to the Agent and the
Required Lenders 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 as permitted by this SECTION 12.5,
the Backup Servicer may petition a court for its removal.
Notwithstanding the foregoing, the Backup Servicer may resign for any
reason, provided an entity acceptable to the Agent and the Required
Lenders shall have assumed the responsibilities and obligations of the
Backup Servicer prior to the effectiveness of any such resignation.

ARTICLE XIII

SERVICER TERMINATION EVENTS

SECTION 13.1 SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "SERVICER TERMINATION
EVENT":

(a) Any failure by the Servicer or, so long as AFL or an
Affiliate of the Borrower is the Servicer, the Borrower to deliver to the
Collateral Agent or Agent any proceeds or payment required to be so
delivered under the terms of this Agreement (or, if AFL or an Affiliate
of the Borrower is the Servicer, under the Purchase Agreement) that
continues unremedied for a period of two Business Days (or, with respect
to any Purchase Amounts, one Business Day) after written notice is
received by the Servicer from the Agent or after discovery of such
failure by a Responsible Officer of the Servicer;

(b) Failure by the Servicer to deliver the Servicer's
Certificate required by SECTION 8.9 by 12:00 Noon, New York City time, on
the second Business Day after each Determination Date;

(c) Failure on the part of the Servicer to observe in all
material aspects its covenants and agreements set forth in SECTION
12.2(a);

(d) Failure on the part of the Servicer or, so long as AFL or
an Affiliate of the Borrower is the Servicer, the Borrower, duly to
observe or perform in any material respect any other covenants or
agreements of the Servicer or, so long as AFL is the Servicer, the
Borrower, as the case may be, set forth in this Agreement, which failure
continues unremedied for a period of 30 days after the earlier of
knowledge thereof by a Responsible Officer of the Servicer and the date
on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Agent;

(e) The entry of a decree or order for relief by a court or
regulatory authority having jurisdiction in respect of the Servicer (or
the Borrower) in an involuntary case under the Bankruptcy Code, 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 Borrower) or of

<PAGE>

any substantial part of their respective properties or ordering the
winding up or liquidation of the affairs of the Servicer (or the
Borrower) or the commencement of an involuntary case under the Bankruptcy
Code, as now or hereinafter in effect, or another present or future
federal or state bankruptcy, insolvency or similar law and such case is
not dismissed within 60 days;

(f) The commencement by the Servicer (or, if AFL or an
Affiliate of the Borrower is the Servicer, the Borrower) of a voluntary
case under the Bankruptcy Code, 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, if AFL or an Affiliate
of the Borrower is the Servicer, the Borrower) to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Servicer (or, if
AFL or an Affiliate of the Borrower is the Servicer, the Borrower) or of
any substantial part of its property or the making by the Servicer (or,
if AFL or an Affiliate of the Borrower is the Servicer, the Borrower) of
an assignment for the benefit of creditors or the failure by the Servicer
(or, if AFL or an Affiliate of the Borrower is the Servicer, the
Borrower) generally to pay its debts as such debts become due or the
taking of corporate action by the Servicer (or, if AFL or an Affiliate of
the Borrower is the Servicer, the Borrower) in furtherance of any of the
foregoing;

(g) Any representation, warranty or statement of the Servicer
(or, if AFL or an Affiliate of the Borrower is the Servicer, the
Borrower) 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
(excluding, however, any representation or warranty set forth in the
definition of "ELIGIBLE RECEIVABLE"), and, within 30 days after the
earlier of knowledge thereof by a Responsible Officer of the Servicer and
the date written notice thereof shall have been given to the Servicer by
the Agent, the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured;

(h) The Agent shall not have delivered a Servicer Extension
Notice pursuant to SECTION 8.14;

(i) The average of the Servicer Delinquency Ratios for the last
day of each of the preceding three Collection Periods exceeds 7%; or

(j) The Portfolio Net Loss Ratio exceeds 6%.

SECTION 13.2 CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a
Servicer Termination Event shall occur and be continuing, the Agent may,
and, upon the direction of the Required Lenders, the Agent shall, by
written notice given to the Servicer, terminate all of the rights and
obligations of the Servicer under this Agreement. On or after the
receipt by the Servicer of such written notice or if the Agent shall not
have delivered a Servicer Extension Notice pursuant to SECTION 8.14, 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; PROVIDED,
HOWEVER, that

<PAGE>

the Backup Servicer shall have no liability with respect to any
obligation which was required to be performed by the prior Servicer prior
to the date that the Backup Servicer becomes the Servicer or any claim of
a third party based on any alleged action or inaction of the prior
Servicer. The Backup Servicer is authorized and empowered by this
Agreement to execute and deliver, on behalf of the prior 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 termination, whether to
complete the transfer and endorsement of the Transferred Receivables and
related documents to show the Collateral Agent (for the benefit of the
Secured Parties) as lienholder or secured party, or otherwise. The prior
Servicer agrees to cooperate with the Backup Servicer in effecting the
termination of the responsibilities and rights of the prior Servicer
under this Agreement, including, without limitation and at the prior
Servicer's expense, the transfer to the Backup Servicer for
administration by it of all cash amounts that shall at the time be held
by the prior Servicer for deposit, or have been deposited by the prior
Servicer, in the Collection Account or thereafter received with respect
to the Transferred Receivables and the delivery to the Backup Servicer of
all Receivable Files, Monthly Records and Collection Records and a
computer tape in readable form containing all information necessary to
enable the Backup Servicer or a successor Servicer to service the
Transferred Receivables. In addition, upon the occurrence of a Servicer
Termination Event, the Servicer shall, if so requested by the Agent,
deliver to the Backup Servicer its Monthly Records within five days after
demand therefor and a computer tape or diskette (or any other means of
electronic transmission acceptable to the Backup Servicer) 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
Transferred Receivables. If requested by the Agent, the Backup Servicer
or successor Servicer shall terminate the Lockbox Agreement with respect
to the Transferred Receivables and direct the Obligors to make all
payments under the Transferred Receivables directly to the successor
Servicer (in which event the successor Servicer shall process such
payments in accordance with SECTION 8.2(e)), or to a lockbox established
by the successor Servicer at the direction of the Agent, at the prior
Servicer's expense. The terminated Servicer shall grant the Agent and
the Backup Servicer reasonable access to the terminated Servicer's
premises at the terminated Servicer's expense.

SECTION 13.3 APPOINTMENT OF SUCCESSOR SERVICER.

(a) On and after (i) the time the Servicer receives a notice of
termination pursuant to SECTION 13.2 or (ii) upon the resignation of the
Servicer pursuant to SECTION 12.5 or (iii) the receipt by the Backup
Servicer (or any alternate successor Servicer appointed pursuant to
SECTION 13.3(b)) of written notice from the Agent that the Agent is not
extending the Servicer's term pursuant to SECTION 8.14, the Backup
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 Backup Servicer
shall not be liable for any acts, omissions or obligations of the
Servicer prior to such succession or for any breach by the Servicer of
any of its representations and warranties contained in this Agreement or
in any related document. The Servicer and such successor

<PAGE>

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 13.2 upon the occurrence of any Servicer Termination Event
applicable to it as Servicer.

(b) The Agent (with the consent of the Required Lenders) may
exercise at any time its right to appoint as Backup Servicer or as
successor to the Servicer a person other than the Person serving as
Backup Servicer at the time and shall have no liability to the Investors,
the Borrower, AFL, the Person then serving as Backup Servicer 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 the
Agent shall fail to appoint a successor Servicer within 60 days of its
receipt of notice from the Backup Servicer to such effect, the Backup
Servicer may petition a court of competent jurisdiction to appoint any
Eligible Servicer as the successor to the Servicer. Pending such
appointment, 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 12.5, 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 13.2, the resignation of the Servicer
pursuant to SECTION 12.5 or the non-extension of the servicing term of
the Servicer pursuant to SECTION 8.14. If, upon the termination of the
Servicer pursuant to SECTION 13.2 or 8.14 or the resignation of the
Servicer pursuant to SECTION 12.5, the Agent (with the consent of the
Required Lenders) 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 appointed pursuant to this
SECTION 13 shall be entitled to compensation based upon a rate equal to
the greater of the (a) Servicing Fee Rate and (b) the then-current fee
for servicing assets comparable to the Receivables, which rate shall be
determined by averaging three servicing fee bids obtained by the Backup
Servicer from third party servicers selected by the Backup Servicer (the
"MARKET RATE SERVICING FEE RATE"). In addition, any successor Servicer
shall be entitled to receive Transition Costs in accordance with the
Collateral Agent Agreement.

(d) The successor Servicer, if Norwest, its successors or
assigns, shall have (i) 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,
(ii) no obligation to perform any repurchase or advancing obligations, if
any, of the Servicer, (iii) no obligation to pay any taxes required to be
paid by the Servicer and (iv) no obligation to pay any of the fees and
expenses of any other party involved in this transaction. NO SUCCESSOR
SERVICER SHALL BE REQUIRED TO MAKE THE REPRESENTATION SET FORTH IN
SECTION 8.6(b)(ix).

ARTICLE XIV

FACILITY TERMINATION EVENTS; THEIR EFFECT

<PAGE>

SECTION 14.1 FACILITY TERMINATION EVENTS. Each of the following
shall constitute a Facility Termination Event under this Agreement:

(a) Default in the payment when due of any principal of any
Advance, which default shall continue unremedied for one Business Day, or
default in the payment of any other amount payable by the Borrower
hereunder, including, without limitation, any Yield on any Advance or any
Fees which default shall continue for one Business Day; or the Borrower
shall fail to comply with the Clean-Up Requirement during any Clean-Up
Period;

(b) The Borrower or AFL (in any capacity) shall fail to perform
or observe any other term, covenant or agreement contained in this
Agreement or in any other Transaction Document on its part to be
performed or observed and, except in the case of the covenants and
agreements contained in SECTIONS 11.7 and 11.8, as to each of which no
grace period shall apply, any such failure shall remain unremedied for 30
days (one Business Day in the case of SECTION 11.6) after knowledge
thereof or after written notice thereof shall have been given by the
Agent to the Borrower;

(c) Any representation or warranty of the Borrower or AFL (in
any capacity) made or deemed to have been made hereunder or in any other
Transaction Document or any other writing or certificate furnished by or
on behalf of the Borrower to the Agent or the Lenders for purposes of or
in connection with this Agreement or any other Transaction Document
(including any certificates delivered pursuant to SECTION 7.2(j), any
Servicer's Certificate or any Borrowing Base Confirmation delivered
pursuant to SECTION 7.2(g)) shall prove to have been false or incorrect
in any material respect when made or deemed to have been made; PROVIDED
that no breach shall be deemed to occur hereunder in respect of any
representation or warranty relating to any Eligible Receivable to the
extent AFL or the Servicer has repurchased the related Receivable in
accordance with the provisions hereof or of the Purchase Agreement;

(d) An Event of Bankruptcy shall have occurred and remain
continuing with respect to the Borrower or AFL;

(e) The aggregate principal amount of all Advances outstanding
hereunder (after giving effect to all distributions in respect of
principal to be made on the date of determination) exceeds the Borrowing
Base and such condition continues unremedied for one Business Day (such
excess referred to as the "BORROWING BASE DEFICIENCY");

(f) The Internal Revenue Service shall file notice of a lien
pursuant to Section 6323 of the Internal Revenue Code with regard to any
of the assets of the Borrower or AFL and such lien shall not have been
released within 30 days, or the Pension Benefit Guaranty Corporation
shall file notice of a lien pursuant to Section 4068 of ERISA with regard
to any of the assets of the Borrower or AFL and such lien shall not have
been released within 30 days;

(g) (i) Any Transaction Document or any Lien granted
thereunder by the Borrower, shall (except in accordance with its terms),
in whole or in part, terminate, cease to

<PAGE>

be effective or cease to be the legally valid, binding and enforceable
obligation of the Borrower; or (ii) the Borrower or any other party
shall, directly or indirectly, contest in any manner such effectiveness,
validity, binding nature or enforceability; or (iii) any Lien securing
any Obligation shall, in whole or in part, cease to be a perfected first
priority security interest against the Borrower (except for any tax or
mechanic's Liens that may arise with respect to any Financed Vehicle
after its related Purchase Date);

(h) A Servicer Termination Event shall have occurred;

(i) On any Determination Date, the Delinquency Ratio averaged
for such Determination Date and the three immediately preceding
Determination Dates exceeds 2.5%;

(j) The Borrower or AFL shall fail to pay any principal of or
premium or interest on any Indebtedness having a principal amount of
$10,000,000 or greater, when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Indebtedness; or any other default under any agreement or instrument
relating to any such Indebtedness of the Borrower or AFL, as applicable,
or any other event, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or instrument if the
effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such
Indebtedness shall be declared to be due and payable or required to be
prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased, or an offer to prepay, redeem, purchase
or defease such Indebtedness shall be required to be made, in each case,
prior to the stated maturity thereof;

(k) There shall occur a "termination event"or "event of
default" or similar event under any other Transaction Document;

(l) Either (i) the long-term senior unsecured debt of AFL is
rated by either S&P or Moody's below B- or B3, respectively, or (ii) if
AFL is not so rated, the Agent, acting at the direction of the Required
Lenders, deems the creditworthiness of AFL to be the equivalent thereof;

(m) AFL shall cease to directly own 100% of the outstanding
capital stock of the Borrower;

(n) Net Yield as of the last day of any Collection Period is
less than 1.0%;

(o) As of any Distribution Date, the amount in the Reserve
Account is less than the Minimum Reserve Account Amount, and such
deficiency is not cured on or prior to the immediately succeeding
Distribution Date;

(p) This Agreement and the Advances hereunder are not rated
"A/A2" by S&P and Moody's within 60 days after the Closing Date or after
such rating is granted, the same is reduced or withdrawn by S&P or
Moody's; or

<PAGE>

(q) A notice of termination with respect to the Lockbox
Agreement with respect to the Transferred Receivables shall have been
delivered, or a termination of the Lockbox Agreement shall have otherwise
occurred, and a replacement Lockbox Bank acceptable to the Agent shall
not have executed a Lockbox Agreement with respect to the Transferred
Receivables in form and substance satisfactory to the Agent within 30
days of such notice.

SECTION 14.2 EFFECT OF FACILITY TERMINATION EVENT.

(a) OPTIONAL TERMINATION. Upon the occurrence of a Facility
Termination Event (other than a Facility Termination Event described in
SECTION 14.1(d)), the Agent may, and, at the direction of the Required
Lenders, the Agent shall declare all or any portion of the outstanding
principal amount of the Advances and other Obligations to be due and
payable and/or the Facility (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of such Advances and other
Obligations which shall be so declared due and payable shall be and
become immediately due and payable, without further notice, demand or
presentment, and/or, as the case may be, the Facility (and the
Commitments of the Banks, if any, thereunder) shall terminate.

(b) AUTOMATIC TERMINATION. Upon the occurrence of a Facility
Termination Event described in SECTION 14.1(d) or a Servicer Termination
Event described in SECTION 13.1(i), the Facility Termination Date shall
be deemed to have occurred automatically, and all outstanding Advances
under this Agreement and all other Obligations under this Agreement shall
become immediately and automatically due and payable, all without
presentment, demand, protest, or notice of any kind.

SECTION 14.3 CERTAIN RIGHTS UPON FACILITY TERMINATION EVENT.

(a) In addition to the rights and remedies specified in SECTION
14.2, if a Facility Termination Event shall have occurred and be
continuing, the Agent may direct the Collateral Agent to exercise any of
the remedies specified in the Collateral Agent Agreement or available to
the Collateral Agent as a secured party under the UCC in respect of the
Borrower Collateral (or any portion thereof).

(b) The rights and remedies provided to the Collateral Agent,
the Agent and the Secured Parties herein and in the other Transaction
Documents are cumulative and not exclusive of any other rights and
remedies the Collateral Agent, the Agent and the Secured Parties may have
under applicable law.

(c) If a Facility Termination Event shall have occurred and be
continuing, then at any time after the acceleration of the maturity of
the Advances and other Obligations has been made and before a judgment or
decree for payment of the money due has been obtained by the Agent as
hereinafter provided, the Required Lenders, by written notice to the
Borrower and the Agent, may rescind and annul such declaration and its
consequences if:

(i) the Borrower has paid or deposited with the Agent a
sum sufficient to pay

<PAGE>

(A) all payments of principal of and Yield on the Advances and all
other amounts that would then be due hereunder or if the Facility Termination
Event giving rise to such acceleration had not occurred; and

(B) all sums paid or advanced by the Agent hereunder and the
reasonable compensation, expenses, disbursements and advances of the Agent and
its agents and counsel; and

(ii) all Facility Termination Events, other than the
nonpayment of the principal of the Advances that has become due solely by such
acceleration, have been cured or waived.

No such rescission shall affect any subsequent default or
impair any right consequent thereto.

ARTICLE XV

THE AGENT

SECTION 15.1 APPOINTMENT. Each Lender hereunder hereby
irrevocably designates and appoints CSFB as Agent hereunder, and
authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and the other Transaction Documents and to
exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and the other Transaction
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities on the part of the Agent to any Lender
shall be read into this Agreement or the other Transaction Documents or
shall otherwise exist against the Agent. In performing its functions and
duties hereunder, the Agent shall act solely as the agent of the Lenders,
and the Agent does not assume, nor shall be deemed to have assumed, any
obligation or relationship of trust or agency with or for any such
Person.

SECTION 15.2 DELEGATION OF DUTIES. The Agent may execute any of
its duties under this Agreement by or through its subsidiaries,
affiliates, agents or attorneys-in-fact and shall be entitled to advice
of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible to any Lender for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care.

SECTION 15.3 EXCULPATORY PROVISIONS. Neither the Agent (acting
in such capacity) nor any of its directors, officers, agents or employees
shall be (a) liable for any action lawfully taken or omitted to be taken
by it or them or any Person described in SECTION 15.2 under or in
connection with this Agreement or the other Transaction Documents (except
for its, their or such Person's own gross negligence or willful
misconduct), or (b) responsible in any manner to any Person for any
recitals, statements, representations or warranties of any Person (other
than itself) contained in the Transaction Documents or in any
certificate, report,

<PAGE>

statement or other document referred to or provided for in, or received
under or in connection with, the Transaction Documents or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of
the Transaction Documents or any other document furnished in connection
therewith or herewith, or for any failure of any Person (other than
itself or its directors, officers, agents or employees) to perform its
obligations under any Transaction Document or for the satisfaction of any
condition specified in a Transaction Document. Except as otherwise
expressly provided in this Agreement, the Agent shall not be under any
obligation to any Person to ascertain or to inquire as to the observance
or performance of any of the agreements or covenants contained in, or
conditions of, the Transaction Documents, or to inspect the properties,
books or records of the Borrower, the AFL or the Servicer.

SECTION 15.4 RELIANCE BY AGENT. The Agent shall in all cases be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to each of the Lenders), independent
accountants and other experts selected by the Agent. The Agent shall in
all cases be fully justified in failing or refusing to take any action
under this Agreement, any other Transaction Document or any other
document furnished in connection herewith or therewith unless it shall
first receive such advice or concurrence of the Lenders, as it deems
appropriate, or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability, cost and expense which may be
incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement, the other Transaction
Documents or any other document furnished in connection herewith or
therewith in accordance with a request of the Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders.

SECTION 15.5 ACTION UPON CERTAIN EVENTS; REPORTS AND NOTICES.

(a) To the extent the Agent is entitled to consent to or
withhold its consent of any waiver or amendment of this Agreement or
other Transaction Documents in accordance with the terms hereof or
thereof, or is notified in writing by a party hereto of a Facility
Termination Event or Servicer Termination Event, the Agent shall (i) give
prompt notice to the Lenders of any such waiver, amendment, Facility
Termination Event or Servicer Termination Event of which it is aware, and
(ii) take such action with respect to such waiver, amendment, Facility
Termination Event or Servicer Termination Event as shall be directed by
the Required Lenders; PROVIDED, HOWEVER, that unless and until the Agent
shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such waiver, amendment, Facility Termination Event or Servicer
Termination Event, as applicable, as the Agent shall, in its sole
discretion, deem advisable and in the best interests of the Lenders.

(b) The Agent shall upon request promptly provide the Lenders
with copies of reports and notices received by it hereunder and under the
Custodial Agreement and the Collateral Agent Agreement.

<PAGE>

SECTION 15.6 NON-RELIANCE ON AGENT. The Lenders expressly
acknowledge that neither the Agent, nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent
hereafter taken, including, without limitation, any review of the affairs
of either the Borrower, the AFL, the Servicer or the Backup Servicer,
shall be deemed to constitute any representation or warranty by the Agent
to any Lender. Except as expressly provided herein, the Agent shall not
have any duty or responsibility to provide any Lender with any credit or
other information concerning the Borrower Collateral or the business,
operations, property, prospects, financial and other condition or
creditworthiness of the Borrower, the AFL, the Servicer, the Lenders or
the Backup Servicer which may come into the possession of the Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.

SECTION 15.7 INDEMNIFICATION. The Banks agree to indemnify the
Agent and its officers, directors, employees, representatives and agents
(to the extent not reimbursed by the Borrower, the Servicer or AFL under
the Transaction Documents, and without limiting the obligation of such
Persons to do so in accordance with the terms of the Transaction
Documents), ratably according to their Commitment Percentages, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of counsel for the Agent or the affected Person in
connection with any investigative, or judicial proceeding commenced or
threatened, whether or not the Agent or such affected Person shall be
designated a party thereto) that may at any time be imposed on, incurred
by or asserted against the Agent or such affected Person as a result of,
or arising out of, or in any way related to or by reason of, any of the
transactions contemplated hereunder or under the Transaction Documents or
any other document furnished in connection herewith or therewith (but
excluding any such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting
solely from the gross negligence or willful misconduct of the Agent or
such affected Person).

SECTION 15.8 SUCCESSOR AGENT. The Agent may, upon five (5) days'
notice to the Lenders (with a copy to the Borrower), resign as Agent;
PROVIDED, in either case, that a Lender agrees to become the successor
Agent hereunder in accordance with the next sentence. If the Agent shall
resign as Agent under this Agreement, then the Required Lenders during
such period shall appoint from among the Banks a successor agent,
whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent, and the term "Agent" shall mean such successor
agent, effective upon its acceptance of such appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement. After the retiring Agent's resignation
hereunder as Agent, the provisions of this ARTICLE XV shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.

SECTION 15.9 LIABILITY OF THE AGENT. Notwithstanding any
provision of this Agreement or any other Transaction Document: (i) the
Agent shall not have any obligations

<PAGE>

under this Agreement or any other Transaction Document other than those
specifically set forth herein and therein, and no implied obligations of
the Agent shall be read into this Agreement or any other Transaction
Document; and (ii) in no event shall the Agent be liable under or in
connection with this Agreement or any other Transaction Document for
indirect, special, or consequential losses or damages of any kind,
including lost profits, even if advised of the possibility thereof and
regardless of the form of action by which such losses or damages may be
claimed. Neither the Agent nor any of its respective directors,
officers, agents or employees shall be liable for any action taken or
omitted to be taken in good faith by it or them under or in connection
with this Agreement or any other Transaction Document, except for its or
their own gross negligence or willful misconduct. Without limiting the
foregoing, the Agent (a) may consult with legal counsel (including
counsel for the Lenders, the Borrower or the Servicer), independent
public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts, (b)
shall not be responsible to the Lenders, the Borrower, the AFL, the
Servicer or the Backup Servicer for any statements, warranties or
representations (other than its own statements) made in or in connection
with this Agreement or the other Transaction Documents, (c) shall not be
responsible to the Lenders, the Borrower, the AFL, the Servicer or the
Backup Servicer for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or
the other Transaction Documents (other than the legality, validity,
enforceability or genuineness of its own execution, authorization and
performance hereof and thereof), (d) shall incur no liability under or in
respect of any of the commercial paper or other obligations of the
Lenders under this Agreement or the other Transaction Documents and
(e) shall incur no liability under or in respect of this Agreement or the
other Transaction Documents by acting upon any notice (including notice
by telephone), consent, certificate or other instrument or writing (which
may be by facsimile) believed by it to be genuine and signed or sent by
the proper party or parties. Notwithstanding anything else herein or in
the other Transaction Documents, it is agreed that where the Agent may be
required under this Agreement or the other Transaction Documents to give
notice of any event or condition or to take any action as a result of the
occurrence of any event or the existence of any condition, the Agent
agrees to give such notice or take such action only to the extent that it
has actual knowledge of the occurrence of such event or the existence of
such condition, and shall incur no liability for any failure to give such
notice or take such action in the absence of such knowledge.

SECTION 15.10 AGENT AND AFFILIATES. The Agent and any of its
Affiliates may generally engage in any kind of business with the
Borrower, the Servicer, AFL, the Backup Servicer, any Obligor, any of
their respective Affiliates and any Person who may do business with or
own securities of the Borrower, the Servicer, AFL, the Backup Servicer,
any Obligor or any of their respective Affiliates, all as if the Agent
were not the Agent hereunder and without any duty to account therefor to
any Lender.

ARTICLE XVI

ASSIGNMENTS

<PAGE>

SECTION 16.1 RESTRICTIONS ON ASSIGNMENTS. Except as specifically
provided herein (with respect to the Servicer and the Backup Servicer),
neither the Borrower, the Servicer, AFL nor Norwest may assign any of
their respective rights or obligations hereunder or any interest herein
without the prior written consent of the Agent and the Lender or, in the
case of Norwest, the Agent and the Required Lenders. No Lender may
assign its rights or obligations hereunder, any Advance or the Note (or
any portion thereof) to any Person without the prior written consent of
the Borrower and the Agent (as to the Borrower only, such consent not to
be unreasonably withheld or delayed); PROVIDED, HOWEVER, that any Lender
may assign, or grant a security interest in, all or any portion of the
Advances and the Note to (i) CSFB or any of its Affiliates or another
Lender or (ii) any Person managed by CSFB or any of its Affiliates, and
(iii) any Liquidity Provider (each, an "ELIGIBLE ASSIGNEE"), in each case
under clauses (i), (ii) and (iii) above, without the prior written
consent of the Borrower; PROVIDED, FURTHER, HOWEVER, that after the
occurrence of the Facility Termination Date, any Lender may, subject to
the provisions of SECTION 16.5, assign all or a portion of the Note held
by it to a Person other than those identified in clauses (i), (ii) and
(iii) above without the prior written consent of the Borrower.

SECTION 16.2 DOCUMENTATION. Each Lender shall deliver to each
assignee an assignment, in such form as such Lender and the related
assignee may agree, duly executed by such Lender assigning any such
rights, obligations, Advance or Note to the assignee; and such Lender
shall promptly execute and deliver all further instruments and documents,
and take all further action, that the assignee may reasonably request, in
order to perfect, protect or more fully evidence the assignee's right,
title and interest in and to the items assigned, and to enable the
assignee to exercise or enforce any rights hereunder or under the Note
evidencing such Advance.

SECTION 16.3 RIGHTS OF ASSIGNEE. Upon the foreclosure of any
assignment of any Advances made for security purposes, or upon any other
assignment of any Advance from any Lender pursuant to this ARTICLE XVI,
the respective assignee receiving such assignment shall have all of the
rights of such Lender hereunder with respect to such Advances and all
references to the Lender or Investors in SECTION 6.1 shall be deemed to
apply to such assignee.

SECTION 16.4 NOTICE OF ASSIGNMENT. Each Lender shall provide
notice to the Borrower of any assignment hereunder by such Lender to any
assignee. Each Lender authorizes the Agent to, and the Agent agrees that
it shall, endorse the Note to reflect any assignments made pursuant to
this ARTICLE XVI or otherwise.

SECTION 16.5 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.

(a) The Agent shall keep a register (the "NOTE REGISTER") in
which, subject to such reasonable regulations as it may prescribe, the
Agent shall provide for the registration of the Note and of transfer of
the Note. The Agent is hereby appointed "NOTE REGISTRAR" for the purpose
of registering the Note and transfers of the Note as herein provided.

(b) Each person who has or who acquired a Note shall be deemed
by the

<PAGE>

acceptance of acquisition of such Note to have agreed to be bound by the
provisions of this SECTION 16.5. No Note may be transferred, and the
Agent shall not register the transfer of the Note, unless the proposed
transferee shall have delivered to the Agent (i) either (x) evidence
satisfactory to it that the transfer of such Note is exempt from
registration or qualification under the Securities Act of 1933, as
amended, and all applicable state securities laws and that the transfer
does not constitute a "prohibited transaction" under ERISA or (y) an
express agreement by the proposed transferee to be bound by and to abide
by the provisions of this SECTION 16.5, the restrictions noted on the
face of such Note and (ii) a properly executed Form W-9 and, in the case
of a transferee who is a foreign person (within the meaning of Section
7701(a)(5) of the Code), a properly executed Form 4224 or Form 1001
showing a zero rate of withholding.

(c) At the option of the holder thereof, the Note may be
exchanged for one or more new Notes of any authorized denominations and
of a like class and aggregate principal amount at an office or agency of
the Borrower. Whenever any Notes are so surrendered for exchange, the
Borrower shall execute and deliver (through the Agent) the new Notes
which the holder making the exchange is entitled to receive.

(d) Upon surrender for registration of transfer of any Note at
an office or agency of the Borrower, the Borrower shall execute and
deliver (through the Agent), in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of
a like class and aggregate principal amount.

(e) All Notes issued upon any registration of transfer or
exchange of any Note in accordance with the provisions of this Agreement
shall be the valid obligations of the Borrower, evidencing the same debt,
and entitled to the same benefits under this Agreement, as the Note(s)
surrendered upon such registration of transfer or exchange.

(f) Every Note presented or surrendered for registration of
transfer or for exchange shall (if so required by the Borrower or the
Agent) be fully endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Note Registrar, duly executed by the
holder thereof or his attorney duly authorized in writing. Each such
Note shall be accompanied by a statement providing the name of the
transferee and indicating whether the transferee is subject to income tax
backup withholding requirements and whether the transferee is the sole
beneficial owner of such Notes.

(g) No service charge shall be made for any registration of
transfer or exchange of Notes, but the Borrower may require payment from
the transferee holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer of exchange of Notes, other than exchanges
pursuant to this SECTION 16.5.

(h) The holders of the Notes shall be bound by the terms and
conditions of this Agreement.

SECTION 16.6 MUTILATED, DESTROYED, LOST AND STOLEN NOTES.

<PAGE>

(a) If any mutilated Note is surrendered to the Agent, the
Borrower shall execute and deliver (through the Agent) in exchange
therefor a new Note of like class and tenor and principal amount and
bearing a number not contemporaneously outstanding.

(b) If there shall be delivered to the Borrower and the Agent
prior to the payment of the Notes (i) evidence to their satisfaction of
the destruction, loss or theft of any Note and (ii) such security or
indemnity as may be required by them to save each of them and any agent
of either of them harmless, then, in the absence of notice to the
Borrower or the Agent that such Note has been acquired by a BONA FIDE
purchaser, the Borrower shall execute and deliver (through the Agent), in
lieu of any such destroyed, lost or stolen Note, a new Note of like
class, tenor and principal amount and bearing a number not
contemporaneously outstanding.

(c) Upon the issuance of any new Note under this SECTION 16.6,
the Borrower may require the payment from the transferor holder of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses connected therewith.

(d) Every new Note issued pursuant to this SECTION 16.6 and in
accordance with the provisions of this Agreement, in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Borrower, whether or not the destroyed,
lost or stolen Note shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Agreement equally and
proportionately with any and all other Notes duly issued hereunder.

(e) The provisions of this SECTION 16.6 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or
stolen Notes.

SECTION 16.7 PERSONS DEEMED OWNERS. The Borrower, the Servicer,
the Agent, the Collateral Agent and any agent for any of the foregoing
may treat the holder of any Note as the owner of such Note for all
purposes whatsoever, whether or not such Note may be overdue, and none of
the Borrower, the Servicer, the Agent, the Collateral Agent and any such
agent shall be affected by notice to the contrary.

SECTION 16.8 CANCELLATION. All Notes surrendered for payment or
registration of transfer or exchange shall be promptly canceled. The
Borrower shall promptly cancel and deliver to the Agent any Notes
previously authenticated and delivered hereunder which the Borrower may
have acquired in any manner whatsoever, and all Notes so delivered shall
be promptly canceled by the Borrower. No Notes shall be authenticated in
lieu of or in exchange for any Notes canceled as provided in this
SECTION 16.8, except as expressly permitted by this Agreement.

SECTION 16.9 PARTICIPATIONS.

(a) At any time and from time to time, each Lender may, in
accordance with

<PAGE>

applicable law, at any time grant participations in all or a portion of
its Commitment and/or its interest in the Advances and other payments due
to it under this Agreement to any Person (each, a "PARTICIPANT");
PROVIDED, HOWEVER, that no participation shall be granted to any Person
unless and until the Agent and, if the proposed Participant is other than
a Person which at such time is an Eligible Assignee, the Borrower shall
have consented thereto (which consent shall not be unreasonably withheld
or delayed). Each Lender hereby acknowledges and agrees that (A) any
such participation will not alter or affect such Lender's direct
obligations hereunder, and (B) neither the Borrower, the Agent nor the
Servicer shall have any obligation to have any communication or
relationship with any Participant. Each Participant shall comply with
the provisions of SECTION 5.1(b). No Participant shall be entitled to
transfer all or any portion of its participation without the prior
written consent of the Agent and, if the proposed transferee is other
than an Eligible Assignee, the Borrower (which consent will not be
unreasonably withheld or delayed).

(b) Each Lender may pledge its interest in the Advances and the
Note to any Federal Reserve Bank as collateral in accordance with
applicable law.
ARTICLE XVII

INDEMNIFICATION

SECTION 17.1 GENERAL INDEMNITY OF THE BORROWER. Without limiting
any other rights which any such Person may have hereunder or under
applicable law, the Borrower hereby agrees to indemnify each of the
Agent, the Investors, the Collateral Agent, the Custodian (if other than
AFL), the Backup Servicer and each other Affected Person and each of
their Affiliates, and each of their respective successors, transferees,
participants and assigns and all officers, directors, shareholders,
controlling persons, employees and agents of any of the foregoing (each
of the foregoing Persons being individually called an "INDEMNIFIED
PARTY"), forthwith on demand, from and against any and all damages,
losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively called "INDEMNIFIED AMOUNTS") awarded against or incurred by
any of them arising out of or relating to any Transaction Document or the
transactions contemplated thereby or the use of proceeds therefrom by the
Borrower, including (without limitation) in respect of the funding of any
Advance or in respect of any Transferred Receivable, EXCLUDING, HOWEVER,
(a) Indemnified Amounts to the extent determined by a court of competent
jurisdiction to have resulted from gross negligence or willful
misconduct on the part of such Indemnified Party or its agent or
subcontractor, (b) except as otherwise provided therein, non-payment by
any Obligor of an amount due and payable with respect to a Transferred
Receivable, (c) any loss in value of any Financed Vehicle or Permitted
Investment due to changes in market conditions or for other reasons
beyond the control of the Borrower or (d) any tax upon or measured by net
income on any Indemnified Party. Without limiting the foregoing, but
subject to the exclusions (a) through (d) above, the Borrower agrees to
indemnify each Indemnified Party for Indemnified Amounts arising out of
or relating to:

(i) the breach of any representation or warranty made by
the Borrower (or any of its officers) under or in connection with this Agreement
or the other Transaction Documents,

<PAGE>

any Servicer's Certificate, Borrowing Base Confirmation or any other
information, report or certificate delivered by the Borrower or Servicer
pursuant hereto or thereto, which shall have been false or incorrect in any
material respect when made or deemed made;

(ii) the failure by the Borrower to comply in any
material way with any applicable law, rule or regulation with respect to any
Transferred Receivable or any Financed Vehicle, or the nonconformity of any
Transferred Receivable with any such applicable law, rule or regulation;

(iii) the failure to vest and maintain vested in the
Collateral Agent, for the benefit of the Secured Parties, a first-priority
security interest in all the Collateral, free and clear of any Lien, other than
a Lien arising solely as a result of an act of any Investor, or any assignee of
any Investor;

(iv) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of an Obligor to the payment of any Transferred
Receivable (including, without limitation, a defense based on such Transferred
Receivable not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms);

(v) any failure of AFL or an Affiliate of the Borrower,
as Servicer, to perform its duties or obligations in accordance with the
provisions of ARTICLE VIII or any provision contained in any Transaction
Document;

(vi) any claim involving products liability that arises
out of or relates to merchandise or services that are the subject of any
Transferred Receivable or strict liability claim in connection with any Financed
Vehicle related to a Transferred Receivable;

(vii) any tax or governmental fee or charge (but not
including taxes upon or measured by net income), all interest and penalties
thereon or with respect thereto, and all out-of-pocket costs and expenses,
including the reasonable fees and expenses of counsel in defending against the
same, which may arise by reason of the making, maintenance or funding, directly
or indirectly, of any Advance, or any other interest in the Borrower Collateral;

(viii) the offering or effectuation of any Take-Out
Securitization; or

(ix) the commingling of the proceeds of the Borrower
Collateral at any time with other funds.

SECTION 17.2 [Intentionally left blank]

SECTION 17.3 CONTRIBUTION. If for any reason (other than the
exclusions (a) through (d) set forth in the first paragraph of
SECTION 17.1) the indemnification provided above in SECTION 17.1 is
unavailable to an Indemnified Party or is insufficient to hold an
Indemnified Party harmless, then the Borrower shall contribute to the
amount paid or payable by such Indemnified Party as a result of such
loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by such Indemnified
Party, on the

<PAGE>

one hand, and the Borrower, on the other hand, but also the relative
fault of such Indemnified Party, on the one hand, and the Borrower, on
the other hand, as well as any other relevant equitable considerations.

ARTICLE XVIII

MISCELLANEOUS

SECTION 18.1 NO WAIVER; REMEDIES. No failure on the part of any
Investor, the Agent, any Indemnified Party or any Affected Person to
exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by any of them of any right, power or remedy hereunder
preclude any other or further exercise thereof, or the exercise of any
other right, power or remedy. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. Without
limiting the foregoing, each Investor and Participant is hereby
authorized by the Borrower at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by it to or for
the credit or the account of the Borrower, now or hereafter existing
under this Agreement, to the Agent, any Affected Person, any Indemnified
Party or any Investor or their respective successors and assigns.

SECTION 18.2 AMENDMENTS, WAIVERS. This Agreement may not be
amended, supplemented or modified nor may any provision hereof be waived
except in accordance with the provisions of this SECTION 18.2. With the
written consent of the Required Lenders, the Agent, the Borrower, the
Servicer and the Backup Servicer may, from time to time, enter into
written amendments, supplements, waivers or modifications hereto for the
purpose of adding any provisions to this Agreement or changing in any
manner the rights of any party hereto or waiving, on such terms and
conditions as may be specified in such instrument, any of the
requirements of this Agreement; PROVIDED, HOWEVER, that no such
amendment, supplement, waiver or modification shall (i) reduce the amount
of or extend the maturity of any payment with respect to an Advance or
reduce the rate or extend the time of payment of Yield thereon, or reduce
or alter the timing of any other amount payable to any Lender hereunder,
in each case without the consent of each Purchaser affected thereby;
(ii) amend, modify or waive any provision of this Section 18.2 OR 18.12,
or reduce the percentage specified in the definition of Required Lenders,
in each case without the written consent of all Lenders or (iii) amend,
modify or waive any provision of ARTICLE XV of this Agreement without the
written consent of the Agent and the Required Lenders. Any waiver of any
provision of this Agreement shall be limited to the provisions
specifically set forth therein for the period of time set forth therein
and shall not be construed to be a waiver of any other provision of this
Agreement.

SECTION 18.3 NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in
writing (including facsimile communication) and shall be personally
delivered or sent by certified mail, postage prepaid, or by facsimile, to
the intended party at the address or facsimile number of such party set
forth under its name on the signature pages hereof or at such other
address or facsimile

<PAGE>

number as shall be designated by such party in a written notice to the
other parties hereto. All such notices and communications shall be
effective, (a) if personally delivered, when received, (b) if sent by
certified mail, three Business Days after having been deposited in the
mail, postage prepaid, (c) if sent by overnight courier, one Business Day
after having been given to such courier, and (d) if transmitted by
facsimile, when sent, receipt confirmed by telephone or electronic means,
except that notices and communications pursuant to SECTION 2.2 shall not
be effective until received.

SECTION 18.4 COSTS, EXPENSES AND TAXES.

(a) In addition to the rights of indemnification granted under
SECTION 17.1, the Borrower agrees to pay on demand all reasonable costs
and expenses of the Agent in connection with the preparation (subject to
the Fee Letter), execution, delivery, syndication and administration of
this Agreement, the Noncommitted Lender Liquidity Arrangement or other
liquidity support facility and the other documents and agreements to be
delivered hereunder or with respect hereto, and any amendments, waivers
or consents executed in connection with this Agreement and the
Noncommitted Lender Liquidity Arrangement or other liquidity support
facility, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Agent with respect thereto and
with respect to advising the Agent as to its rights and remedies under
this Agreement and the Noncommitted Lender Liquidity Arrangement or other
liquidity support facility, and to pay all costs and expenses, if any
(including reasonable counsel fees and expenses), of the Agent, the
Lenders, the Collateral Agent, the Investors and their respective
Affiliates, in connection with the enforcement of this Agreement, any of
the other Transaction Documents and/or the Noncommitted Lender Liquidity
Arrangement or other liquidity support facility and the other documents
and agreements to be delivered hereunder or with respect hereto.

(b) In addition, the Borrower shall pay any and all stamp and
other taxes and fees payable in connection with the execution, delivery,
filing and recording of this Agreement, the Note or the other documents
or agreements to be delivered hereunder, and agrees to save each
Indemnified Party harmless from and against any liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes
and fees.

SECTION 18.5 BINDING EFFECT; SURVIVAL. This Agreement shall be
binding upon and inure to the benefit of the Borrower, the Servicer, the
Backup Servicer, the Collateral Agent, the Investors, the Agent and their
respective successors and assigns, and the provisions of SECTION 5.1(b),
ARTICLE VI, SECTION 12.1, and ARTICLE XVII shall inure to the benefit of
the Affected Persons and the Indemnified Parties, as the case may be, and
their respective successors and assigns; PROVIDED, HOWEVER, nothing in
the foregoing shall be deemed to authorize any assignment not permitted
by ARTICLE XVI. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its
terms, and shall remain in full force and effect until such time, after
the Commitment Termination Date when all Obligations have been finally
and fully paid and performed. The rights and remedies with respect to
any breach of any representation and warranty made by the Borrower
pursuant to ARTICLE IX and the indemnification and payment provisions of
ARTICLE VI, SECTION 12.1, and ARTICLE XVII and the provisions of SECTION
18.11 and SECTION 18.12

<PAGE>
shall be continuing and shall survive any termination of this Agreement
and any termination of AFL's rights to act as Servicer hereunder or under
any other Transaction Document.

SECTION 18.6 CAPTIONS AND CROSS REFERENCES. The various captions
(including, without limitation, the table of contents) in this Agreement
are provided solely for convenience of reference and shall not affect the
meaning or interpretation of any provision of this Agreement. Unless
otherwise indicated, references in this Agreement to any Section,
Schedule or Exhibit are to such Section of or Schedule or Exhibit to this
Agreement, as the case may be, and references in any Section, subsection,
or clause to any subsection, clause or subclause are to such subsection,
clause or subclause of such Section, subsection or clause.

SECTION 18.7 SEVERABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision
in any other jurisdiction.

SECTION 18.8 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE
A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO ANY OTHERWISE APPLICABLE CONFLICT OF LAW
PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).

SECTION 18.9 COUNTERPARTS. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to
be an original but all of which shall constitute together but one and the
same agreement.

SECTION 18.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
AND EACH INVESTOR BY ITS ACCEPTANCE OF ANY INTEREST IN ANY NOTE OR
ADVANCE OR IN A LENDER'S OBLIGATION TO MAKE ADVANCES HEREUNDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE BORROWER, AFL, THE
SERVICER, THE AGENT, THE BACKUP SERVICER, THE COLLATERAL AGENT, THE
INVESTORS OR ANY OTHER AFFECTED PERSON. THE BORROWER ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION (AND EACH OTHER PROVISION OF EACH OTHER TRANSACTION DOCUMENT TO
WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH
OTHER TRANSACTION DOCUMENT.

SECTION 18.11 CONFLICT WAIVER. CSFB acts as Agent hereunder, as
administrative

<PAGE>

agent for the Noncommitted Lender, and as provider and as agent for other
providers of backup facilities for the Noncommitted Lender, and may
provide other services or facilities from time to time (the "CSFB
ROLES"). Each of the parties hereto hereby acknowledges and consents to
any and all CSFB Roles, waives any objections it may have to any actual
or potential conflict of interest caused by CSFB's acting or maintaining
any of the CSFB Roles, and agrees that in connection with any CSFB Role,
CSFB may take, or refrain from taking, any action consistent with its
obligations under the Transaction Documents.

SECTION 18.12 NO PROCEEDINGS.

(a) Each of the Borrower, AFL, the Servicer, the Backup
Servicer, the Collateral Agent, and each Investor (other than the
Noncommitted Lender) hereby agrees that it will not institute against the
Noncommitted Lender, or join any other Person in instituting against the
Noncommitted Lender, any insolvency proceeding (namely, any proceeding of
the type referred to in the definition of Event of Bankruptcy) so long as
any commercial paper or other senior indebtedness issued by the
Noncommitted Lender shall be outstanding or there shall not have elapsed
one year PLUS one day since the last day on which any such commercial
paper or other senior indebtedness shall be outstanding. The foregoing
shall not limit such Person's right to file any claim in or otherwise
take any action with respect to any insolvency proceeding that was
instituted by any Person other than such Person.

(b) Each of CSFB, AFL, the Servicer, the Backup Servicer, the
Collateral Agent, each Investor and the Agent hereby agrees that it will
not institute against the Borrower, or join any other Person in
instituting against the Borrower, any insolvency proceeding (namely, any
proceeding of the type referred to in the definition of Event of
Bankruptcy) so long as any Advances or other amounts due from the
Borrower hereunder shall be outstanding or there shall not have elapsed
one year PLUS one day since the last day on which any such Advances or
other amounts shall be outstanding. The foregoing shall not limit such
Person's right to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted by any Person
other than such Person.

SECTION 18.13 LIMITED RECOURSE TO THE LENDERS. No recourse under
any obligation, covenant or agreement of a Lender contained in this
Agreement shall be had against any incorporator, stockholder, officer,
director, member, manager, employee or agent of any Lender or any of its
Affiliates (solely by virtue of such capacity) by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any
statute or otherwise; it being expressly agreed and understood that this
Agreement is solely a corporate obligation of each Lender, and that no
personal liability whatever shall attach to or be incurred by any
incorporator, stockholder, officer, director, member, manager, employee
or agent of any Lender or any of their Affiliates (solely by virtue of
such capacity) or any of them under or by reason of any of the
obligations, covenants or agreements of a Lender contained in this
Agreement, or implied therefrom, and that any and all personal liability
for breaches by a Lender of any of such obligations, covenants or
agreements, either at common law or at equity, or by statute, rule or
regulation, of every such incorporator, stockholder, officer, director,
member, manager, employee or agent is hereby expressly waived as a
condition of and in consideration for the execution of this Agreement;
PROVIDED that the

<PAGE>

foregoing shall not relieve any such Person from any liability it might
otherwise have as a result of their willful misconduct, gross negligence
or of fraudulent actions taken or fraudulent omissions made by them.

SECTION 18.14 COLLATERAL AGENT. Each Lender and each Investor by
its acceptance of any interest in any Note or Advance or in a Lender's
obligation to make Advances hereunder and the Agent designate and appoint
Norwest to act as Collateral Agent hereunder and under the Collateral
Agent Agreement. Norwest, by its execution hereof, accepts and agrees to
such designation and appointment and agrees to perform its obligations
under the Collateral Agent Agreement in accordance with the terms thereof
and for the benefit of the Agent, the Lenders and other Secured Parties.
In furtherance of the foregoing, each Lender authorizes the Agent to
enter into the Collateral Agent Agreement and to appoint the Collateral
Agent to act on behalf of, and as agent for, such Lender and the Agent
under the Collateral Agent Agreement and agrees to be bound by Section 9
of such agreement.

SECTION 18.15 CUSTODIAN. AFL accepts and agrees to its
designation and appointment as Custodian under the Custodial Agreement
and agrees to perform its obligations under such agreement in accordance
with the terms thereof and for the benefit of the Borrower and the
Secured Parties.

SECTION 18.16 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS EXECUTED AND DELIVERED HEREWITH REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.

[signature pages begin on next page]

<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the day and year
first above written.

ARCADIA RECEIVABLES FINANCE CORP. IV

By:
Name:
Title:
7825 Washington Avenue South, Suite 901
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Facsimile No.: (612) 942-6620

ARCADIA FINANCIAL LTD., individually and
as Servicer and Custodian

By:
Name:
Title:

7825 Washington Avenue South, Suite 500
Minneapolis, Minnesota 55439-2435
Attention: Treasurer
Facsimile No.: (612) 942-6620

CREDIT SUISSE FIRST BOSTON, NEW
YORK BRANCH, as Agent

By:
Name:
Title:

<PAGE>

Eleven Madison Avenue
New York, New York 10010
Attention: Asset Finance Department
Facsimile No.: (212) 325-6677

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

By:
Name:
Title:

Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services - Asset
Backed Administration
Facsimile No.: (612) 667-3539

THE BANKS COMMITMENT: $150,000,000

CREDIT SUISSE FIRST BOSTON, NEW
YORK BRANCH, as a Bank

By:
Name:
Title:

Eleven Madison Avenue
New York, New York 10010
Attention: Asset Finance Department
Facsimile No.: (212) 325-6677

<PAGE>

EXHIBIT A

[FORM OF ADVANCE REQUEST]

Credit Suisse First Boston, Norwest Bank Minnesota, National
New York Branch, as Agent Association
Eleven Madison Avenue Norwest Center
New York, NY 10010 Sixth Street & Marquette Avenue
Attention: Margoth Pilla/Eric Shea Minneapolis, MN 55479-0070
Fax #: (212) 325-6677 Fax #: (612) 667-3539
Phone #: (212) 325- 9075/9084 Phone#: (612) 667-

RE: Advance Request: $__________

Gentlemen and Ladies:

This Advance Request is delivered to you pursuant to SECTION 2.2 of the
Receivables Financing Agreement, dated as of September 24, 1998 (together with
all amendments, if any, from time to time made thereto, the "RECEIVABLES
FINANCING AGREEMENT"), among Arcadia Receivables Finance Corp. IV (the
"Borrower"), Arcadia Financial Ltd., Norwest Bank Minnesota, National
Association, the Lenders parties thereto and Credit Suisse First Boston, New
York Branch (the "AGENT") . Unless otherwise defined herein or the context
otherwise requires, capitalized terms used herein have the meanings provided in
the Receivables Financing Agreement.

The Borrower hereby requests that on ________, 19__ an Advance be made in
the aggregate principal amount of $_________having a Fixed Period of days
(determined pursuant to SECTION 3.3(b) of the Receivables Financing Agreement).

The Schedule of Receivables setting forth the Eligible Receivables to be
purchased on the date of the requested Advance by the Borrower under the
Purchase Agreement is attached hereto as Annex I.

Please wire $____________ to the Reserve Account and $_________to the
Borrower pursuant to SECTION 2.3 of the Receivable Financing Agreement . After
giving effect to the requested Advance and the application of the proceeds
thereof, the amount on deposit in the Reserve Account on the Advance Date will
be $______________ which amount equals or exceeds the Minimum Reserve Account
Amount.

The Borrower hereby acknowledges that, pursuant to SECTION 2.4 of the
Receivables Financing Agreement, each of the delivery of this Advance Request
and the acceptance by the Borrower of the proceeds of the Advances requested
hereby constitutes a representation and warranty by the Borrower that, on the
date of such Advances, and before and after giving

<PAGE>

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.

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. IV

By:
Name:
Title:

ATTACHMENT

EXHIBIT B

[FORM OF NOTE]

NOTE

THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE
DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF BY THE OWNER
HEREOF UNLESS SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND
SUCH STATE LAWS, AND WILL NOT BE A "PROHIBITED TRANSACTION" UNDER THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"). BY ACCEPTANCE OF
THIS NOTE, THE HOLDER AGREES TO BE BOUND BY ALL THE TERMS OF THE RECEIVABLES
FINANCING AGREEMENT.

<PAGE>

$______________ _________ __, 1998

FOR VALUE RECEIVED, the undersigned, Arcadia Receivables Finance Corp. IV,
a Delaware corporation (the "BORROWER"), promises to pay to the order of Credit
Suisse First Boston, New York Branch, as Agent for the Lenders, on the Facility
Termination Date the principal sum of _________________________ _______
($___________) or, if less, the aggregate unpaid principal amount of all
Advances shown on the schedule attached hereto (and any continuation thereof)
and/or in the records of Agent made by the Lenders pursuant to that certain
Receivables Financing Agreement, dated as of September 24, 1998 (together with
all amendments and other modifications, if any, from time to time thereafter
made thereto, the "RECEIVABLES FINANCING AGREEMENT"), among the Borrower,
Arcadia Financial Ltd., Norwest Bank Minnesota, National Association, the
Lenders parties thereto and Credit Suisse First Boston, New York Branch, as
Agent. Unless otherwise defined, capitalized terms used herein have the
meanings provided in the Receivables Financing Agreement.

The Borrower also promises to pay Yield on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Receivables Financing
Agreement.

Payments of both principal and Yield are to be made in lawful money of the
United States of America in immediately available funds to the account
designated by the Agent pursuant to the Receivables Financing Agreement.

This Note is the Note referred to in, and evidences indebtedness incurred
under, the Receivables Financing Agreement, and the holder hereof is entitled to
the benefits of the Receivables Financing Agreement, to which reference is made
for a description of the security for this Note and for a statement of the terms
and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the indebtedness evidenced by this
Note and on which such indebtedness may be declared to be immediately due and
payable.

All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.

As provided in the Receivables Financing Agreement and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Note Register, upon surrender of this Note for registration of transfer at the
office or agency of the Agent in The City of New York, duly endorsed by, or
accompanied by a written instrument of transfer in the form satisfactory to the
Note Registrar duly executed by, the holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.

The Notes are issuable only in registered form without coupons in minimum

<PAGE>

denominations of $100,000. As provided in the Agreement and subject to certain
limitations therein set forth, Notes are exchangeable for a like aggregate
principal amount of Notes of a different authorized denomination, as requested
by the holder surrendering the same.

No service charge shall be made for any such registration of transfer or
exchange, but the Borrower may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

The Borrower, and any agent of the Borrower, the Collateral Agent and the
Agent may treat the Person in whose name this Note is registered as the owner
hereof for all purposes, whether or not this Note may be overdue, and shall be
affected by notice to the contrary.

The holder hereof hereby agrees, and any assignee of such holder, by
accepting such assignment, shall be deemed to have agreed, that it will not
institute against the Noncommitted Lender or the Borrower, or join any other
Person in instituting against the Noncommitted Lender or the Borrower, any
insolvency proceeding (namely, any proceeding of the type referred to in the
definition of Event of Bankruptcy) so long as, in the case of the Noncommitted
Lender, any commercial paper or other senior indebtedness issued by the
Noncommitted Lender shall be outstanding or there shall not have elapsed one
year PLUS one day since the last day on which any such commercial paper or other
senior indebtedness shall be outstanding and, in the case of the Borrower, any
Advances or other amounts due from the Borrower hereunder shall be outstanding
or there shall not have elapsed one year PLUS one day since the last day on
which any such Advances or other amounts shall be outstanding. The foregoing
shall not limit such Person's right to file any claim in or otherwise take any
action with respect to any insolvency proceeding that was instituted by any
Person other than such Person. The agreement set forth in this paragraph shall
survive payment of this Note.

THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.

ARCADIA RECEIVABLES FINANCE CORP. IV

By:
Name:
Title:

Personally appeared before me ________________________ [name of notary],
in _____________________[county], ____________________ [state], the above-named

<PAGE>

_______________________ [name of person executing], known or proved to me to be
the same person who executed the foregoing instrument and to be the
_______________________ [title] of ARCADIA RECEIVABLES FINANCE CORP. IV and
acknowledged to me that he executed the same as his free act and deed and the
free act and deed of [ ].

Subscribed and sworn before me this ____ day of _________, 199_.

NOTARY PUBLIC

COUNTY OF __________________
STATE OF ___________________

My commission expires the ____ day of
____________, ____.

<PAGE>

FORM OF ASSIGNMENT FORM

ASSIGNMENT FORM

If you the holder want to assign this Note, fill in the form below and have
your signature guaranteed:

I or we assign and transfer this Note to:

(Print or type name, address and zip code and
social security or tax ID number of assignee)

and irrevocably appoint , agent to transfer this Note
on the books of the Borrower. The agent may substitute another to act for him.

Dated: Signed:

(sign exactly as the name appears on the other side of this Note)

Signature Guarantee

Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Note, it is recommended that you fill in the name of the new owner in the
"Assignee" blank. Alternatively, instead of using this Assignment Form, you may
sign a separate "power of attorney" form and then mail the unsigned Note and the
signed "power of attorney" in separate envelopes. For added protection, use
certified or registered mail for a Note.

<PAGE>

Schedule attached to Note
dated ___________, 199_
of [ ] payable to
the order of Credit Suisse
First Boston, New York
Branch, as Agent

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DATE OF AMOUNT OF AMOUNT OF
ADVANCE ADVANCE REPAYMENT
- --------------------------------------------------------------------------------
<S> <C> <C>

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

- --------------------------------------------------------------------------------
</TABLE>

<PAGE>

EXHIBIT C

[FORM OF INTEREST RATE HEDGE ASSIGNMENT ACKNOWLEDGMENT]

[Date]

[Name of Hedge Counterparty]
[Address of Hedge Counterparty]
Attention:_________________

ISDA Master Agreement and Schedule, dated as of ___________, 19__ (as
amended, the "Hedge Agreement"), among [Name of Hedge Counterparty] (the
"Counterparty") and Arcadia Receivables Finance Corp. IV ("Company")

Ladies and Gentlemen:

Company hereby notifies you that Company has assigned to Norwest
Bank Minnesota, National Association, as Collateral Agent, under the
Receivables Financing Agreement identified below, all of its right, title
and interest in and to any interest rate hedge (each, a "Hedge") entered
into pursuant to the Hedge Agreement, including, without limitation, (i)
all rights of Company to receive moneys due and to become due under or
pursuant to the Hedges, (ii) claims of Company for damages arising out of
or for breach of or default under the Hedges, (iii) the right of Company to
terminate the Hedges or the Hedge Agreement, and to compel performance and
otherwise exercise all remedies thereunder, and (iv) all proceeds of any
and all of the foregoing (the assignment of all right, title and interest
of Company in and to the Hedges and the Hedge Agreement being referred to
as the "Assigned Rights").

As used herein, "Receivables Financing Agreement" shall mean that
certain Receivables Financing Agreement, dated as of SEPTEMBER 24, 1998,
by and among Arcadia Financial Ltd., individually and as Servicer and
Custodian, the Lenders parties thereto, Credit Suisse First Boston,
New York Branch, as Agent (the "Agent"), and Norwest Bank Minnesota,
National Association ("Norwest), as Backup Servicer and Collateral Agent,
as the same may from time to time be amended, supplemented or otherwise
modified and in effect.

The Counterparty hereby agrees that, until the Counterparty
receives written notice from the Agent to the contrary, the Counterparty
shall make all payments under the Hedge Agreement and the Hedges to
Norwest, as Collateral Agent, as follows: [INSERT WIRE INSTRUCTIONS].
Upon the Counterparty's receipt of written notice from the Agent, (i) the
Counterparty will cease to make any such payments to Norwest, and shall
make all such payments only to the Agent or as the Agent may from time to
time direct, and (ii) the Agent shall be entitled to exercise any and all
rights and remedies of Company under the Hedge

<PAGE>

Agreement and the Hedges to receive such payments in accordance with the
terms hereof.

All payments to be made under the Hedge Agreement and the Hedges
by the Counterparty shall be made by the Counterparty irrespective of, and
without deduction for, any counterclaim, defense, recoupment or set-off
(other than netting for payments owing by Company thereunder in accordance
with the terms of the Hedge Agreement and the Hedges) and shall be final,
and the Counterparty will not seek to recover from the Agent or any
Purchaser for any reason any such payment once made.

Notwithstanding the foregoing, (a) Company shall remain liable
under the Hedge Agreement and each Hedge to perform all of its duties and
obligations thereunder to the same extent as if this Acknowledgment had not
been executed, (b) the exercise by the Agent of any of the rights hereunder
shall not release Company from any of its duties or obligations under the
Hedge Agreement or any Hedge, and (c) neither the Agent nor any Investor
shall have any obligation or liability under the Hedge Agreement or any
Hedge by reason of this Acknowledgment, nor shall any of them be obligated
to perform any of the obligations or duties of Company thereunder or to
take any action to collect or enforce any claim for payment thereunder.

Company shall not, without the prior written consent of the Agent
(i) sell, assign (by operation of law or otherwise) or otherwise dispose
of, or grant any option with respect to, any of the Assigned Rights, or
create or permit to exist any lien, security interest, option or other
charge or encumbrance upon or with respect to any of the Assigned Rights,
except for the assignment acknowledged hereby; (ii) cancel or terminate the
Hedge Agreement or any Hedge or consent to or accept any cancellation or
termination thereof; (iii) amend or otherwise modify the Hedge Agreement or
any Hedge or give any consent, waiver or approval thereunder; (iv) waive
any default under or breach of the Hedge Agreement or any Hedge; or (v)
take any other action in connection with the Hedge Agreement or any Hedge
which would impair the value of the interest or rights of Company
thereunder or which would impair the interests or rights of the Agent for
the benefit of the Lenders.

No amendment or waiver of any provision hereof, and no consent to
any departure by Company herefrom shall in any event be effective unless
the same shall be in writing and signed by the Agent, Company and the
Counterparty, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

This letter agreement may be executed in counterparts, each of
which when executed by the parties hereto shall be deemed an original and
all of which together shall be deemed the same instrument.

This letter agreement shall be binding upon Company and the
Counterparty and their respective successors and assigns, and shall inure,
together with the rights and remedies of the Agent hereunder, to the
benefit of the Agent and Investors, and their respective successors,
transferees and assigns. This letter agreement shall be governed by and
construed in accordance with the laws (including Section 5-1401 of the
General

<PAGE>

Obligations Laws of New York but otherwise without regard to conflicts of
law provisions) of the State of New York.

Very truly yours,

ARCADIA RECEIVABLES FINANCE CORP. IV

By
Name:
Title:
- --------------------------------------------------------------------------------
Acknowledged and agreed:

[NAME OF HEDGE
COUNTERPARTY]

By
Name:
Title:
- --------------------------------------------------------------------------------
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Agent

By
Name:
Title:

<PAGE>

EXHIBIT D

[FORM OF BORROWING BASE CONFIRMATION]

<PAGE>

EXHIBIT E

[FORM OF SERVICER'S CERTIFICATE]

EXHIBIT F

JOINDER SUPPLEMENT

JOINDER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I
hereto, among Arcadia Financial Ltd., individually and as Servicer ("AFL"),
Arcadia Receivables Finance Corp. IV (the "BORROWER"), the Structured Lender set
forth in Item 2 of Schedule I hereto (the "NONCOMMITTED LENDER"), and Credit
Suisse First Boston, New York Branch, as Agent for the Lenders under, and as
defined in, the Agreement described below (in such capacity, the "AGENT").

W I T N E S S E T H:

WHEREAS, this Supplement is being executed and delivered under the
Receivables Financing Agreement, dated as of September 24, 1998, among AFL, the
Borrower, the Lenders, Norwest Bank Minnesota, National Association ("NORWEST"),
and the Agent (as from time to time amended, supplemented or otherwise modified
in accordance with the terms thereof, the "AGREEMENT"; unless otherwise defined
herein, terms defined in the Agreement are used herein as therein defined); and

WHEREAS, the party set forth in Item 2 of Schedule I hereto wishes to
become the Noncommitted Lender party to the Agreement;

NOW, THEREFORE, the parties hereto hereby agree as follows:

(a) Upon receipt by the Agent of five counterparts of this Supplement, to
each of which is attached a fully completed Schedule I and Schedule II, each of
which has been executed by the Noncommitted Lender, the Agent, AFL and the
Borrower, the Agent will transmit to AFL, the Borrower, Norwest and the
Noncommitted Lender a Joinder Effective Notice, substantially in the form of
Schedule III to this Supplement (a "JOINDER EFFECTIVE NOTICE"). Such Joinder
Effective Notice shall be executed by the Agent and shall set forth, INTER ALIA,
the date on which the joinder effected by this Supplement shall become effective
(the "JOINDER EFFECTIVE DATE"). From and after the Joinder Effective Date, the
party set forth in Item 2 of Schedule I hereto shall be the Noncommitted Lender
and a Lender party to the Agreement for all purposes thereof.

(b) Each of the parties to this Supplement agrees and acknowledges that at
any time and from time to time upon the written request of any other party, it
will execute and

<PAGE>

deliver such further documents and do such further acts and things as such other
party may reasonably request in order to effect the purposes of this Supplement.

(c) By executing and delivering this Supplement, the Noncommitted Lender
confirms to and agrees with the Agent and the Lenders as follows: (i) neither
the Agent nor any Lender makes any representation or warranty or assumes any
responsibility with respect to any statements, warranties or representations
made in or in connection with the Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Agreement or
any other instrument or document furnished pursuant thereto, or with respect to
the Receivables or the financial condition of AFL or the Borrower, or the
performance or observance by AFL or the Borrower of any of their respective
obligations under the Agreement or any other instrument or document furnished
pursuant hereto; (ii) the Noncommitted Lender confirms that it has received a
copy of such documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Supplement; (iii) the
Noncommitted Lender will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Agreement; (iv) the Noncommitted Lender appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Agreement as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto, all in
accordance with Article XV of the Agreement; and (vi) the Noncommitted Lender
agrees (for the benefit of the parties hereto, the Lenders and Norwest) that it
will perform in accordance with their terms all of the obligations which by the
terms of the Agreement are required to be performed by it as a Lender which is a
Noncommitted Lender.

(d) Schedule II hereto sets forth administrative information with respect
to the Noncommitted Lender.

(e) This Supplement shall be governed by, and construed in accordance
with, the laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
executed by their respective duly authorized officers on Schedule I hereto as of
the date set forth in Item 1 of Schedule I hereto.

<PAGE>

SCHEDULE I TO
JOINDER SUPPLEMENT

COMPLETION OF INFORMATION AND
SIGNATURES FOR JOINDER SUPPLEMENT

Receivables Financing Agreement, dated as of September 24, 1998, with
Arcadia Financial Ltd., the other parties thereto and Credit Suisse First
Boston, New York Branch, as Agent.

Item 1: Date of Joinder Supplement: ______________

Item 2: Noncommitted Purchaser: _________________________________

Item 3: Signatures of Parties to Agreement:

___________________________, as Noncommitted Lender

By: ____________________________________, as
Attorney-in-Fact

By:_____________________________________
Name:
Title:

ARCADIA FINANCIAL LTD., individually and as Servicer

By:_____________________________________
Name:
Title:

<PAGE>
ARCADIA RECEIVABLES FINANCE CORP. IV

By:_________________________________
Name:
Title:

CREDIT SUISSE FIRST BOSTON, NEW YORK
BRANCH, as Agent

By:________________________________
Name:
Title:

<PAGE>

SCHEDULE II TO
JOINDER SUPPLEMENT

LIST OF INVESTING OFFICES, ADDRESS
FOR NOTICES AND WIRE INSTRUCTIONS

ADDRESS FOR NOTICES: ________________________
________________________
________________________

INVESTING OFFICE: ________________________

WIRE INSTRUCTIONS: ________________________

<PAGE>

SCHEDULE III TO
JOINDER SUPPLEMENT

FORM OF
JOINDER EFFECTIVE NOTICE

[Name and address of AFL, the Borrower, Norwest
and Noncommitted Lender]

The undersigned, as Agent under the Receivables Financing Agreement,
dated as of September 24, 1998, with Arcadia Financial Ltd., the other
parties thereto and Credit Suisse First Boston, New York Branch, as Agent for
the Lenders thereunder, acknowledges receipt of five executed counterparts of
a completed Joinder Supplement. [Note: attach copies of Schedules I and II
from such Agreement.] Terms defined in such Supplement are used herein as
therein defined.

Pursuant to such Supplement, you are advised that the Joinder
Effective Date for [Name of Noncommitted Lender] will be _____________.

Very truly yours,

CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Agent

By:_______________________
Name:
Title:

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
RECEIVABLES FINANCING AGREEMENT 1
BACKGROUND 1

ARTICLE I DEFINITIONS
SECTION 1.1 DEFINED TERMS 1
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS 29

ARTICLE II THE FACILITY, ADVANCE PROCEDURES AND NOTE
SECTION 2.1 FACILITY 30
SECTION 2.2 ADVANCE PROCEDURES 30
SECTION 2.3 FUNDING 30
SECTION 2.4 REPRESENTATION AND WARRANTY 31
SECTION 2.5 [Intentionally left blank] 31
SECTION 2.6 [Intentionally left blank] 31
SECTION 2.7 VOLUNTARY TERMINATION OF FACILITY; REDUCTION OF
FACILITY 31
SECTION 2.8 NOTE 31

ARTICLE III YIELD, FEES, ETC.
SECTION 3.1 YIELD 32
SECTION 3.2 YIELD PAYMENT DATES 32
SECTION 3.3 YIELD ALLOCATIONS; SELECTION OF FIXED PERIODS, ETC. 32
SECTION 3.4 FEES 33
SECTION 3.5 COMPUTATION OF YIELD AND FEES 33

ARTICLE IV REPAYMENTS AND PREPAYMENTS
SECTION 4.1 REPAYMENTS AND PREPAYMENTS 33

ARTICLE V PAYMENTS; TAXES
SECTION 5.1 MAKING OF PAYMENTS; TAXES 34
SECTION 5.2 APPLICATION OF CERTAIN PAYMENTS 35
SECTION 5.3 DUE DATE EXTENSION 35

ARTICLE VI INCREASED COSTS, ETC.

<PAGE>

SECTION 6.1 INCREASED COSTS 36
SECTION 6.2 ADDITIONAL YIELD ON ADVANCES BEARING A EURODOLLAR RATE 37
SECTION 6.3 FUNDING LOSSES 37
SECTION 6.4 REPLACEMENT OF AFFECTED PERSON 37

ARTICLE VII EFFECTIVENESS; CONDITIONS TO ADVANCES
SECTION 7.1 EFFECTIVENESS 38
SECTION 7.2 ALL ADVANCES 39

ARTICLE VIII ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 8.1 DUTIES OF THE SERVICER 41
SECTION 8.2 COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATION AND
AMENDMENT OF RECEIVABLES; LOCKBOX AGREEMENTS 42
SECTION 8.3 REALIZATION UPON RECEIVABLES 44
SECTION 8.4 INSURANCE 45
SECTION 8.5 MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES 46
SECTION 8.6 COVENANTS, REPRESENTATIONS AND WARRANTIES OF SERVICER 47
SECTION 8.7 PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT OR
REPRESENTATION AND WARRANTY 50
SECTION 8.8 TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER 51
SECTION 8.9 SERVICER'S CERTIFICATE 51
SECTION 8.10 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER
TERMINATION EVENT 52
SECTION 8.11 ANNUAL INDEPENDENT ACCOUNTANTS' REPORT 52
SECTION 8.12 ACCESS TO CERTAIN DOCUMENTATION; WEEKLY REVIEW 53
SECTION 8.13 MONTHLY TAPE 53
SECTION 8.14 RETENTION OF SERVICER 54
SECTION 8.15 FIDELITY BOND 54
SECTION 8.16 INSURANCE 55
SECTION 8.17 ACCOUNTS 55
SECTION 8.18 COLLECTIONS 55
SECTION 8.19 APPLICATION OF COLLECTIONS 56

ARTICLE IX GRANT OF SECURITY INTERESTS
SECTION 9.1 BORROWER'S GRANT OF SECURITY INTEREST 56
SECTION 9.2 DELIVERY OF COLLATERAL 58
SECTION 9.3 BORROWER REMAINS LIABLE 58
SECTION 9.4 COVENANTS OF THE BORROWER AND SERVICER REGARDING THE
COLLATERAL 58
SECTION 9.5 RELEASE OF BORROWER COLLATERAL 61

ARTICLE X REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 10.1 ORGANIZATION AND GOOD STANDING 62
SECTION 10.2 DUE QUALIFICATION 62

<PAGE>

SECTION 10.3 POWER AND AUTHORITY 63
SECTION 10.4 SECURITY INTEREST; BINDING OBLIGATIONS 63
SECTION 10.5 NO VIOLATION 63
SECTION 10.6 NO PROCEEDINGS 63
SECTION 10.7 NO CONSENTS 64
SECTION 10.8 USE OF PROCEEDS 64
SECTION 10.9 CHIEF EXECUTIVE OFFICE 64
SECTION 10.10 SOLVENCY 64
SECTION 10.11 TAX TREATMENT 64
SECTION 10.12 COMPLIANCE WITH LAWS 64
SECTION 10.13 TAXES 64
SECTION 10.14 CERTIFICATES 65
SECTION 10.15 NO LIENS, ETC. 65
SECTION 10.16 PURCHASE AND SALE 65
SECTION 10.17 INVESTMENT COMPANY ACT OF 1940 65
SECTION 10.18 INFORMATION TRUE AND CORRECT 65
SECTION 10.19 ERISA COMPLIANCE 65
SECTION 10.20 FINANCIAL OR OTHER CONDITION 65
SECTION 10.21 INVESTMENT COMPANY STATUS 66
SECTION 10.22 NO TRADE NAMES 66
SECTION 10.23 SEPARATE CORPORATE EXISTENCE 66
SECTION 10.24 INVESTMENTS 66
SECTION 10.25 REPRESENTATION AND WARRANTIES TRUE AND CORRECT 66
SECTION 10.26 TRANSACTION DOCUMENTS 66
SECTION 10.27 OWNERSHIP OF THE BORROWER 67
SECTION 10.28 ELIGIBLE RECEIVABLES 67

ARTICLE XI COVENANTS OF THE BORROWER
SECTION 11.1 PROTECTION OF SECURITY INTEREST OF THE SECURED PARTIES 67
SECTION 11.2 REPORTING REQUIREMENTS 68
SECTION 11.3 PRESERVATION OF EXISTENCE 69
SECTION 11.4 KEEPING OF RECORDS AND BOOKS OF ACCOUNT 69
SECTION 11.5 SEPARATE CORPORATE EXISTENCE 69
SECTION 11.6 INTEREST RATE HEDGES 70
SECTION 11.7 TANGIBLE NET WORTH 70
SECTION 11.8 TAKE-OUT SECURITIZATION 71
SECTION 11.9 SALES, LIENS, ETC., AGAINST RECEIVABLES AND RELATED
ASSETS 71
SECTION 11.10 STOCK, MERGER, CONSOLIDATION, ETC. 71
SECTION 11.11 CHANGE IN CORPORATE NAME 71
SECTION 11.12 INDEBTEDNESS 71
SECTION 11.13 GUARANTEES 71
SECTION 11.14 LIMITATION ON TRANSACTIONS WITH AFFILIATES 71
SECTION 11.15 DOCUMENTS 72
SECTION 11.16 CHARTER AND BY-LAWS 72
SECTION 11.17 ACCOUNTING TREATMENT 72
SECTION 11.18 LIMITATION ON INVESTMENTS 72

<PAGE>

SECTION 11.19 DIVIDENDS 72
SECTION 11.20 OTHER LIENS OR INTERESTS 72

ARTICLE XII THE SERVICER
SECTION 12.1 LIABILITY OF SERVICER; INDEMNITIES 73
SECTION 12.2 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER 74
SECTION 12.3 LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND
OTHERS 75
SECTION 12.4 DELEGATION OF DUTIES 76
SECTION 12.5 SERVICER AND BACKUP SERVICER NOT TO RESIGN 76

ARTICLE XIII SERVICER TERMINATION EVENTS
SECTION 13.1 SERVICER TERMINATION EVENT 77
SECTION 13.2 CONSEQUENCES OF A SERVICER TERMINATION EVENT 78
SECTION 13.3 APPOINTMENT OF SUCCESSOR SERVICER 79

ARTICLE XIV FACILITY TERMINATION EVENTS; THEIR EFFECT
SECTION 14.1 FACILITY TERMINATION EVENTS 80
SECTION 14.2 EFFECT OF FACILITY TERMINATION EVENT 83
SECTION 14.3 CERTAIN RIGHTS UPON FACILITY TERMINATION EVENT 83

ARTICLE XV THE AGENT
SECTION 15.1 APPOINTMENT 84
SECTION 15.2 DELEGATION OF DUTIES 84
SECTION 15.3 EXCULPATORY PROVISIONS 84
SECTION 15.4 RELIANCE BY AGENT 85
SECTION 15.5 ACTION UPON CERTAIN EVENTS; REPORTS AND NOTICES 85
SECTION 15.6 NON-RELIANCE ON AGENT 86
SECTION 15.7 INDEMNIFICATION 86
SECTION 15.8 SUCCESSOR AGENT 86
SECTION 15.9 LIABILITY OF THE AGENT 87
SECTION 15.10 AGENT AND AFFILIATES 87

ARTICLE XVI ASSIGNMENTS
SECTION 16.1 RESTRICTIONS ON ASSIGNMENTS 88
SECTION 16.2 DOCUMENTATION 88
SECTION 16.3 RIGHTS OF ASSIGNEE 88
SECTION 16.4 NOTICE OF ASSIGNMENT 88
SECTION 16.5 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE 88
SECTION 16.6 MUTILATED, DESTROYED, LOST AND STOLEN NOTES 90
SECTION 16.7 PERSONS DEEMED OWNERS 90
SECTION 16.8 CANCELLATION 90
SECTION 16.9 PARTICIPATIONS 91

ARTICLE XVII INDEMNIFICATION
SECTION 17.1 GENERAL INDEMNITY OF THE BORROWER 91
SECTION 17.2 [Intentionally left blank] 93

<PAGE>

SECTION 17.3 CONTRIBUTION 93

ARTICLE XVIII MISCELLANEOUS
SECTION 18.1 NO WAIVER; REMEDIES 93
SECTION 18.2 AMENDMENTS, WAIVERS 93
SECTION 18.3 NOTICES, ETC. 94
SECTION 18.4 COSTS, EXPENSES AND TAXES 94
SECTION 18.5 BINDING EFFECT; SURVIVAL 95
SECTION 18.6 CAPTIONS AND CROSS REFERENCES 95
SECTION 18.7 SEVERABILITY 95
SECTION 18.8 GOVERNING LAW 95
SECTION 18.9 COUNTERPARTS 95
SECTION 18.10 WAIVER OF JURY TRIAL 95
SECTION 18.11 CONFLICT WAIVER 96
SECTION 18.12 NO PROCEEDINGS 96
SECTION 18.13 LIMITED RECOURSE TO THE LENDERS 97
SECTION 18.14 COLLATERAL AGENT 97
SECTION 18.15 CUSTODIAN 97
SECTION 18.16 ENTIRE AGREEMENT 97
__________
</TABLE>

EXHIBITS:

EXHIBIT A Form of Advance Request (Section 2.2)
EXHIBIT B Form of Note (Section 2.8)
EXHIBIT C Form of Interest Rate Hedge Acknowledgment (Section 7.2)
EXHIBIT D Form of Borrowing Base Confirmation (Section 7.2)
EXHIBIT E Form of Servicer's Certificate (Section 8.9)
EXHIBIT F Form of Joinder Supplement (Section 7.1)

<PAGE>

RECEIVABLES PURCHASE AGREEMENT
AND ASSIGNMENT

BETWEEN

ARCADIA RECEIVABLES FINANCE CORP. IV
PURCHASER

AND

ARCADIA FINANCIAL LTD.
SELLER

DATED AS OF
SEPTEMBER 24, 1998
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

PAGE
----
<S> <C>
ARTICLE I DEFINITIONS 1
SECTION 1.1 General 1
SECTION 1.2 Specific Terms 1
SECTION 1.3 Usage of Terms 3
SECTION 1.4 Certain References 3
SECTION 1.5 No Recourse 3
SECTION 1.6 Effectiveness 3

ARTICLE II CONVEYANCE OF THE RECEIVABLES AND THE OTHER
CONVEYED PROPERTY 4
SECTION 2.1 Purchase Price 4
SECTION 2.2 Conveyance of Receivables 4
SECTION 2.3 Delivery of Receivables File 5

ARTICLE III REPRESENTATIONS AND WARRANTIES 5
SECTION 3.1 Representations and Warranties of Arcadia 5
SECTION 3.2 Representations and Warranties of ARFC IV 7

ARTICLE IV COVENANTS OF ARCADIA 9
SECTION 4.1 Protection of Title of ARFC IV 9
SECTION 4.2 Other Liens or Interests 10
SECTION 4.3 Costs and Expenses; Fees 11
SECTION 4.4 Indemnification 11

ARTICLE V REPURCHASES 13
SECTION 5.1 Repurchase of Receivables Upon Breach of
Warranty or Covenant 13
SECTION 5.2 Reassignment of Purchased Receivables 13
SECTION 5.3 Waivers 14

ARTICLE VI MISCELLANEOUS 14
SECTION 6.1 Liability of Arcadia 14
SECTION 6.2 Merger or Consolidation of Arcadia or ARFC IV 14
SECTION 6.3 Limitation on Liability of Arcadia and Others 15
SECTION 6.4 Amendment 15
SECTION 6.5 Notices 15
SECTION 6.6 Merger and Integration 15
SECTION 6.7 Severability of Provisions 15
SECTION 6.8 Intention of the Parties 16
SECTION 6.9 Governing Law 16

<PAGE>

SECTION 6.10 Counterparts 16
SECTION 6.11 Pledge of the Receivables and the Other
Conveyed Property to the Collateral Agent
on behalf of the Secured Parties 16

</TABLE>

<PAGE>

RECEIVABLES PURCHASE AGREEMENT
AND ASSIGNMENT

THIS RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT, dated as of September
24, 1998, executed between ARCADIA RECEIVABLES FINANCE CORP. IV, a Delaware
corporation, as purchaser ("ARFC IV"), and ARCADIA FINANCIAL LTD., a Minnesota
corporation, as seller ("Arcadia").

WITNESSETH:

WHEREAS, ARFC IV has agreed from time to time to purchase from Arcadia
and Arcadia, pursuant to this Agreement, has agreed from time to time to sell
and assign to ARFC IV the Receivables and Other Conveyed Property;

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 acknowledged, ARFC IV and Arcadia, intending to be
legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 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.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Financing Agreement (defined below).

SECTION 1.2 SPECIFIC TERMS. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:

"AGREEMENT" means this Receivables Purchase Agreement and Assignment and
all amendments hereof and supplements hereto.

"ARFC IV" means Arcadia Receivables Finance Corp. IV, a Delaware
corporation.

"ASSIGNMENT AGREEMENT" means, with respect to any Receivables and related

<PAGE>

Other Conveyed Property, the assignment agreement between Arcadia and ARFC IV
pursuant to which Arcadia sells and assigns such Receivables and related Other
Conveyed Property to ARFC IV, the form of which is attached hereto as Exhibit A.

"EFFECTIVENESS DATE" has the meaning specified in SECTION 1.6 hereof.

"FINANCING AGREEMENT" means the Receivables Financing Agreement, dated as
of September 24, 1998, executed and delivered by ARFC IV, as Borrower, Arcadia,
as Servicer and as Custodian, the "Lenders" (as defined therein) party thereto,
Credit Suisse First Boston, New York Branch, as Agent and Norwest Bank
Minnesota, National Association, as Backup Servicer and Collateral Agent.

"OTHER CONVEYED PROPERTY" means, with respect to any Receivable, all
monies at any time paid or payable on such Receivable or in respect thereof
after the applicable Transfer Date (including amounts due on or before the
applicable Transfer Date but received by ARFC IV or Arcadia after such Transfer
Date), an assignment of security interests of Arcadia in the related Financed
Vehicle, the Insurance Policies and any proceeds from any Insurance Policies
relating to such Receivable, the Obligors or the Financed Vehicle, including
rebates of premiums, rights under any Collateral Insurance and any Force Placed
Insurance relating to such Receivable, rights of Arcadia against Dealers with
respect to such Receivable under the Dealer Agreements and the Dealer
Assignments, all items contained in the related Receivable File, any and all
other documents or electronic records that Arcadia keeps on file in accordance
with its customary procedures or rating to such Receivable, the Obligors or the
Financed Vehicles, property (including the right to receive Recoveries) that
secures such Receivable and that has been acquired by or on behalf of Arcadia
pursuant to liquidation of such Receivable, and all proceeds of the foregoing.

"PURCHASE AMOUNT" has the meaning specified in SECTION 5.1 hereof.

"PURCHASE PRICE" has the meaning specified in Section 2.1 hereof.

"RECEIVABLE" means a retail installment contract or promissory note and
related security agreement for a new or used automobile or light truck (and all
accessories thereto) that is originated or purchased by Arcadia, and all rights
and obligations thereunder.

"REPURCHASE EVENT" means the occurrence of a breach of any of Arcadia's
representations and warranties contained in SECTION 3.1 (a) hereof or any other
event which requires the repurchase of a Receivable by Arcadia under the
Financing Agreement.

"SCHEDULE OF RECEIVABLES" means the schedule of all Receivables sold and
transferred pursuant to each Assignment Agreement which is attached hereto as

<PAGE>

Schedule A, as such Schedule shall be supplemented from time to time (i) 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 (ii) to reflect the repurchase from ARFC IV of (a)
Warranty Receivables and (b) other Receivables purchased from ARFC IV by
Arcadia. 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.

"TRANSACTION DOCUMENTS" means the Note, the Collateral Agent Agreement,
the Financing Agreement, the Custodian Agreement and the Lockbox Agreement. The
Transaction Documents to be executed by any party are referred to herein as
"SUCH PARTY'S TRANSACTION DOCUMENTS," "ITS TRANSACTION DOCUMENTS" or by a
similar expression.

"TRANSFER DATE" means any date on which Receivables and related Other
Conveyed Property are sold and assigned to ARFC IV pursuant to SECTION 2.2.

SECTION 1.3 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 or the Financing
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 1.4 CERTAIN REFERENCES. All references to the Principal
Balance of a Receivable as of a Transfer Date shall refer to the close of
business on such day.

SECTION 1.5 NO RECOURSE. Without limiting the obligations of Arcadia
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 Arcadia,
or of any predecessor or successor of Arcadia.

SECTION 1.6 EFFECTIVENESS. The "Effectiveness Date" of this Agreement
shall occur on the date on which the conditions set forth in this Agreement
shall have been satisfied or waived by both parties to this Agreement.

ARTICLE II

<PAGE>

CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY

SECTION 2.1 PURCHASE PRICE. In consideration of the conveyance of the
Receivables and the related Other Conveyed Property to ARFC IV on each Transfer
Date, ARFC IV shall pay or cause to be paid to Arcadia an amount (the "Purchase
Price") equal to the product of (x) the outstanding Principal Balance (as
defined in the Financing Agreement) of each Receivable and (y) 100%. Such
amount shall be paid to Arcadia, by wire transfer of immediately available
funds, (a) on the date of such conveyance, in an amount equal to the product of
(i) the outstanding Principal Balance of such Receivables and (ii) (A) 100%
minus (B) the Required Percentage minus (C) the Deficiency Percentage minus (D)
the amount necessary to meet the Required Reserve Account Amount, in each case
with respect to such Receivables; PROVIDED that the amount set forth in this
clause (a) may be reduced by an amount not to exceed 1% of the outstanding
Principal Balance of such Receivables to equal the amount of financing available
to ARFC IV for such purchase, and (b) upon the subsequent transfer by ARFC IV of
such Receivables for securitization or upon a Take-Out Securitization, in an
amount equal to the remaining balance of the Purchase Price.

SECTION 2.2 CONVEYANCE OF RECEIVABLES.

(a) Subject to the conditions set forth in paragraph (b) below,
Arcadia, 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 IV without recourse (but without limitation of its
obligations in this Agreement or the Financing Agreement), all of the right,
title and interest of Arcadia, whether then existing or thereafter acquired, in
and to the Receivables listed on the Schedule of Receivables and the related
Other Conveyed Property. It is the intention of ARFC IV and Arcadia 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 Arcadia to ARFC IV, conveying good title thereto free and clear of
any Liens, and the Receivables and Other Conveyed Property shall not be a part
of Arcadia's estate in the event of the filing of a bankruptcy petition by or
against Arcadia under any bankruptcy or similar law.

(b) Arcadia shall transfer to ARFC IV 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
Transfer Date

(i) Arcadia shall have delivered to ARFC IV a duly executed
Assignment Agreement (including an acceptance by ARFC IV), which shall
include a Schedule of Receivables listing the Receivables being
transferred on such Transfer Date, including the loan numbers thereof;

<PAGE>

(ii) as of such Transfer Date, Arcadia shall not have been
insolvent nor shall Arcadia have been rendered insolvent by such sale and
assignment nor shall Arcadia be aware of any pending insolvency;

(iii) Arcadia shall have taken any action necessary or advisable
to maintain the first priority perfected ownership interest of ARFC IV in
the Receivables and Other Conveyed Property;

(iv) no selection procedures adverse to the interests of ARFC IV
shall have been used by Arcadia or ARFC IV in selecting the Receivables;

(v) Arcadia shall have provided to ARFC IV any information
reasonably requested by ARFC IV with respect to the Receivables;

(vi) each of the representations and warranties made by Arcadia
pursuant to SECTION 3.1 shall be true and correct as of the related
Transfer Date, and Arcadia shall have performed all obligations to be
performed by it hereunder on or prior to such Transfer Date;

(vii) Arcadia shall, at its own expense, on or prior to the
Transfer Date, indicate in its computer files that the Receivables
identified in the Assignment Agreement have been sold to ARFC IV pursuant
to this Agreement and the related Assignment Agreement;

(viii) if Arcadia is not acting as a Custodian under the Custodian
Agreement, Arcadia shall have delivered the Receivable Files with respect
to such Receivables to the Custodian.

(ix) Arcadia shall have delivered to the Agent an Officer's
Certificate confirming the satisfaction of each condition precedent
specified in this paragraph (b).

SECTION 2.3 DELIVERY OF RECEIVABLES FILE. In the event that at any
time Arcadia is not acting as Custodian under the Custodian Agreement, Arcadia
shall deliver or cause to be delivered to ARFC IV within three Business Days
after each Transfer Date a notice indicating transfer of the related Receivable
Files to the Custodian.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF ARCADIA. Arcadia hereby

<PAGE>

makes the following representations and warranties, on which ARFC IV relies in
purchasing the Receivables and the Other Conveyed Property. Such
representations are made as of the Effectiveness Date and each Transfer Date,
and shall survive the sale, transfer and assignment of the Receivables and the
Other Conveyed Property hereunder and under the Assignment Agreements and the
pledge thereof by ARFC IV to the Collateral Agent on behalf of the Secured
Parties under the Financing Agreement. Arcadia and ARFC IV agree that ARFC IV
will pledge to the Collateral Agent for the benefit of the Secured Parties all
of ARFC IV's rights under this Agreement and that the Collateral Agent on behalf
of the Secured Parties will, to the extent provided in the Transaction
Documents, thereafter be entitled to enforce this Agreement against Arcadia.

(a) SCHEDULE OF REPRESENTATIONS. The representations and warranties
set forth on the Schedule of Representations are true and correct.

(b) ORGANIZATION AND GOOD STANDING. Arcadia 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 IV.

(c) DUE QUALIFICATION. Arcadia 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. Arcadia has the power and authority to
execute and deliver this Agreement, each Assignment Agreement and its
Transaction Documents and to carry out its terms and their terms, respectively;
Arcadia 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 IV
under each Assignment Agreement and has duly authorized such sale and assignment
to ARFC IV by all necessary corporate action; and the execution, delivery and
performance of this Agreement, each Assignment Agreement and Arcadia's
Transaction Documents have been duly authorized by Arcadia by all necessary
corporate action

(e) VALID SALE: BINDING OBLIGATIONS. This Agreement, each Assignment
Agreement and Arcadia's Transaction Documents have been duly executed and
delivered, shall effect a valid sale, transfer and assignment of the Receivables
and the Other Conveyed Property, enforceable against Arcadia and creditors of
and purchasers from Arcadia; and this Agreement, each Assignment Agreement and
Arcadia's Transaction Documents constitute legal, valid and binding obligations
of Arcadia enforceable in accordance with their respective terms, except as
enforceability may be

<PAGE>

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.

(f) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement, each Assignment Agreement and the Transaction Documents and
the fulfillment of the terms of this Agreement, each Assignment Agreement and
the Transaction 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 articles of incorporation or bylaws of
Arcadia, or any indenture, agreement, mortgage, deed of trust or other
instrument to which Arcadia 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, each Assignment Agreement and the
Financing Agreement, or violate any law, order, rule or regulation applicable to
Arcadia of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over Arcadia or
any of its properties.

(g) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to, Arcadia's knowledge, threatened against Arcadia, before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over Arcadia or its properties (i) asserting
the invalidity of this Agreement, any Assignment Agreement or any of the
Transaction Documents, (ii) seeking any determination or ruling that might
materially and adversely affect the performance by Arcadia of its obligations
under, or the validity or enforceability of, this Agreement, any Assignment
Agreement or any of the Transaction Documents or (iii) 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 the Financing Agreement.

(h) NO TERMINATION EVENTS. No default hereunder or Servicer
Termination Event shall have occurred and be continuing.

(i) CHIEF EXECUTIVE OFFICE. The chief executive office of Arcadia is
located at 7825 Washington Avenue South, Suite 500, Minneapolis, MN 55439-2435.

SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF ARFC IV. ARFC IV hereby
makes the following representations and warranties, on which Arcadia relies in
selling, assigning, transferring and conveying the Receivables and the Other
Conveyed Property to ARFC IV under this Agreement and each Assignment Agreement.
Such representations are made as of the Effectiveness Date and each Transfer
Date, and shall survive the sale, transfer and assignment of the Receivables and
the Other Conveyed

<PAGE>

Property hereunder and under each Assignment Agreement and the pledge thereof by
ARFC IV to the Collateral Agent for the benefit of the Secured Parties under the
Financing Agreement.

(a) ORGANIZATION AND GOOD STANDING. ARFC IV 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 pledge the Receivables and the Other Conveyed Property
to the Collateral Agent for the benefit of the Secured Parties pursuant to the
Financing Agreement.

(b) DUE QUALIFICATION. ARFC IV 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 (i) ARFC IV's ability to acquire the Receivables or the
Other Conveyed Property, (ii) the validity or enforceability of the Receivables
and the Other Conveyed Property or (iii) ARFC IV's ability to perform its
obligations hereunder, under any Assignment Agreement and under its Transaction
Documents.

(c) POWER AND AUTHORITY. ARFC IV has the power, authority and legal
right to execute and deliver this Agreement, each Assignment Agreement and its
Transaction Documents and to carry out the terms hereof and thereof and to
acquire the Receivables and the Other Conveyed Property hereunder and under each
Assignment Agreement; and the execution, delivery and performance of this
Agreement, each Assignment Agreement and its Transaction Documents and all of
the documents required pursuant hereto or thereto have been duly authorized by
ARFC IV by all necessary action.

(d) NO CONSENT REQUIRED. ARFC IV 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 Transaction Documents, except for
such as have been obtained, effected or made.

(e) BINDING OBLIGATION. This Agreement, each Assignment Agreement and
each of its Transaction Documents constitutes a legal, valid and binding
obligation of ARFC IV, enforceable against ARFC IV in accordance with its 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 IV
of this Agreement and each Assignment Agreement, the consummation of the
transactions contemplated by this Agreement, each Assignment Agreement and the
Transaction

<PAGE>

Documents and the fulfillment of the terms of this Agreement, each Assignment
Agreement and the Transaction 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 IV, 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 IV is a party or by which ARFC IV 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 the Financing
Agreement), or violate any law, order, rule or regulation, applicable to ARFC IV
or its properties, of any federal or state regulatory body or any court,
administrative agency, or other governmental instrumentality having jurisdiction
over ARFC IV or any of its properties.

(g) NO PROCEEDINGS. There are no proceedings or investigations
pending, or, to the knowledge of ARFC IV, threatened against ARFC IV, before any
court, regulatory body, administrative agency, or other tribunal or governmental
instrumentality having jurisdiction over ARFC IV or its properties: (i)
asserting the invalidity of this Agreement, any Assignment Agreement or any of
the Transaction Documents, (ii) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement, any Assignment Agreement or any
of the Transaction Documents, (iii) seeking any determination or ruling that
might materially and adversely affect the performance by ARFC IV of its
obligations under, or the validity or enforceability of, this Agreement, any
Assignment Agreement or any of the Transaction Documents or (iv) that may
adversely affect the federal or state income 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 or
under any Assignment Agreement or the pledge of the Receivables and the Other
Conveyed Property to the Collateral Agent on behalf of the Secured Parties
pursuant to the Financing Agreement. In the event of any breach of a
representation and warranty made by ARFC IV hereunder, Arcadia and ARFC IV agree
that damages will not be an adequate remedy for such breach and that this
covenant may be specifically enforced by ARFC IV or by the Collateral Agent on
behalf of the Secured Parties.

ARTICLE IV

COVENANTS OF ARCADIA

SECTION 4.1 PROTECTION OF TITLE OF ARFC IV.

(a) At or prior to the Closing Date, Arcadia shall have filed or
caused to be filed a UCC- I financing statement, executed by Arcadia as seller
or debtor, naming ARFC IV as purchaser or secured party and describing the
Receivables and the Other

<PAGE>

Conveyed Property, with respect to this Agreement and each Assignment Agreement,
being sold by it to ARFC IV as collateral, with the office of the Secretary of
State of the State of Minnesota and in such other locations as ARFC IV shall
have required. From time to time thereafter, Arcadia 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 IV under this
Agreement and each Assignment Agreement and of the Collateral Agent under the
Financing Agreement in the Receivables and the Other Conveyed Property and in
the proceeds thereof. Arcadia shall deliver (or cause to be delivered) to ARFC
IV, the Agent and the Collateral Agent 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 Arcadia fails to perform its
obligations under this subsection, ARFC IV may do so at the expense of Arcadia.

(b) Arcadia 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 Arcadia (or by ARFC IV, the Agent or the
Collateral Agent on behalf of Arcadia) 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 IV, the Agent and the Collateral Agent at least 60
days' prior written notice thereof, and shall promptly file appropriate
amendments to all previously filed financing statements and continuation
statements.

(c) Arcadia shall give ARFC IV, the Agent and the Collateral Agent 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. Arcadia shall at all
times maintain each office from which it services Receivables and its principal
executive office within the United States of America.

(d) Arcadia shall maintain its computer systems so that, from and
after the time of sale under this Agreement and under any Assignment Agreement
of the Receivables to ARFC IV, and the pledge of the Receivables by ARFC IV to
the Collateral Agent for the benefit of the Secured Parties, Arcadia's master
computer records (including archives) that shall refer to a Receivable indicate
clearly that such Receivable has been sold to ARFC IV and has been pledged by
ARFC IV to the Collateral Agent on behalf of the Secured Parties. Indication of
the Collateral Agent's security interest in the Receivable shall be deleted from
or modified on Arcadia's computer systems when, and only when, the Receivable
shall become a Pledged Receivable, shall have been paid in full or shall
otherwise have been released from such security interest pursuant to the
Transaction Documents. Arcadia shall indicate in its consolidated financial
statements that Receivables have been sold to ARFC IV and are not available to
the creditors of Arcadia.

<PAGE>

(e) If at any time Arcadia 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, Arcadia 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 IV and is subject to a security interest in
favor of the Collateral Agent for the benefit of the Secured Parties.

SECTION 4.2 OTHER LIENS OR INTERESTS. Except for the conveyances under
any Assignment Agreement, Arcadia 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
Arcadia shall defend the right, title and interest of ARFC IV and the Collateral
Agent on behalf of the Secured Parties in and to the Receivables and the Other
Conveyed Property against all claims of third parties claiming through or under
Arcadia.

SECTION 4.3 COSTS AND EXPENSES; FEES.

(a) Arcadia shall pay all reasonable costs and disbursements in
connection with the performance of its obligations hereunder and under each
Assignment Agreement and its Transaction Documents.

(b) In consideration of ARFC IV's purchase of Receivables (and the
related Other Conveyed Property) from time to time hereunder, Arcadia hereby
agrees to pay to ARFC IV the amount of any fees payable by ARFC IV pursuant to
the Fee Letter in respect of the unused portion of the Facility.

SECTION 4.4 INDEMNIFICATION OF ARFC IV. Arcadia hereby agrees to
indemnify ARFC IV, each Lender, each Investor, the Agent, the Collateral Agent
and the Backup Servicer (each of the foregoing Persons being individually called
an "INDEMNIFIED PARTY" and shall be a third party beneficiary of the
indemnifications set forth in this Section 4.4), forthwith on demand, from and
against any and all damages, losses, claims, liabilities and related costs and
expenses, including reasonable attorneys' fees and disbursements (all of the
foregoing being collectively called "INDEMNIFIED AMOUNTS") awarded against or
incurred by any of them arising out of or relating to any Transaction Document
or the transactions contemplated thereby or the use of proceeds therefrom by
Arcadia, including (without limitation) in respect of the funding of any Advance
or in respect of any Transferred Receivable, EXCLUDING, HOWEVER, (a) Indemnified
Amounts resulting from gross negligence or willful misconduct on the part of
such Indemnified Party or its agent or subcontractor, (b) except as specifically
provided herein, non-payment by any Obligor of an amount due and payable with

<PAGE>

respect to a Transferred Receivable, (c) any loss in value of any Financed
Vehicle or any loss in value of any Permitted Investment due to changes in
market conditions or for other reasons beyond the control of Arcadia or (d) any
tax upon or measured by net income of any Indemnified Party. Without limiting
the foregoing, but subject to the exclusions (a) through (d) above, Arcadia
agrees to indemnify each Indemnified Party for Indemnified Amounts arising out
of or relating to:

(a) the breach of any representation or warranty made by Arcadia (or
any of its officers) under or in connection with this Agreement or the other
Transaction Documents, any Servicer's Certificate, Borrowing Base Confirmation
or any other information, report or certificate delivered by Arcadia pursuant
hereto or thereto, which shall have been false or incorrect in any material
respect when made or deemed made;

(b) the failure by Arcadia to comply in any material way with any
applicable law, rule or regulation with respect to any Transferred Receivable or
any Financed Vehicle, or the nonconformity of any Transferred Receivable with
any such applicable law, rule or regulation;

(c) the failure to vest and maintain vested in the Collateral Agent,
for the benefit of the Secured Parties, a first-priority security interest in
all the Collateral, free and clear of any Lien, other than a Lien arising solely
as a result of an act of any Investor, or any assignee of any Investor;

(d) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of an Obligor to the payment of any Transferred Receivable
(including, without limitation, a defense based on such Transferred Receivable
not being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms);

(e) any failure to perform its duties or obligations as Servicer in
accordance with the provisions of ARTICLE VIII of the Financing Agreement or any
provision contained in any Transaction Document;

(f) any claim involving products liability that arises out of or
relates to merchandise or services that are the subject of any Transferred
Receivable or strict liability claim in connection with any Financed Vehicle
related to a Transferred Receivable;

(g) the offering or effectuation of any Take-Out Securitization;

(h) the commingling of the proceeds of the Borrower Collateral at any
time with other funds;

(i) any breach of any of Arcadia's representations and warranties
contained

<PAGE>

herein;

(j) the use, ownership or operation of a Financed Vehicle;

(k) any action taken, or failed to be taken, by it in respect of any
portion of the Receivables and the Other Conveyed Property transferred hereunder
other than in accordance with this Agreement or the Financing Agreement;

(l) any taxes that may at any time be asserted against the Indemnified
Parties with respect to the transactions contemplated in this Agreement or in
any Assignment 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 the date of, any sale, transfer and assignment of the Receivables
and the Other Conveyed Property to ARFC IV, or asserted with respect to
ownership of the Receivables and Other Conveyed Property which shall be
indemnified by Arcadia pursuant to clause (m) below, or federal, state or other
income taxes, arising out of distributions on the Note or transfer taxes arising
in connection with the transfer of the Note) and costs and expenses in defending
against the same, arising by reason of the acts to be performed by Arcadia under
this Agreement or under any Assignment Agreement or imposed against such
Persons;

(m) any taxes which may at any time be asserted against such Persons
with respect to, and as of the date of, the conveyance or ownership of any
Receivables or the Other Conveyed Property hereunder or under each Assignment
Agreement and the pledge of such Receivables and Other Conveyed Property under
the Financing Agreement, 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 Note) and costs and expenses in
defending against the same, arising by reason of the acts to be performed by
Arcadia under this Agreement or under any Assignment Agreement or imposed
against such Persons;

(n) to the extent that such cost, expense, loss, claim, damage, or
liability arose out of, or was imposed upon any Indemnified Party through the
negligence, willful misfeasance, or bad faith of Arcadia in the performance of
its duties under this Agreement or under any Assignment Agreement or by reason
of reckless disregard of Arcadia's obligations and duties under this Agreement
or under any Assignment Agreement;

(o) the failure of any Receivable, or the sale of the related Financed
Vehicle, to comply with all requirements of applicable law; or

(p) the acceptance or performance of Arcadia's duties as Servicer
under the

<PAGE>

Financing 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 IV.

The indemnity obligations hereunder shall be in addition to any obligation that
Arcadia may otherwise have.

ARTICLE V

REPURCHASES

SECTION 5.1 REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY OR
COVENANT. Upon the occurrence of a Repurchase Event, Arcadia shall, unless such
breach shall have been cured in all material respects, repurchase such
Receivable from ARFC IV by the last day of the first full calendar month
following discovery or notice to Arcadia of such breach, and Arcadia shall pay
the sum of the outstanding principal amount of such Receivable plus accrued
interest thereon in each case as of the date of repurchase (the "Purchase
Amount"). It is understood and agreed that, except as set forth in SECTION 6.1,
the obligation of Arcadia 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 Arcadia for such breach available to ARFC IV, the
Secured Parties the Agent, the Collateral Agent and the Backup Servicer. The
provisions of this SECTION 5.1 are intended to grant the Collateral Agent, for
the benefit of the Secured Parties, a direct right against Arcadia to demand
performance hereunder, and in connection therewith, Arcadia waives any
requirement of prior demand against ARFC IV with respect to such repurchase
obligation. Any such purchase shall take place in the manner specified in
Section 8.7 of the Financing Agreement. Notwithstanding any other provision of
this Agreement or the Financing Agreement to the contrary, the obligation of
Arcadia under this Section shall not terminate upon a termination of Arcadia as
Servicer under the Financing Agreement and shall be performed in accordance with
the terms hereof notwithstanding the failure of the Servicer or ARFC IV to
perform any of their respective obligations with respect to such Receivable
under the Financing Agreement.

In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by Arcadia, Arcadia shall indemnify the
Collateral Agent on behalf of the Secured Parties 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.

SECTION 5.2 REASSIGNMENT OF PURCHASED RECEIVABLES. Upon deposit in the
Collection Account of the Purchase Amount of any Receivable repurchased by

<PAGE>

Arcadia under SECTION 5.1, ARFC IV and the Collateral Agent on behalf of the
Secured Parties shall take such steps as may be reasonably requested by Arcadia
in order to assign to Arcadia all of ARFC IV's right, title and interest in and
to such Receivable and all security and documents and all Other Conveyed
Property conveyed to ARFC IV directly relating thereto, and to release the
Collateral Agent's security interest therein, 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 IV. 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 Arcadia 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 IV shall, at the expense of Arcadia, take such
steps as Arcadia deems reasonably necessary to enforce the Receivable, including
bringing suit in ARFC IV's name.

SECTION 5.3 WAIVERS. No failure or delay on the part of ARFC IV, or
the Collateral Agent on behalf of the Secured Parties as assignee of ARFC IV, 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 6.1 LIABILITY OF ARCADIA. Arcadia shall be liable in
accordance herewith only to the extent of the obligations in this Agreement or
in any Assignment Agreement specifically undertaken by Arcadia and the
representations and warranties of Arcadia.

SECTION 6.2 MERGER OR CONSOLIDATION OF ARCADIA OR ARFC IV. Any
corporation or other entity (i) into which Arcadia or ARFC IV may be merged or
consolidated, (ii) resulting from any merger or consolidation to which Arcadia
or ARFC IV is a party or (iii) succeeding to the business of Arcadia or ARFC IV,
in the case of ARFC IV, which corporation has a certificate of incorporation
containing provisions relating to limitations on business and other matters
substantively identical to those contained in ARFC IV's certificate of
incorporation, provided that in any of the foregoing cases such corporation
shall execute an agreement of assumption to perform every obligation of Arcadia
or ARFC IV, as the case may be, under this Agreement and each Assignment
Agreement and, whether or not such assumption agreement is executed, shall be
the successor to Arcadia or ARFC IV, as the case may be, hereunder and under
each such Assignment Agreement (without relieving Arcadia or ARFC IV of its
responsibilities hereunder, if it survives such merger or consolidation) without
the

<PAGE>

execution or filing of any document or any further act by any of the parties to
this Agreement or each Assignment Agreement. Notwithstanding the foregoing,
ARFC IV shall not merge or consolidate with any other Person or permit any other
Person to become the successor to ARFC IV's business without the prior written
consent of the Agent. Arcadia or ARFC IV shall promptly inform the other party,
the Agent, the Collateral Agent and the Backup Servicer of any such merger,
consolidation or purchase and assumption. Notwithstanding the 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 3.1 and 3.2 of this
Agreement, or similar representation or warranty made in any Assignment
Agreement, shall have been breached (for purposes hereof, such representations
and warranties shall speak as of the date of the consummation of such
transaction), (y) Arcadia or ARFC IV, as applicable, shall have delivered prompt
written notice of such consolidation, merger or purchase and assumption to the
Agent, the Collateral Agent and the Backup Servicer prior to the consummation of
such transaction and shall have delivered to the Agent 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 6.2 and
that all conditions precedent, if any, provided for in this Agreement, or in
each Assignment Agreement, relating to such transaction have been complied with,
and (z) Arcadia or ARFC IV, as applicable, shall have delivered to the Agent an
Opinion of Counsel, stating that, 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 Collateral Agent for the benefit of the Secured Parties in the
Receivables and Other Conveyed Property and reciting the details of the filings
or (B) no such action shall be necessary to preserve and protect such interest.

SECTION 6.3 LIMITATION ON LIABILITY OF ARCADIA AND OTHERS. Arcadia 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.
Arcadia 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, any
Assignment Agreement or its Transaction Documents and that in its opinion may
involve it in any expense or liability.

SECTION 6.4 AMENDMENT.

This Agreement and any Assignment Agreement may be amended by Arcadia and
ARFC IV, with the consent of the Agent.

SECTION 6.5 NOTICES. All demands, notices and communications to
Arcadia or ARFC IV hereunder shall be in writing, personally delivered, or sent
by

<PAGE>

telecopier (subsequently confirmed in writing), 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 Arcadia, to Arcadia Financial Ltd.,
7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435, Attention: John
A. Witham, or such other address as shall be designated by Arcadia in a written
notice delivered to Arcadia and to the Agent, as applicable, or (b) in case of
ARFC IV, to Arcadia Receivables Finance Corp. II, 7825 Washington Avenue South,
Suite 410, Minneapolis, Minnesota 55439-2435, Attention: John A. Witham.

SECTION 6.6 MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement, each Assignment Agreement and the Transaction
Documents set 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, each Assignment Agreement and the Transaction
Documents. Neither this Agreement nor any Assignment Agreement may be modified,
amended, waived or supplemented except as provided herein.

SECTION 6.7 SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, provisions or terms of this Agreement or any Assignment 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
teens of this Agreement or any Assignment Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or any
Assignment Agreement.

SECTION 6.8 INTENTION OF THE PARTIES. The execution and delivery of
this Agreement shall constitute an acknowledgment by Arcadia and ARFC IV 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 Arcadia to ARFC IV, and that the
Receivables and the Other Conveyed Property shall not be a part of Arcadia'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, Arcadia. In the event that such conveyance is determined to be
made as security for a loan made by ARFC IV to Arcadia, the parties intend that
Arcadia shall have granted (and Arcadia does hereby grant) to ARFC IV a security
interest in all of Arcadia'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.

SECTION 6.9 GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO ANY OTHERWISE

<PAGE>

APPLICABLE CONFLICT OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW).

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 PLEDGE OF THE RECEIVABLES AND THE OTHER CONVEYED PROPERTY
TO THE COLLATERAL AGENT ON BEHALF OF THE SECURED PARTIES. Arcadia acknowledges
that ARFC IV intends, pursuant to the Financing Agreement, to pledge and assign
the Receivables and the Other Conveyed Property together with its rights under
this Agreement to the Collateral Agent for the benefit of the Secured Parties on
the date hereof. Arcadia acknowledges and consents to such pledge and
assignment and waives any further notice thereof and covenants and agrees that
the representations and warranties of Arcadia contained in this Agreement and
the rights of ARFC IV hereunder are intended to benefit the Collateral Agent for
the benefit of the Secured Parties. In furtherance of the foregoing, Arcadia
covenants and agrees to perform its duties and obligations hereunder, in
accordance with the terms hereof for the benefit of the Collateral Agent for the
benefit of the Secured Parties and that, notwithstanding anything to the
contrary in this Agreement, Arcadia shall be directly liable to the Collateral
Agent for the benefit of the Secured Parties (notwithstanding any failure by the
Servicer, the Backup Servicer or ARFC IV to perform its duties and obligations
hereunder or under the Financing Agreement) and that the Collateral Agent for
the benefit of the Secured Parties may enforce the duties and obligations of
Arcadia under this Agreement against Arcadia.

[Signature Pages to Follow]

<PAGE>

IN WITNESS THEREOF, the parties have caused this 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. IV, AS
PURCHASER

By:
Name:
Title:

ARCADIA FINANCIAL LTD., AS SELLER

By:
Name:
Title:

[Signature page to Receivables Purchase Agreement]
<PAGE>

EXHIBIT A

FORM OF ASSIGNMENT AGREEMENT

THIS ASSIGNMENT AGREEMENT, dated as of __________, executed between
ARCADIA RECEIVABLES FINANCE CORP. IV, a Delaware corporation, as
purchaser ("ARFC IV"), and ARCADIA FINANCIAL LTD., a Minnesota corporation, as
seller ("Arcadia").

WITNESSETH

WHEREAS, ARFC IV and Arcadia are parties to the Receivables Purchase
Agreement and Assignment dated as of October 17, 1997 (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, Arcadia wishes to convey
Receivables and Other Conveyed Property (as each such term is defined in the
Purchase Agreement) to ARFC IV hereunder;

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 IV and Arcadia, intending to
be legally bound, hereby agree as follows:

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.

"Transfer Date" shall mean, with respect to the Receivables and the
related Other Conveyed Property being conveyed hereby, __________ __, ____.

2. SCHEDULE OF RECEIVABLES. The Schedule of Receivables attached
hereto as Exhibit A is a supplement to the Schedule of Receivables attached as
Schedule A to the Purchase Agreement. The Receivables listed in the Schedule of
Receivables constitute the Receivables to be conveyed pursuant to this Agreement
on the Transfer Date.

3. 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, Arcadia hereby sells, transfers,
assigns and otherwise conveys to ARFC IV without recourse (but without
limitation of its obligations in the Purchase Agreement or the Financing
Agreement), all of the right, title and interest of Arcadia, whether now
existing or hereafter acquired, in and to all accounts, contract rights, general
intangibles, chattel paper, instruments, documents,

<PAGE>

money, deposit accounts, certificates of deposit, goods, letters of credit,
advices of credit and uncertified securities consisting of, arising from or
relating to the Receivables listed on Schedule A hereto and the related Other
Conveyed Property.

4. INCORPORATION OF PURCHASE AGREEMENT. This Assignment Agreement is
made pursuant to and in reliance upon the representations, warranties and
agreements on the part of Arcadia and ARFC IV contained in the Purchase
Agreement and shall be governed in all respects by the Purchase Agreement.

5. RATIFICATION OF PURCHASE AGREEMENT. As supplemented by this
Agreement, the Purchase Agreement is in all respects ratified and confirmed and
the Purchase Agreement as so supplemented by this Agreement shall be read, taken
and construed as one and the same instrument.

6. 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.

7. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY
OTHERWISE APPLICABLE CONFLICT OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW).

<PAGE>

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. IV, AS
PURCHASER

By:
Name:
Title:

ARCADIA FINANCIAL LTD., AS SELLER

By:
Name:
Title:
<PAGE>

SCHEDULE A

SCHEDULE OF RECEIVABLES
<PAGE>

SCHEDULE B

SCHEDULE OF REPRESENTATIONS

Each Receivable:

(a) (i) was originated directly by AFL with the consumer or was originated 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 a Dealer Agreement with AFL and was validly assigned by such Dealer to
AFL, (ii) 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 (iii) is a Simple Interest Receivable or Pre-Computed
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;

(b) is a Dollar obligation of an Obligor domiciled in the United
States of America and was originated and, if originated by a Dealer, was sold by
the Dealer to AFL, without any fraud or material misrepresentation on the part
of such originator or Dealer in either case or on the part of the Obligor;

(c) with respect to which 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 Financed 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 such Receivable, the sale
of the Financed Vehicle related thereto and the sale of credit life and credit
accident and health insurance and any extended service contracts, if any, in
connection with such Receivable, have been complied with in all material
respects;

(d) was originated in the United States of America and, at the time of
origination, materially conformed to all requirements of the Dealer Underwriting
Guides applicable to such Receivable;

(e) represents the genuine, legal, valid and binding payment
obligation of the Obligor thereon, is enforceable by the holder thereof in
accordance with its terms, except (i) as enforceability may be limited by
bankruptcy, insolvency, reorganization or

<PAGE>

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
and (ii) as such Receivable may be modified by the application of the Soldiers'
and Sailors' Civil Relief Act of 1940, as amended; and all parties to such
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;

(f) is not due from the United States of America or any State or from
any agency, department, subdivision or instrumentality thereof;

(g) (i) as of the related Advance Date, (A) had an original maturity
of at least 6 months but not more than 84 months, PROVIDED that, after giving
effect to the inclusion of such Receivable as an Eligible Receivable, the
Aggregate Outstanding Principal Balance of Eligible Receivables with original
maturities in excess of 72 months shall not exceed 10% of the Aggregate
Outstanding Principal Balance of all Eligible Receivables at such time, (B) had
an original Amount Financed of at least $1,000 and not more than $50,000, (C)
had an Annual Percentage Rate of at least 7.75% and not more than 27.0%, and (D)
was not more than 30 days past due; (ii) no funds have been advanced with
respect to such Receivable by the Borrower, the Servicer, any Dealer, or anyone
acting on behalf of any of them in order to cause such Receivable to qualify
under SUBCLAUSE (i)(D) of this CLAUSE (f); and (iii) had no provision thereof
waived, altered or modified in any respect since its origination other than any
provision requiring vendor single interest insurance and those waivers,
alterations or modifications specifically permitted pursuant to SECTION 8.2 of
this Agreement;

(h) with respect to which the information pertaining to such
Receivable set forth in each Schedule of Receivables submitted to the Agent and
the Custodian is true and correct in all material respects;

(i) with respect to which, by the related Advance Date and on each
relevant date thereafter, AFL will have caused the portions of AFL's servicing
records relating to such Receivable to be clearly and unambiguously marked to
show that such Receivable constitutes part of the Collateral and is subject to
the Lien of the Collateral Agent on behalf of the Secured Parties;

(j) with respect to which the Monthly Tape delivered by the Servicer
to the Backup Servicer from time to time was complete and accurate as of the
date delivered and consistent with the information set forth in the Schedule of
Receivables with respect to such Receivable;

(k) which constitutes chattel paper within the meaning of the UCC;

(l) of which there is only one original executed copy;

<PAGE>

(m) with respect to each of which a Receivable File is in the
possession of the Custodian and such Receivable File contains (i) the fully
executed original of such Receivable, (ii) a certificate of insurance, an
application form for insurance signed by the related Obligor, or a signed
representation letter from the Obligor named in such Receivable pursuant to
which such Obligor has agreed to obtain physical damage insurance for the
related Financed Vehicle, or copies thereof, or a documented verbal confirmation
by an insurance agent for such Obligor of a policy number for an insurance
policy for the Financed Vehicle, (iii) the original Lien Certificate (indicating
AFL's interest as first lienholder) 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 the Servicer within 180 days
(PROVIDED that the Lien Certificate is delivered to the Custodian within 180
days), and (iv) a credit application signed by the Obligor, or a copy thereof;
each of such documents which is required to be signed by the Obligor has been
signed by the Obligor in the appropriate spaces; and all blanks on any form have
been properly filled in and each form has otherwise been correctly prepared;

(n) which has not been satisfied, subordinated or rescinded, and the
Financed Vehicle securing such Receivable has not been released from the Lien of
such Receivable in whole or in part;

(o) which was not originated in, or is subject to the laws of, any
jurisdiction the laws of which would make unlawful, void or voidable the sale,
pledge, transfer and assignment of such Receivable under this Agreement and with
respect to which AFL has not entered into any agreement with any account debtor
that prohibits, restricts or conditions the assignment of any portion of such
Receivable;

(p) which has not been sold, transferred, assigned or pledged by the
Borrower to any Person other than hereunder; and no Dealer has a participation
in, or other right to receive, proceeds of such Receivable and with respect to
which neither AFL nor the Borrower has taken any action to convey any right to
any Person (other than hereunder) that would result in such Person having a
right to payments received under the related Insurance Policy or the related
Dealer Agreement or Dealer Assignment or to payments due under such Receivable;

(q) which has created, or will create when all required procedures are
completed by the Servicer, a valid, binding and enforceable first priority
perfected security interest in the related Financed Vehicle in favor of AFL as
secured party, and such security interest is, or will be upon the completion of
all required procedures by the Servicer, prior to all other Liens upon and
security interests in such Financed Vehicle that now exist or may hereafter
arise or be created (except, as to priority, for any tax liens or mechanic's
liens that may arise after the applicable Advance Date for such Receivable);

<PAGE>

(r) as to which 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 Collateral Agent, on
behalf of the Secured Parties, a first priority perfected Lien on such
Receivable and the proceeds thereof and the other Collateral related thereto
have been made, taken or performed;

(s) as to which neither AFL nor the Borrower has done anything to
convey any right to any Person that would result in such Person having a right
to payments due under such Receivable or otherwise to impair the rights of the
Collateral Agent on behalf of the Secured Parties in such Receivable or the
proceeds thereof;

(t) which is not assumable by another Person in a manner which would
release the Obligor thereof from such Obligor's obligations to the Borrower with
respect to such Receivable;

(u) which is not subject to any right of rescission, setoff,
counterclaim or defense and no such right has been asserted or threatened with
respect thereto;

(v) (i) if determined on any day during a Collection Period prior to
the Distribution Date occurring during such Collection Period, as of the last
day of the second preceding Collection Period, or (ii) if determined on any day
during a Collection Period after the Distribution Date occurring during such
Collection Period, as of the last day of the immediately preceding Collection
Period: as to which there has been no default, breach, violation or event
permitting acceleration under the terms of such Receivables (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 such Receivables, and there has been no waiver of any of the
foregoing, and with respect to which the related Financed Vehicle had not been
repossessed;

(w) at the time of the origination of which the related Financed
Vehicle was covered by a comprehensive and collision insurance policy (i) in an
amount at least equal to the lesser of (A) its maximum insurable value and (B)
the Amount Financed, (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 and with respect to
which the Obligor is required to maintain physical loss and damage insurance,
naming AFL and its successors and assigns as an additional insured party, and
such 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 unless
otherwise prohibited by the law of the state in which the related contract was
entered into;

<PAGE>

(x) with respect to which the following is true:

(y) as to which no selection procedures adverse to the Secured Parties
have been utilized in selecting such Receivable from all other similar
Receivables owned or originated by AFL;

(z) if determined on any day during a Collection Period prior to the
Distribution Date occurring during such Collection Period, was not a Defaulted
Receivable as of the last day of the second preceding Collection Period, or, if
determined on any day during a Collection Period after the Distribution Date
occurring during such Collection Period, was not a Defaulted Receivable as of
the last day of the immediately preceding Collection Period;

(aa) if determined on any day during a Collection Period prior to the
Distribution Date occurring during such Collection Period, was not a Delinquent
Receivable as of the last day of the second preceding Collection Period, or, if
determined on any day during a Collection Period after the Distribution Date
occurring during such Collection Period, was not a Delinquent Receivable as of
the last day of the immediately preceding Collection Period; and

(bb) is not secured by vehicles which are financed repossessions.

<PAGE>

RECEIVABLES TRANSFER AGREEMENT

BY AND AMONG

ARCADIA RECEIVABLES FINANCE CORP. V,
as Seller

ARCADIA FINANCIAL LTD.,
Individually and as Servicer

PARK AVENUE RECEIVABLES CORPORATION,

as purchaser

THE CHASE MANHATTAN BANK,
as Funding Agent and Back-Up Servicer

Dated as of October 16, 1998

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
----

ARTICLE I
<S> <C>
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.2 Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 1.3 Computation of Time Period. . . . . . . . . . . . . . . . . . . . . . 32

ARTICLE II

AMOUNTS AND TERMS OF THE PURCHASES . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.1 Facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.2 Making Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.3 Transfers of Interests in Contracts . . . . . . . . . . . . . . . . . 35
SECTION 2.4 Termination or Reduction of the Facility Limit. . . . . . . . . . . . 35
SECTION 2.5 Settlement Procedures . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.6 Payments and Computations, Etc. . . . . . . . . . . . . . . . . . . . 38
SECTION 2.7 Yield Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.8 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 2.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 2.10 Broken Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 2.11 Inability to Determine Eurodollar Rate. . . . . . . . . . . . . . . . 45
SECTION 2.12 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 2.13 Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 2.14 Collection Account. . . . . . . . . . . . . . . . . . . . . . . . . . 48

ARTICLE III

CONDITIONS OF PURCHASES; OPTIONAL SALES. . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.1 Conditions Precedent to Initial Purchase. . . . . . . . . . . . . . . 50
SECTION 3.2 Conditions Precedent to All Purchases . . . . . . . . . . . . . . . . 51
SECTION 3.3 Optional Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 3.4 Optional Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . 55

ARTICLE IV

REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 56

i
<PAGE>

SECTION 4.1 Representations and Warranties of the Seller. . . . . . . . . . . . . 56
SECTION 4.2 Representations and Warranties of the Servicer. . . . . . . . . . . . 61

ARTICLE V

GENERAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 5.1 Affirmative Covenants of the Seller . . . . . . . . . . . . . . . . . 64
SECTION 5.2 Reporting Requirements of the Seller. . . . . . . . . . . . . . . . . 68
SECTION 5.3 Negative Covenants of the Seller. . . . . . . . . . . . . . . . . . . 69
SECTION 5.4 Covenants of the Servicer . . . . . . . . . . . . . . . . . . . . . . 71

ARTICLE VI

ADMINISTRATION AND COLLECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 6.1 Retention and Termination of Servicer . . . . . . . . . . . . . . . . 79
SECTION 6.2 Duties of the Servicer. . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 6.3 Rights of the Funding Agent . . . . . . . . . . . . . . . . . . . . . 82
SECTION 6.4 Responsibilities of the Seller. . . . . . . . . . . . . . . . . . . . 83
SECTION 6.5 Further Action Evidencing Purchases . . . . . . . . . . . . . . . . . 83
SECTION 6.6 Application of Payments . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 6.7 Consequences of a Servicer Termination Event. . . . . . . . . . . . . 84
SECTION 6.8 Appointment of Successor. . . . . . . . . . . . . . . . . . . . . . . 85

ARTICLE VII

TERMINATION EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 7.1 Termination Events. . . . . . . . . . . . . . . . . . . . . . . . . . 87

ARTICLE VIII

INDEMNIFICATION; REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

SECTION 8.1 Indemnities by the Seller . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 8.2 Repurchase of Receivables . . . . . . . . . . . . . . . . . . . . . . 93

ARTICLE IX

MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

ii
<PAGE>

SECTION 9.1 Amendments, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 9.2 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 9.3 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 9.4 Binding Effect; Assignability . . . . . . . . . . . . . . . . . . . . 98
SECTION 9.5 Governing Law; Waiver of Jury Trial . . . . . . . . . . . . . . . . . 99
SECTION 9.6 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 9.7 No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . .100
SECTION 9.8 Execution in Counterparts; Severability . . . . . . . . . . . . . . .101
SECTION 9.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . .101
SECTION 9.10 Limited Recourse to PARCO . . . . . . . . . . . . . . . . . . . . . .102
SECTION 9.11 Waiver of Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . .103
SECTION 9.12 Conflict Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . .103
SECTION 9.13 Liabilities and Rights of Funding Agent . . . . . . . . . . . . . . .103
SECTION 9.14 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . .104

EXHIBITS AND SCHEDULES

EXHIBIT A Form of Certificate
EXHIBIT B Credit and Collection Policy
EXHIBIT C [Reserved]
EXHIBIT D Form of Interest Rate Hedge Assignment Acknowledgment
EXHIBIT E Form of Monthly Report
EXHIBIT F Form of Purchase Notice
EXHIBIT G Servicer's Optional Sale Date Certificate
EXHIBIT H List of Offices of Originator Where Records Kept
EXHIBIT I List of the Lock-Box Bank

Schedule I Accountant's Procedures Letter
</TABLE>

iii
<PAGE>

RECEIVABLES TRANSFER AGREEMENT
Dated as of October 16, 1998

ARCADIA RECEIVABLES FINANCE CORP. V, a Delaware corporation, as seller
(together with its successors and assigns in such capacity, the "SELLER"),
ARCADIA FINANCIAL LTD., a Minnesota corporation, individually and as servicer
(together with its successors and assigns in such capacity, the "SERVICER"),
PARK AVENUE RECEIVABLES CORPORATION, a Delaware corporation, as purchaser
(together with its successors and assigns in such capacity, "PARCO"), and THE
CHASE MANHATTAN BANK, a New York banking corporation, as back-up servicer (in
such capacity, the "BACK-UP SERVICER") and as funding agent for the benefit of
PARCO and the several APA Banks from time to time (together with its successors
and assigns in such capacity, the "FUNDING AGENT") hereby agree as follows:

PRELIMINARY STATEMENTS

(1) Certain terms which are capitalized and used throughout this
Agreement (in addition to those defined above) are defined in Article I of this
Agreement.

(2) The Originator or a Subsidiary of the Originator in its ordinary
course of business finances the cost of Financed Vehicles purchased by Obligors
or the Originator purchases Contracts with respect to Financed Vehicles from
Dealers;

(3) The Seller is a wholly-owned, special-purpose Subsidiary of the
Originator established to purchase or otherwise acquire Eligible Receivables and
Related Security;

(4) The Seller wishes from time to time to offer to sell to PARCO and
the APA Banks, as applicable, certain Eligible Receivables and Related Security;
and

(5) PARCO and the APA Banks, as applicable, desire to purchase such
Eligible Receivables and Related Security from the Seller, subject to the terms
and conditions of this Agreement;

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as

<PAGE>

follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

"ACCRUAL PERIOD" means, with respect to each Settlement Date (i) for
any Tranche funded based on a CP Rate, the immediately preceding Settlement
Period (or, in the case of the first Settlement Date, the period commencing on
the Initial Purchase Date and ending on the last day of the calendar month in
which the Initial Purchase Date occurs) and (ii) for any Tranche funded based on
a Base Rate or a Eurodollar Rate, initially the period from and including the
day on which such Tranche commences and ending on the day before such Settlement
Date and thereafter, with respect to such Tranche, the period from and including
the preceding Settlement Date and ending on such Settlement Date.
Notwithstanding the foregoing, each Accrual Period to occur following the
Termination Date shall be of a duration selected by the Funding Agent in its
sole discretion.

"ACTIVE BANKRUPT ACCOUNT BALANCE" means, as of the last day of any
Settlement Period, the aggregate Outstanding Balance of any Receivable
comprising the Servicing Portfolio with respect to which the Obligor is the
subject of any bankruptcy, insolvency, reorganization or similar proceeding.

"ADVANCE PERCENTAGE" means 91%; PROVIDED, that:

(a) (i) in the event the Net Yield as of the last day of any
Settlement Period is less than the Required Net Yield for such Settlement
Period, such percentage shall be decreased by an amount equal to the Weighted
Average Remaining Term at such time (expressed in years) MULTIPLIED BY the
amount by which such Required Net Yield exceeds such Net Yield, and (ii) in the
event the Net Yield as of the last day of any Settlement Period exceeds the
Required Net Yield for such Settlement Period, such percentage shall be
increased by an amount equal to the Weighted Average Remaining Term MULTIPLIED
BY the amount by which such Net Yield exceeds such Required Net Yield; and

(b) (i) such percentage shall be decreased by 2%, in the event that
the

<PAGE>

long-term debt rating of AFL falls to B- by S&P or B3 by Moody's, and (ii)
if such percentage has been and remains decreased pursuant to the foregoing
clause (b)(i), such percentage shall be increased by 2%, in the event that the
long-term debt rating of AFL is greater than B- by S&P and greater than B3 by
Moody's; and

(c) (i) such percentage shall be decreased by 2%, as of the last day
of any Settlement Period, in the event that the aggregate Outstanding Balance of
Receivables comprising the Servicing Portfolio with respect to which more than
$10 of any scheduled payment is more than thirty (30) days past due exceeds 6%
of the Servicing Portfolio Balance averaged for such Settlement Period and the
two immediately preceding Settlement Periods at such time, and (ii) if such
percentage has been and remains decreased pursuant to the foregoing clause
(c)(i), such percentage shall be increased by 2%, as of the last day of any
Settlement Period, in the event that the aggregate Outstanding Balance of
Receivables comprising the Servicing Portfolio with respect to which more than
$10 of any schedule payment is more than thirty (30) days past due is less than
or equal to 6% of the Servicing Portfolio Balance averaged for such Settlement
Period and the two immediately preceding Settlement Periods at such time; and

(d) (i) such percentage shall be decreased by 2%, as of the last day
of any Settlement Period, in the event that the Monthly Extension Rate averaged
for such Settlement Period and the two immediately preceding Settlement Periods
exceeds 3.5%, and (ii) if such percentage has been and remains decreased
pursuant to the foregoing clause (d)(i), such percentage shall be increased by
2%, as of the last day of any Settlement Period, in the event that the Monthly
Extension Rate averaged for such Settlement Period and the two immediately
preceding Settlement Periods is less than or equal to 3.5%; and

(e) (i) such percentage shall be decreased by 2%, as of the last day
of any Settlement Period, in the event that the average for such Settlement
Period and the two immediately preceding Settlement Periods of the Active
Bankrupt Account Balance DIVIDED BY the Servicing Portfolio Balance exceeds
3.5%, and (ii) if such percentage has been and remains decreased pursuant to the
foregoing clause (e)(i), such percentage shall be increased by 2%, as of the
last day of any Settlement Period, in the event that the average for such
Settlement Period and the two immediately preceding Settlement Periods of the
Active Bankrupt Account Balance DIVIDED BY the Servicing Portfolio Balance is
less than or equal to 3.5%; PROVIDED, FURTHER, that in no event shall the
Advance Percentage exceed 91%. The Advance Percentage shall be calculated based
on the most recent Monthly Report received by the Funding Agent.

<PAGE>

Notwithstanding any of the foregoing, any adjustment to the Advance Percentage
shall not be effective until the next Settlement Date, except as specified in
Section 2.2(c).

"AFFECTED PARTY" means PARCO, each APA Bank, Chase, individually and
in its capacity as Funding Agent, the Back-Up Servicer and each of their
respective Affiliates and assigns.

"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by or is under common control
with such Person (excluding any trustee under, or any committee with
responsibility for administering, any employee benefit plan). A Person shall be
deemed to be controlled by any other Person if such other Person controls such
Person within the meaning of Section 15 of the Securities Act of 1933, as
amended, or Section 20 or the Securities Exchange Act of 1934, as amended.

"AFL" means Arcadia Financial Ltd., a Delaware corporation, and its
successors and assigns.

"AGGREGATE COMMITMENT" has the meaning specified in the Asset Purchase
Agreement.

"AGGREGATE UNPAIDS" means, at any time, an amount equal to the sum of
(i) the aggregate accrued and unpaid Discount with respect to all Tranche
Periods at such time, (ii) the Net Investment at such time, and (iii) all fees
and other amounts owed (whether due or accrued) hereunder or under the Fee
Letter by the Seller or AFL to PARCO or the APA Banks at such time.

"AGREEMENT" means this Receivables Transfer Agreement, as amended,
supplemented or otherwise modified and in effect from time to time pursuant to
the terms hereof.

"APA BANK" means any of the several financial institutions named as
such in the Asset Purchase Agreement.

"ASSET PURCHASE AGREEMENT" means that certain Asset Purchase
Agreement, dated as of October 16, 1998, by and among PARCO, the Funding Agent
and the several APA Banks party thereto from time to time, as the same may be
amended, supplemented or otherwise modified and in effect from time to time.

"ASSIGNEE RATE" for any Accrual Period and any Tranche funded by a APA
Bank means an interest rate per annum equal to the applicable Eurodollar Rate;
PROVIDED, HOWEVER, that (i) in the case of any Tranche which commences earlier
than the third (3rd) Business Day after the related APA Banks have been notified
thereof, then the "Assignee Rate" shall be the average of the applicable Base
Rates for each

<PAGE>

day during such Accrual Period prior to the applicable Eurodollar Rate taking
effect; (ii) if the Funding Agent notifies the Seller of the unavailability or
unsuitability of the Eurodollar Rate in accordance with Section 2.11 hereof, the
"Assignee Rate" shall be the average of the applicable Base Rates for each day
during such Accrual Period that the Tranche Rate is determined by reference to
the Base Rate; and (iii) following the occurrence of an Termination Event, the
"Assignee Rate" for each Tranche shall be the average of the applicable Base
Rate PLUS 2% per annum for each day during such Accrual Period that such
post-termination Base Rate is in effect.

"BACK-UP SERVICER" means Chase, as back-up servicer, and its
successors and assigns in such capacity.

"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Section 101 ET SEQ), as amended and in effect from time to time, or any
successor statute.

"BASE RATE" means a rate per annum equal to the greater of (i) the
prime rate of interest announced by the Funding Agent from time to time,
changing when and as said prime rate changes (such rate not necessarily being
the lowest or best rate charged by the Funding Agent) and (ii) the sum of (a)
0.50% 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 such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day for such transactions received
by the Funding Agent from three (3) Federal funds brokers of recognized standing
selected by it.

"BENEFIT PLAN" means a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which the Seller
or any ERISA Affiliate is, or at any time within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of ERISA.

"BLENDED HEDGE RATE" means, as of the related Settlement Date, a per
annum rate equal to the weighted average of the rates payable by the Seller
under Interest Rate Hedges then in effect and the lower of (i) the "strike
rates" under Interest Rate Hedges then in effect which are caps or (ii) the
weighted average of the Tranche Rates then in effect.

"BR TRANCHE" means a Tranche as to which Discount is calculated at
<PAGE>

the Base Rate.

"BUSINESS DAY" means any day excluding Saturday, Sunday and any day on
which banks in The City of New York, New York or Minneapolis, Minnesota are
authorized or required by law to close, and, when used with respect to the
determination of any Eurodollar Rate or any notice with respect thereto, any
such day which is also a day for trading by and between banks in United States
dollar deposits in the London interbank market.

"CARRYING COSTS" means the costs and expenses specified in Sections
2.5(c)(iii)-(c)(vii) and (c)(xii)-(c)(xiv).

"CERTIFICATE" means a certificate in substantially the form of Exhibit
A hereto, which evidences the ownership interest of PARCO or the APA Banks, as
applicable, and their respective assignees in the Purchased Assets.

"CHARGED-OFF RECEIVABLE" means any Receivable which has been
written-off in accordance with the Credit and Collection Policy.

"CHASE" means The Chase Manhattan Bank, a New York banking
corporation, and its successors and assigns.

"CHASE ROLES" has the meaning specified in Section 9.12.

"COLLECTION ACCOUNT" has the meaning set forth in Section 2.14(a).

"COLLECTIONS" means with respect to each Purchased Receivable, without
limitation, all (i) payments received and collected on such Purchased
Receivable, if any, theretofore required to be remitted by the Servicer to the
Collection Account with respect to such Purchased Receivable, (ii) net proceeds
received by virtue of the liquidation of such Purchased Receivable, (iii)
retained proceeds received under any property damage, casualty or other
insurance policy with respect to such Purchased Receivable, (iv) interest of the
Seller in any property damage, casualty or other insurance policies as the same
relate to the Financed Vehicle securing such Purchased Receivable and (v) other
proceeds relating to such Purchased Receivable or its Contract File, including,
but not limited to, amounts received under any Interest Rate Hedge, Recoveries,
Repurchase Proceeds and amounts from withdrawals from the Reserve Account.

"COMMERCIAL PAPER" means the short-term promissory notes of PARCO
issued by PARCO in the commercial paper market.

"COMMITMENT EXPIRY DATE" has the meaning specified in the Asset
Purchase Agreement.

<PAGE>

"CONTRACT" means, with respect to each Receivable, the note, retail
sales installment contract or any other instrument, agreement, invoice or other
writing evidencing the Obligor's obligation to repay Indebtedness to the
Originator.

"CONTRACT FILE" means, with respect to each Receivable, the original
Contract, the original credit application or a copy thereof (fully executed on
the Servicer's customary form or a form approved by the Servicer), either a copy
of the application to the appropriate state authorities for a Title to the
related Financed Vehicle or a standard assurance in the form commonly used in
the industry relating to the provision of Title and when issued by the
appropriate state authorities, the related Title (but only to the extent that
Title documents are required under applicable state law to be held by a secured
party in order to perfect such secured party's security interest in the related
Financed Vehicle) or, for 180 days after the date of such Contract, in lieu of
the related Title, a letter from the applicable Dealer binding such Dealer
unconditionally to repurchase the related Receivable and/or Contract if the
Title is not received by the Servicer within 180 days from the date of such
Contract, all original instruments (or copies thereof) modifying the terms and
conditions of the Contract and the original endorsements or assignments of such
Contract.

"CP RATE" means, with respect to any Accrual Period during which the
Net Investment is funded by Commercial Paper relating to the Seller, the rate
equivalent to the rate (or, if more than one rate, the weighted average of the
rates) at which such Commercial Paper outstanding during such Accrual Period may
be sold by any placement agent or commercial paper dealer selected by PARCO,
which rates shall reflect and give effect to the commissions of placement agents
and dealers in respect of such promissory notes, to the extent such commissions
are allocated, in whole or in part, to such promissory notes by the Funding
Agent (on behalf of PARCO); PROVIDED, HOWEVER, that if the rate (or rates) as
agreed between any such agent or dealer and PARCO is a discount rate, then the
rate (or if more than one rate, the weighted average of the rates) resulting
from PARCO's converting such discount rate (or rates) to an interest-bearing
equivalent rate per annum.

"CREDIT AND COLLECTION POLICY" means the Credit and Collection Policy
of the Originator for the Contracts and the Receivables attached as Exhibit B
hereto, as modified in compliance with Section 5.3(c) or Section 5.4(c)(ii)
hereto and Section 5.2(c) of the Receivables Purchase Agreement.

"CREDIT SCORE" means, with respect to any Purchased Receivable, the

<PAGE>

applicable BEACON Score or any other credit score scale acceptable to the
Funding Agent and the Rating Agencies, as applicable.

"CUTOFF DATE" means, with respect to any Purchased Receivable, the
date specified as the Cutoff Date in the related Purchase Notice.

"DEALER" means any retail dealer of new or used automobiles,
light-duty trucks or minivans.

"DEALER AGREEMENT" means an agreement between the Seller and any
Dealer as approved by the Funding Agent from time to time.

"DEFAULTED RECEIVABLE" means a Receivable with respect to which:
(i) in accordance with the Credit and Collection Policy, the Servicer has
determined that eventual payment in full is unlikely, (ii) the related Financed
Vehicle has been repossessed, or (iii) greater than $10 of any scheduled payment
is over sixty (60) days past the due date therefor. A Receivable shall be
deemed to be a Defaulted Receivable upon the earliest to occur of the events
specified in clauses (i), (ii) and (iii) of the preceding sentence.

"DELINQUENCY RATIO" means, as of the last day of any Settlement
Period, the average of the following ratio (expressed as a percentage) for such
Settlement Period and the two (2) immediately preceding Settlement Periods: (i)
the sum of (A) aggregate Outstanding Balance of all Receivables comprising the
Servicing Portfolio which are Delinquent Receivables as of the last day of such
Settlement Period and (B) the remaining aggregate Outstanding Balance of all
Receivables comprising the Servicing Portfolio as of the last day of such
Settlement Period which do not constitute Defaulted Receivables and with respect
to which the related Financed Vehicle has been repossessed DIVIDED BY (ii) the
aggregate Outstanding Balance of all Receivables comprising the Servicing
Portfolio as of the last day of such Settlement Period.

"DELINQUENT RECEIVABLE" means a Receivable with respect to which
greater than $10 of any payment thereon has remained unpaid more than thirty
(30) days past the due date therefor.

"DEMAND NOTE" shall have the meaning specified in the Receivables
Purchase Agreement.

"DETERMINATION DATE" means the 10th day of each calendar month;

<PAGE>

PROVIDED, that, if in any month such day is not a Business Day, the
"Determination Date" for such calendar month shall be the first Business Day to
occur after such 10th day.

"DISCOUNT" means, with respect to any Tranche and any Settlement Date,
an amount equal to:

[NI X TR X AD]
----------------

[ YD ]

NI = the daily average of the Net Investment allocable to such Tranche
during the related Accrual Period;

TR = the Tranche Rate for such Tranche during the related Accrual
Period;

AD = the actual number of days elapsed during the related Accrual
Period during which such Tranche was outstanding;

YD = either (i) if the Tranche Rate is the CP Rate or the Eurodollar
Rate, 360 or (ii) if the Tranche Rate is the Base Rate, 365 or
366, as applicable; and

PROVIDED, HOWEVER, that (i) no provision of this Agreement shall require the
payment or permit the collection of Discount in excess of the maximum permitted
by applicable law and (ii) Discount shall not be considered paid by any
distribution if at any time such distribution is rescinded or must otherwise be
returned for any reason.

"EFFECTIVE DATE" has the meaning specified in Section 3.1.

"ELIGIBLE ACCOUNT" means either (i) a segregated trust account with
the trust department of a depository institution organized under the laws of the
United States of America or any state thereof or the District of Columbia (or
any domestic branch of a foreign bank), which institution is a "securities
intermediary" within the meaning of Section 8-102(14) of the UCC as in effect in
the State of New York and has a long-term deposit rating of at least Baa3 by
Moody's, having trust powers and acting as trustee for funds deposited in such
account, or (ii) a segregated deposit account with a depository institution
organized under the laws of the United States of America or any state thereof
(or any domestic branch of a foreign bank), which institution is a "securities
intermediary" within the meaning of Section 8-102(14) of the UCC as in effect in
the State of New York and has long-term deposit obligations which are rated Aa3
or higher by Moody's and has short-term debt obligations which are rated "A-1"
by S&P and "P-1" by Moody's.

<PAGE>

"ELIGIBLE RECEIVABLE" means, at any time of determination, any
Receivable which satisfies the following:

(i) which Receivable (A) was originated in the United States by
a Dealer, the Originator or a Subsidiary of the Originator for the retail sale
of a Financed Vehicle in the ordinary course of such Person's business, which
Person had all licenses and permits necessary to originate Receivables in the
jurisdiction where such Person is located, (B) arose pursuant to a Contract
which was fully and properly executed by the parties thereto (C) was purchased
from the Dealer (unless such Receivable was originated by the Originator or a
Subsidiary of the Originator) by the Originator or a Subsidiary of the
Originator under a Dealer Agreement existing and enforceable at the time of the
origination of the related Receivable, which Dealer Agreement contains no clause
restricting its assignability in any way, and (D) if originated by a Subsidiary
of the Originator, was validly sold and assigned to the Originator by such
Subsidiary;

(ii) related to which there exists a valid, subsisting and
enforceable first priority perfected security interest in favor of AFL in the
related Financed Vehicle (which security interest has been assigned to the
Seller and is validly assignable by the Seller to the Funding Agent on behalf of
PARCO and the APA Banks);

(iii) with respect to which the related Contract contains customary
and enforceable provisions so as to render the rights and remedies of the holder
thereof against the property subject to such Contract adequate for the
realization of the benefits of the security provided thereby, including all the
rights of a secured party under the UCC in effect in the jurisdiction in which
the related Obligor resides or such Contract was executed;

(iv) the Contract related to which provides for level monthly
payments (PROVIDED that the payment in the first or last month in the life of
the Receivable may be minimally different from the level payment) that fully
amortize the amount financed over the original contractual term and yield
interest at the annual percentage rate;

(v) the Contract related to which provides for, in the event such
Contract is prepaid, a prepayment that fully pays the principal balance and
includes accrued but unpaid interest through the date of prepayment calculated
at a rate at least equal to the annual percentage rate specified in such
Contract;

<PAGE>

(vi) the Contract (or any provision thereof) related to which has
not been waived, amended or rewritten or amounts due and owing with respect
thereto deferred or waived except in accordance with the Credit and Collection
Policy and/or the following guidelines (such guidelines, the "ADDITIONAL CREDIT
GUIDELINES"): (A) the waiver of any prepayment charge, late payment charge or
any other similar fees that may be collected in the ordinary course of servicing
such Contract, (B) a modification of or amendment to such Contract in order to
change the Obligor's regular due date to a date within the Settlement Period in
which such due date occurs, reamortize the scheduled payments on such Contract
following a partial prepayment of principal and grant extensions on such
Contract, provided that the monthly payments on such Contract shall not have
been extended more than two times in any twelve-month period, and provided
further that the aggregate period of all extensions on such Contract shall not
have exceeded six months, and (C) subject to the foregoing clause (B), the
granting of payment extensions or deferrals on, or other modifications or
amendments to, such Contract in accordance with customary procedures of the
Servicer if the Servicer believes in good faith that such extension, deferral,
modification or amendment is necessary to avoid a default on such Contract,
will maximize the amount to be received by PARCO and/or the APA Banks with
respect to such Contract, and is otherwise in the best interests of PARCO and/or
the APA Banks.

(vii) which does not, at the time of the initial creation of an
interest of PARCO and/or the APA Banks therein, constitute a Defaulted
Receivable or a Delinquent Receivable;

(viii) which, together with the related Contract, does not
contravene applicable laws, rules or regulations including, without limitation,
laws, rules or regulations concerning such matters as usury, consumer
protection, truth in lending, fair credit billing and equal credit opportunity;

(ix) which, if originated by a Dealer, was sold by such Dealer to
the Originator without any fraud or misrepresentation by the Dealer;

(x) which, together with the related Contract, represents the
genuine, legal, valid and binding payment obligation in writing of the Obligor,
enforceable in accordance with its terms (except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and general principles of equity),
and all parties to the related Contract had full legal capacity to execute and
deliver such

<PAGE>

Contract and all other documents related thereto and to grant the security
interest purported to be granted thereby;

(xi) the Obligor of which is not the United States of America or
any state or local government or territory or any agency, department or
instrumentality thereof;

(xii) with respect to which no Obligor had been identified on the
records of the Originator, the Seller or the Servicer as being the subject of a
bankruptcy, insolvency, reorganization or other similar proceeding;

(xiii) with respect to which the information set forth in the
related Purchase Notice was produced from the Servicer's electronic ledger and
was true and correct in all material respects on the related Cutoff Date.

(xiv) which (1) has a remaining maturity, as of the related Cutoff
Date, of not more than 72 months, (2) has an original maturity of not more than
72 months, (3) has a remaining principal balance as of the related Cutoff Date
of not more than $50,000, (4) is not more than 30 days past due as of the
related Cutoff Date, and (5) with respect to which no funds have been advanced
by the Originator, the Servicer or any Dealer, or anyone acting on behalf of any
of them in order to cause any Receivable to qualify under clause (4) above;

(xv) which, together with the Contract related thereto, has not
been satisfied, subordinated or rescinded, nor shall any Financed Vehicle or
other Related Security have been released from the security interests granted
under the related Contract in whole or in part;

(xvi) which, except for the security interests in favor of AFL, the
Seller and the Funding Agent, is free and clear of all security interests,
liens, charges, and encumbrances, and with respect to which no right of
rescission, setoff, counterclaim or defense shall have been asserted or
threatened;

(xvii) with respect to which no liens or claims have been filed for
work, labor or materials relating to a Financed Vehicle that will be prior to or
equal with the security interest in the Financed Vehicle which is the subject of
the related Contract;

(xviii) with respect to which there is no default, breach, violation
or event of acceleration existing under the related Contract, and there is no
event which,

<PAGE>

with the passage of time, or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of acceleration;

(xix) with respect to which the related Obligor has, at the time of
the initial creation of an interest of PARCO and/or the APA Banks therein,
obtained physical damage and theft insurance covering the related Financed
Vehicle, and such Obligor is required under the terms of the related Contract to
maintain such insurance;

(xx) with respect to which, immediately prior to the sale pursuant
to this Agreement, the Seller has good and marketable title to such Receivable
free and clear of all liens, encumbrances, security interests and rights of
others, and the sale and assignment of such Receivable to the Seller by the
Originator has been perfected under the UCC;

(xxi) with respect to which there exists a Contract File which
contains, without limitation, each of the items described in the definition of
"Contract File" and is in the possession of the Servicer and with respect to
each document contained therein which is required to be executed by the related
Obligor has been executed by such Obligor in the appropriate spaces, all blanks
on any form have been properly filled in, and each form has otherwise been
correctly prepared in all material respects;

(xxii) which was not originated in, and is not subject to the laws
of, any jurisdiction under which the sale, transfer and assignment of such
Receivable is unlawful, void or voidable;

(xxiii) with respect to which all filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the Funding Agent
a first priority perfected security interest in the Receivables shall have been
made;

(xxiv) for which one, and only one, original executed copy of each
Contract exists;

(xxv) the Obligor of which is required to make payments to the
Lock-Box;

(xxvi) which, together with the related Contract, constitutes
"chattel paper" under the UCC; and

(xxviii) which is not the subject of a subvention program.

"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended and in effect from time to time, and any successor statute.

<PAGE>

"ERISA AFFILIATE" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the IRC) as the Seller; (ii) partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of Section 414(c) of
the IRC) with the Seller or (iii) member of the same affiliated service group
(within the meaning of Section 414(m) of the IRC) as the Seller, any corporation
described in clause (i) above or any partnership or other trade or business
described in clause (ii) above.

"EURODOLLAR RATE" means, with respect to any Tranche for which the
applicable rate is to be determined by reference to LIBOR, a rate which is 0.80%
in excess of a rate per annum equal to the sum (rounded upwards, if necessary,
to the next higher 1/100 of 1%) of (A) the rate obtained by dividing (i) the
applicable LIBOR by (ii) a percentage equal to 100% MINUS the reserve percentage
used for determining the maximum reserve requirement as specified in Regulation
D of the Board of Governors of the Federal Reserve System (including, without
limitation, any marginal, emergency, supplemental, special or other reserves)
that is applicable to the Funding Agent during the related Accrual Period in
respect of eurocurrency or eurodollar funding, lending or liabilities (or, if
more than one percentage shall be so applicable, the daily average of such
percentage for those days in the related Accrual Period during which any such
percentage shall be applicable) PLUS (B) the then daily net annual assessment
rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) as estimated by
the Funding Agent for determining the current annual assessment payable by the
Funding Agent to the Federal Deposit Insurance Corporation in respect of
eurocurrency or eurodollar funding, lending or liabilities.

"EURODOLLAR TRANCHE" means a Tranche as to which Discount is
calculated at a Eurodollar Rate.

"EVENT OF BANKRUPTCY" shall mean, with respect to any Person, (i) that
such Person (a) shall generally not pay its debts as such debts become due or
(b) shall admit in writing its inability to pay its debts generally or (c) shall
make a general assignment for the benefit of creditors; (ii) any proceeding
shall be instituted by or against such Person seeking to adjudicate it as
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or any substantial part of
its property or (iii) if such Person is a corporation, such Person or

<PAGE>

any Subsidiary shall take any corporate action to authorize any of the actions
set forth in the preceding clauses (i) or (ii).

"FACILITY DOCUMENTS" means collectively, this Agreement, the Lock-Box
Agreement, the Receivables Purchase Agreement, the Certificate, the Demand Note,
the Fee Letter, the Asset Purchase Agreement and all other agreements, documents
and instruments delivered pursuant thereto or in connection therewith.

"FACILITY LIMIT" means, at any time, $150,000,000; PROVIDED, HOWEVER,
that at all times on and after the Termination Date, the "Facility Limit" means
the aggregate outstanding Net Investment. The Facility Limit may also be
reduced pursuant to Section 2.4.

"FEE LETTER" means the letter agreement of even date herewith between
the Seller and the Funding Agent.

"FINAL COLLECTION DATE" means the date following the Termination Date
on which the aggregate outstanding Net Investment has been reduced to zero and
PARCO and the APA Banks have received all Discount (including, without
limitation, all amounts accrued under clause (ii) of the definition of "Assignee
Rate") and other amounts payable to PARCO, the APA Banks and the Funding Agent
under this Agreement or any other agreement executed pursuant hereto.

"FINAL TERMINATION DATE" means October 15, 1999, as such time may be
extended for an additional 364 days from time to time in accordance with Section
9.1(b).

"FINANCE CHARGE COLLECTIONS" means, for any Settlement Period, the
aggregate amount of Collections (other than Principal Collections) received
during such Settlement Period, including, without limitation, all amounts paid
by or on behalf of Obligors with respect to interest, finance charges, late
payment charges, fees, and any other amounts due under the Contracts relating to
the Purchased Receivables (other than with respect to the unpaid principal
balance thereof) .

"FINANCED VEHICLE" means the new or used automobile, minivan or
light-duty truck that is purchased by the Obligor to which a particular
Receivable relates.

"FORCE-PLACED INSURANCE" has the meaning specified in Section 6.9.

"FUNDING AGENT" has the meaning set forth in the preamble to this
Agreement.

"GAAP" means generally accepted accounting principles set forth in

<PAGE>

the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such accounting profession, which are in effect as of the date of
this Agreement.

"HEDGE COUNTERPARTY" means any Person party to an Interest Rate Hedge
with the Seller.

"INCREMENTAL PURCHASE" means any Purchase which, pursuant to Section
2.2, causes the aggregate outstanding Net Investment hereunder to increase.

"INDEBTEDNESS" means, with respect to any Person, (i) indebtedness for
borrowed money (other than trade accounts payable incurred in the ordinary
course of business that do not bear interest if paid on or before the due date
thereof and which are not in fact overdue), (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations to pay the
deferred purchase price of property or services, (iv) obligations as lessee
under leases which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases, and (v) obligations
under direct or indirect guaranties in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clauses (i) through (iv) above.

"INDEMNIFIED AMOUNTS" has the meaning specified in Section 8.1(a).

"INELIGIBLE PURCHASED RECEIVABLE" has the meaning specified in Section
8.2.

"INITIAL PURCHASE DATE" means the date on which the first Purchase is
made pursuant to this Agreement.

"INTEREST COLLECTIONS" means (A) the Collections and payments under
Interest Rate Hedges set aside for PARCO, the APA Banks and the Seller pursuant
to Section 2.5(b), (B) the Repurchase Proceeds, which, in the case of clauses
(A) and (B) above, constitute Finance Charge Collections, (C) Recoveries (to the
extent treated as Finance Charge Collections), (D) amounts from withdrawals from
the Reserve Account (to the extent treated as Finance Charge Collections), and
(E) all other Collections constituting or treated as Finance Charge Collections.

"INTEREST RATE HEDGE" means any interest rate cap or other hedging

<PAGE>

mechanism which satisfies the requirements of Section 5.1(l).

"INTEREST RATE HEDGE ASSIGNMENT ACKNOWLEDGMENT" means an
acknowledgment in substantially the form of Exhibit D hereto executed by a
counterparty to an Interest Rate Hedge (if other than Chase) in favor of the
Funding Agent.

"INSURANCE ADD-ON AMOUNT" means the premium charged to the Obligor if
the Servicer obtains Force-Placed Insurance pursuant to Section 6.9

"IRC" means the Internal Revenue Code of 1986, as amended.

"LAW" means any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of
any Official Body.

"LIBOR" means, with respect to any Tranche funded by the APA Banks and
not based on the Base Rate, for a specific Accrual Period, the rate for deposits
in United States dollars for a term equal to such Accrual Period (commencing on
the first day of such Accrual Period) which appears on Telerate Page 3750 as of
11:00 A.M. (London time) on the second Business Day prior to the commencement of
such Accrual Period. If such rate does not appear on Telerate Page 3750, the
rate for such period shall be determined on the basis of the rates at which
deposits in United States dollars are offered by four (4) major banks in the
London interbank market, selected by the Funding Agent, at approximately 11:00
A.M. (London time) on such date to prime banks in the London interbank market
for a period equal to such Accrual Period (commencing on the first day of the
Accrual Period). The Funding Agent shall request the principal London office of
each such bank to provide a quotation of its rate. If at least two (2) such
quotations are provided, the rate for such Accrual Period shall be the
arithmetic mean of the quotations. If fewer than two quotations are provided as
requested, the rate for such Accrual Period shall be the arithmetic mean of the
rates quoted by four (4) major banks in The City of New York, selected by the
Funding Agent, at approximately 11:00 A.M. (New York time) on the first day of
such Accrual Period for loans in United States dollars to leading European banks
for a period equal to such Accrual Period (commencing on the first day of such
Accrual Period). If at least two (2) such quotations are provided, the rate for
such Accrual Period shall be the arithmetic mean of the quotations. If fewer
than two (2) quotations are provided as requested, the rate for such Accrual
Period shall be the LIBOR rate for the immediately preceding Accrual Period.

"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), preference, priority or other security

<PAGE>

agreement or preferential arrangement of any kind or nature whatsoever in
respect of any property of a Person, whether granted voluntarily or imposed by
law, and includes the interest of a lessor under a capital lease or under any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement or similar notice (other
than a financing statement filed by a "true" lessor or consignor pursuant to
Section 9-408 of the UCC), naming the owner of such property as debtor, under
the UCC or other comparable law of any jurisdiction.

"LOCK-BOX" means the "Lockbox", together with the "Agent Account",
each as defined in the Lock-Box Agreement.

"LOCK-BOX ACCOUNT" means that certain bank account held at Harris
Trust and Savings Bank in the name, and under the sole dominion and control of,
The Chase Manhattan Bank, as Funding Agent for the benefit of PARCO and the APA
Banks, as Account No. 1474709, or any successor account designated by the
Funding Agent from time to time.

"LOCK-BOX AGREEMENT" means 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 the date hereof, among Harris Trust and Savings
Bank, AFL, the Seller and the Funding Agent, as such agreements may be amended,
supplemented or otherwise modified and in effect from time to time, unless such
agreement shall be terminated in accordance with its terms, in which event
"Lock-Box Agreement" shall mean such other agreement, in form and substance
acceptable to the Funding Agent, among the Servicer, the Seller, the Funding
Agent and the Lock-Box Bank.

"LOCK-BOX BANK" means Harris Trust and Savings Bank, and its
successors and assigns; PROVIDED, that any such successor and assign shall be
acceptable to the Funding Agent.

"LTV" means the ratio, expressed as a percentage, the numerator of
which is the amount financed under any Contract (excluding Soft-Adds), and the
denominator of which is the retail value of the related Financed Vehicle as of
the date of such Contract, as listed on the applicable Dealer's invoice, the
NADA Used Car Guide, the National Auto Research Black Book or the Kelley Blue
Book, as applicable.

<PAGE>

"MAXIMUM INTEREST RATE CAP STRIKE PRICE" means, with respect to any
Purchase Date, a per annum rate equal to the Weighted Average Coupon MINUS
10.15%.

"MINIMUM RESERVE ACCOUNT BALANCE" means an amount equal to $200,000.

"MONTHLY EXTENSION RATE" means, for any Settlement Period, a fraction
expressed as a percentage, the numerator of which is the aggregate Outstanding
Balance, as of the last day of such Settlement Period, of all Receivables
comprising the Servicing Portfolio with respect to which the scheduled payments
relating thereto were extended during such Settlement Period, and the
denominator of which is the Servicing Portfolio Balance as of the last day of
such Settlement Period.

"MONTHLY REPORT" means a report, in substantially the form of Exhibit
E hereto, furnished by the Servicer to the Funding Agent for the benefit of
PARCO and the APA Banks pursuant to Section 2.5(a).

"MOODY'S" means Moody's Investors Service, Inc., and its successors
and assigns.

"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by either the Seller or any ERISA Affiliate.

"NET CREDIT LOSSES" means, with respect to any Settlement Period, the
Outstanding Balance of Receivables comprising the Servicing Portfolio (without
duplication, net of Recoveries received by the Servicer) which became
Charged-Off Receivables during such Settlement Period, calculated in a manner
consistent with the calculations of net losses in Arcadia's Annual Report filed
with the Securities and Exchange Commission on Form 10-K for the year ended
December 31, 1997.

"NET CREDIT LOSS RATIO" means, as of any Determination Date, a
fraction, expressed as a percentage, the numerator of which equals the product
of two and the Net Credit Losses for the six preceding Settlement Periods and
the denominator of which equals the average of the Servicing Portfolio Balance
for the seven preceding Settlement Periods. The calculation of "Net Credit Loss
Ratio" shall not include the June 1998 Settlement Period.

"NET INVESTMENT" means the sum of the amounts paid by PARCO and

<PAGE>

the APA Banks, as applicable, to the Seller for each Incremental Purchase
pursuant to Section 2.2, as reduced from time to time by Collections received
and distributed on account of such Net Investment pursuant to Section 2.5. If
PARCO or an APA Bank is required (or believes in good faith that it is required)
by law to repay (as a preference or otherwise, to the Seller, the Originator, an
Obligor, a trustee for the Seller, the originator or any Obligor, a court or any
other Person) any amount which previously caused a reduction in Net Investment,
then the Net Investment shall be reinstated by the amount of such repayment, and
the Seller will indemnify and hold PARCO, the APA Banks or the Funding Agent, as
applicable, harmless for the amount of such repayment, interest thereon required
(or believed in good faith by PARCO, the APA Banks or the Funding Agent, as
applicable, to be required) to be paid in connection therewith and all losses,
liabilities, costs and expenses related thereto (including but not limited to
reasonable attorneys' fees and expenses).

"NET POOL BALANCE" means, at any time, the sum of (i) the aggregate
Outstanding Balance of all Purchased Receivables which constitute Eligible
Receivables as of the last day of the immediately preceding Settlement Period
PLUS (ii) the aggregate balance of Principal Collections on deposit in the
Collection Account at such time PLUS (iii) amounts on deposit in the Lock-Box
Account attributable to the Purchased Receivables; PROVIDED that the Net Pool
Balance shall not include the Outstanding Balance of (i) any Defaulted
Receivable, (ii) any Delinquent Receivable, (iii) any Receivable which is the
subject of a Repurchase Obligation, and (iv) any Receivable which has a
remaining principal balance greater than $40,000 to the extent such balance,
when taken together with the remaining principal balances of all other such
Receivables, exceeds 2% of the aggregate Outstanding Balance of all Purchased
Receivables.

"NET YIELD" means the Weighted Average Coupon of the Outstanding
Balance of Purchased Receivables as of the last day of any Settlement Period
MINUS the sum of (i) the Blended Hedge Rate, (ii) the LIBOR margin of 0.80%,
(iii) the Servicing Fee Percentage and (iv) 0.10%.

"OBLIGOR" means the obligor and any co-obligor(s) under a Receivable.

"OFFICIAL BODY" shall mean any government or political subdivision or
any agency, authority, bureau, central bank, commission, department or
instrumentality of any such government or political subdivision, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.

"OPTIONAL SALE" has the meaning assigned to that term in Section 3.3.

"OPTIONAL SALE DATE" means any day on which an Optional Sale is
designated pursuant to Section 3.3.

<PAGE>

"OPTIONAL SALE RELATED COLLATERAL" shall mean, with respect to any
Optional Sale, all or a portion of the Purchased Assets selected by the Seller
in connection with the Optional Sale in accordance with the FIFO method
(excluding, however, any Purchased Receivable and Related Security subject to a
Repurchase Obligation and Purchased Receivables and Related Security which are
not included in the Net Pool Balance), as the Seller has agreed to sell in an
arm's-length transaction permitted hereby and as are designated by the Seller
and specified in the Servicer's Optional Sale Date Certificate.

"ORIGINATOR" means Arcadia Financial Ltd., a Delaware corporation, and
its successors and assigns in such capacity.

"OTHER COSTS" has the meaning specified in Section 9.6(c).

"OTHER SELLER" means any Person, other than the Seller, that has
entered into a receivables purchase agreement, receivables transfer agreement,
loan agreement or funding agreement with PARCO.

"OUTSTANDING BALANCE" means, with respect to any date and any
Receivable, the then outstanding principal balance of such Receivable. For the
avoidance of doubt, it is understood that in no event shall the definition of
"Outstanding Balance" include any amount in respect of (i) finance charges and
income with respect to any such Receivable or (ii) prepaid dealer reserves or
other marketing expenses with respect to any such Receivable.

"PARCO" has the meaning set forth in the preamble to this Agreement.

"PERMITTED INVESTMENT" means 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;

<PAGE>

(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 thereof and subject
to supervision and examination by federal and/or state banking authorities
(including, if applicable, the Funding Agent or any agent thereof 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 Funding Agent
has taken actual or constructive delivery of such obligation, 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+" and "P-1" by
the Rating Agencies (including, if applicable, the Funding Agent or any agent
thereof 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 Permitted 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 Collection Account and the
Reserve Account to exceed 10% of the value Permitted Investments held in such
accounts (with Permitted Investments held in such 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) units of money market funds in the highest credit rating category
by each Rating Agency; or

(g) any other demand or time deposit, obligation, security or
investment (including, without limitation, a hedging arrangement) as may be
acceptable to the Funding Agent, as evidenced by a writing to that effect, as
may from time to time be confirmed in writing to the Funding Agent.

PROVIDED that (i) Permitted Investments may be purchased by or through the
Funding Agent or any of its Affiliates and (ii) all Permitted Investments shall
be held in the

<PAGE>

name of the Funding Agent.

"PERMITTED SECURITIZATION TRANSACTION" means a transfer of Receivables
by way of a term securitization transaction or other type of refinancing.

"PERMITTED ORIGINATOR TRANSACTION" means a transfer of Receivables by
way of a refinancing which is effected through a Subsidiary of the Originator.

"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture, government (or any agency or
political subdivision thereof) or other entity.

"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA
in respect of which the Seller or any ERISA Affiliate is, or within the
immediately preceding six years was, an "employer" as defined in Section 3(5) of
ERISA.

"POOL BALANCE" means, on any date of determination, the aggregate
Outstanding Balance of all Purchased Receivables.

"POTENTIAL TERMINATION EVENT" shall mean an event which, but for the
lapse of time or the giving of notice or both, would constitute a Termination
Event.

"PRINCIPAL COLLECTIONS" means, for any Settlement Period, the
aggregate amount of Collections with respect to the unpaid principal balances
due under the Purchased Receivables received or deemed received during such
Settlement Period, together with, following the Termination Date, the aggregate
amount withdrawn from the Reserve Account and treated as Principal Collections
pursuant to Section 2.13(c).

"PROGRAM FEE" has the meaning set forth in the Fee Letter.

"PURCHASE" means a purchase of Purchased Receivables, Related Security
with respect to such Purchased Receivables and Collections with respect thereto
by PARCO and the APA Banks (acting through the Funding Agent), as applicable,
from the Seller pursuant to Sections 2.1 and 2.2.

"PURCHASE DATE" means the Initial Purchase Date and, thereafter, any
Business Day of a calendar month on which a Purchase occurs; PROVIDED, that no
more than one Purchase may occur on any Purchase Date.

<PAGE>

"PURCHASE NOTICE" means a notice, in substantially the form of Exhibit
F hereto, furnished by the Seller to the Funding Agent pursuant to Section 2.2.

"PURCHASE PRICE" has the meaning specified in Section 2.2(c).

"PURCHASE TERMINATION EVENT" has the meaning specified in the
Receivables Purchase Agreement.

"PURCHASED ASSETS" means, at any time, all then outstanding Purchased
Receivables, Related Security with respect to such Purchased Receivables,
payments owing to the Seller or the Funding Agent (as applicable) under Interest
Rate Hedges covering Purchased Receivables and Collections with respect to, and
other proceeds of, such Purchased Receivables.

"PURCHASED RECEIVABLE" means any Receivable which appears on any list
of Receivables at any time hereafter submitted to and accepted by the Funding
Agent, on behalf of and at the direction of PARCO or the APA Banks, as
applicable, pursuant to Section 2.2. Once a Receivable appears on any such list
it shall remain a Purchased Receivable; PROVIDED, HOWEVER, that with respect to
any Receivable that is repurchased by the Seller pursuant to Section 8.2 or
Section 3.3, following the Funding Agent's receipt of the repurchase price for
such Receivable (and any other amounts due in connection therewith), "Purchased
Receivable" shall not include the Receivable so repurchased.

"RATING AGENCIES" means S&P and Moody's.

"RATING AGENCY CONDITION" means, with respect to any action, that each
Rating Agency shall have been given ten (10) days' (or such shorter period as
shall be acceptable to each Rating Agency) prior notice thereof and that each of
the Rating Agencies shall have notified the Seller, the Servicer and the Funding
Agent in writing that such action will not result in a reduction or withdrawal
of the then current rating of PARCO's Commercial Paper.

"RECEIVABLES" means the indebtedness evidenced by the Contracts,
whether constituting accounts, general intangibles, contract rights, chattel
paper or instruments.

"RECEIVABLES PURCHASE AGREEMENT" means that certain Receivables
Purchase Agreement, dated as of October 16, 1998, between the Originator and the
Seller, as the same may be amended, supplemented or otherwise modified and in
effect from time to time.

"RECIPIENT" has the meaning specified in Section 2.12.

<PAGE>

"RECORDS" means, with respect to each Purchased Receivable, all
factory invoices and work orders describing the related Financed Vehicle, the
bill of sale and guaranty of title, insurance policies, tax receipts, property
and casualty insurance policies or binders naming the Servicer as loss payee or
additional named insured, as is appropriate, insurance premium receipts, ledger
sheets, payment records, insurance claim files and correspondence, all
documentation in connection with any modification, release, accommodation,
co-signing or guaranty of the Purchased Receivable and all other documents and
instruments, including all books, records, files, tapes, correspondence and
other information or materials (including, without limitation, computer
programs, tapes, discs, punch cards, data processing software and related
property and rights) relating to the Purchased Receivable, the Contract, the
Title and the Financed Vehicle relating to the Purchased Receivable and this
Agreement.

"RECOVERIES" means, with respect to Receivables which constitute
Defaulted Receivables, all amounts representing recoveries on such Receivables
resulting from payments by any third party, the foreclosure upon, sale or other
disposition of the related Financed Vehicle, insurance proceeds with respect to
the related Financed Vehicle or payments made by or on behalf of the Obligor.

"REFINANCING PROCEEDS" means proceeds received by the Seller pursuant
to a Permitted Securitization Transaction involving Purchased Receivables which
are concurrently repurchased by the Seller under Section 3.3.

"RELATED SECURITY" means, with respect to any Receivable, all of the
Seller's right, title, and interest in, to and under (i) the related Contract
File, (ii) the related Financed Vehicle, (iii) all related Records, (iv) all
guarantees, insurance and other agreements or arrangements of whatever character
from time to time supporting or securing payment of such Receivable, whether
pursuant to the related Contract or otherwise, (v) all security interests, liens
and other property purporting to secure payment of the related Contract,
together with all financing statements signed by an Obligor and security
agreements describing any collateral securing such Contact, and (vi) all
proceeds of the foregoing.

"REPURCHASE OBLIGATION" means, with respect to any Purchased
Receivable, any obligation of the Seller to purchase such Purchased Receivable
set forth in Section 8.2.

"REPURCHASE PROCEEDS" means the amounts paid by the Seller in
connection with any repurchase of Purchased Receivables pursuant to Section 8.2

<PAGE>

hereof.

"REQUIRED APA BANKS" means, on any date of determination, the APA
Banks whose commitments represent 66 2/3% of the Facility Limit.

"REQUIRED NET YIELD" means, at any time, 8%.

"RESERVE ACCOUNT" means that certain account as described in Section
2.13 hereof.

"S&P" means Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc., and its successors and assigns.

"SECTION 2.7 COSTS" has the meaning specified in Section 2.7.

"SECURITIES" means any limited, general or other partnership interest,
or any stock, shares, voting trust certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or any certificates of interest, shares, or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire any of the foregoing.

"SELLER" has the meaning set forth in the preamble to this Agreement.

"SERVICER" means initially AFL and, thereafter, any successor
appointed pursuant to Article VI to service, administer and collect Purchased
Receivables.

"SERVICER ADVANCE" has the meaning specified in Section 2.5(d).

"SERVICER'S OPTIONAL SALE DATE CERTIFICATE" means an Officer's
Certificate of the Servicer substantially in the form of Exhibit G hereto.

"SERVICER TERMINATION EVENT" means any of the following events shall
have occurred:

(a) The Servicer shall fail to make any payment or deposit to
be made by it hereunder and such failure is not due to a technical or similar
failure beyond the Servicer's control (and in no way related to the ability of
the Servicer to make such payment or deposit) which such technical or similar
failure has not been

<PAGE>

cured with one (1) Business Day;

(b) The Servicer shall fail to perform or observe in any
material respect any other term, covenant or agreement contained in this
Agreement or any other Facility Document on its part to be performed or
observed, including failure to observe the Credit and Collection Policy and/or
the Additional Credit Guidelines;

(c) Any representation or warranty made or deemed to be made
by the Servicer (or any of its officers) under or in connection with this
Agreement or any other Facility Document, including any Monthly Report or any
Purchase Notice, shall prove to have been false or incorrect in any material
respect when made;

(d) An Event of Bankruptcy shall occur with respect to the
Servicer;

(e) A Termination Event shall occur and be continuing and the
Funding Agent has notified the Seller that a determination has been made that
the Servicer's ability to service the Purchased Receivables in accordance with
the terms of the Facility Documents has been impaired;

(f) The Servicer shall materially modify the Credit and
Collection Policy, unless it has given the Funding Agent timely notification of
such modification and the Funding Agent has determined in its reasonable
discretion that such modification is not a change which would be reasonably
likely to materially and adversely affect the interests of PARCO and APA Banks
hereunder; or

(g) Any event which is reasonably likely to materially and
adversely affect the ability of the Servicer to perform its duties and
obligations hereunder (including, but not limited to, the collection and
servicing of the Purchased Receivables).

"SERVICING FEE" means a fee with respect to each Settlement Period,
payable to the Funding Agent in arrears for the account of the Servicer, equal
to the product of (i) the average daily Pool Balance during such Settlement
Period and (ii) the Servicing Fee Percentage.

"SERVICING FEE PERCENTAGE" means 1.25% per annum or, if AFL is not the
Servicer, such higher percentage as the Funding Agent shall reasonably determine
in good faith to be the then current market rate payable to entities performing
duties and functions similar to those of the Servicer hereunder.

"SERVICING PORTFOLIO" means all Receivables serviced by AFL

<PAGE>

(whether or not then subject to this Agreement, a Permitted Securitization
Transaction or a Permitted Originator Transaction).

"SERVICING PORTFOLIO BALANCE" means the aggregate Outstanding Balance
of all Receivables which comprise the Servicing Portfolio.

"SETTLEMENT DATE" means the 15th day of each calendar month; PROVIDED,
that if in any month such day is not a Business Day, the "Settlement Date" for
such calendar month shall be the first Business Day to occur after such 15th
day.

"SETTLEMENT PERIOD" means a calendar month (except that the first
Settlement Period shall begin at the opening of business on the Effective Date
and shall end on the last day of the calendar month in which the Effective Date
occurs).

"SOFT-ADDS" means those products which do not constitute the physical
portion of a Financed Vehicle, including, but not limited to, credit life and
disability insurance, vehicle extended warranty packages and vehicle servicing
packages.

"SPECIAL CHARGE" means, with respect to any Person, any item, whether
cash or non-cash in nature, reported from time to time on the quarterly or
annual financial statements of such Person or otherwise, which is extraordinary,
unusual, or infrequent for purposes of GAAP and which is applied as a negative
charge against the net income of such Person (but not including charges due to
changes in accounting methods as prescribed by FASB and/or any other applicable
regulatory body).

"SUBSIDIARY" means any corporation or other entity of which Securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are at the
time directly or indirectly owned or controlled by such Person, one or more of
the other subsidiaries of such Person or any combination thereof.

"TAXES" has the meaning assigned to that term in Section 2.9.

"TERMINATION DATE" means the earliest of (i) the date of the reduction
of the Facility Limit to zero pursuant to Section 2.4 or the declaration or
automatic occurrence of the Termination Date pursuant to Section 7.1, (ii) five
(5) Business Days prior to the Commitment Expiry Date, and (iii) the Final
Termination Date.

"TERMINATION EVENT" has the meaning assigned to that term in Section

<PAGE>

7.1.

"TITLE" means, with respect to each Receivable, the original
certificate of title or other instrument or registration evidencing ownership of
the related Financed Vehicle, which certificate, other instrument or
registration shall have the Lien of the Originator noted thereon or a UCC
financing statement signed by the Obligor and filed in the appropriate
jurisdiction evidencing the perfection of the Lien granted by the Obligor to the
Originator, assigned to the Seller under the Receivables Purchase Agreement and
assigned to the Funding Agent for the benefit of PARCO and the APA Banks (or its
designee) as provided herein. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Title"
means only a certificate of notification issued to a secured party.

"TRANCHE" means a portion of the Net Investment funded based on a
specific Tranche Rate pursuant to Article II of this Agreement.

"TRANCHE RATE" means, for any Tranche and any Accrual Period, (i)
prior to the occurrence of a Wind-Down Event, the CP Rate and (ii) following the
occurrence of a Wind-Down Event, a rate equal to the applicable Assignee Rate
for such Tranche and related Accrual Period.

"TRANSITION COSTS" means any documented expenses and allocated cost of
personnel reasonably incurred by a successor Servicer in connection with a
transfer of servicing from the Servicer to a successor Servicer pursuant to
Section 6.1 hereof.

"UCC" means the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.

"WEIGHTED AVERAGE COUPON" means, as of the last day of any Settlement
Period, the weighted average of the per annum interest rates applicable to the
Purchased Receivables (other than Purchased Receivables that have been
charged-off) as of such last day.

"WEIGHTED AVERAGE CREDIT SCORE" means, as of the last day of each
Settlement Period, the weighted average, by Outstanding Balance, of the Credit
Scores of all Purchased Receivables as of such last day.

"WEIGHTED AVERAGE REMAINING TERM" means, at any time, a term
(calculated in years on an aggregate basis) equal to two (2) years.

"WIND-DOWN EVENT" means the occurrence of any of the following events:

<PAGE>

(a) PARCO, in its sole discretion, determines that it is unable or
unwilling to issue Commercial Paper to fund the Net Investment or
to make Purchases pursuant to Section 2.1(a);

(b) the providers of PARCO's liquidity and/or letter of credit
facilities shall have given notice that an event of default has
occurred and is continuing under their respective agreements with
PARCO;

(c) on the fifth (5th) Business Day prior to the Commitment Expiry
Date, the APA Banks shall have notified PARCO that their
commitments will not be extended for an additional 364 days;

(d) PARCO's Commercial Paper shall not be rated at least A-1/P-1 by
S&P and Moody's, respectively; and

(e) a Termination Event or a Potential Termination Event.

"YEAR 2000 COMPLIANT" means, with regard to any Person, that all
software, embedded microchips, and other processing capabilities utilized by,
and material to the business or servicing operations or financial condition of
such Person, are able to interpret and manipulate data involving all calendar
dates correctly and without causing any abnormal ending scenario, including
dates in and after the Year 2000.

SECTION 1.2 OTHER TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles. All terms used in Article 9 of the UCC in the State of
New York, and not specifically defined herein, are used herein as defined in
such Article 9.

SECTION 1.3 COMPUTATION OF TIME PERIOD. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."

<PAGE>

ARTICLE II

AMOUNTS AND TERMS OF THE PURCHASES

SECTION 2.1 FACILITY. (a) From the Effective Date to the Termination
Date, (i) prior to the occurrence of a Wind-Down Event, PARCO, acting through
the Funding Agent, may, in its sole discretion, make Purchases from the Seller
and (ii) following the occurrence of a Wind-Down Event, the APA Banks, acting
through the Funding Agent, shall make Purchases from the Seller on the terms and
conditions set forth herein. Each such Purchase shall constitute an absolute
assignment and sale by the Seller, and a purchase and acquisition by PARCO or
the APA Banks, as applicable, of Purchased Assets, including, without
limitation, Purchased Receivables, Related Security and Collections with respect
thereto. Under no circumstances shall PARCO or the APA Banks, as applicable,
make an Incremental Purchase, if, after giving effect to such Incremental
Purchase, the outstanding Net Investment hereunder would exceed the Facility
Limit. Each Incremental Purchase shall be in a minimum amount of at least
$5,000,000. Nothing in this Agreement shall be deemed to be or construed as a
commitment by PARCO to make Purchases at any time.

(b) It is the intention of the parties hereto that each Purchase
of Receivables, Related Security and Collections made hereunder shall constitute
a sale, which sale is absolute, irrevocable and without recourse except as
specifically provided herein and provide PARCO and the APA Banks, as applicable,
with the full benefits of ownership of the Purchased Receivables and such
related Purchased Assets. Neither the Seller, the Funding Agent, PARCO nor the
APA Banks intend for the transactions contemplated hereunder to be, or for any
purpose to be characterized as, loans from PARCO or the APA Banks to the Seller
secured by such assets. In addition, the Seller hereby pledges, grants a
security interest in and assigns to the Funding Agent, for the benefit of PARCO
and the APA Banks, as security for such loans and for the payment and
performance of all obligations of the Seller hereunder, all of the Seller's
right, title and interest in, to and under (i) the Purchased Receivables, the
Related Security and Collections related thereto, (ii) the Reserve Account, the
Collection Account, the Lock-Box and the Lock-Box Account and all funds and
investments on deposit therein and credited thereto, (iii) the Demand Note, (iv)
the Receivables Purchase Agreement, (v) Interest Rate Hedges and (vi) all
proceeds of the foregoing. It is the intention of the parties hereto that the
Purchases of Purchased Receivables, Related Security and Collections made
hereunder shall constitute sales of such Purchased Receivables, Related Security
and Collections rather than a loan secured by such Purchased Receivables,
Related Security and Collections, and the Seller agrees to note, clearly and
unambiguously, on its financial statements and its electronic ledgers and other
applicable records that such Purchased Receivables, Related Security and
Collections have been sold to PARCO or the APA Banks, as applicable.

<PAGE>

SECTION 2.2 MAKING PURCHASES.

(a) INCREMENTAL PURCHASES. Each Incremental Purchase shall be
made on a Purchase Date upon delivery to the Funding Agent of a Purchase Notice
at least one Business Day prior such Purchase Date UNLESS any portion of
Discount with respect to the initial Tranche applicable to such Purchase is to
be calculated by reference to a Eurodollar Rate, in which case such notice must
be delivered to the Funding Agent by no later than 2:00 P.M. (New York time) on
the third (3rd) Business Day before such Purchase Date. Each Purchase Notice
for an Incremental Purchase shall specify the amount of the proposed increase to
outstanding Net Investment as a result of such requested Incremental Purchase.
Each Purchase Notice shall be in the form of Exhibit F hereto.

(b) EFFECT OF PAYMENT OF PURCHASE PRICE. Upon the payment of
the Purchase Price for any Purchase, title to the Purchased Receivables
specified in the related Purchase Notice and the other Purchased Assets related
thereto shall vest in PARCO or the APA Banks, as applicable, whether or not the
conditions precedent to such Purchase were in fact satisfied; PROVIDED, HOWEVER,
that PARCO or the APA Banks, as applicable, shall not be deemed to have waived
any claim any of them may have under this Agreement for the failure by the
Seller in fact to satisfy any such condition precedent.

(c) AGGREGATE PURCHASE PRICE; ADVANCE PERCENTAGE. Each of
PARCO or each APA Bank, as applicable, shall pay to the Seller, through the
Funding Agent, its PRO RATA share of the increase in the Net Investment
attributable to each Incremental Purchase. The Advance Percentage will be
calculated for each Purchase prior to the applicable Purchase Date.

The amount of each Incremental Purchase shall be the amount requested
by the Seller in the related Purchase Notice; PROVIDED, that after giving effect
to such Incremental Purchase, the Net Investment shall not exceed the product of
the Advance Percentage and the Net Pool Balance (net of Principal Collections
held in the Collection Account and the Lock-Box Account at such time) (the
"PURCHASE PRICE"); PROVIDED FURTHER, that, if a Purchase occurs on a day which
is after the Determination Date related to any Settlement Period but prior to
the Settlement Date related to such Settlement Period, the Purchase Price shall
be the product of the Advance Percentage (adjusted according to the most
recently delivered Monthly Report or the most recently available information
regarding AFL's long-term debt rating) and the Outstanding Balance of
Receivables to become Purchased

<PAGE>

Receivables on such date, and the immediately preceding proviso shall not be
applicable with respect to such Purchase. On the date of each Incremental
Purchase, PARCO or each APA Bank, as applicable, shall, upon satisfaction of the
applicable conditions set forth in Article III, make available to the Funding
Agent at its address referred to in Section 2.6 its ratable portion, of the
aggregate amount of such Incremental Purchase in same day funds, and after
receipt by the Funding Agent of such funds, the Funding Agent will make such
funds immediately available to the Seller at Chase's address at 450 West 33rd
Street, New York, New York or as otherwise notified to the Funding Agent by the
Seller from time to time. The ownership interest of PARCO or the APA Banks, as
applicable, in the Purchased Assets shall be evidenced by a Certificate executed
by the Seller and delivered to the Funding Agent. After the Final Collection
Date has occurred, PARCO and each APA Bank shall, through the Funding Agent,
assign and sell to the Seller its respective remaining interest in the Purchased
Assets at par and any remaining Collections without any recourse, representation
or warranty, express or implied (other than a representation and warranty that
such Purchased Assets are free and clear of any Lien created by or through the
Funding Agent for the benefit of PARCO and the APA Banks ).

SECTION 2.3 TRANSFERS OF INTERESTS IN CONTRACTS. Except as expressly
set forth in this Agreement, neither the Funding Agent, PARCO nor any APA Bank
shall have any affirmative obligation or liability with respect to any Purchased
Receivables or related Contracts or any other Purchased Assets (including,
without limitation, any Interest Rate Hedges), nor shall any of them be
obligated to perform any of the affirmative obligations of the Seller or the
Originator thereunder.

SECTION 2.4 TERMINATION OR REDUCTION OF THE FACILITY LIMIT. The
Seller may, upon at least five (5) Business Days' written notice to the Funding
Agent, terminate in whole or reduce in part the unused portion of the Facility
Limit; PROVIDED, HOWEVER, that each partial reduction shall be in an amount
equal to $1,000,000 or an integral multiple thereof.

SECTION 2.5 SETTLEMENT PROCEDURES.

(a) MONTHLY REPORTS. On or prior to each Determination Date,
the Servicer shall prepare and forward to the Funding Agent and the Back-Up
Servicer a Monthly Report substantially in the form of Exhibit E hereto;
PROVIDED, that the Servicer shall be deemed not to be in default with respect to
the foregoing requirement if such default is cured within one (1) Business Day.

<PAGE>

(b) RECEIPT OF COLLECTIONS AND INTEREST RATE HEDGE PAYMENTS.
The Servicer shall cause all Collections of Purchased Receivables deposited in
(i) the Lock-Box to be transferred to the Lock-Box Account within one (1)
Business Day following receipt thereof into the Lock-Box and (ii) the Lock-Box
Account to be transferred to the Collection Account within two (2) Business Days
(or, after a Servicer Termination Event, one (1) Business Day) following receipt
thereof into the Lock-Box Account, and shall in no event later than two (2)
Business Days after such receipt (or, after a Servicer Termination Event, one
(1) Business Day) transfer any and all Collections of Purchased Receivables
received by the Servicer to the Collection Account. In addition, each payment
from the applicable counterparty under an Interest Rate Hedge and all Recoveries
(to the extent not previously deposited into the Collection Account) and
Repurchase Proceeds paid by the Seller pursuant to Section 8.2 hereof shall be
deposited to the Collection Account. All Collections of Purchased Receivables
received by the Servicer shall, prior to deposit in the Collection Account, be
held in trust by the Servicer for the benefit of PARCO, the APA Banks and the
Seller.

(c) SETTLEMENT DATES. On each Settlement Date, the Funding
Agent, at the direction of the Servicer, shall pay, from the Collections for the
related Settlement Period, to the following Persons in the following order of
priority:

(i) FIRST, to the Servicer, to repay any outstanding
Servicer Advances;

(ii) SECOND, to the Lock Box Bank and the independent
accountants, on a PRO RATA basis, to pay fees owed and reasonable
out-of-pocket costs and expenses which are accrued and unpaid;

(iii) THIRD, to the Servicer, any accrued and unpaid
Servicing Fee;

(iv) FOURTH, to the Back-Up Servicer, any accrued and
unpaid Back-Up Servicing Fee;

(v) FIFTH, to the Funding Agent, Discount and related
fees (including commercial paper placement agent fees) on Commercial
Paper issued by PARCO to fund the Net Investment, as

<PAGE>

well as, if applicable, any Discount under the Asset Purchase
Agreements, in each case accrued during the immediately preceding
Accrual Period; and

(vi) SIXTH, to the Funding Agent, all Program Fees as
outlined in the Fee Letter;

(vii) SEVENTH, to the Funding Agent, an amount equal to any
amount described in clause (v) which is then past due;

(viii) EIGHTH, to PARCO and the APA Banks, as applicable, an
amount necessary to reduce the Net Investment to an amount not greater
than the product of (A) the Advance Percentage and (B) the Net Pool
Balance;

(ix) NINTH, following any replacement of the Servicer, to
a successor Servicer to pay the reasonable costs of transition, to the
extent such costs have not been paid by the terminated Servicer;

(x) TENTH, after the occurrence of the Termination Date,
to PARCO and the APA Banks, as applicable, any remainder to reduce the
Net Investment;

(xi) ELEVENTH, prior to the occurrence of the Termination
Date, the balance, if any, for deposit into the Reserve Account such
that the amount on deposit therein equals the greater of (A) the
Minimum Reserve Account Balance and (B) 6% of the Pool Balance;

(xii) TWELFTH, to each applicable Affected Party, on a PRO
RATA basis, amounts to cover increased costs of such Affiliated Party
of the type described in Sections 2.7, 2.8, 2.9, 2.10 and 9.6;

(xiii) THIRTEENTH, to each applicable Affected Party any
Indemnified Amounts owing (other than in clause (xii) above), payable
on a PARI PASSU basis;

(xiv) FOURTEENTH, to the applicable person, any other costs
and expenses due and owing to PARCO, the Funding Agent and the APA
Banks; and

(xv) FIFTEENTH, to the Seller, any remaining funds,
PROVIDED that, following a Termination Date, all remaining collections

<PAGE>

will be used to reduce the Net Investment until the Net Investment is
reduced to zero.

(d) SERVICER ADVANCES. In the event that, on any date,
Collections are not sufficient to pay the sum of the amounts described in
clauses (ii) through (iv) above due and payable on such day, the Servicer shall
advance an amount equal to such amounts due and payable on such day (each, a
"SERVICER ADVANCE").

(e) RESERVE ACCOUNT ADVANCES. If, on any date, Collections
are not sufficient to pay the sum of the amounts described in clauses (i)
through (viii) above that are then due and payable (after taking into account
any Servicer Advance), funds on deposit in the Reserve Account will be used to
cover such deficiency (PROVIDED, that any such applications with respect to the
amounts described in clause (c)(vi) of this Section shall be made on a
Settlement Date).

SECTION 2.6 PAYMENTS AND COMPUTATIONS, ETC. All amounts to be paid or
deposited by or at the direction of the Seller or the Servicer hereunder shall
be paid or deposited in accordance with the terms hereof no later than 1:00 P.M.
(New York time) on the day when due in lawful money of the United States of
America in immediately available funds to a special account (account number
507-940-628) in the name of the Funding Agent and maintained at Chase's office
at 450 West 33rd Street in The City of New York. The Seller shall, to the
extent permitted by law, pay to the Funding Agent, pursuant to Section
2.5(c)(xiv), interest on all amounts not paid or deposited when due hereunder at
2% per annum above the applicable Base Rate, payable on the next succeeding
Settlement Date (prior to a Termination Event) or on demand (following a
Termination Event); PROVIDED, HOWEVER, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law. Such interest shall
be distributed by the Funding Agent to PARCO or the APA Banks, as applicable.
All computations of interest and all computations of Discount and fees hereunder
shall be made on the basis of a year of 360 days (or, in the case of Discount
calculated at a Base Rate, a year of 365 or 366 days, as applicable) for the
actual number of days (including the first but excluding the last day) elapsed.

SECTION 2.7 YIELD PROTECTION. (a) If, after the date hereof, the
adoption of any Law or bank regulatory guideline or any amendment or change in
the interpretation of any existing or future Law or bank regulatory guideline by
any Official Body charged with the administration, interpretation or application
thereof, or the compliance with any directive of any Official Body (in the case
of any bank

<PAGE>

regulatory guideline, whether or not having the force of Law):

(i) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System) against assets of, deposits with or for the account
of, or credit extended by, any Affected Party or shall impose on any
Affected Party or on the United States market for certificates of
deposit or the London interbank market any other condition affecting
this Agreement, the other Facility Documents, the ownership,
maintenance or financing of the Purchased Assets or payments of
amounts due hereunder or its obligation to advance funds hereunder or
under the other Facility Documents, the ownership, maintenance or
financing of the Purchased Assets or the Purchased Receivables; or

(ii) imposes upon any Affected Party any other expense with
respect to this Agreement, the other Facility Documents, the
ownership, maintenance or financing of the Purchased Assets, the
Purchased Receivables or payments of amounts due hereunder or its
obligation to advance funds hereunder or otherwise in respect of this
Agreement, the other Facility Documents, the ownership, maintenance or
financing of the Purchased Assets or the Purchased Receivables;

and the result of any of the foregoing is to increase the cost to such Affected
Party with respect to this Agreement, the other Facility Documents, the
ownership, maintenance or financing of the Purchased Assets, the Purchased
Receivables, the obligations hereunder, the funding of any Purchases hereunder
or under the other Facility Documents, by an amount deemed by such Affected
Party to be material, then, on the next succeeding Settlement Date following
demand by such Affected Party, the Seller shall pay to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
increased cost or reduction; PROVIDED that no such amount shall be payable with
respect to any period commencing more than sixty (60) days prior to the date
such Affected Party first notifies the Seller of its intention to demand
compensation therefor under this Section 2.7(a); PROVIDED FURTHER that if such
change in Law, rule or regulation giving rise to such increased costs or
reductions is retroactive, then such 60-day period shall be extended to include
the period of retroactive effect thereof.

(b) If any Affected Party shall have determined that after the
date hereof, the adoption of any applicable Law or bank regulatory guideline
regarding capital adequacy, or any change therein, or any change in the
interpretation thereof by any Official Body, or any directive regarding capital
adequacy (in the case

<PAGE>

of any bank regulatory guideline, whether or not having the force of law) of any
such Official Body, has or would have the effect of reducing the rate of return
on capital of such Affected Party (or its parent) as a consequence of such
Affected Party's obligations hereunder or with respect hereto to a level below
that which such Affected Party (or its parent) could have achieved but for such
adoption, change, request or directive (taking into consideration its policies
with respect to capital adequacy) by an amount deemed by such Affected Party to
be material, then from time to time, on the next succeeding Settlement Date
after demand by such Affected Party, the Seller shall pay to such Affected Party
such additional amount or amounts as will compensate such Affected Party (or its
parent) for such reduction; PROVIDED that no such amount shall be payable with
respect to any period commencing more than sixty (60) days prior to the date
such Affected Party first notifies the Seller of its intention to demand
compensation therefor under this Section 5.2(a); PROVIDED FURTHER that if such
change in Law, rule or regulation giving rise to such increased costs or
reductions is retroactive, then such 60-day period shall be extended to include
the period of retroactive effect thereof.

(c) Anything in this Section 2.7 to the contrary
notwithstanding, if PARCO enters into agreements for the acquisition of
interests in receivables from one or more Other Sellers, PARCO shall ratably
allocate the liability for any amounts under this Section 2.7 ("SECTION 2.7
COSTS") to the Seller and each Other Seller; PROVIDED, HOWEVER, that if such
Section 2.7 Costs are attributable to the Seller, the Originator or the Servicer
and not attributable to any Other Seller, the Seller shall be solely liable for
such Section 2.7 Costs or, if such Section 2.7 Costs are attributable to Other
Sellers and not attributable to the Seller, the Originator or the Servicer, such
Other Sellers shall be solely liable for such Section 2.7 Costs.

The Funding Agent will, within fifteen (15) days after receipt of
notice of any event occurring after the date hereof which will entitle an
Affected Party to compensation pursuant to this Article II, notify the Seller in
writing. Any notice by the Funding Agent claiming compensation under this
Article II and setting forth in reasonable detail an explanation therefor and a
calculation of the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of manifest error. In determining such amount, the
Funding Agent or any applicable Affected Party may use any reasonable averaging
and attributing methods.

SECTION 2.8 ILLEGALITY. (a) Notwithstanding any other provision
herein, if, after the Effective Date, the adoption of any Law or bank regulatory
guideline or any amendment or change in the interpretation of any existing or
future

<PAGE>

Law or bank regulatory guideline by any Official Body charged with the
administration, interpretation or application thereof, or the compliance with
any directive of any Official Body (in the case of any bank regulatory
guideline, whether or not having the force of Law), shall make it unlawful for
any APA Bank to acquire or maintain a Eurodollar Tranche at the applicable
Eurodollar Rate as contemplated by this Agreement, (i) such APA Bank shall,
within fifteen (15) days after receiving actual knowledge thereof, deliver a
certificate to the Seller (with a copy to the Funding Agent) setting forth the
basis for such illegality, which certificate shall be conclusive absent manifest
error, (ii) the commitment of such APA Bank hereunder to make a portion of a
Eurodollar Tranche, continue any portion of a Eurodollar Tranche as such and
convert a BR Tranche to a Eurodollar Tranche shall forthwith be cancelled, and
such cancellation shall remain in effect so long as the circumstance described
above exists, and (iii) such APA Bank's portion of any Eurodollar Tranche then
outstanding shall be converted automatically to a BR Tranche on the last day of
the related Tranche, or within such earlier period as required by law.

If any such conversion of a portion of a Eurodollar Tranche occurs on
a day which is not the last day of the related Tranche, the Seller shall pay to
such APA Bank such amounts, if any, as may be required to compensate such APA
Bank for the costs of such conversion. If circumstances subsequently change so
that it is no longer unlawful for an affected APA Bank to acquire or to maintain
a portion of a Eurodollar Tranche as contemplated hereunder, such APA Bank will,
as soon as reasonably practicable after such APA Bank knows of such change in
circumstances, notify the Seller and the Funding Agent, and upon receipt of such
notice, the obligations of such APA Bank to acquire or maintain its acquisition
of portions of Eurodollar Tranches or to convert its portion of a BR Tranche
into portions of Eurodollar Tranches shall be reinstated.

(b) By its execution of an Asset Purchase Agreement, each APA Bank
agrees that, upon the occurrence of any event giving rise to the operation of
Section 2.8(a) with respect to such APA Bank, it will, if requested by the
Seller and to the extent permitted by law or by the relevant Official Body,
endeavor in good faith to change the office at which it books its portions of
Eurodollar Tranches hereunder if such change would make it lawful for such APA
Bank to continue to acquire or to maintain its acquisition of portions of
Eurodollar Tranches hereunder; PROVIDED, HOWEVER, that such change may be made
in such manner that such APA Bank, in its sole determination, suffers no
unreimbursed cost or expense or any other material disadvantage whatsoever.

compensation under Section 2.7 or Section 2.8 hereof by an Affected Party, if
payment thereof shall not be waived by such Affected Party, the Seller may (a)
request such Affected Party to obtain a replacement bank, financial institution
or structured lender, as applicable, satisfactory to the Seller (in the case of
a replacement lender) and meeting the requirements of an APA Bank hereunder, to
acquire and assume all or a ratable part of such Affected Party's commitment to
make purchases, or interests therein (a "REPLACEMENT PERSON"), (b) request one
or more of the other APA Banks to acquire and assume all or part of such
Affected Party's commitment to make Purchases or interests therein (which
request may be accepted or rejected in the sole discretion of each such APA
Bank), or (c) designate a Replacement Person. Any such designation of
Replacement Person pursuant to clause (a) or clause (c) above shall be subject
to the prior written consent of the Funding Agent (which consent shall not be
unreasonably withheld). Upon notice from the Seller, such Affected Party shall
assign its commitment to make Purchases, or interests therein, and its other
rights and obligations (if any) hereunder, or a ratable share thereof, to the
Replacement Person or Replacement Persons designated by the Seller for a
purchase price equal to the sum of the principal amount of the Purchases or
interests therein, so assigned, all accrued and unpaid yield thereon and any
other amounts (including fees) to which such Affected Party is entitled
hereunder; PROVIDED that (i) the Seller shall provide such Affected Party with
an officer's certificate stating that such Replacement Person has advised the
Seller that it is not subject to, or has agreed not to seek, such increased
amount and (ii) any such assignment shall be without recourse, representation or
warranty by such Affected Party, and upon effectiveness of such assignment, the
obligations of such APA Bank hereunder shall be extinguished.

SECTION 2.9 TAXES. (a) All payments made by the Seller, the
Originator or the Servicer to the Funding Agent for the benefit of PARCO and the
APA Banks under this Agreement and any other Facility Document shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Official Body (EXCLUDING (i) taxes
imposed on the net income of the Funding Agent or any other Affected Party,
however denominated, and (ii) franchise taxes imposed on the net income of the
Funding Agent or any other Affected Party in each case imposed: (1) by the
United States or any political subdivision or taxing authority thereof or
therein; (2) by any jurisdiction under the laws of which the Funding Agent or
such Affected Party or lending office is organized or in which its lending
office is located, managed or controlled or in which its principal office is
located or any political subdivision or taxing authority thereof or therein; or
(3) by reason of any connection between the jurisdiction imposing such tax and
the Funding Agent, such Affected Party or such lending office other than a
connection arising solely from this Agreement or any other Facility Document or
any transaction hereunder or thereunder) (all such non-excluded taxes, levies,
imposts, duties,

<PAGE>

charges, fees, deductions or withholdings, collectively or individually,
"TAXES"). If any such Taxes are required to be withheld from any amounts
payable to the Funding Agent or any Affected Party hereunder, the amounts so
payable to the Funding Agent or such Affected Party shall be increased to the
extent necessary to yield to the Funding Agent or such Affected Party (after
payment of all Taxes) all amounts payable hereunder at the rates or in the
amounts specified in this Agreement and the other Facility Documents. The
Seller shall indemnify the Funding Agent or any such Affected Party for the
full amount of any such Taxes on the Settlement Date occurring after the date
of written demand therefor by the Funding Agent; PROVIDED that no Person
shall be indemnified pursuant to this Section 2.9(a) to the extent the reason
for such indemnification relates to, or arises from, the failure by such
Person to comply with the provisions of Section 2.9(b).

(b) Each Affected Party that is not incorporated under the laws
of the United States of America or a state thereof or the District of Columbia
shall:

(i) prior to becoming a party to any Facility Document, deliver
to the Seller (A) two duly completed copies of IRS Form 1001 or Form 4224,
or successor applicable form, as the case may be, and (B) an IRS Form W-8
or W-9, or successor applicable form, as the case may be;

(ii) deliver to the Seller two (2) further copies of any such
form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously delivered by it
to the Seller; and

(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the Seller;

unless, in any such case, an event (including, without limitation, any change in
treaty, law or regulation) has occurred after the Effective Date and prior to
the date on which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent such Affected Party from duly
completing and delivering any such form with respect to it, and such Affected
Party so advises the Seller. Each such Affected Party so organized shall
certify (i) in the case of an IRS Form 1001 or IRS Form 4224, that it is
entitled to receive payments under the this Agreement and the other Facility
Documents without deduction or withholding of any United States federal income
taxes and (ii) in the case of an IRS Form W-8 or IRS Form W-9, that it is
entitled to an exemption from United States backup

<PAGE>

withholding tax. Each Person that is a purchaser or participant under an Asset
Purchase Agreement, or which otherwise becomes a party to an Asset Purchase
Agreement as an APA Bank, shall, prior to the effectiveness of such assignment,
participation or addition, as applicable, be required to provide all of the
forms and statements required pursuant to this Section 2.9.

SECTION 2.10 BROKEN FUNDING. In the event of (a) the payment of any
principal of any Eurodollar Tranche other than on the last day of such Tranche
(including as a result of the occurrence of the Termination Date or an optional
prepayment of a Eurodollar Tranche), (b) the conversion of any Eurodollar
Tranche other than on the last day of such related Tranche, or (c) any failure
to borrow, convert, continue or prepay any Eurodollar Tranche on the date
specified in any notice delivered pursuant hereto, then, in any such event, the
Seller shall compensate the applicable APA Banks for the loss, cost and expense
attributable to such event. Such loss, cost or expense to any APA Banks shall
be deemed to include an amount determined by such APA Bank to be the excess, if
any, of (i) the amount of the Discount, as the case may be, which would have
accrued on the principal amount of such Eurodollar Tranche had such event not
occurred, at a Eurodollar Rate that would have been applicable to such
Eurodollar Tranche, for the period from the date of such event to the last day
of such Tranche (or, in the case of a failure to borrow, convert or continue,
for the period that would have been the Accrual Period for such Tranche), over
(ii) the amount of interest which would accrue on such principal amount for such
period at the interest rate which such APA Bank would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the interbank eurodollar market. Within fifteen (15)
days after any APA Bank hereunder receives actual knowledge of any of the events
specified in this Section 2.10, a certificate of such APA Bank setting forth in
reasonable detail a calculation of any amount or amounts that such APA Bank is
entitled to receive pursuant to this Section 2.10 and the reason(s) therefor
shall be delivered to the Seller and shall be conclusive absent manifest error.
The Seller shall pay each such APA Bank the amount shown as due on any such
certificate on the next succeeding Settlement Date after receipt thereof.

SECTION 2.11 INABILITY TO DETERMINE EURODOLLAR RATE. If, prior to the
first day on which any Eurodollar Tranche commences:

(i) the Funding Agent shall have determined or shall have been
notified (which determination or notification, in the absence of manifest
error, shall be conclusive and binding upon the Seller) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means
do not exist for ascertaining a Eurodollar Rate for such Tranche; or

(ii) the Funding Agent shall have received notice from the Required
APA Banks that a Eurodollar Rate determined or to be determined

<PAGE>

for such Tranche will not adequately and fairly reflect the cost to such
APA Bank(s) (as conclusively certified by such APA Bank(s)) of purchasing
or maintaining its/their affected portions of Eurodollar Tranches during
the related Accrual Period;

then, in either such event, the Funding Agent shall give telecopy or telephonic
notice thereof (confirmed in writing) to the Seller and the APA Banks as soon as
practicable (but, in any event, within fifteen (15) days after such
determination or notice, as applicable) thereafter. Until such notice has been
withdrawn by the Funding Agent, no further Eurodollar Tranches shall be made.
The Funding Agent agrees to withdraw any such notice as soon as reasonably
practicable after the APA Banks Agent is notified of a change in circumstances
which makes such notice inapplicable.

SECTION 2.12 SHARING OF PAYMENTS, ETC. If PARCO or any APA Bank (for
purposes of this Section 2.12 only, being a "RECIPIENT") shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of any interest in the Purchased Assets owned
by it in excess of its ratable share of payments on account of any interest in
the Purchased Assets obtained by PARCO and/or the APA Banks entitled thereto,
such Recipient, through the Funding Agent, shall forthwith purchase from PARCO
and/or the APA Banks, as applicable, entitled to a share of such amount,
participations in the percentage interests owned by such Persons as shall be
necessary to cause such Recipient to share the excess payment ratably with each
such other Person entitled thereto; PROVIDED, HOWEVER, that if all or any
portion of such excess payment is thereafter recovered from such Recipient, such
purchase from each such other Person shall be rescinded and each such other
Person shall repay to the Recipient, through the Funding Agent, the purchase
price paid by such Recipient for such participation to the extent of such
recovery, together with an amount equal to such other Person's ratable share
(according to the proportion of (a) the amount of such other Person's required
payment to (b) the total amount so recovered from the Recipient) of any interest
or other amount paid or payable by the Recipient in respect of the total amount
so recovered.

SECTION 2.13 RESERVE ACCOUNT.

(a) ESTABLISHMENT OF THE RESERVE ACCOUNT. The
Servicer, for the benefit of PARCO, the APA Banks and the Funding Agent shall
establish and maintain or cause to be established and maintained with a bank
acceptable to the Funding Agent, in the name of the Funding Agent for the
benefit of PARCO and the

<PAGE>

APA Banks, as an Eligible Account, a reserve account (the "RESERVE ACCOUNT"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of PARCO and APA Banks. The Funding Agent, for the benefit
of PARCO and the APA Banks, shall possess all right, title and interest in all
funds on deposit from time to time in the Reserve Account and in all proceeds
thereof. The Reserve Account shall be under the sole dominion and control of
the Funding Agent for the benefit of PARCO and the APA Banks. The taxpayer
identification number associated with the Reserve Account shall be that of the
Seller and the Seller will report for Federal, state and local income tax
purposes, the income, if any, represented by the Reserve Account. If the
Reserve Account shall at any time cease to be an Eligible Account, then the
Servicer shall, immediately thereafter, establish a new Eligible Account as the
Reserve Account, which Eligible Account shall be maintained as set forth in this
Section 2.13, and shall, on such date, transfer all funds in the existing
Reserve Account to such new Reserve Account.

On the Effective Date, the Seller shall deposit an amount in the
Reserve Account equal to the Minimum Reserve Account Balance as of such date.
On each Settlement Date, the Seller shall deposit or cause to be deposited in
the Reserve Account, from Collections, an amount in accordance with Section
2.5(c)(xi). On each Business Day, the Seller shall deposit or cause to be
deposited in the Reserve Account an amount sufficient to ensure that the Minimum
Reserve Account Balance is satisfied.

(b) ADMINISTRATION OF THE RESERVE ACCOUNT. Funds on deposit
in the Reserve Account shall, at the direction of the Servicer, be invested by
the Funding Agent in Permitted Investments. Each instruction by the Servicer
shall designate specific investments and shall certify that the investments so
specified constitute Permitted Investments. The Servicer, shall manage the
maturities of such investments such that amounts available for withdrawal on
each Settlement Date will be sufficient to comply with the requirements of
Section 2.13(c). The Funding Agent shall not be liable for any loss incurred in
connection with any investment in the Reserve Account.

(c) WITHDRAWALS FROM RESERVE ACCOUNT. If, on any
Settlement Date, the Servicer shall have insufficient Collections to pay the
amounts required under Sections 2.5(c)(i)-(viii), the Servicer shall be required
to direct the Funding Agent to make a withdrawal from the Reserve Account in an
amount sufficient to pay any remaining amounts owing thereunder. If, on any
Settlement Date, after giving effect to the transactions occurring on such
Settlement Date, funds on deposit in the Reserve Account are in excess of the
greater of (x) the Minimum

<PAGE>

Reserve Account Balance and (y) 6% of the Pool Balance at such time, the
Servicer may withdraw and apply such excess as Collections in accordance with
Section 2.5(c); PROVIDED, HOWEVER that on each Settlement Date occurring after
the Termination Date, such excess shall be treated as Principal Collections and
applied in accordance with Section 2.5(c)(x). After any Optional Sale which has
fully satisfied the requirements of Section 3.3, and provided that no
Termination Event has occurred and is continuing, the Servicer may withdraw and
remit to the Seller funds from the Reserve Account in an amount equal to the
product of (i) the amount in the Reserve Account immediately prior to such
Optional Sale and (ii) a fraction, the numerator of which is the Outstanding
Balance of Eligible Receivables sold and assigned pursuant to such Optional
Sale, and the denominator of which is the Net Pool Balance before giving effect
to the Optional Sale; PROVIDED, HOWEVER that after such withdrawal, the amount
in the Reserve Account shall not be less than the Minimum Reserve Account
Balance. On the Business Day succeeding the Final Collection Date, the Servicer
shall withdraw from the Reserve Account all amounts on deposit therein for
remittance to the Seller. The Funding Agent hereby grants to the Servicer the
authority to make the withdrawals from the Reserve Account described in this
Section 2.13(c).

SECTION 2.14 COLLECTION ACCOUNT.

(a) ESTABLISHMENT OF THE COLLECTION ACCOUNT. The Servicer,
for the benefit of PARCO, the APA Banks and the Funding Agent shall establish
and maintain or cause to be established and maintained with a bank acceptable to
the Funding Agent, in the name of the Funding Agent for the benefit of PARCO and
the APA Banks, as an Eligible Account, a collection account (the "COLLECTION
ACCOUNT"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of PARCO and the APA Banks. The Funding Agent,
for the benefit of PARCO and the APA Banks, shall possess all right, title and
interest in and to all funds on deposit from time to time in the Collection
Account and in all proceeds thereof. The taxpayer identification number
associated with the Collection Account shall be that of the Seller, and the
Seller will report for Federal, state and local income tax purposes, the income,
if any, represented by the Collection Account. If the Collection Account shall
at any time cease to be an Eligible Account, then the Servicer shall,
immediately thereafter, establish a new Eligible Account as the Collection
Account, which Eligible Account shall be maintained as set forth in this Section
2.14, and shall, on such date, transfer all funds in the existing Collection
Account to such new Collection Account.

(b) ADMINISTRATION OF THE COLLECTION ACCOUNT. Funds on
deposit in the Collection Account shall, at the direction of the Servicer, be
invested by the Funding Agent in Permitted Investments. The Servicer shall
designate by standing or periodic instructions delivered to the Funding Agent
specific investments and shall certify that the investments so specified
constitute Permitted Investments.

<PAGE>

If no instructions are so in effect, the Funding Agent shall invest such funds
in Permitted Investments in its sole discretion. The Funding Agent, at the
direction of the Servicer, shall manage the maturities of such investments such
that amounts available for withdrawal on each Settlement Date will be sufficient
to comply with the requirements of Section 2.14(c). The Funding Agent shall not
be liable for any loss incurred in connection with any investment in the
Collection Account.

(c) WITHDRAWALS FROM COLLECTION ACCOUNT. The Funding Agent
shall have the sole right of withdrawal from the Collection Account and shall
withdraw funds on deposit therein on each Settlement Date or otherwise in
accordance with the terms of this Agreement. On the Business Day succeeding
the Final Collection Date, the Funding Agent shall withdraw from the Collection
Account all amounts on deposit therein for remittance to the Seller. On and
after the occurrence of a Servicer Termination Event or a Termination Event, the
Servicer shall remit daily, immediately upon receipt, to the Collection Account
all Collections received with respect to any Purchased Receivables. Following
an Optional Sale, an optional repurchase pursuant to Section 3.4 or a Permitted
Securitization Transaction immediately after which the Net Investment is equal
to zero and all Aggregate Unpaids have been paid by the Seller to the Funding
Agent, PARCO and the APA Banks, all amounts in the Collection Account shall be
released to the Seller.
<PAGE>

ARTICLE III

CONDITIONS OF PURCHASES; OPTIONAL SALES

SECTION 3.1 CONDITIONS PRECEDENT TO EFFECTIVENESS. This Agreement
shall become effective on the first day on which the Funding Agent, on behalf of
PARCO and the APA Banks, shall have received the following (the "EFFECTIVE
DATE"), each in form and substance satisfactory to the Funding Agent:

(a) This Agreement and the Asset Purchase Agreement executed
by each party thereto, together with the certificates required under each such
agreement, and the Demand Note, executed by AFL in favor of the Seller;

(b) A copy of the resolutions of the Board of Directors of the
Seller and AFL approving this Agreement and the other Facility Documents to be
delivered by it hereunder and the transactions contemplated hereby, certified by
its Secretary or Assistant Secretary;

(c) The Certificate, or Articles, of Incorporation of each of
the Seller and AFL certified by the appropriate Secretary of State;

(d) Good Standing Certificates for each of the Seller and AFL
issued by the Secretary of State of Delaware and the Secretary of State of
Minnesota, respectively;

(e) A certificate of the Secretary or Assistant Secretary of
each of the Seller and AFL certifying (i) the names and true signatures of the
officers authorized on its behalf to sign this Agreement and the other Facility
Documents to be delivered by it hereunder (on which certificate the Funding
Agent, PARCO and the APA Banks may conclusively rely until such time as the
Funding Agent shall receive from the Seller a revised certificate meeting the
requirements of this subsection (e)) and (ii) a copy of the Seller's by-laws;

(f) Acknowledgment copies of proper UCC-1 Financing Statements
(executed by the Originator and/or Seller, as applicable), as may be necessary
or, in the opinion of the Funding Agent, desirable under the UCC of all
appropriate jurisdictions or any comparable law to perfect the Funding Agent's,
PARCO's and the APA Banks' respective interests in all Purchased Receivables and
Related Security in which an interest may be assigned to it hereunder;

(g) Certified copies of Requests for Information or Copies
(Form UCC-11) (or a similar search report certified by a party acceptable to the
Funding Agent), dated a date reasonably near to the date of the initial
Purchase, listing all effective financing statements which name the Seller or
the Originator

<PAGE>

(under their respective present names and any previous names) as debtor and
which are filed in the jurisdictions in which filings were made pursuant to
subsection (f) of this Section 3.1, together with copies of such financing
statements;

(h) The Lock-Box Agreement, executed by the parties thereto;

(i) The Receivables Purchase Agreement, executed by the Seller
and the Originator, together with copies of all documents required to be
delivered thereunder as a condition precedent to the initial purchase of
Receivables thereunder;

(j) Opinion(s) of Dorsey & Whitney LLP, special counsel for
the Seller and AFL in form and substance satisfactory to the Funding Agent, as
to such matters as the Funding Agent may reasonably request;

(k) The Fee Letter shall have been duly executed and delivered
by the Seller and accepted by the Funding Agent;

(l) S&P shall have confirmed it's A-1 rating of PARCO's
Commercial Paper and Moody's shall have confirmed its P-1 rating of PARCO's
Commercial Paper; and

(m) Such other documents, instruments, certificates and
opinions of counsel as the Funding Agent, PARCO or the APA Banks shall
reasonably request.

SECTION 3.2 CONDITIONS PRECEDENT TO ALL PURCHASES. Each Purchase
(including the initial Purchase) shall be subject to the further conditions
precedent that:

(a) on or prior to the date thereof, the Servicer shall have
delivered to the Funding Agent, (1) in form and substance reasonably
satisfactory to the Funding Agent, a completed Purchase Notice dated at least
one Business Day prior to the date of such Purchase and containing such
additional information as may be reasonably requested by the Funding Agent, (2)
a duly completed Monthly Report for the immediately preceding Settlement Period
for which a Monthly Report was due in accordance with this Agreement, and (3)
evidence, in form and substance satisfactory reasonably to the Funding Agent,
that the Seller has entered into Interest Rate Hedges satisfying the
requirements of Section 5.1(l) (together, for any Interest

<PAGE>

Rate Hedges the counterparty of which is not a Funding Agent, with an Interest
Rate Hedge Assignment Acknowledgment duly executed by such counterparty and
concurrently delivered to the Funding Agent); and

(b) on the date of each Purchase, the following statements
shall be true, and the Seller, by accepting the amount for an Incremental
Purchase or by receiving the proceeds of Collections in consideration for a
Purchase pursuant to Section 2.5, shall be deemed to have certified that:

(i) The representations and warranties contained in
Section 4.1 hereof and Section 4.1 of the Receivables Purchase
Agreement are correct on and as of such day as though made on and as
of such date;

(ii) No event has occurred and is continuing, or would
result from such Purchase which constitutes a Termination Event or
would constitute a Termination Event but for the requirement that
notice be given or time elapse or both; and

(iii) The provisions of Section 2.2(a) hereof have been
satisfied in all material respects.

(c) at its request, the Funding Agent shall have received
(with copies to the Rating Agencies indicating that each Rating Agency is
entitled to rely thereon), with respect to any state in which, after giving
effect to such Purchase, more than 10% of the aggregate Outstanding Balance of
all Receivables comprising the Servicing Portfolio Balance shall relate to
Financed Vehicles titled (or to be titled) in such state, an opinion of counsel
(or a reliance letter) in form and substance reasonably satisfactory to the
Funding Agent; PROVIDED that no such opinion of counsel shall be necessary with
respect to any such state to the extent the Funding Agent shall have received,
on, or prior to, the Effective Date or on any previous Purchase Date, such an
opinion of counsel with respect to such state (unless, in the opinion of any of
them, reasonable legal or factual reasons shall exist at such time to require an
additional opinion of counsel with respect to such state); and

(d) the Funding Agent shall have received such other approvals
or documents as the Funding Agent may reasonably request.

SECTION 3.3 OPTIONAL SALES. (a) On any Optional Sale Date, the
Seller shall have the right to prepay all or a portion of the Net Investment in
connection the sale and assignment to the Seller by PARCO or the APA Banks, as
applicable, of Optional Sale Related Collateral (each, an "OPTIONAL SALE"),
subject to the following terms and conditions:

<PAGE>

(i) The Seller shall have given the Funding Agent at
least five (5) Business Days' prior written notice of its intent to
effect an Optional Sale;

(ii) Any Optional Sale shall be in connection with a
Permitted Securitization Transaction or a Permitted Originator
Transaction;

(iii) Unless an Optional Sale is to be effected on a
Settlement Date (in which case the relevant calculations with respect
to such Optional Sale shall be reflected on the applicable Monthly
Report), the Servicer shall deliver to the Funding Agent a Servicer's
Optional Sale Date Certificate, together with evidence to the Funding
Agent (which evidence may consist solely of the Servicer's Optional
Sale Date Certificate) that the Seller shall have sufficient funds on
the related Optional Sale Date to effect the contemplated Optional
Sale in accordance with this Agreement. In effecting an Optional
Sale, the Seller may (i) use the proceeds of sales of Receivables
(which sales must be made in arm's-length transactions to Persons
other than AFL), and (ii) give effect to Principal Collections on
deposit in the Collection Account at such time to the extent
consistent with the requirements of clause (v) below (as evidenced by
the Servicer's Optional Sale Date Certificate).

(iv) In connection with any such Optional Sale that does
not constitute a prepayment in full of the outstanding Net Investment
(x) Receivables constituting part of the Optional Sale Related
Collateral with respect to such Optional Sale shall be selected in
accordance with the "FIFO" method (excluding, however, any Purchased
Receivable and Related Security subject to a Repurchase Obligation and
Purchased Receivables and Related Security which are not included in
the Net Pool Balance), and (y) following receipt by the Funding Agent
of the amounts referred to in clause (vi) below, there shall be sold
and assigned to the Seller all of the right, title and interest of
PARCO and the APA Banks, as applicable, and under the Optional Sale
Related Collateral, and such Optional Sale Related Collateral shall be
released from the Lien of this Agreement (subject to the requirements
of clause (v) below).

(v) After giving effect to the Optional Sale and the
assignment to the Seller of Optional Sale Related Collateral on any

<PAGE>

Optional Sale Date, (x) the remaining Net Investment (less Principal
Collections held in the Collection Account and the Lock-Box Account at
the close of business on the Optional Sale Date and not yet applied)
shall be less than or equal to the product of the Advance Percentage
and the Net Pool Balance and (y) a Termination Event or Potential
Termination Event shall not have resulted.

(vi) On the related Optional Sale Date, the Funding Agent
shall have received, for the benefit of PARCO or the APA Banks, as
applicable, in immediately available funds, an amount equal to the sum
of (i) the portion of PARCO's or the APA Banks' Net Investment to be
prepaid PLUS (ii) an amount equal to all unpaid Carrying Costs
(including Carrying Costs not yet accrued) to the extent reasonably
determined by the Funding Agent to be attributable to that portion of
the Net Investment to be prepaid in connection with the Optional Sale
PLUS (iii) an aggregate amount equal to the sum of all other amounts
due and owing to the Funding Agent, PARCO and the APA Banks, as
applicable, under this Agreement and the other Facility Documents, to
the extent accrued to such date and to accrue thereafter, as
reasonably determined by the Funding Agent to be attributable to that
portion of the Net Investment to be prepaid.

(vii) On or prior to each Optional Sale Date, the Seller
shall have delivered to the Funding Agent a list specifying all
Contracts under which the Receivables to be sold and assigned pursuant
to such Optional Sale arose.

(b) The Seller hereby agrees to pay the reasonable legal fees and
expenses of the Funding Agent, PARCO and the APA Banks in connection with any
Optional Sale (including, but not limited to, expenses incurred in connection
with the release of the Lien of the Funding Agent over the Purchased Assets in
connection with such Optional Sale).

(c) In connection with any Optional Sale, on the related Optional
Sale Date, the Funding Agent, on behalf of PARCO and the APA Banks, shall, at
the expense of the Seller (i) execute such instruments of release with respect
to the Optional Sale Related Collateral, in recordable form if necessary, in
favor of the Seller as the Seller may reasonably request, (ii) deliver any
Optional Sale Related Collateral in its possession to the Seller and (iii)
otherwise take such actions as are necessary and appropriate to release the Lien
of the Funding Agent on the Optional

<PAGE>

Sale Related Collateral and release and deliver to the Seller such Optional Sale
Related Collateral.

SECTION 3.4 OPTIONAL REPURCHASE. At any time, the Seller may in its
sole discretion, upon ten (10) days' prior verbal notice (to be confirmed by 5
days' prior written notice) to the Funding Agent, repurchase all of the
Purchased Receivables from PARCO at a price which shall equal the amount of all
Aggregate Unpaids.

<PAGE>

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants to PARCO, the APA Banks and the Funding Agent on the
date hereof and on each Purchase Date as follows:

(a) DUE INCORPORATION AND GOOD STANDING. The Seller is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction named at the beginning hereof and is duly qualified to
do business, and is in good standing, in every jurisdiction in which the nature
of its business requires it to be so qualified.

(b) DUE AUTHORIZATION AND NO CONFLICT. The execution,
delivery and performance by the Seller of this Agreement, each other Facility
Document to which the Seller is a party and all other agreements, instruments
and documents to be delivered by it hereunder or thereunder or in connection
herewith or therewith, and the transactions contemplated hereby and thereby, are
within the Seller's corporate powers, have been duly authorized by all necessary
corporate action, do not contravene (i) the Seller's charter or by-laws, (ii)
any law, rule or regulation applicable to the Seller, (iii) any contractual
restriction contained in any material indenture, loan or credit agreement,
lease, mortgage, security agreement, bond, note, or other agreement or
instrument binding on or affecting the Seller or its property or (iv) any order,
writ, judgment, award, injunction or decree binding on or affecting the Seller
or its property, and do not result in or require the creation of any Lien upon
or with respect to any of its properties (other than as contemplated hereunder);
and no transaction contemplated hereby requires compliance with any bulk sales
act or similar law. This Agreement and all other Facility Documents to which
the Seller is a party have been duly executed and delivered on behalf of the
Seller.

(c) GOVERNMENTAL CONSENT. No authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Seller of this Agreement, any of the Facility Documents to which the Seller
is a party or any other agreement, document or instrument to be delivered by it
hereunder or thereunder.

(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Agreement and
each other Facility Document to be delivered by the Seller in connection
herewith constitute the legal, valid and binding obligation of the Seller
enforceable against the Seller in accordance with their respective terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
fraudulent

<PAGE>

conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).

(e) NO LITIGATION. There are no actions, suits or proceedings
pending, or to the knowledge of the Seller threatened, against or affecting the
Seller or any of its Subsidiaries, or the property of the Seller or any of its
Subsidiaries, in any court, or before any arbitrator of any kind, or before or
by any governmental body, which may materially adversely affect (i) the
financial condition of the Seller and its Affiliates taken as a whole or (ii)
the ability of the Seller to perform its obligations under this Agreement or any
of the other Facility Documents to which the Seller is a party or (iii) the
collectibility of the Purchased Receivables. Neither the Seller nor any of it's
Affiliates is in default with respect to any order of any court, arbitrator or
governmental body.

(f) USE OF PROCEEDS. No proceeds of any Purchase will be used
by the Seller to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

(g) ELIGIBILITY OF PURCHASED RECEIVABLES; PERFECTION OF
INTEREST IN PURCHASED RECEIVABLES.

(i) As of the date of Purchase hereunder of each
Purchased Receivable, such Purchased Receivable will satisfy the
conditions of the definition of "Eligible Receivable."

(ii) Prior to the Purchase of each Purchased Asset
hereunder, the Seller is or will be the lawful owner of such Purchased
Asset free and clear of any Lien, and upon each Purchase of Purchased
Assets hereunder, the Funding Agent, on behalf of PARCO and the APA
Banks, shall acquire a valid and perfected first priority security or
ownership interest in such Purchased Assets; and no effective
financing statement or other instrument similar in effect covering any
Purchased Receivable, the Related Security, Collections or any other
Purchased Assets shall at any time be on file in any recording office
except such as may be filed in accordance with this Agreement or the
Receivables Purchase Agreement.

(h) ACCURACY OF INFORMATION. No Purchase Notice or Monthly
Report (if prepared by the Seller or the Servicer, or to the extent that

<PAGE>

information contained therein is supplied by the Seller), information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished by the Seller to the Funding Agent, PARCO or any APA Bank in
connection with this Agreement is or shall be inaccurate in any material respect
as of the date it is or shall be dated or (except as otherwise disclosed to the
Funding Agent, PARCO or any such, as the case may be, at such time or promptly
thereafter) as of the date so furnished, or contains or shall contain any
material misstatement of fact or omits or shall omit to state a material fact or
any fact necessary to make the statements contained therein not misleading.

(i) LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The chief
place of business and chief executive office of the Seller are located at the
address of the Seller referred to in Section 9.2 hereof and the locations of the
offices where the Seller keeps all the Records are listed on Exhibit H hereto
(or at such other locations, notified to the Funding Agent, in jurisdictions
where all action required by Section 6.5 has been taken and completed).

(j) LOCK-BOX BANK INFORMATION. The name and address of the
Lock-Box Bank, together with the location and account number of the Lock-Box, is
specified in Exhibit I hereto (or at such other Lock-Box Bank and/or with such
other Lock-Box as have been notified to the Funding Agent in accordance with
Section 5.3(d) and with respect to which (and with respect to all Collections to
be deposited therein) all action required by Section 5.3(d) has been taken and
completed).

(k) NO TRADE NAMES. The Seller has no trade names, fictitious
names, assumed names or "doing business as" names.

(l) SEPARATE CORPORATE EXISTENCE. The Seller is operated as
an entity with assets and liabilities distinct from those of the Originator and
any other Affiliates of the Seller, and the Seller hereby acknowledges that the
Funding Agent, PARCO and each of the APA Banks are entering into the
transactions contemplated by this Agreement in reliance upon the Seller's
identity as a separate legal entity from the Originator and each such Affiliate.
Since its incorporation, the Seller has been (and will be) operated in such a
manner as to comply with the covenants set forth in Section 5.1(k).

(m) INVESTMENTS. The Seller does not own or hold, directly or
indirectly, any capital stock or equity security of, or any equity interest in,
any Person.

(n) FACILITY DOCUMENTS. The Receivables Purchase Agreement is
the only agreement pursuant to which the Seller purchases and receives
contributions of Contracts and Receivables, and the Facility Documents
delivered to

<PAGE>

the Funding Agent, PARCO and the APA Banks represent all material agreements
up to this time between the Originator, on the one hand, and the Seller, on the
other. The Seller has furnished to the Funding Agent true, correct and complete
copies of each Facility Document to which the Seller is a party, each of which
is in full force and effect. Neither the Seller nor any Affiliate party thereto
is in default of any of its obligations thereunder in any material respect.
Upon the purchase and/or contribution of each Receivable pursuant to the
Receivables Purchase Agreement, the Seller shall be the lawful owner of, and
have good title to, such Receivable and all assets relating thereto, free and
clear of any Liens. All such assets are transferred to the Seller without
recourse to the Originator except as described in the Receivables Purchase
Agreement. The purchases of such assets by the Seller constitute valid and true
sales for consideration (and not merely a pledge of such assets for security
purposes) and the contributions of such assets received by the Seller constitute
valid and true transfers for consideration, each enforceable against creditors
of the Originator, and no such assets shall constitute property of the
Originator.

(o) BUSINESS. Since its incorporation, the Seller has
conducted no business other than the purchase and receipt of Receivables and
related assets from the Originator under the Receivables Purchase Agreement, the
sale of Purchased Assets under this Agreement to finance any such Purchases,
other transactions provided for herein and such other activities as are
incidental to the foregoing.

(p) OWNERSHIP OF THE SELLER. One hundred percent (100%) of the
outstanding capital stock of the Seller is directly owned (both beneficially and
of record) by the Originator. Such stock is validly issued, fully paid and
nonassessable and there are no options, warrants or other rights to acquire
capital stock from the Seller.

(q) TAXES. The Seller has filed or caused to be filed all
Federal, state and local tax returns which are required to be filed by it, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the Seller has set aside
adequate reserves on its books in accordance with generally accepted accounting
principles and which have not given rise to any Liens.

(r) SOLVENCY; FRAUD. The Seller: (i) is not "insolvent" (as
such term is defined in Section 101(32)(A) of the Bankruptcy Code), (ii) is able
to pay its

<PAGE>

debts as they mature; and (iii) does not have unreasonably small capital for the
business in which it is engaged or for any business or transaction in which it
is about to engage. There is no fraud on the part of the Seller or, to the
knowledge of the Seller, on the part of any other party to any of the Facility
Documents in connection with the transactions contemplated by this Agreement or
any of the other Facility Documents.

(s) SOFTWARE. Except as set forth in the Receivables Purchase
Agreement, the Servicer has (or will have, concurrently with the effectiveness
hereof) an enforceable right (whether by license, sublicense or assignment) to
use all of the computer software used to account for the Purchased Receivables
to the extent necessary to administer the Purchased Receivables.

(t) SELECTION OF CONTRACTS; CONTRACT FILE COMPLETE. No
selection procedures reasonably believed by the Seller to be adverse to PARCO
and the APA Banks were utilized in selecting the Contracts under which
Receivables are purchased hereunder. There exists a Contract File pertaining to
each Purchased Receivable and such Contract File contains, without limitation,
each of the items described in the definition of "Contract File." Each document
contained in the Contract File which is required to be signed by the Obligor has
been signed by the Obligor in the appropriate spaces, and all blanks on any form
contained in the Contract File have been properly filled in and each such form
has otherwise been correctly prepared. Each Contract File is held by AFL.

(u) INVESTMENT COMPANY ACT. The Seller is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

(v) YEAR 2000. The Seller has (i) undertaken a detailed
review and assessment of all areas within its business and operations (including
its servicing operations) that could be adversely affected by the failure of the
Seller to be Year 2000 Compliant on a timely basis, (ii) developed a detailed
plan and timetable for becoming Year 2000 Compliant on a timely basis, and (iii)
implemented and will implement that plan in accordance with that timetable in
all material respects;

SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The
Servicer represents and warrants to PARCO, the APA Banks and the Funding Agent
on the date hereof (in the case of the initial Servicer) and in the case of any
Servicer appointed hereafter pursuant to Section 6.1, as of the date of its
acceptance of its

<PAGE>

appointment, and on each Purchase Date as follows:

(a) DUE INCORPORATION AND GOOD STANDING. The Servicer is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and is duly qualified to do business, and is in
good standing, in every jurisdiction in which the nature of its business
requires it to be so qualified, except where the failure to be so qualified
would not materially adversely affect its ability to perform its obligations
hereunder.

(b) DUE AUTHORIZATION AND NO CONFLICT. The execution,
delivery and performance by the Servicer of this Agreement, each other Facility
Document to which the Servicer is a party and all other agreements, instruments
and documents to be delivered hereunder and thereunder, and the transactions
contemplated hereby and thereby, are within the Servicer's powers, have been
duly authorized by all necessary action, do not contravene (i) the Servicer's
organizational documents and by-laws, (ii) any law, rule or regulation
applicable to the Servicer, (iii) any contractual restriction contained in any
material indenture, loan or credit agreement, lease, mortgage, security
agreement, bond, note, or other agreement or instrument binding on or affecting
the Servicer or its property or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting the Servicer or its property, and
do not result in or require the creation of any Lien upon or with respect to any
of its properties. This Agreement and each other Facility Document to which the
Servicer is a party have been duly executed and delivered on behalf of the
Servicer.

(c) GOVERNMENTAL CONSENT. No authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Servicer of this Agreement, any of the other Facility Documents to which the
Servicer is a party or any other agreement, document or instrument to be
delivered hereunder or thereunder.

(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Agreement and
each other Facility Document to be delivered by the Servicer in connection
herewith constitute the legal, valid and binding obligation of the Servicer
enforceable against the Servicer in accordance with their respective terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and general principles of equity
(regardless of whether such enforceability is considered in a proceeding at law
or in equity).

(e) NO LITIGATION. There are no actions, suits or proceedings
pending, or to the knowledge of the Servicer threatened, against or affecting
the Servicer, or the property of the Servicer, in any court, or before any

<PAGE>

arbitrator of any kind, or before or by any governmental body, which may
materially adversely affect (i) the financial condition of the Servicer or (ii)
the ability of the Servicer to perform its obligations under this Agreement or
any of the other Facility Documents to which the Servicer is a party. The
Servicer is not in default with respect to any order of any court, arbitrator or
governmental body except for defaults with respect to orders of governmental
agencies which defaults are not material to the business or operations of the
Servicer or the ability of the Servicer to perform its obligations under this
Agreement or under any of the other Facility Documents to which the Servicer is
a party.

(f) ACCURACY OF INFORMATION. No Monthly Report or Purchase
Notice (if prepared by the Servicer), information, exhibit, financial statement,
document, book, record or report furnished or to be furnished by the Servicer to
the Funding Agent, PARCO or any APA Bank in connection with this Agreement is or
shall be inaccurate in any material respect as of the date it is or shall be
dated or (except as otherwise disclosed to the Funding Agent, PARCO or any such
APA Bank, as the case may be, at such time or promptly thereafter) as of the
date so furnished, or contains or shall contain any material misstatement of
fact or omits or shall omit to state a material fact or any fact necessary to
make the statements contained therein not materially misleading.

(g) LOCK-BOX BANK INFORMATION. The name and address of the
Lock-Box Bank, together with the location and account number of the Lock-Box, is
specified in Exhibit I (as amended from time to time) hereto (or at such other
Lock-Box Bank and/or with such other Lock-Box as have been notified to the
Funding Agent in accordance with Section 5.3(d) and with respect to which (and
with respect to all Collections to be deposited therein) all action required by
Section 5.3(d) has been taken and completed).

(h) CONTRACT FILE COMPLETE. There exists a Contract File
pertaining to each Purchased Receivable and such Contract File contains, without
limitation, each of the items described in the definition of "Contract File."
Each document contained in the Contract File which is required to be signed by
the Obligor has been signed by the Obligor in the appropriate spaces and all
blanks on any form contained in the Contract File have been properly filled in
and each such form has otherwise been correctly prepared.

(i) NO CHANGE IN ABILITY TO SERVICE. Since January 1, 1998,
there has been no material adverse change in the ability of the Servicer to
service and collect the Receivables, Related Security and Collections.

<PAGE>

(j) FINANCIAL CONDITION. The Servicer is not insolvent or the
subject of any bankruptcy, insolvency, reorganization or similar proceeding.

(k) YEAR 2000. The Servicer and its Subsidiaries have (i)
undertaken a detailed review and assessment of all areas within its business and
operations (including their respective servicing operations) that could be
adversely affected by the failure of the Servicer or its Subsidiaries to be Year
2000 Compliant on a timely basis, (ii) developed a detailed plan and timetable
for becoming Year 2000 Compliant on a timely basis, and (iii) implemented and
will implement that plan in accordance with that timetable in all material
respects.
<PAGE>

ARTICLE V

GENERAL COVENANTS

SECTION 5.1 AFFIRMATIVE COVENANTS OF THE SELLER. From the Effective
Date until the later of the Termination Date or the Final Collection Date, the
Seller will, unless the Funding Agent shall otherwise consent in writing:

(a) COMPLIANCE WITH LAWS, ETC. Comply in all material
respects with all material applicable laws, rules, regulations and orders with
respect to it, its business and properties and all Receivables and related
Contracts.

(b) PRESERVATION OF CORPORATE EXISTENCE. Observe all
corporate procedures required by its Certificate of Incorporation and By-Laws
and preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified in good standing as a foreign corporation in each jurisdiction where
the failure to preserve and maintain such existence, rights, franchises,
privileges and qualifications would materially adversely affect (i) the
interests hereunder of the Funding Agent, PARCO or the APA Banks, (ii) the
collectibility of any Purchased Receivable or (iii) the ability of the Seller or
the Servicer to perform their respective obligations hereunder.

(c) AUDITS. At any time and from time to time upon reasonable
request by prior written notice to the Seller and during regular business hours,
permit the Funding Agent or its respective agents or representatives, (i) to
examine and make copies of and abstracts from all Records, and (ii) to visit the
offices and properties of the Seller for the purpose of examining such Records,
and to discuss matters relating to the Receivables or the Seller's performance
hereunder with any of the officers or employees of the Seller having knowledge
of such matters. Prior to a Termination Event, the Seller shall bear the costs
and expenses relating to any such examination and visit only one time per year;
the costs of all other examinations and visits prior to a Termination Event
shall be borne by the Funding Agent. After a Termination Event, the Seller
shall bear the costs and expenses relating to all such examinations and visits
without regard to the frequency thereof.

(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and
implement (or cause the Servicer to maintain and implement) administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing the Receivables in the event of the destruction of the
originals thereof)

<PAGE>

and keep and maintain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all Receivables
(including, without limitation, records adequate to permit the daily
identification of all Collections of and adjustments to each Purchased
Receivable). The original counterpart of each Contract subject to a Purchase
hereunder shall be delivered to the Servicer and all other Records relating
thereto shall be held by the Servicer segregated from any similar documents.

(e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS.
At its expense timely and fully perform and comply, in all material respects,
with all material provisions, covenants and other promises required to be
observed by it under the Contracts related to the Purchased Receivables.

(f) LOCATION OF RECORDS. Keep its chief place of business and
chief executive office, and the offices where it keeps the Records, at the
addresses referred to in Section 4.1(i), or, in any such case, upon thirty (30)
days' prior written notice to the Funding Agent, at such other locations within
the United States where all action required by Section 6.5 shall have been taken
and completed.

(g) CREDIT AND COLLECTION POLICIES. Without limiting the
requirements of Section 5.3(b), comply and cause the Servicer to comply in all
material respects with the Credit and Collection Policy and the Additional
Credit Guidelines in regard to each Purchased Receivable and the related
Contract.

(h) COLLECTIONS. Instruct all Obligors (or cause the Servicer
to instruct all Obligors) to cause all Collections to be mailed directly to the
Lock-Box and if the Seller shall receive any Collections (including, without
limitation, any Collections deemed to have been received pursuant to Section
8.2), the Seller shall remit such Collections to the Collection Account within
one (1) Business Day following the Seller's receipt thereof.

(i) POSTING OF COLLECTIONS AND RECEIVABLES. Apply (or cause
the Servicer to apply) all Collections to the applicable Receivables pursuant to
the terms of Section 6.6 and modify its general trial balance to reflect such
Collections, in each case, within one (1) Business Day following the Seller's or
the Servicer's receipt of information in respect of such Collections, but in no
event more than three (3) Business Days after the earliest date on which such
Collections are deposited with the Lock-Box Bank or otherwise received by the
Servicer or the Seller.

(j) FACILITY DOCUMENTS. Comply in all material respects with
the terms of and employ the procedures outlined in and enforce the obligations
of the Originator under the Receivables Purchase Agreement and all of the other
Facility Documents to which it is a party, take all such action to such end as
may be

<PAGE>

from time to time reasonably requested by the Funding Agent, maintain all such
Facility Documents in full force and effect and make to any party to the
Receivables Purchase Agreement such reasonable demands and requests for
information and reports or for action as the Seller is entitled to make
thereunder and as may be from time to time reasonably requested by the Funding
Agent.

(k) SEPARATE CORPORATE EXISTENCE. Take all reasonable steps
(including, without limitation, all steps that the Funding Agent may from time
to time reasonably request) to maintain the Seller's identity as a separate
legal entity from the Originator and to make it manifest to third parties that
the Seller is an entity with assets and liabilities distinct from those of the
Originator and each other Affiliate thereof. Without limiting the generality of
the foregoing and in addition to and consistent with the covenants set forth in
Sections 5.1(b) and 5.3(m), the Seller shall:

(i) conduct business correspondence in its own name,
hold regular meetings of, or obtain regular written consents from, its
Board of Directors and maintain appropriate books and records;

(ii) not permit any limitation on the authority of its
own directors and officers to conduct its business and affairs in
accordance with their independent business judgment, or authorize or
suffer any Person other than its own directors and officers to act on
its behalf with respect to matters (other than matters customarily
delegated to others under powers of attorney) for which a
corporation's own directors and officers would customarily be
responsible;

(iii) maintain or cause to be maintained by an agent of
the Seller under the Seller's control physical possession of all its
books and records;

(iv) maintain capitalization adequate for the conduct of
its business;

(v) account for and manage its liabilities separately
from those of any other Person, including, without limitation, payment
of all payroll and other administrative expenses and taxes from its
own assets;
<PAGE>

(vi) segregate and identify separately all of its assets
from those of any other Person (other than the commingling of
Collections of Receivables as contemplated by the Receivables Purchase
Agreement and this Agreement);

(vii) maintain offices through which its business is
conducted separate from those of the Originator and any Affiliates of
the Originator and any Affiliates of the Seller (provided that, to the
extent that the Seller and any of its Affiliates have offices in the
same location, there shall be a fair and appropriate allocation of
overhead costs and expenses among them, and each such entity shall
bear its fair share of such expenses);

(viii) not commingle its funds with those of the Originator
or any Affiliate of the Originator or any Affiliates of the Seller
except to the extent contemplated herein, or use its funds for other
than the Seller's uses; and

(ix) ensure that any financial reports required of the
Seller shall comply with generally accepted accounting principles and
shall be issued separately from, but may be consolidated with, any
reports prepared by any of its Affiliates.

(l) INTEREST RATE HEDGES. Maintain, at all times, either (i)
Interest Rate Hedges (A) between the Seller and a bank or other financial
institution whose long-term rating is at least A from S&P and A2 from Moody's
and whose short-term unsecured debt obligation rating is at least A-1/P-1 by S&P
and Moody's, respectively, and is reasonably acceptable to the Funding Agent
(with copies to the Rating Agencies of any Interest Rate Hedge entered into with
a counterparty other than the Funding Agent), (B) with a notional principal
amount not less than the Net Investment, which notional principal amount may
amortize with a final maturity date that is no earlier than the final scheduled
payment date with respect to the last maturing Purchased Receivable included in
such Incremental Purchase, and (C) which, if an interest rate cap, has a strike
price no greater than the Maximum Interest Rate Cap Strike Price and which
requires such counterparty to make monthly payments, if any, to the Collection
Account; PROVIDED that, with respect to any Interest Rate Hedge entered into
after the initial Interest Rate Hedge, consent of the Rating Agencies shall not
be required if such Interest Rate Hedge is similar in all material respects to
the immediately preceding Interest Rate Hedge, or (ii) any other hedging
mechanism in form and substance reasonably acceptable to the Funding Agent and
the Rating Agencies.

(m) LOCAL COUNSEL OPINIONS. In the event the aggregate

<PAGE>

Outstanding Balance of all Receivables included in the Servicing Portfolio
Balance having Obligors with mailing addresses in the same state exceeds 10% of
the Outstanding Balance of all Receivables included in the Servicing Portfolio
Balance, obtain from counsel in such state an opinion (or a reliance letter) in
form and substance acceptable to each Funding Agent with respect to the
requirements in such state for the assignment of a security interest in a
Financed Vehicle.

SECTION 5.2 REPORTING REQUIREMENTS OF THE SELLER. From the Effective
Date until the later of the Termination Date or the Final Collection Date, the
Seller will, unless the Funding Agent shall otherwise consent in writing,
furnish to the Funding Agent:

(a) as soon as available and in any event within 120 days
after the end of the Seller's fiscal year, a copy of its unaudited financial
statements for such year and a balance sheet for the twelve month period then
ended, a statement of income of the Seller for such fiscal year, together with
comparative information for the previous fiscal year, and copies of all reports
and management letters, if any, from the independent certified public
accountants to the Seller, which reports and letters shall be reasonably
satisfactory to the Funding Agent, all certified by the chief financial officer
of the Seller;

(b) as soon as possible and in any event within five Business
Days after the occurrence of each Termination Event or each event which, with
the giving of notice or lapse of time or both, would constitute an Termination
Event, the statement of the chief financial officer, chief accounting officer or
treasurer of the Seller setting forth details of such Termination Event or event
and the action which the Seller proposes to take with respect thereto;

(c) promptly, from time to time, such other information,
documents, records or reports respecting the Receivables or the conditions or
operations, financial or otherwise, of the Seller as the Funding Agent may from
time to time reasonably request in order to protect the interests of the Funding
Agent, PARCO or any APA Banks under or as contemplated by this Agreement.

Notwithstanding the foregoing, with respect to paragraphs (a) and (b) of this
Section 5.2, the Seller shall be deemed not to be in default with respect to the
specified delivery date if such default is cured within thirty (30) days.

SECTION 5.3 NEGATIVE COVENANTS OF THE SELLER. From the Effective Date
until the later of the Termination Date or the Final Collection Date, the Seller
<PAGE>

will not, without the written consent of the Funding Agent:

(a) SALES, LIENS, ETC., AGAINST RECEIVABLES AND RELATED
ASSETS. Except as otherwise provided herein or in the other Facility Documents,
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
create or suffer to exist, any Lien upon or with respect to, any Purchased
Receivable, Related Security or Collections, or any related Contract, or upon or
with respect to the Collection Account or the Lock-Box Account or assign any
right to receive income in respect thereof.

(b) EXTENSION OR AMENDMENT OF PURCHASED RECEIVABLES. Except
as expressly contemplated by the Credit and Collection Policy and/or the
Additional Credit Guidelines, compromise, extend, release or adjust payments on
any Contracts or Receivables, accept a conveyance of a Financed Vehicle in full
or partial satisfaction of any Contract or Receivable, or release the Lien noted
on any Title to any Financed Vehicle securing any Receivable, or allow the
Servicer to do any of the foregoing.

(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make
any change in the character of its business or make or allow to be made any
material change in the Credit and Collection Policy without prior notice to and
approval by the Funding Agent (which approval shall not be unreasonably
withheld); PROVIDED, HOWEVER, that the Funding Agent will be deemed to have
approved any such change unless it shall have disapproved of such change within
ten (10) Business Days of its receipt of such notice; the Seller shall provide
the Rating Agencies with copies of any notices which contain change to the
Credit and Collection Policy.

(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Amend the
Lock-Box Agreement (except to add additional Program Parties (as defined
therein)) or terminate Harris Trust and Savings Bank (or any successor and
assign) as the Lock-Box Bank or make or allow to be made any change in its or
the Servicer's instructions to Obligors regarding payments to be made to the
Seller or payments to be made to the Lock-Box Bank, unless the Funding Agent
shall have received (i) ten Business Days' prior notice of such amendment,
termination or change and (ii) prior to the effective date of such amendment,
termination or change, an executed copy of the amended Lock-Box Agreement
executed by the Lock-Box Bank, the Funding Agent, AFL and the Seller.

(e) STOCK, MERGER, CONSOLIDATION, ETC. Merge or consolidate
with or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to, acquire all or
substantially all of the assets of, any Person or division of any Person, except
as expressly permitted under the terms of this Agreement.

<PAGE>

(f) CHANGE IN CORPORATE NAME. Make any change to its
corporate name or use any trade names, fictitious names, assumed names or "doing
business as" names.

(g) ERISA MATTERS. Establish any Plan, Multiemployer Plan or
Benefit Plan.

(h) INDEBTEDNESS. Incur, create, assume, suffer to exist or
otherwise become liable with respect to any Indebtedness other than (i) under
the Facility Documents or any Permitted Securitization Transaction and (ii)
other Indebtedness for operational expenses of the Seller in an amount not to
exceed $9,750 at any one time outstanding.

(i) GUARANTEES. Guarantee, endorse or otherwise be or become
contingently liable (including by agreement to maintain balance sheet tests) in
connection with the obligations of any other Person, except endorsements of
negotiable instruments for collection in the ordinary course of business and
reimbursement or indemnification obligations in favor of the Funding Agent,
PARCO, the APA Banks or any Affected Party as provided for under this Agreement.

(j) LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into,
or be a party to any transaction with any Affiliate of the Seller, except for
(i) the transactions contemplated by the Facility Documents and (ii) to the
extent not otherwise prohibited under this Agreement, other transactions in the
nature of employment contracts and directors' fees, upon fair and reasonable
terms materially no less favorable to the Seller than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate.

(k) FACILITY DOCUMENTS. Cancel or terminate the Receivables
Purchase Agreement, or consent to or accept any cancellation or termination of
any of such agreements; or amend or otherwise modify any term or condition of
the Receivables Purchase Agreement or give any consent, waiver or approval under
any such agreement; or waive any default under or breach of the Receivables
Purchase Agreement or take any other action under any such agreement not
required by the terms thereof.

(l) CHARTER AND BY-LAWS. Amend, modify or otherwise change any
of the terms or provisions in its certificate of incorporation, its by-laws,
<PAGE>

any document setting forth the designation, amount, relative rights, limitations
and preferences of any class or series of its capital stock, and in each case,
any equivalent documents, as in effect on the date hereof, without the prior
written consent of the Funding Agent.

(m) ACCOUNTING TREATMENT. Prepare any financial statements or
other statements (including any tax filings which are not consolidated with
those of the Originator) which shall account for the transactions contemplated
by the Receivables Purchase Agreement in any manner other than as the sale of,
or a capital contribution of, the Contracts, the Receivables and the related
assets by the Originator to the Seller.

(n) LIMITATION ON INVESTMENTS. Make or suffer to exist any
loans or advances to, or extend any credit to, or make any investments (by way
of transfer of property, contributions to capital, purchase of stock or
securities or evidences of indebtedness, acquisition of the business or assets,
or otherwise) in, any Affiliate or any other Person except as otherwise
permitted herein and pursuant to the Receivables Purchase Agreement.

SECTION 5.4 COVENANTS OF THE SERVICER.

(a) AFFIRMATIVE COVENANTS OF THE SERVICER. From the Effective
Date until the later of the Termination Date or the Final Collection Date, the
Servicer will, unless the Funding Agent shall otherwise consent in writing:

(i) COMPLIANCE WITH LAWS, ETC. Comply in all material
respects with all applicable laws, rules, regulations and orders with
respect to it, its business and properties and all Receivables and
related Contracts.

(ii) PRESERVATION OF EXISTENCE. Observe all procedures
required by its organizational documents and by-laws and preserve and
maintain its existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in
good standing in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and
qualifications would materially adversely affect (1) the interests
hereunder of the Funding Agent, PARCO or the APA Banks, (2) the
collectibility of any Purchased Receivable or (3) its ability to
perform its obligations hereunder.

(iii) AUDITS. At any time and from time to time upon
reasonable request by prior written notice to the Servicer and during
regular business hours, permit the Funding Agent or its

<PAGE>

respective agents or representatives, (1) to examine and make copies
of and abstracts from all Records, and (2) to visit the offices and
properties of the Servicer for the purpose of examining such Records,
and to discuss matters relating to the Receivables or the Servicer's
performance hereunder with any of the officers or employees of the
Servicer having knowledge of such matters. Prior to a Termination
Event, the Servicer shall bear the costs and expenses relating to any
such examination and visit only one time per year; the costs of all
other examinations and visits prior to a Termination Event shall be
borne by the Funding Agent. After a Termination Event, the Servicer
shall bear the costs and expenses relating to all such examinations
and visits without regard to the frequency thereof.

(iv) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain
and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing the
Purchased Receivables in the event of the destruction of the originals
thereof) and keep and maintain, all documents, books, records and
other information reasonably necessary or advisable for the collection
of all Purchased Receivables (including, without limitation, records
adequate to permit the daily identification of all Collections of and
adjustments to each Purchased Receivable). AFL, as Servicer, hereby
covenants that the original counterpart of each Contract subject to a
Purchase hereunder shall be delivered to the Servicer and all other
Records relating thereto shall be marked electronically to segregate
such Records from any similar documents.

(v) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND
CONTRACTS. At its expense timely and fully perform and comply, in all
material respects, with all material provisions, covenants and other
promises required to be observed by it under any Contract related to a
Purchased Receivable (except, in the case of a successor Servicer,
such material provisions, covenants and other provisions shall only
include those provisions relating to the collection and servicing of
the Purchased Receivables to the extent such obligations are set forth
in a document included in the related Contract File).

(vi) CREDIT AND COLLECTION POLICIES. Comply in all
material respects with its Credit and Collection Policy and/or the
Additional Credit Guidelines in regard to each Purchased Receivable
<PAGE>

and the related Contract, including, without limitation, the taking of
such steps as are necessary to maintain perfection, free and clear of
all equal or prior Liens, of the security interest created by each
such Contract in the related Financed Vehicle on behalf of the Funding
Agent, PARCO and the APA Banks.

(vii) COLLECTIONS. Instruct all Obligors to cause all
Collections to be mailed directly to the Lock-Box and, within one (1)
Business Day after receipt into the Lock-Box, remit all such
Collections to the Lock-Box Account and, within two (2) days of
receipt into the Lock-Box, remit all Collections to the Collection
Account.

(viii) POSTING OF COLLECTIONS AND RECEIVABLES. Apply all
Collections to the applicable Purchased Receivables pursuant to the
terms of Section 6.6 within one Business Day following the Seller's or
the Servicer's receipt of information in respect of such Collections
but in no event more than two Business Days after the earliest date on
which such Collections are deposited with the Lock-Box Bank or
otherwise received by the Servicer or the Seller.

(ix) FACILITY DOCUMENTS. Comply in all material respects
with the terms of and employ the procedures outlined in the
Receivables Purchase Agreement, and all of the other Facility
Documents to which it is a party and take all such action to such end
as may be from time to time reasonably requested by the Funding Agent.

(x) QUARTERLY REVIEWS. Following the end of each
calendar quarter in each fiscal year in which PARCO or the APA Banks
have acquired an interest in Purchased Receivables, the Servicer shall
cause a firm of nationally recognized independent certified public
accountants to undertake an integrity review in accordance with
Schedule I attached hereto, as such Schedule I shall be amended by
agreement of the Seller and the Funding Agent from time to time. The
report of such accountants on the results of each such data integrity
review shall be completed and delivered to the Funding Agent, the
Servicer and the Seller within twenty (20) days of the end of each
such calendar quarter.

(b) REPORTING REQUIREMENTS OF THE SERVICER. From the
Effective Date until the later of the Termination Date or the Final Collection
Date, the Servicer will, unless the Funding Agent shall otherwise consent in
writing, furnish to the Funding Agent:
<PAGE>

(i) As soon as available and in any event within
forty-five (45) days after the end of each calendar quarter in each
fiscal year, consolidated balance sheets of the Servicer and its
Subsidiaries as of the end of such quarter and consolidated statements
of income of the Servicer and its Subsidiaries for such quarter and
for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, certified by the chief financial
officer of the Servicer.

(ii) As soon as available and in any event within 120
days after the end of the Servicer's fiscal year, a copy of its
audited consolidated financial statements for such year and audited
consolidated balance sheets for the twelve month period then ended,
audited consolidated statements of income, cash flow and changes in
shareholder equity of the Servicer and its Subsidiaries for such
fiscal year, together with comparative information for the previous
fiscal year, and copies of all reports and management letters, if any,
from the independent certified public accountants to the Servicer,
which reports and letters shall be reasonably satisfactory to the
Funding Agent, all certified by the chief financial officer of the
Servicer, accompanied by a statement, addressed to the Funding Agent
and the Back-Up Servicer, of the accountants that conducted the audit
of the foregoing to the effect that: (A) such audit 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 accountants considered necessary in the
circumstances, and (B) such accountants are independent of the Seller
and the Servicer within the meaning of the Code of Professional Ethics
of the American Institute of Certified Public Accountants.

(iii) As soon as possible and in any event within five
Business Days after the occurrence of each Termination Event or each
event which, with the giving of notice or lapse of time or both, would
constitute an Termination Event, a notice setting forth details of
such Termination Event or event.

(iv) As soon as possible and in any event within five
Business Days after the occurrence of each Servicer Termination Event
or each event which, with the giving of notice or lapse of time

<PAGE>

or both, would constitute a Servicer Termination Event, the statement
of the chief financial officer, chief accounting officer or treasurer
of the Servicer setting forth details of such Servicer Termination
Event or event and the action which the Servicer proposes to take with
respect thereto.

(v) Promptly, from time to time, such other information,
documents, records or reports within its possession respecting the
Receivables or the conditions or operations, financial or otherwise,
of the Servicer as the Funding Agent may from time to time reasonably
request in order to protect the interests of the Funding Agent, PARCO
or any APA Bank under, or as contemplated by, this Agreement.

(vi) As soon as available and in any event within 120
days after the end of the Servicer's fiscal year, an Officer's
Certificate, dated as of the last day of the previous fiscal year,
stating that (A) a review of the activities of the Servicer during the
previous 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 (B) 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.

(vii) On or before each Determination Date, the Servicer
will deliver to the Back-Up Servicer a computer tape and a diskette
(or any other electronic transmission acceptable to the Funding Agent
and the Back-Up Servicer) in a format acceptable to the Back-Up
Servicer containing the information with respect to the Purchased
Receivables as of the last day of the related Settlement Period
necessary for preparation of the Monthly Report for the related
Determination Date and necessary to determine the application of
collections as provided in Section 2.5. The Back-Up Servicer shall
use such tape or diskette (or other electronic transmission acceptable
to the Funding Agent and the Back-Up Servicer) to verify the Monthly
Report delivered by the Servicer, and the Back-Up Servicer shall
certify to the Funding Agent that it has verified the Monthly Report
in accordance with this Section 5.4(b)(vii) and shall notify the
Servicer and the Funding Agent of any discrepancies, in each case, on
or before the second Business Day following such Determination Date.
In the event that the Back-Up Servicer and the Servicer are

<PAGE>

unable to reconcile discrepancies with respect to a Monthly Report by
the related Settlement Date, the Servicer shall cause a firm of
nationally recognized independent certified public accountants, at the
Servicer's expense, to audit the Monthly Report and, prior to the next
succeeding Determination Date, reconcile the discrepancies. The
effect, if any, of such reconciliation shall be reflected in the
Monthly Report for the next succeeding Determination Date.

(viii) Upon the reasonable request of the Back-Up Servicer,
the Servicer shall provide a computer tape (or any other electronic
transmission acceptable to the Funding Agent and the Back-Up Servicer)
containing all data maintained by the Servicer in connection with the
servicing of Purchased Receivables.

Notwithstanding the foregoing, (A) with respect to clauses (i), (ii) and (vi) of
this Section 5.2(b), the Servicer shall be deemed not to be in default with
respect to the specified delivery date if such default is cured within thirty
(30) days and (B) with respect to clause (vii) of this Section 5.2(b), the
Servicer shall be deemed not to be in default with respect to the specified
delivery date of the computer tapes and diskettes referred to in such clause if
such default is cured within one (1) Business Day.

(c) NEGATIVE COVENANTS OF THE SERVICER. From the Effective
Date until the later of the Termination Date or the Final Collection Date, the
Servicer will not, without the written consent of the Funding Agent:

(i) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
otherwise expressly contemplated by the Credit and Collection Policy
and/or the Additional Credit Guidelines, compromise, extend, release
or adjust payments on any Contracts or Receivables, accept a
conveyance of a Financed Vehicle in full or partial satisfaction of
any Contract or Receivable, or release the Lien noted on any Title to
any Financed Vehicle securing any Receivable.

(ii) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY.
Make any material change in the character of its business or in the
Credit and Collection Policy without prior notice to and approval by
the Funding Agent; PROVIDED, HOWEVER, that the Funding Agent will be
deemed to have approved any such change unless it shall have
disapproved of such change within ten (10) Business Days of its
receipt of such notice.
<PAGE>

(iii) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Amend
the Lock-Box (except to add additional Program Parties (as defined
therein)) Agreement or terminate Harris Trust and Savings Bank (or any
successor or assign) as the Lock-Box Bank or make any change in its
instructions to Obligors regarding payments to be made to the Seller
or payments to be made to Lock-Box Bank, unless the Funding Agent
shall have received (A) ten (10) Business Days' prior notice of such
amendment, termination or change and (B) prior to the effective date
of such amendment, termination or change, an executed copy of the
Lock-Box Agreement executed by the Lock-Box Bank, the Funding Agent,
AFL and the Seller.

(iv) ERISA. So long as the Servicer is AFL or an
Affiliate thereof, (1) engage or permit any ERISA Affiliate to engage
in any prohibited transaction for which an exemption is not available
or has not previously been obtained from the Department of Labor; (2)
permit to exist any accumulated funding deficiency, as defined in
Section 302(a) of ERISA and Section 412(a) of the IRC, or funding
deficiency with respect to any Benefit Plan other than a Multiemployer
Plan; (3) fail to make any payments to any Multiemployer Plan that the
Servicer or any ERISA Affiliate may be required to make under the
agreement relating to such Multiemployer Plan or any law pertaining
thereto; (4) terminate any Benefit Plan so as to result in any
material risk of liability of the Servicer, the Seller or any ERISA
Affiliate under ERISA or the IRC; or (5) permit to exist any
occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of a liability of the Servicer, the
Seller or any ERISA Affiliate under ERISA or the IRC.
<PAGE>
ARTICLE VI

ADMINISTRATION AND COLLECTION

SECTION 6.1 RETENTION AND TERMINATION OF SERVICER.

(a) The servicing, administering and collection of the
Receivables shall be conducted by the Person (the "SERVICER") so designated from
time to time in accordance with this Section 6.1. Subject to termination due to
the occurrence of a Servicer Termination Event or as otherwise provided below in
this Section 6.1, AFL shall serve as Servicer hereunder. The Funding Agent
shall, upon ten (10) Business Days' prior written notice following the
occurrence of a Servicer Termination Event, terminate the appointment of the
Servicer by designating as Servicer the Back-Up Servicer, or, in the case of the
termination of the Back-Up Servicer, any other Person as successor Servicer.
Any designation of a successor Servicer (including the Back-Up Servicer)
hereunder shall become effective upon such successor Servicer's agreement to
perform the duties and obligations of the Servicer pursuant to the terms hereof,
and such person shall, for the purposes of this Agreement, become Servicer. The
Servicer may, with the prior consent of the Funding Agent, subcontract with any
other Person for servicing, administering or collecting the Purchased
Receivables; PROVIDED that the Servicer shall remain liable for the performance
of the duties and obligations of the Servicer pursuant to the terms hereof.

(b) Upon any successor Servicer's assumption of the
obligations of Servicer pursuant to this Agreement, the Servicer shall deliver
to such successor Servicer all documents and instruments and monies held by it
under this Agreement; and the Servicer and the Funding Agent 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 Servicer all
such rights, powers, duties, and obligations.

(c) The Servicer shall not resign from the obligations and
duties imposed on it by this Agreement as Servicer except upon a determination
that by reason of a change in legal requirements, the performance of its duties
hereunder would cause it to be in violation of such legal requirements in a
manner which would have a material adverse effect on the Servicer, and the
Funding Agent does not elect to waive the obligations of the Servicer 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 pursuant to this Section 6.1(c) shall be evidenced by an opinion of
counsel as to the relevant legal requirements delivered and acceptable to the
Funding Agent in form and substance.

(d) Any Person (i) into which the Servicer may be merged or

<PAGE>

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, 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.

(e) In the event any successor Servicer assumes the
obligations of the Servicer pursuant to this Section 6.1, such successor
Servicer shall also thereupon so assume all of the rights and obligations of the
outgoing Servicer under the Lock-Box Agreement. In such event, such successor
Servicer shall be deemed to have assumed all of the Servicer's interest therein
and to have replaced the Servicer as a party to the Lock-Box Agreement to the
same extent as if the Lock-Box Agreement had been assigned to such successor
Servicer, except that the Servicer shall not thereby be relieved of any
liability or obligations to the Lock-Box Bank under such Lock-Box Agreement.
The Servicer shall, upon request of the Funding Agent, but at the expense of the
Servicer, deliver to any successor Servicer all documents and records relating
to the Lock-Box Agreement and an accounting of amounts collected and held by the
Lock-Box Bank and otherwise use its best efforts to effect the orderly and
efficient transfer of the Lock-Box Agreement to any such successor Servicer.

(f) If any Person assumes the role of successor Servicer,
(A) such successor Servicer may appoint a subservicer to perform its duties and
obligations as successor Servicer or outsource any of its duties and obligations
as successor Servicer (PROVIDED that no such delegation or outsourcing shall
relieve such successor Servicer of its obligations as the successor Servicer)
and (B) such successor Servicer shall, by the thirtieth (30th) day following the
day of such assumption of duties, obtain all licenses, approvals and consents
necessary or required to be obtained in connection with the performance of its
obligations as successor Servicer hereunder.

SECTION 6.2 DUTIES OF THE SERVICER.

(a) The Servicer shall take or cause to be taken all such
actions as may be necessary or advisable to collect each Purchased Receivable
from time to

<PAGE>

time, all in accordance with applicable laws, rules and regulations, with
reasonable care and diligence, and in accordance with the Credit and
Collection Policy and/or the Additional Credit Guidelines. Each of the
Seller, PARCO, the APA Banks and the Funding Agent hereby appoints as its
agent the Servicer, from time to time designated pursuant to Section 6.1, to
enforce its respective rights and interests in and under the Purchased
Receivables, the Related Security and the related Contracts. The Servicer
(so long as it is AFL) will at all times apply the same standards and follow
the same procedures with respect to the decision to commence litigation, and
in prosecuting and litigating with respect to Purchased Receivables as it
applies and follows with respect to Receivables which are not Purchased
Receivables. In no event shall the Servicer be entitled to make the Funding
Agent, PARCO or any APA Bank a party to any litigation referred to in the
immediately preceding sentence without such Person's express prior written
consent. The Servicer shall cause all Collections of Purchased Receivables
deposited in the Lock-Box to be transferred to the Lock-Box Account within
one (1) day of receipt into the Lock-Box and to the Collection Account within
two (2) Business Days of receipt into the Lock-Box Account (or, following a
Servicer Termination Event, one (1) Business Day). The Servicer shall also,
in no event later than two (2) Business Days (or, after a Servicer
Termination Event, one (1) Business Day) after receipt, transfer to the
Collection Account any and all Collections of Purchased Receivables received
by the Servicer and, prior to such transfer, shall hold such amounts in trust
for the benefit of PARCO and APA Banks. Provided that the Termination Date
shall not have occurred, the Servicer, may, in accordance with the express
provisions of the Credit and Collection Policy and/or the Additional Credit
Guidelines and in the ordinary course of business, amend, modify or waive any
term or condition of any Contract relating to any Purchased Receivable. The
Seller shall deliver to the Servicer, and the Servicer shall hold in trust
for the benefit of Seller, PARCO and the APA Banks in accordance with their
respective interests, all Records.

(b) The Servicer shall, as soon as practicable following
receipt, turn over to the Seller the Collections of any Receivable which is not
a Purchased Receivable less, in the event AFL is not the Servicer, all
reasonable and appropriate out-of-pocket costs and expenses of such Servicer of
servicing, collecting and administering the Receivables to the extent not
covered by the Servicing Fee received by it. The Servicer, if other than AFL,
shall as soon as practicable upon demand deliver to the Seller all Records in
its possession relating to Receivables of the Seller other than Purchased
Receivables, and copies of Records in its possession relating to Purchased
Receivables. The Servicer's authorization under this Agreement shall terminate
after the Termination Date on the Final Collection Date.

(c) Notwithstanding anything to the contrary contained in this
Article VI, the Servicer, if the Funding Agent or its applicable designee, shall
have no obligation to collect, enforce or take any other action described in
this Article VI with respect to any Receivable that is not a Purchased
Receivable other than to

<PAGE>

deliver to the Seller the Collections and documents with respect to any such
Receivable that is not a Purchased Receivable as described in the first two
sentences of Section 6.2(b) and to exercise the same degree of care with respect
to Collections and documents in its possession as it would with respect to its
own property.

SECTION 6.3 RIGHTS OF THE FUNDING AGENT.

(a) At any time and from time to time the Seller (or the
Servicer) shall, at the Funding Agent's reasonable request, segregate all cash,
checks and other instruments received by it from time to time constituting
Collections of Purchased Receivables in a manner reasonably acceptable to the
Funding Agent and shall, promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer, to the
Funding Agent or its designee.

(b) At any time following the designation of a Servicer other
than AFL pursuant to Section 6.1:

(i) At the direction of the Funding Agent, the
Servicer shall notify at any time the Obligors of Purchased
Receivables, or any of them, of PARCO' and the APA Banks'
interests in Purchased Assets and direct such Obligors, or any of
them, that payment of all amounts payable under any Purchased
Receivable be made directly to the Funding Agent or its designee.

(ii) The Servicer or the Seller shall (or shall
cause), at the Funding Agent's request and at the Seller's
expense, give notice of PARCO's and the APA Banks' interest in
Purchased Receivables to each Obligor and direct that payments be
made directly to the Funding Agent or its designee.

(iii) Each of the Seller, the Funding Agent, PARCO
and the APA Banks hereby authorizes the Funding Agent to take any
and all steps in the Seller's name and on behalf of the Seller,
the Funding Agent, PARCO and the APA Banks necessary or
desirable, in the determination of the Funding Agent, to collect
all amounts due under any and all Purchased Receivables,
including, without limitation, endorsing the Seller's name on
checks and other instruments representing Collections and
enforcing such Receivables and the related Contracts.

<PAGE>

SECTION 6.4 RESPONSIBILITIES OF THE SELLER. Anything herein to the
contrary notwithstanding, the Seller shall pay when due any taxes including,
without limitation, sales, excise and personal property taxes payable in
connection with the Purchased Receivables, unless the Seller is contesting the
payment of such taxes in good faith and by appropriate proceedings.

SECTION 6.5 FURTHER ACTION EVIDENCING PURCHASES. The Seller agrees
that from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents necessary or advisable, and take all further
action that the Funding Agent may reasonably request, in order to perfect,
protect or more fully evidence its interest in the Purchased Assets, or to
enable PARCO, the APA Banks or the Funding Agent to exercise or enforce any of
their respective rights hereunder. Without limiting the generality of the
foregoing, the Seller will (i) mark its master data processing records
evidencing such Purchased Receivables and related Contracts with a legend,
acceptable to the Funding Agent, evidencing that the Funding Agent, on behalf of
PARCO and the APA Banks, has acquired an interest therein as provided in this
Agreement and (ii) upon the request of the Funding Agent), execute and file such
financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate or as the Funding Agent may reasonably request. The Seller hereby
authorizes the Funding Agent to file one or more financing or continuation
statements, and amendments thereto and assignments thereof, relative to all or
any of the Purchased Assets now existing or hereafter arising without the
signature of the Seller where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the Purchased
Assets, or any part thereof, shall be sufficient as a financing statement. If
the Seller fails to perform any of its agreements or obligations under this
Agreement, the Funding Agent may (but shall not be required to) itself perform,
or (at the direction of the Funding Agent) cause performance of, such agreement
or obligation, and the expenses of the Funding Agent incurred in connection
therewith shall be payable by the Seller upon the Funding Agent's demand
therefor; PROVIDED, HOWEVER, prior to taking any such action, the Funding Agent
shall give notice of such intention to the Seller and provide the Seller with a
reasonable opportunity to take such action itself.

SECTION 6.6 APPLICATION OF PAYMENTS. To the extent the Servicer
receives a payment from an Obligor of a Purchased Receivable with respect to
which the Obligor has not identified the Receivable to which such payment should
be applied (a payment in the exact amount of an outstanding invoice being
sufficient identification), the Servicer shall use its best efforts to contact
such Obligor to confirm the Receivable to which such Obligor intended that such
payment be applied.

SECTION 6.7 CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a
Servicer Termination Event shall occur and be continuing, the Funding Agent, by
ten

<PAGE>

(10) days' prior notice given in writing to the Servicer and subject to Section
6.1(a), may terminate the then current Servicer as Servicer under this
Agreement. Each successor Servicer is authorized and empowered by this
Agreement to execute and deliver, on behalf, and at the expense, of the prior
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 Related Security or
otherwise. The prior Servicer agrees to cooperate with any successor Servicer
in effecting the termination of the responsibilities and rights of the prior
Servicer under this Agreement, including, without limitation, the transfer to
any successor Servicer for administration by it of all cash amounts that shall
at the time be held by the prior Servicer or that are thereafter received with
respect to the Receivables and the delivery to any successor Servicer of all
Contract Files and Records and a computer tape (or a diskette or any other
electronic transmission acceptable to the Funding Agent and the successor
Servicer) in readable form containing all information necessary to enable such
successor Servicer to service the Receivables and Related Security. The Funding
Agent and any successor Servicer may set off and deduct any amounts owed by the
terminated Servicer from any amounts payable to the terminated Servicer. The
terminated Servicer shall grant the Funding Agent and any successor Servicer
(including the Back-Up Servicer) reasonable access to the terminated Servicer's
premises at the Servicer's expense.

SECTION 6.8 APPOINTMENT OF SUCCESSOR.

(a) Subject to Section 6.1(a), on or after (i) the time the
Servicer receives a notice of termination pursuant to Section 6.1 (a) or 6.7 or
(ii) the resignation of the Servicer pursuant to Section 6.1(c), the Back-Up
Servicer or, upon the termination of the Back-Up Servicer, a successor Servicer
appointed by the Funding Agent 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 any such successor Servicer shall not be
liable for any acts, omissions or obligations of the Servicer prior to such
succession or for any breach by the Servicer of any of its representations and
warranties contained in this Agreement or in any related document or agreement.
The Funding Agent 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 6.7 upon the occurrence of any Servicer Termination Event
applicable to it as Servicer

<PAGE>

and under Section 6.1(a).

(b) Except as otherwise specified herein, any successor
Servicer shall be entitled to such compensation as the Servicer would have been
entitled to under this Agreement if the Servicer had not resigned or been
terminated hereunder.

SECTION 6.9 FORCE-PLACED INSURANCE (a) The Servicer may, if any
Obligor fails to obtain or maintain a physical loss and damage 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 Funding Agent. Any cost
incurred by the Servicer in maintaining such Force-Placed Insurance (the
"INSURANCE ADD-ON AMOUNT") shall only be recoverable out of premiums paid by the
Obligor(s) or Recoveries with respect to the Purchased Receivable, as provided
in paragraph (b) of this Section 6.9.

(b) In connection with any Force-Placed Insurance obtained hereunder,
the Servicer may, in the manner and to the extent permitted by applicable law,
require the Obligor(s) to repay the entire premium to the Servicer. In no event
shall the Servicer 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
Outstanding Balance of such Receivable. The Servicer shall retain and
separately administer the right to receive payments from Obligors with respect
to Insurance Add-On Amounts or rebates of Force-Placed Insurance premiums. If
an Obligor makes a payment with respect to a Receivable having Force-Placed
Insurance, but the Servicer 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. Recoveries on any Receivable will be used first to pay the
Outstanding 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 the Servicer has placed Force-Placed Insurance fails to make scheduled
payments of such Insurance Add-On Amount as due, and the Servicer has determined
that eventual payment of the Insurance Add-On Amount is unlikely, the Servicer
may, but shall not be required to, purchase such Receivable from the seller on
any Subsequent Settlement Date. Any such Receivable, and any Receivable with
respect to which the Servicer has placed Force-Placed Insurance which has been
paid in full (excluding any Insurance Add-On Amounts) will be assigned to the
Servicer.

<PAGE>

ARTICLE VII

TERMINATION EVENTS

SECTION 7.1 TERMINATION EVENTS.

The occurrence of any of the following shall constitute a "Termination
Event":

(a) the breach of any representation or warranty or failure to
perform or observe any covenant by the Seller, the Originator or the Servicer;
PROVIDED, that with respect to any Purchased Receivable with respect to which it
is determined that there has been a breach of any covenant or representation and
warranty, such breach shall not constitute a Termination Event hereunder if the
Seller has repurchased such Receivable in accordance with the terms of Section
8.2;

(b) the Delinquency Ratio is greater than 7.0%;

(d) the Net Yield for any Settlement Period is less than 5%;

(e) the Weighted Average Credit Score is less than 580 or the
average of all LTVs for the Purchased Receivables is greater than 100%;

(f) the failure to reduce to zero the Net Pool Balance
pursuant to a Permitted Securitization Transaction or a Permitted Originator
Transaction at least once during a six-month period;

(g) the failure to maintain Interest Rate Hedges meeting the
requirements of Section 5.1(l);

(h) an Event of Bankruptcy shall occur with respect to the
Originator, the Servicer or the Seller;

(i) the Originator, the Servicer, AFL or the Seller: (i)
shall default in the performance of any payment or undertaking pursuant to any
Facility Document; or (ii) with respect to any outstanding credit agreement,
other than in connection with the Facility, representing a commitment or
outstanding Indebtedness

<PAGE>

in excess of $5,000,000, shall default in any payment of principal or interest
or shall default in any other respect the effect of which is to cause or permit
the holders of indebtedness pursuant to any such agreements to cause the
acceleration of such Indebtedness (in each case, after giving effect to all
applicable cure periods in any such credit agreement);

(j) the filing of any action or proceeding against AFL (or any
Subsidiary thereof) after the date hereof as to which there is a reasonable
possibility of an adverse determination in such action or proceeding and either
(i) if adversely determined, such action or proceeding could reasonably be
expected, individually or in the aggregate, to have a material adverse effect on
the business, operations or financial condition of AFL or AFL and its
Subsidiaries taken as a whole, or (ii) such action or proceeding challenges the
enforceability of, or the interest of, the Funding Agent in all or a portion of
the Purchased Receivables pursuant to any of the Facility Documents and the
transactions contemplated hereby and thereby, or (iii) challenges the validity
or enforceability of any material portion of the Purchased Receivables;

(k) any final rulings or judgments against, or settlements by
(x) AFL (or any Affiliate or Subsidiary) for damages in excess of $5,000,000 in
the aggregate, or (y) the Seller for damages in excess of $50,000 in the
aggregate, excluding, in either case, any such ruling or judgment that is
otherwise covered by insurance or that is discharged or stayed within 60 days;

(l) the occurrence of a Servicer Termination Event or a
Purchase Termination Event, or the Receivables Purchase Agreement shall have
terminated by its own terms;

(m) the Funding Agent shall, for any reason, fail to have a
valid and perfected first priority security interest in the Receivables and
other Purchased Assets and the proceeds thereof;

(n) the Originator, the Servicer or the Seller shall enter
into any transaction or merger whereby it is not the surviving entity or shall
sell all or substantially all of its assets to another Person (except pursuant
to a Permitted Securitization Transaction or a Permitted Originator Transaction)
unless it has given prior written notice thereof to the Funding Agent and the
following conditions are met: (a) such surviving entity or such Person, as the
case may be, assumes the obligations of such Person; (b) the Required Banks
consent in writing; and (c) the Rating Agency Condition is satisfied;

(o) on any Settlement Date, after giving effect to the
distribution of Collections, the Net Investment as set forth in the related
Monthly Report exceeds the product of the Advance Percentage and the Net Pool
Balance as set forth in the related Monthly Report and such condition remains in
effect until the next

<PAGE>

succeeding Determination Date;

(p) the long-term debt rating of any hedge counterparty under
any Interest Rate Hedge is below A by S&P or A2 by Moody's, unless a new hedge
counterparty acceptable to each Agent is in place or collateral acceptable to
each Agent has been posted within ten (10) Business Days;

(q) the average for any three (3) consecutive Settlement
Periods of the Active Bankrupt Account Balance (averaged for each such
Settlement Period) DIVIDED BY the Servicing Portfolio Balance (averaged for each
such Settlement Period) exceeds 4.25%;

(r) the Net Credit Loss Ratio exceeds 6%;

(s) an unwaived event of default (as therein defined) under
any of AFL's public asset-backed transactions shall occur and either (i) the
holders of any asset-backed securities, their representatives or any credit
enhancement providers shall take any action to accelerate the maturity of such
asset-backed securities, or (ii) the same remains uncured and unwaived for a
period of more than forty-five (45) days;

(t) one or more Special Charges to the Seller or the Servicer
during any six-month period which taken together equal or exceed $50,000,000;

(u) the long-term debt rating of AFL falls below B- by S&P or
B3 by Moody's; and

(v) the amount on deposit in the Reserve Account shall fall
below the Minimum Reserve Account Balance and shall remain so for one (1)
Business Day.

then, and in any such event, the Funding Agent may (and, if so required by the
Asset Purchase Agreement, shall), by notice to the Seller, declare the
Termination Date to have occurred, except that, in the case of any event
described in subsection (f) or (h) above, the Termination Date shall be deemed
to have occurred automatically upon the occurrence of such event. Upon any such
declaration or automatic occurrence, the Funding Agent, PARCO and the APA Banks
shall have, in addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of the
applicable jurisdiction and other applicable laws, which rights shall be
cumulative.

<PAGE>

ARTICLE VIII

INDEMNIFICATION; REPURCHASES

SECTION 8.1 INDEMNITIES BY THE SELLER.

(a) Without limiting any other rights which any Affected Party
may have hereunder or under applicable law, the Seller hereby agrees to
indemnify each Affected Party and its officers, directors, shareholders,
employees or agents, from and against any and all damages, losses, claims,
liabilities and related costs and expenses, including reasonable attorneys' fees
and disbursements (all of the foregoing being collectively referred to as
"INDEMNIFIED AMOUNTS") awarded against or incurred by such Affected Party
arising out of or as a result of the following items, excluding, however, (i)
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of any Affected Party or (ii) recourse (except as
otherwise provided for in this Agreement) for uncollectible Purchased
Receivables:

(i) reliance on any representation or warranty made or
deemed made by the Seller or the Servicer (or any of their respective
officers) under or in connection with this Agreement, any Monthly
Report, any Purchase Notice or any other information or report
delivered by the Seller or the Servicer pursuant hereto, which shall
have been false or incorrect in any material respect when made or
deemed made or delivered;

(ii) the failure by the Seller or the Servicer to comply
with any term, provision or covenant contained in this Agreement or
the other Facility Documents to which it is a party or with any
applicable law, rule or regulation with respect to any Receivable, the
related Contract or the Related Security, or the nonconformity of any
Receivable, the related Contract or the Related Security with any such
applicable law, rule or regulation;

(iii) the failure as a result of any action by the Seller
or the Servicer (so long as AFL or any Affiliate thereof is the
Servicer) to vest and maintain vested in the Funding Agent or to
transfer to the Funding Agent, on behalf of PARCO and the APA Banks,
an interest in the Receivables which are, or are purported to be,
Purchased Receivables, together with all Collections and Related
Security, free and clear of any Lien except in favor of any Affected
Party, whether existing at the time of the Purchase of such Receivable
or at any time thereafter;

<PAGE>

(iv) the failure to file, or any delay in filing (other
than solely as a result of the action or inaction of any Affected
Party), financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other applicable laws
against the Seller with respect to any Receivables which are, or are
purported to be, Purchased Receivables, whether at the time of any
Purchase or at any subsequent time;

(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable which is, or is purported to be, a Purchased
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in
accordance with its terms);

(vi) any failure of the Servicer, to perform its duties
or obligations in accordance with the provisions of Article VI;

(vii) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with the Financed
Vehicle related to any Receivable or Contract;

(viii) the failure to pay when due any taxes, including,
without limitation, sales, excise or personal property taxes payable
by the Seller or the Originator in connection with the Purchased
Receivables;

(ix) the commingling of any Collections of Purchased
Receivables with any other funds except to the extent expressly
permitted hereunder; or

(x) any other event similar in nature to the foregoing
which (A) arises or results from such Affected Party's participation
in the transactions evidenced by this Agreement or the ownership of
the Purchased Assets or in respect of any Receivable or any Contract
and (B) involves the failure of the Seller or the Servicer to perform
its obligations hereunder or the documents executed pursuant hereto.

<PAGE>

Any amounts subject to the indemnification provisions of this Section 8.1 shall
be paid by the Seller to the Funding Agent for the benefit of the Affected
Parties within two Business Days following the Funding Agent's demand therefor.

(b) If any Affected Party is required to compensate a APA Bank
as a result of any event or circumstance similar to those described in clauses
(i) through (x) above (excluding, however, (i) compensation for amounts to the
extent resulting from gross negligence or willful misconduct on the part of such
APA Bank or (ii) recourse (except with respect to payment and performance
obligations provided for in applicable documentation with such APA Bank) for
uncollectible Purchased Receivables), then within ten (10) days after demand by
such Affected Party, the Seller shall pay to such Affected Party such additional
amount or amounts as may be necessary to pay such APA Bank the amounts due or to
otherwise reimburse such Affected Party for any amounts paid by it.

SECTION 8.2 REPURCHASE OF RECEIVABLES. The following rights are in
addition to and not in limitation of any other rights or remedies that PARCO,
the APA Banks or the Funding Agent may have hereunder.

(a) If, with respect to any Purchased Receivable, (i) such
Receivable did not constitute an Eligible Receivable on the date such Receivable
became a Purchased Receivable (or the Funding Agent notifies the Seller that any
Receivable which became a Purchased Receivable on the date of such Purchase is
not an Eligible Receivable) or the Seller shall have breached any representation
or warranty made hereunder with respect to such Receivable, including, without
limitation, any of the representations and warranties contained in Section
4.1(g), (ii) such Receivable, after the date such Receivable became a Purchased
Receivable, became subject to any BONA FIDE dispute, claim, offset or defense
(other than the discharge in bankruptcy of the Obligor) of the Obligor to the
payment of such Receivable (including, without limitation, a defense based on
such Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its terms)
or (iii) the Seller shall at any time breach any covenant made herein with
respect to any such Receivable (a Purchased Receivable described in any of
clauses (i), (ii) or (iii) above being referred to as an "INELIGIBLE PURCHASED
RECEIVABLE"), then the Seller shall on the next succeeding Settlement Date, upon
the Funding Agent's demand, repurchase such Ineligible Purchased Receivable for
the repurchase price specified in subsection (c) of this Section 8.2. In
addition, the Seller may, at any time, notify the Funding Agent of its intent to
repurchase any Purchased Receivable (i) which is a Defaulted Receivable or (ii)
in connection with the rewriting and/or restructuring of the related Contract as
an accommodation to, and at the request of, the Obligor thereunder (other than
for reasons relating to a decline in the creditworthiness of the Obligor
thereof). On the Settlement Date next succeeding any such notice, the Seller
shall repurchase such

<PAGE>

Defaulted Receivable or rewritten or restructured Purchased Receivable for the
retransfer price specified in subsection (c) of this Section 8.2.

(b) At any time following the Termination Date when the
Outstanding Balance of the Purchased Receivables is less than ten percent (10%)
of the Outstanding Balance of the Purchased Receivables as of the Termination
Date, the Seller may notify the Funding Agent of its intent to repurchase all
remaining Purchased Receivables. On the Settlement Date next succeeding any
such notice, the Seller shall repurchase all outstanding Purchased Receivables
for the retransfer price specified in subsection (c) of this Section 8.2.

(c) In the case of a repurchase from PARCO or the APA Banks,
as applicable, by the Seller or the Servicer of a Purchased Receivable pursuant
to this Section 8.2, the Seller or the Servicer shall, on the Settlement Date
coinciding with such repurchase, pay to the Funding Agent, for application in
accordance with Section 2.5 of this Agreement (as applicable), as a reduction of
Net Investment an amount equal to the Outstanding Balance of such Purchased
Receivable plus all accrued and unpaid interest, finance charges, fees and other
amounts due under the related Contract; PROVIDED that any repurchase under this
Section 8.2 which requires a payment by the Seller to any counterparty to an
Interest Rate Hedge as a result of the termination of such Interest Rate Hedge
shall be effective only upon the making of such payment to such counterparty.
The proceeds of any such repurchase shall be deemed to be Collections of such
Receivable received by the Seller, and the amount of each such Collection shall
be applied as provided in Section 2.5. The repurchase of any Receivable shall
not relieve the Seller of the obligation to pay Discount on the Net Investment
outstanding with respect to such Receivable through the date of such repurchase.
Any such repurchase shall be made without recourse or representation or
warranty, express or implied (other than a representation and warranty that such
Receivable is free and clear of any Lien created by or through the Funding Agent
for the benefit of PARCO and the APA Banks).

(d) The Seller, the Servicer and the Funding Agent, as the
case may be, shall inform the other parties to this Agreement promptly, in
writing, upon the discovery of any breach of the Servicer's covenants pursuant
to Section 5.4(a) (v), 5.4(a) (vi), 5.4(a)(vii), 5.4(a)(viii), 5.4(c)(i),
5.4(c)(ii) or 5.4(c)(iii); PROVIDED that the failure to give such notice shall
not relieve the Servicer of its repurchase obligations under this Section
8.2(d). Unless such breach shall have been cured by the last day of the first
full calendar month following the discovery by or notice to the Servicer of the
breach, the Servicer shall repurchase any Purchased Receivable with respect to
which such breach has a material adverse effect on such Purchased Receivable or
the

<PAGE>

interest therein of the Funding Agent, PARCO or the APA Banks. Such repurchase
shall occur for the same retransfer price and pursuant to the same procedures
applicable to repurchases by the Seller pursuant to subsection (c) of this
Section 8.2.

(e) If, with respect to any Purchased Receivable, (i) such
Receivable, after the date such Receivable became a Purchased Receivable,
becomes subject to any BONA FIDE dispute, claim, offset or defense (other than
the discharge in bankruptcy of the Obligor) of the Obligor to the payment of
such Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its terms)
or (ii) the Servicer, for so long as the Servicer is AFL, shall at any time
breach any covenant made herein with respect to any such Receivable, then the
Servicer, so long as the Servicer is AFL, shall on the next succeeding
Settlement Date, upon the Funding Agent's demand, repurchase such Purchased
Receivable for the repurchase price specified in subsection (c) of this Section
8.2.
<PAGE>

ARTICLE IX

MISCELLANEOUS

SECTION 9.1 AMENDMENTS, ETC.

(a) Subject to clause (b) below, no amendment to or waiver of
any provision of this Agreement nor consent to any departure by any party to
this Agreement shall in any event be effective unless the same shall be in
writing and signed by all of the parties hereto, and then such waiver, amendment
or consent shall be effective only in the specific instance and for the specific
purpose for which given. This Agreement contains a final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire Agreement (together with
the exhibits hereto) among the parties hereto with respect to the subject matter
hereof, superseding all prior oral or written understandings.

(b) The Seller may extend the Final Termination Date for an
additional 364 days from time to time with the written consent of the Funding
Agent, PARCO and the APA Banks, which written consent, if so given, shall be
delivered to the Seller no later than sixty (60) days prior to the Final
Termination Date then in effect. The Seller shall request any such extension no
later than the ninetieth (90th) day prior to the Final Termination Date then in
effect.

SECTION 9.2 NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex communication and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at its address set
forth under its name below or at such other address as shall be designated by
such party in a written notice to the other parties hereto. All such notices
and communications shall be effective, upon receipt, or in the case of delivery
by mail, five days after being deposited in the mails, or, in the case of notice
by telex, when telexed against receipt of answer back, or in the case of notice
by facsimile copy, when verbal communication of receipt is obtained, in each
case addressed as aforesaid, except that notices and communications pursuant to
Article II shall not be effective until received.

<PAGE>

IF TO THE SELLER:

ARCADIA RECEIVABLES FINANCE CORP. V
7825 Washington Avenue South
Suite 902
Minneapolis, Minnesota 55439-2444
Attention: Treasurer
Telephone: (612) 942-9880
Telecopy: (612) 942-6620

IF TO THE SERVICER:

ARCADIA FINANCIAL LTD.
7825 Washington Avenue South
Suite 500
Minneapolis, Minnesota 55439-2444
Attention: Treasurer
Telephone: (612) 942-9880
Telecopy: (612) 942-6620

IF TO PARCO:

PARK AVENUE RECEIVABLES CORPORATION
c/o Global Securitization Services, LLC
25 West 43rd Street, Suite 704
New York, New York 10036
Attention: President
Telephone: (212) 302-5151
Telecopy: (212) 302-8767

(with a copy to the Funding Agent)

IF TO THE FUNDING AGENT:

THE CHASE MANHATTAN BANK
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Andrew Taylor
Structured Finance Services
<PAGE>

Telephone: (212) 946-7861
Telecopy: (212) 946-7776

SECTION 9.3 NO WAIVER; REMEDIES. No failure on the part of the
Funding Agent, PARCO or any APA Banks to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. Without limiting
the foregoing, the Funding Agent is hereby authorized by the Seller at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (whether general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by Chase or any Affiliate of either of them to or for the credit or the account
of the Seller against any and all of the obligations of Seller, now or hereafter
existing under this Agreement or under any agreement executed pursuant hereto,
to the Funding Agent, PARCO or any APA Bank or their respective successors and
assigns irrespective of whether or not demand therefor shall have been made
under this Agreement or under any agreement executed pursuant hereto. The
Seller acknowledges that the rights of the Funding Agent, PARCO and the APA
Banks or any of their respective successors and assigns described in this
paragraph are in addition to other rights and remedies (including, without
limitation, other rights of set-off) such parties may have.

SECTION 9.4 BINDING EFFECT; ASSIGNABILITY. (a) This Agreement shall
be binding upon and inure to the benefit of the Seller, the Servicer, the
Funding Agent, PARCO, the APA Banks and their respective successors and
permitted assigns (which successors of the Seller shall include a trustee in
bankruptcy). This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until such time, after the Termination Date, as the
Final Collection Date shall occur; PROVIDED, HOWEVER, that the rights and
remedies with respect to any breach of any representation and warranty made by
the Seller pursuant to Article IV and the indemnification and payment provisions
of Articles II and VIII shall be continuing and shall survive any termination
of this Agreement.

(b) The Seller may not assign any of its rights and obligations
hereunder or any interest herein without the prior written consent of the
Funding Agent.

(c) At any time and from time to time, PARCO may, without the consent
of the Seller, assign all or a portion of its interests in Purchased Assets
hereunder to the related APA Banks pursuant to its Asset Purchase Agreement.
Each APA Bank shall also be entitled to sell its interests (or portions thereof)
to other APA Banks pursuant to the terms of the related Asset Purchase
Agreement. If

<PAGE>

PARCO (or any APA Bank) makes any such assignment, it shall provide notice to
the Seller of any assignment hereunder or thereunder and, to the extent of such
assignment, shall have no further rights hereunder. The Seller shall have the
right to consent (which consent will not be unreasonably withheld) to any Person
(other than Chase) becoming a APA Bank.

SECTION 9.5 GOVERNING LAW; WAIVER OF JURY TRIAL. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York. Each of the parties hereto each hereby waives any right to have a jury
participate in resolving any dispute, whether sounding in contract, tort, or
otherwise among any of the Seller, the Servicer, PARCO, the APA Banks or the
Funding Agent arising out of, connected with, related to, or incidental to the
relationship between them in connection with this Agreement. Instead, any
dispute resolved in court will be resolved in a bench trial without a jury.
With respect to the foregoing consent to jurisdiction, each of the Seller and
the Servicer hereby waives any objection based on FORUM NON CONVENIENS, and any
objection to venue of any action instituted hereunder and consents to the
granting of such legal or equitable relief as is deemed appropriate by the
court.

SECTION 9.6 COSTS, EXPENSES AND TAXES. (a) In addition to the rights
of indemnification under Article VIII hereof, the Seller agrees to pay on demand
all reasonable costs and expenses in connection with the preparation, execution,
delivery and administration (including periodic auditing and any requested
amendments, waivers or consents) of this Agreement and the other documents to be
delivered hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Funding Agent, PARCO and the APA Banks
with respect thereto and with respect to advising the Funding Agent, PARCO and
the APA Banks as to their respective rights and remedies under this Agreement,
and the other agreements executed pursuant hereto and all costs and expenses, if
any (including reasonable counsel fees and expenses), in connection with the
enforcement of this Agreement and the other agreements and documents to be
delivered hereunder.

(b) In addition, the Seller shall pay any and all stamp,
sales, excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement
or the other agreements and documents to be delivered hereunder, and agrees to
indemnify the Funding Agent, PARCO and the APA Banks against any liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes and fees.

(c) In addition, the Seller shall pay on demand all other
costs and expenses incurred by PARCO or any shareholder of such PARCO ("OTHER
COSTS"), including, without limitation, the cost of auditing PARCO's books by
certified public accountants, the cost of rating PARCO's promissory notes by
independent financial

<PAGE>

rating agencies and the reasonable fees and out-of-pocket expenses of counsel
for such Person or any counsel for any shareholder of PARCO with respect to (i)
advising PARCO or such general or limited partner or shareholder as to its
rights and remedies under this Agreement, (ii) the enforcement of this Agreement
and the other documents to be delivered hereunder or (iii) advising PARCO or
such general or limited partner or shareholder as to matters relating to PARCO's
operations; PROVIDED, HOWEVER, that if PARCO enters into or has entered into
agreements with Other Sellers, the Seller and such Other Sellers shall each be
liable for such Other Costs ratably in accordance with the usage under the
respective facilities of PARCO to purchase receivables (or make loans secured by
receivables) from the Seller and each Other Seller; and PROVIDED, FURTHER, that
if such Other Costs are attributable to the Seller and not attributable to any
Other Seller, the Seller shall be solely liable for such Other Costs.
Notwithstanding the foregoing, the Seller shall not pay Other Costs in excess of
$5,000 annually.

SECTION 9.7 NO PROCEEDINGS. Each of the parties hereto hereby agrees
that it will not institute against, or join with any other Person in instituting
against, PARCO any proceeding of the type referred to in clause (i) of Section
7.1(g) so long as any Commercial Paper or other notes issued by PARCO shall be
outstanding or there shall not have elapsed one year plus one day since the last
day on which any such Commercial Paper or other notes shall have been
outstanding.

SECTION 9.8 EXECUTION IN COUNTERPARTS; SEVERABILITY. This Agreement
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 to be an
original and all of which when taken together shall constitute one and the same
Agreement. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

SECTION 9.9 CONFIDENTIALITY. (a) Each of the Seller and the Servicer
shall maintain, and shall cause each officer, employee and agent of itself and
its Affiliates to maintain, the confidentiality of this Agreement and the other
Facility Documents and all other confidential proprietary information with
respect to PARCO, the Funding Agent and the APA Banks and each of their
respective businesses obtained by them in connection with the structuring,
negotiation and execution of the transactions contemplated herein and in the
other Facility Documents, except for information that has become publicly
available or information

<PAGE>

disclosed (i) to legal counsel, accountants and other professional advisors to
the Seller, the Servicer and their Affiliates, (ii) as required by law,
regulation or legal process, including, without limitation, information
disclosed as an exhibit to AFL's annual and quarterly reports to the Securities
and Exchange Commission on Form 10-K and Form 10-Q or (iii) in connection with
any legal or regulatory proceeding to which the Seller, the Servicer or any of
their Affiliates is subject. Each of the Seller and the Servicer hereby
consents to the disclosure of any non-public information with respect to it
received by PARCO, the Funding Agent or any APA Bank to (i) any of PARCO, the
Funding Agent or any APA Bank, (ii) any nationally recognized rating agency
providing a rating or proposing to provide a rating to PARCO's Commercial Paper,
(iii) any placement agent or commercial paper dealer which proposes to offer and
sell PARCO's Commercial Paper, (iv) any provider of PARCO's program-wide
liquidity or credit support facilities, (v) any potential APA Bank or (vi) any
participant or potential participant (which Person, in the case of clauses
(iii) - (vi), agrees in writing to be bound by the confidentiality provisions
of this Section 9.9(a)).

(b) Each of PARCO, the Funding Agent and the APA Banks shall
maintain, and shall cause each officer, employee and agent of itself and its
Affiliates to maintain, the confidentiality of this Agreement and the other
Facility Documents and all other confidential proprietary information with
respect to the Seller, the Servicer and their Affiliates and each of their
respective businesses obtained by them in connection with the structuring,
negotiation and execution of the transactions contemplated herein and in the
other Facility Documents, except for information that has become publicly
available or information disclosed (i) to legal counsel, accountants and other
professional advisors to the Seller, the Servicer and their Affiliates, (ii) as
required by law, regulation or legal process or (iii) in connection with any
legal or regulatory proceeding to which the Seller, the Servicer or any of their
Affiliates is subject.

SECTION 9.10 LIMITED RECOURSE TO PARCO. Notwithstanding anything to
the contrary contained herein, the obligations of PARCO under this Agreement are
solely the corporate obligations of PARCO and (i) in the case of obligations of
PARCO other than Commercial Paper, shall be payable at such time as funds are
actually received by, or are available to, PARCO in excess of funds necessary to
pay in full all outstanding Commercial Paper and, to the extent funds are not
available to pay such obligations, the claims relating thereto shall not
constitute a claim against PARCO, but shall continue to accrue. Each party
hereto agrees that the payment of any claim (as defined in Section 101 of Title
11, United States Code (Bankruptcy)) of any such party against PARCO shall be
subordinated to

<PAGE>

the payment in full of all of PARCO's outstanding Commercial Paper.

No recourse under any obligation, covenant or agreement of PARCO
contained in this Agreement shall be had against any incorporator, stockholder,
officer, director, member, manager, employee or agent of PARCO, Chase, Global
Securitization Services, LLC or any of their Affiliates (solely by virtue of
such capacity) by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise; it being expressly agreed and
understood that this Agreement is solely a corporate obligation of PARCO, and
that no personal liability whatever shall attach to or be incurred by any
incorporator, stockholder, officer, director, member, manager, employee or agent
of PARCO, Chase, Global Securitization Services, LLC or any of their Affiliates
(solely by virtue of such capacity) or any of them under or by reason of any of
the obligations, covenants or agreements of PARCO contained in this Agreement,
or implied therefrom, and that any and all personal liability for breaches by
PARCO of any of such obligations, covenants or agreements, either at common law
or at equity, or by statute, rule or regulation, of every such incorporator,
stockholder, officer, director, member, manager, employee or agent is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement; PROVIDED that the foregoing shall not relieve any such Person
from any liability it might otherwise have as a result of their willful
misconduct or of fraudulent actions taken or fraudulent omissions made by them.

SECTION 9.11 WAIVER OF SETOFF. Each of the parties hereto hereby
waives any right of setoff it may have or to which it may be entitled under this
Agreement from time to time against PARCO or its assets.

SECTION 9.12 CONFLICT WAIVER. (a) Chase acts as Funding Agent and as
program administrative agent for PARCO, as issuing and paying agent for PARCO's
Commercial Paper, as provider of other backup facilities for PARCO, and may
provide other services or facilities from time to time (the "CHASE ROLES").
Each of the parties hereto hereby acknowledges and consents to any and all Chase
Roles, waives any objections it may have to any actual or potential conflict of
interest caused by Chase's acting as the Funding Agent or as an APA Bank under
the Asset Purchase Agreement and acting as or maintaining any of the Chase
Roles, and agrees that in connection with any Chase Role, Chase may take, or
refrain from taking, any action consistent with its obligations under the
Facility Documents which it in its discretion deems appropriate.

SECTION 9.13 LIABILITIES AND RIGHTS OF FUNDING AGENT.
(a) Notwithstanding any provision of this Agreement or any other Facility
Document: (i) the Funding Agent shall not have any obligations under this
Agreement or any other Facility Document other than those specifically set forth
herein and therein, and no implied obligations of the Funding Agent shall be
read

<PAGE>

into this Agreement or any other Facility Document; and (ii) in no event shall
the Funding Agent be liable under or in connection with this Agreement or any
other Facility Document for indirect, special, or consequential losses or
damages of any kind, including lost profits, even if advised of the possibility
thereof and regardless of the form of action by which such losses or damages may
be claimed. Neither the Funding Agent nor any of its respective directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken in good faith by it or them under or in connection with this Agreement
or any other Facility Document, except for its or their own gross negligence or
willful misconduct. Without limiting the foregoing, each Funding Agent (a) may
consult with legal counsel (including counsel for PARCO), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts, (b) shall not be responsible to
PARCO, the APA Banks, the Seller or the Servicer for any statements, warranties
or representations made in or in connection with this Agreement or the other
Facility Documents, (c) shall not be responsible to PARCO, the APA Banks, the
Seller or the Servicer for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Facility Documents, (d) shall incur no liability under or in respect of any of
the Commercial Paper or other obligations of PARCO under this Agreement or the
other Facility Documents and (e) shall incur no liability under or in respect of
this Agreement or the other Facility Documents by acting upon any notice
(including notice by telephone), consent, certificate or other instrument or
writing (which may be by facsimile) believed by it to be genuine and signed or
sent by the proper party or parties. Notwithstanding anything else herein or in
the other Facility Documents, it is agreed that where a Funding Agent may be
required under this Agreement or the other Facility Documents to give notice of
any event or condition or to take any action as a result of the occurrence of
any event or the existence of any condition, such Funding Agent agrees to give
such notice or take such action only to the extent that it has actual knowledge
of the occurrence of such event or the existence of such condition, and shall
incur no liability for any failure to give such notice or take such action in
the absence of such knowledge.

(b) The Funding Agent hereby represents and warrants to the Seller
and the Servicer that it is duly authorized to act on behalf of PARCO and the
APA Banks.

SECTION 9.14 FURTHER ASSURANCES. The Seller hereby agrees to do such
further acts and things and to execute and deliver to the Funding Agent, for the
benefit of PARCO and the APA Banks, such additional assignments, agreements,

<PAGE>

powers and instruments as are required by the Funding Agent to carry into effect
the purposes of this Agreement or to perform its obligations hereunder or to
receive its rights, remedies and benefits hereunder for the benefit of PARCO and
the APA Banks.

<PAGE>

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

ARCADIA RECEIVABLES FINANCE CORP. V,
as Seller

By:
Name:
Title:

ARCADIA FINANCIAL LTD.,
individually and as Servicer

By:
Name:
Title:

PARK AVENUE RECEIVABLES CORPORATION,
as purchaser

By:
Name:
Title:

THE CHASE MANHATTAN BANK,
individually and as Funding Agent

By:
Name:
Title:

<PAGE>

RECEIVABLES PURCHASE AGREEMENT
Dated as of October 16, 1998

ARCADIA RECEIVABLES FINANCE CORP. V, a Delaware corporation, as buyer
(together with its successors and assigns in such capacity, the "BUYER"), and
ARCADIA FINANCIAL LTD., a Delaware corporation, as originator (together with its
successors and assigns in such capacity, the "ORIGINATOR"), agree as follows:

PRELIMINARY STATEMENTS

(1) Certain terms which are capitalized and used throughout this
Agreement (in addition to those defined above) are defined in Article I of this
Agreement.

(3) The Buyer is a wholly-owned, special-purpose Subsidiary of the
Originator established to purchase or otherwise acquire Eligible Receivables and
Related Security;

(4) The Originator wishes from time to time to offer to sell to the
Buyer Eligible Receivables and Related Security; and

(5) The Buyer desires to purchase or otherwise procure such Eligible
Receivables and Related Security from the Originator;

NOW, THEREFORE, on the terms and conditions set forth herein, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

<PAGE>

ARTICLE I

DEFINITIONS

SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

"AGREEMENT" means this Receivables Purchase Agreement, dated as of
October 16, 1998, between the Buyer and the Originator, as the same may from
time to time be amended, supplemented or otherwise modified and in effect.

"DEMAND NOTE" shall mean a demand note, dated as of October 16, 1998,
executed by the Originator in favor of the Buyer, substantially in the form of
Exhibit B hereto.

"ELIGIBLE RECEIVABLE" has the meaning specified in the Receivables
Transfer Agreement.

"INDEMNIFIED AMOUNTS" has the meaning specified in Section 7.1(a).

"INDEMNIFIED PARTY" has the meaning specified in Section 7.1(a).

"INITIAL PURCHASE DATE" means the date the first Purchase is made
pursuant to this Agreement.

"OBLIGOR" means the obligor and any co-obligor(s) under a Receivable.

"ORIGINATOR" has the meaning set forth in the preamble to this
Agreement.

"PURCHASE" means a purchase of Purchased Receivables, Related Security
with respect to such Purchased Receivables and Collections with respect thereto
by the Buyer from the Originator pursuant to Sections 2.1 and 2.2.

"PURCHASE DATE" means the Initial Purchase Date and, thereafter, any
Business Day of a calendar month, on which a Purchase occurs; PROVIDED, that no
more than one Purchase may occur on any Purchase Date.

"PURCHASE NOTICE" means a notice, in substantially the form of Exhibit
A, furnished by the Originator to the Buyer pursuant to Section 2.2.

<PAGE>

"PURCHASE PERCENTAGE" shall mean initially 100%; PROVIDED, HOWEVER,
that the Purchase Percentage may change from time to time to reflect historic
loss experience of the Originator's Receivable portfolio, as agreed upon by the
Originator and the Buyer. The Buyer shall notify the Funding Agent of any
change in the Purchase Percentage.

"PURCHASE PRICE" has the meaning specified in Section 2.2.(b).

"PURCHASE TERMINATION DATE" has the meaning specified in Section 8.8.

"PURCHASED ASSETS" means, at any time, all then outstanding Purchased
Receivables, Related Security with respect to such Purchased Receivables and
Collections with respect to, and other proceeds of, such Purchased Receivables.

"PURCHASED RECEIVABLE" means any Receivable which appears on any list
of Receivables at any time hereafter submitted to and accepted by the Buyer
pursuant to Section 2.2. Once a Receivable appears on any such list it shall
remain a Purchased Receivable; PROVIDED, HOWEVER, that with respect to any
Receivable that is repurchased by the Originator pursuant to Section 7.2,
following the Buyer's receipt of the repurchase price for such Receivable, or
any Receivable that is the subject of a Permitted Securitization Transaction or
a Permitted Originator Transaction, "PURCHASED RECEIVABLE" shall not include
such Receivable.

"PURCHASE TERMINATION EVENT" means an Event of Bankruptcy shall have
occurred with respect to the Originator.

"RECEIVABLES" means the indebtedness evidenced by the Contracts,
whether constituting accounts, general intangibles, contract rights, chattel
paper or instruments.

"RECEIVABLES TRANSFER AGREEMENT" means the Receivables Transfer
Agreement, dated as of October 16, 1998, between the Buyer, the Servicer, PARCO,
the Originator and the Funding Agent, as the same may from time to time be
amended, supplemented or otherwise modified and in effect.

<PAGE>

files, tapes, correspondence and other information or materials (including,
without limitation, computer programs, tapes, discs, punch cards, data
processing software and related property and rights) relating to the Purchased
Receivable, the Contract, the Title and the Financed Vehicle relating to the
Purchased Receivable and this Agreement.

"RELATED SECURITY" means, with respect to any Receivable, all of the
Originator's right, title, and interest in, to and under (i) the related
Contract File, (ii) the related Financed Vehicle, (iii) all related Records (iv)
all guarantees, insurance and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such Receivable,
whether pursuant to the related Contract or otherwise, (v) all security
interests, liens and other property purporting to secure payment of the related
Contract, together with all financing statements signed by an Obligor and
security agreements describing any collateral securing such Contract, and (vi)
all proceeds of the foregoing.

"TITLE" means, with respect to each Receivable, the original
certificate or other instrument or registration evidencing ownership of the
related Financed Vehicle, which certificate, other instrument or registration
shall have the Lien of the Originator noted thereon or a UCC financing statement
signed by the Obligor and filed in the appropriate jurisdiction evidencing the
perfection of the Lien granted by the Obligor to the Originator and assigned to
the Buyer or its designee as provided herein.

"UCC" means the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.

SECTION 1.2. OTHER TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in, or
incorporated by reference into, the Receivables Transfer Agreement. All
accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of New York, and not specifically defined
herein, are used herein as defined in such Article 9.

SECTION 1.3. COMPUTATION OF TIME PERIODS. Unless otherwise stated
in this Agreement, in the computation of a period of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding."

<PAGE>

ARTICLE II

AMOUNTS AND TERMS OF PURCHASES

SECTION 2.1. GENERAL TERMS. (a) On the terms and conditions
hereinafter set forth, from the date the conditions precedent to the initial
Purchase in Section 3.1 are satisfied to (but excluding) the Purchase
Termination Date, the Originator may offer to sell to the Buyer on each Purchase
Date all right, title and interest of the Originator in, to and under certain
Eligible Receivables, all Related Security with respect to such Eligible
Receivables and Collections and proceeds with respect thereto, and the Buyer, in
its sole discretion, may purchase all or any portion of such Eligible
Receivables, Related Security, Collections and proceeds with respect thereto
from the Originator. Nothing in this Agreement shall be deemed to be or
construed as a commitment by the Buyer to purchase any Purchased Assets at any
time.

(b) It is the intention of the parties hereto that each Purchase of
Eligible Receivables, Related Security, Collections and proceeds with respect
thereto made hereunder shall constitute a sale, as such term is used in Article
9 of the UCC, which sales are absolute, irrevocable and without recourse except
as specifically provided herein and provide the Buyer with the full benefits of
ownership of the Purchased Receivables and such related Purchased Assets.
Neither the Originator nor the Buyer intends the transactions contemplated
hereunder to be, or for any purpose to be characterized as, loans from the Buyer
to the Originator secured by such assets. If at any time a court characterizes
the Purchases hereunder as loans by the Buyer to the Originator, then the
Originator hereby pledges, grants a security interest in and assigns to the
Buyer, all of the Originator's right and title to and interest in (i) the
Purchased Receivables, (ii) the Related Security and Collections with respect
thereto, (iii) the Lock-Box Account, (iv) funds on deposit in the Lock-Box to
the extent attributable to Purchased Receivables and Related Security and
Collections with respect thereto, and (v) proceeds with respect thereto as
security for such loans and for the payment and performance of all obligations
of the Originator hereunder. In view of the intention of the parties hereto
that the Purchases of Eligible Receivables, Related Security, Collections and
proceeds with respect thereto made hereunder shall constitute sales of such
Purchased Receivables, Related Security, Collections and proceeds with respect
thereto rather than a loan secured by such Purchased Receivables, Related
Security, Collections and proceeds with respect thereto, the Originator agrees
to note on its financial statements that such Purchased Receivables, Related
Security, Collections and proceeds with respect thereto have been sold to the
Buyer.

SECTION 2.2. PURCHASES FROM THE ORIGINATOR. (a) Each Purchase shall
be made on a Purchase Date; PROVIDED that a Purchase Notice requesting such
Purchase is received by the Buyer by the close of business on such Purchase
Date. Each such Purchase Notice shall list all Eligible Receivables of the
Originator

<PAGE>

requested to be purchased and shall specify the Purchase Price
therefor. The Buyer shall promptly thereafter notify the Originator whether the
Buyer has determined to purchase all or any portion of such Eligible
Receivables.

(b) The purchase price (the "PURCHASE PRICE") for the new Purchased
Receivables noted on a Purchase Notice (together with the related Purchased
Assets) payable with respect to any Purchase Date shall be an amount equal to
the product of the Outstanding Balance of such Purchased Receivables on the
Purchase Date and the Purchase Percentage. The Purchase Price shall be paid to
the Originator, by wire transfer of immediately available funds, (i) on the
related Purchase Date, in an amount equal to the product of (x) the Outstanding
Balance of such Purchased Receivables on such Purchase Date, and (y) the Advance
Percentage in effect on such Purchase Date, and (ii) upon the date of any
Permitted Securitization Transaction, in an amount equal to the remaining
balance of the Purchase Price for such Purchased Receivables.

SECTION 2.3. COLLECTIONS; LOCK-BOX ACCOUNT. In connection with the
Purchases of Purchased Receivables hereunder, the Originator hereby transfers
and assigns to the Buyer all the Originator's right, title and interest in and
to the Lock-Box and the Lock-Box Account with respect to the Purchased
Receivables. In connection with such transfer and assignment, the Originator
hereby agrees to instruct each Obligor of a Purchased Receivable to remit
payment on the Purchased Receivables to the Lock-Box. The Originator further
agrees that it will not make any change in its instructions to Obligors
regarding payments to be made to the Lock-Box except in accordance with the
Facility Documents. The Originator agrees that if it shall receive any
Collections, the Originator shall hold such Collections in trust for the benefit
of the Buyer and remit such Collections to the Buyer by depositing such
Collections into the Collection Account within two (2) Business Days following
the Originator's receipt thereof. The location of the Lock-Box, together with
the name and address of the Lock-Box Bank, are specified in Exhibit C.

SECTION 2.4. TRANSFER OF RECORDS TO THE BUYER. (a) In connection
with the Purchases of Purchased Receivables hereunder, the Originator hereby
sells, transfers, assigns and otherwise conveys to the Buyer all of the
Originator's right, title and interest in, to and under the Records relating to
all Purchased Receivables, without the need for any further documentation in
connection with any Purchase. In connection with such transfer, the Originator
hereby grants to the Buyer and the Servicer an irrevocable, non-exclusive
license to use, without royalty or payment of any kind, all software used by the
Originator to account for the Purchased Receivables, to the extent necessary to
administer the Purchased Receivables, whether such software is owned by the
Originator or is owned by others and used by the Originator under license
agreements with respect thereto. The license granted hereby shall be

<PAGE>

irrevocable, and shall terminate when all Purchased Receivables have been
collected or charged off as uncollectible.

(b) The Originator shall take such action requested by the Servicer
and/or Buyer and its assignees, from time to time hereafter, that may be
necessary or appropriate to ensure that the Buyer and its assignees has (i) an
enforceable ownership interest in the Records relating to the Purchased
Receivables and (ii) an enforceable right (whether by license or sublicense or
otherwise) to use all of the computer software used to account for the Purchased
Receivables and/or to recreate such Records.

SECTION 2.5. PERFECTION OF LIENS; FURTHER ASSURANCES. The
Originator shall, at its expense, promptly execute and deliver all further
instruments and documents, and take all further action (including, without
limitation, the execution and filing of such financing or continuation
statements, or amendments thereto or assignments thereof), that may be necessary
or desirable, or that the Buyer may request, in order to perfect and protect any
ownership or security interest granted or purported to be granted to the Buyer
hereunder or to enable the Buyer to exercise and enforce its rights and remedies
hereunder with respect to any Purchased Assets (including, without limitation,
the security interest of the Buyer in the Financed Vehicles securing the
Purchased Receivables). The Originator hereby authorizes the Buyer to file one
or more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any part of the Purchased Assets now
existing or hereafter arising without the signature of the Originator where
permitted by law. A carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Purchased Assets or any part
thereof shall be sufficient as a financing statement. The Originator will
furnish to the Buyer from time to time statements and schedules further
identifying and describing the Purchased Assets and such other reports in
connection with the Purchased Assets as the Buyer may reasonably request, all in
reasonable detail.

<PAGE>

ARTICLE III

CONDITIONS OF PURCHASES

SECTION 3.1. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial
Purchase shall be subject to the condition precedent that the Buyer shall have
received the following, each in form and substance satisfactory to the Buyer:

(a) The Facility Documents executed by parties thereto and a copy of
the executed Lock-Box Agreement;

(b) Acknowledgment copies of proper UCC-1 Financing Statements
executed by the Originator, as may be necessary or, in the opinion of the Buyer,
desirable under the UCC of all appropriate jurisdictions or any comparable law
to perfect the Buyer's interests in all Purchased Receivables, Related Security,
Collections and proceeds with respect thereto, in which an interest may be
assigned to it hereunder;

(c) certified copies of Requests for Information or Copies (Form
UCC-11) (or a similar search report certified by a party acceptable to the
Buyer), dated a date reasonably near to the date hereof, listing all effective
financing statements which name the Originator (under its present name and any
previous names) as debtor and which are filed in the jurisdictions in which
filings were made pursuant to subsection (b) of this Section 3.1, together with
copies of such financing statements;

(d) A copy of the resolutions of the Board of Directors of the
Originator approving this Agreement and the other Facility Documents to be
delivered by it hereunder and under the Facility Documents and the transactions
contemplated hereby and thereby certified by its Secretary or Assistant
Secretary;

(e) The Certificate of Incorporation of the Originator certified by
the Secretary of State of Minnesota;

(f) A certificate of the Secretary or Assistant Secretary of the
Originator certifying (i) the names and true signatures of the officers
authorized on its behalf to sign this Agreement and the other Facility Documents
to be delivered by it hereunder (on which certificate the Buyer may conclusively
rely until such time as the Buyer shall receive from the Originator a revised
certificate meeting the requirements of this subsection (f)) and (ii) a copy of
the Originator's by-laws; and

(g) Opinions of Dorsey & Whitney LLP special counsel for the
Originator, in form and substance satisfactory to the Buyer, as to such matters
as the Buyer and the Funding Agent may reasonably request.

SECTION 3.2. CONDITIONS PRECEDENT TO ALL PURCHASES. Each Purchase

<PAGE>

(including the initial Purchase) by the Buyer from the Originator shall be
subject to the further conditions precedent that (a) with respect to any such
Purchase, not later than the close of business on the date of such Purchase, the
Originator shall have delivered to the Buyer, in form and substance satisfactory
to each of them, a completed Purchase Notice dated the date of such Purchase and
containing such additional information as may be reasonably requested by the
Buyer, (b) on the date of such Purchase the representations and warranties
contained in Section 4.1 shall be correct on and as of such date as though made
on and as of such date, (c) on the date of such Purchase, no Purchase
Termination Event shall have occurred and be continuing, and (d) the Originator
shall have taken all actions (including, but not limited to, filing financing
statements covering the Purchased Assets) necessary or advisable to perfect and
protect the Buyer's security interest in the Purchased Assets, free and clear of
any Lien, (by accepting the Purchase Price for such Purchase the Originator
shall be deemed to have certified the foregoing clauses (a)-(d) to such effect).

SECTION 3.3. EFFECT OF PAYMENT OF PURCHASE PRICE. Upon the payment
of the Purchase Price for any Purchase, all of the Originator's right, title and
interest, whether then existing or thereafter acquired, in and to the Purchased
Receivables specified in the related Purchase Notice and the other Purchased
Assets related thereto shall be sold, transferred, assigned and otherwise
conveyed to the Buyer and title thereto shall vest in the Buyer, whether or not
the conditions precedent to such Purchase were in fact satisfied; PROVIDED,
HOWEVER, that the Buyer shall not be deemed to have waived any claim it may have
under this Agreement for the failure by the Originator in fact to satisfy any
such condition precedent. Immediately following each Purchase hereunder, the
Originator shall make available to the Buyer an updated schedule of all
Purchased Receivables, which schedule, as amended from time to time, shall be
incorporated into, and made a part of, this Agreement as Exhibit D hereto.

<PAGE>

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR. The
Originator represents and warrants as follows:

(a) DUE INCORPORATION AND GOOD STANDING. The Originator is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction named with respect thereto in the preamble and is duly
qualified to do business, and is in good standing, in every jurisdiction in
which the nature of its business requires it to be so qualified.

(b) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery and
performance by the Originator of this Agreement, the other Facility Documents to
which the Originator is a party and all other agreements, instruments and
documents to be delivered hereunder, and the transactions contemplated hereby
and thereby, are within the Originator's corporate powers, have been duly
authorized by all necessary corporate action, do not contravene (i) the
Originator's Articles of Incorporation or by-laws, (ii) any law, rule or
regulation applicable to the Originator, (iii) any contractual restriction
contained in any material indenture, loan or credit agreement, lease, mortgage,
security agreement, bond, note, or other agreement or instrument binding on or
affecting the Originator or its property or (iv) any order, writ, judgment,
award, injunction or decree binding on or affecting the Originator or its
property, and do not result in or require the creation of any Lien upon or with
respect to any of its properties (other than in favor of the Buyer as
contemplated hereunder); and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law. This Agreement and each
other Facility Document to which the Originator is a party has been duly
executed and delivered on behalf of the Originator.

(c) GOVERNMENTAL CONSENT. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Originator of this Agreement, any other Facility Document to which the
Originator is a party or any other agreement, document or instrument to be
delivered hereunder.

(d) ENFORCEABILITY OF FACILITY DOCUMENTS, RECEIVABLES AND CONTRACTS.
This Agreement and each other Facility Document to be delivered by the
Originator in connection herewith and therewith constitute the legal, valid and
binding obligation of the Originator enforceable against the Originator in
accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in

<PAGE>

equity).

(e) NO LITIGATION. There are no actions, suits or proceedings
pending, or to the knowledge of the Originator threatened, against or affecting
the Originator or any of its Subsidiaries, or the property of the Originator or
any of its Subsidiaries, in any court, or before any arbitrator of any kind, or
before or by any governmental body, which may materially adversely affect (i)
the financial condition of the Originator or the Originator and its consolidated
Subsidiaries taken as a whole or (ii) the ability of the Originator to perform
its obligations under this Agreement or the other Facility Documents or (iii)
the collectibility of the Purchased Receivables. Neither the Originator nor any
of its Subsidiaries is in default with respect to any order of any court,
arbitrator or governmental body, except for defaults with respect to orders of
governmental agencies which defaults are not material to the business or
operations of the Originator or the ability of the Originator to perform its
obligations under this Agreement or under any of the other Facility Documents to
which the Originator is a party.

(f) USE OF PROCEEDS. No proceeds of any Purchase will be used by the
Originator to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

(g) ELIGIBILITY OF PURCHASED RECEIVABLES; PERFECTION OF INTEREST
IN PURCHASED RECEIVABLES. (i) As of the date of Purchase hereunder of each
Purchased Receivable, such Purchased Receivable will satisfy the conditions
of the definition of "Eligible Receivable."

(ii) Prior to the Buyer's Purchase of each Purchased Asset
hereunder, the Originator is or will be the lawful owner of, and have good
title to, such Purchased Asset free and clear of any Lien and upon each
Purchase by the Buyer of Purchased Assets hereunder, the Buyer shall
acquire a valid and perfected first priority ownership interest in each
Purchased Receivable then existing or thereafter arising and in the Related
Security, Collections and proceeds with respect thereto, in each case free
and clear of any Lien. All such Purchases of Purchased Receivables and
related Purchased Assets constitute true and valid sales, and all such
Purchases of Purchased Receivables and related Purchased Assets constitute
true and valid transfers and assignments of all of the Originator's right,
title and interest in, to and under such Purchased Assets (and not merely a
pledge of such Purchased Receivables and related Purchased Assets for
security purposes) enforceable against creditors of the Originator. No
such

<PAGE>

Purchased Assets shall constitute property of the Originator; and no
effective financing statement or other instrument similar in effect
covering any Purchased Receivable, the Related Security, Collections and
proceeds with respect thereto or any other Purchased Assets shall at any
time be on file in any recording office except such as may be filed in
favor of the Buyer (or its assignees) in accordance with this Agreement.

(h) ACCURACY OF INFORMATION. No Purchase Notice, information,
exhibit, financial statement, document, book, record or report furnished or to
be furnished by the Originator to the Buyer in connection with this Agreement is
or shall be inaccurate in any material respect as of the date it is or shall be
dated or (except as otherwise disclosed to the Buyer, as the case may be, at
such time) as of the date so furnished, or contains or shall contain any
material misstatement of fact or omits or shall omit to state a material fact or
any fact necessary to make the statements contained therein not materially
misleading.

(i) LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The chief place
of business and chief executive office of the Originator are located at the
address of the Originator referred to in Section 8.2 hereof and the locations of
the offices where the Originator keeps all the Records are listed on Exhibit E
(or at such other locations, notified to the Buyer in accordance with Section
5.1(e), in jurisdictions where all action required by Section 6.3 has been taken
and completed). The Originator has, since its incorporation, operated only
under the names listed on Exhibit F hereto and, since its incorporation, has not
changed its name or merged with or into or consolidated with any other entity or
been the subject of any proceeding under the Bankruptcy Code, except as
disclosed on Exhibit F hereto.

(j) SEPARATE CORPORATE EXISTENCE. The Originator is entering into
the transactions contemplated by this Agreement in reliance on the Buyer's
identity as a separate legal entity from the Originator and each of its
Affiliates, and acknowledges that the Buyer and the other parties to the
Facility Documents are similarly entering into the transactions contemplated by
the other Facility Documents in reliance on the Buyer's identity as a separate
legal entity from the Originator and each such other Affiliate.

(k) TAXES. The Originator has filed or caused to be filed all
federal, state and local tax returns which are required to be filed by it, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the Originator has set aside
adequate reserves on its books in accordance with generally accepted accounting
principles and which have not given rise to any Liens.

<PAGE>

(l) SOLVENCY. The Originator: (i) is not "insolvent" (as such term
is defined in Section 101(32)(A) of the Bankruptcy Code), (ii) is able to pay
its debts as they mature; and (iii) does not have unreasonably small capital for
the business in which it is engaged or for any business or transaction in which
it is about to engage.

(m) NO FRAUDULENT CONVEYANCE. The transactions contemplated by this
Agreement and by each of the Facility Documents are being consummated by the
Originator in furtherance of the Originator's ordinary business, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. By its receipt of the Purchase Prices
hereunder and its ownership of the capital stock of the Buyer, the Originator
shall have received reasonably equivalent value for the Purchased Receivables
sold or otherwise conveyed to the Buyer under this Agreement.

(n) NOT AN INVESTMENT COMPANY. The Originator is not, and is not
controlled by, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or is exempt from all provisions of such Act.

(o) ERISA. Each of the Originator and its ERISA Affiliates is in
compliance in all material respects with ERISA, and no lien in favor of the
Pension Benefit Guaranty Corporation exists on any of the Purchased Receivables,
Related Security, Collections or proceeds with respect thereto.

(p) LOCK-BOX BANK INFORMATION. The name and address of the Lock-Box
Bank, together with the location of the Lock-Box, is specified in Exhibit C (as
amended from time to time) hereto (or at such other Lock-Box Bank and/or with
such other Lock-Box as have been notified to the Buyer in accordance with
Section 5.2(h) and with respect to which (and with respect to all Collections to
be deposited therein) all action required by Section 5.2(h) has been taken and
completed). All Obligors have been instructed to make payment to the Lock-Box.

SECTION 4.2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES BY THE
ORIGINATOR; NOTICE OF BREACH. On the date hereof and on each Business Day on
which Purchased Receivables are sold hereunder, the Originator, by accepting the
proceeds of such sale, shall be deemed to have certified that all
representations and warranties described in Section 4.1 are true and correct on
and as of such day as though made on and as of such day. The representations
and warranties set forth in Section 4.1 shall survive (i) the conveyance of the
Purchased Receivables to the Buyer, (ii) the termination of the rights and
obligations of the Buyer and the Originator under this Agreement and (iii) the
termination of the Receivables Transfer Agreement. Upon discovery by the
Originator or the Buyer of a breach of any of the foregoing

<PAGE>

representations and warranties, the party discovering such breach shall give
prompt written notice to the other within three (3) Business Days of such
discovery.

<PAGE>

ARTICLE V

GENERAL COVENANTS OF THE ORIGINATOR

SECTION 5.1. AFFIRMATIVE COVENANTS OF THE ORIGINATOR. The
Originator will at all times:

(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with
all applicable laws, rules, regulations and orders with respect to it, its
business and properties and all Receivables and related Contracts.

(b) PRESERVATION OF EXISTENCE. Observe all procedures required by
its Articles of Incorporation and by-laws and preserve and maintain its
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing in each
jurisdiction where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualifications would materially adversely affect the
interests hereunder of the Buyer, (2) the collectibility of any Purchased
Receivable or (3) its ability to perform its obligations hereunder.

(c) AUDITS. At any time and from time to time upon prior written
notice to the Originator and during regular business hours, permit the Buyer, or
its agents or representatives, (i) to examine and make copies of and abstracts
from all Records, and (ii) to visit the offices and properties of the Originator
for the purpose of examining such Records, and to discuss matters relating to
the Purchased Receivables or the Originator's performance hereunder with any of
the officers or employees of the Originator having knowledge of such matters.

(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing the Purchased Receivables in the event of
the destruction of the originals thereof) and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Purchased Receivables (including, without limitation, records
adequate to permit the daily identification of all Collections of and
adjustments to each Purchased Receivable). The Originator hereby agrees to give
the Buyer prompt written notice of any change in its administrative and
operating procedures which would be reasonably likely to have a material adverse
effect on the collectibility of the Receivables. The Originator hereby covenants
that the original counterpart of each Contract subject to a Purchase hereunder
shall be delivered to the Servicer and all other Records relating thereto shall
be marked electronically to segregate such Records from any similar documents.

(e) LOCATION OF RECORDS. Keep its chief place of business and
chief executive office, and the offices where it keeps the Records, at the
address(es) of the

<PAGE>

Originator referred to in Section 4.1(i), or, in any such case, upon 30 days'
prior written notice to the Buyer, at such other locations within the United
States where all action required by Section 6.3 shall have been taken and
completed.

(f) CREDIT AND COLLECTION POLICY. Comply in all material respects
with its Credit and Collection Policy and/or the Additional Credit Guidelines in
regard to each Purchased Receivable and the related Contract, including, without
limitation, the taking of such steps as are necessary to maintain perfection,
free and clear of all equal or prior Liens, of the security interest created by
each such Contract in the related Financed Vehicle on behalf of the Buyer.

(g) NATURE OF BUSINESS. Engage principally in, directly or
indirectly through the ownership of its Subsidiaries, the business of financing
the cost of Financed Vehicles purchased by Obligors.

(h) MAINTENANCE OF INSURANCE. Maintain and keep in force insurance in
amounts and with companies as is customary for companies engaged in the same
business as that of the Originator.

(i) SEPARATE IDENTITY. Take all actions required to maintain the
Buyer's status as a separate legal entity, including, without limitation, (i)
not holding the Buyer out to third parties as other than an entity with assets
and liabilities distinct from the Originator and the originator's other
Subsidiaries; (ii) not holding itself out to be responsible for the debts of the
Buyer or, other than by reason of owning capital stock of the Buyer, for any
decisions or actions relating to the business and affairs of the Buyer; (iii)
causing any internal financial statements consolidated with those of the Buyer
to report the Buyer as a separate corporate entity; (iv) taking such other
actions as are necessary on its part to ensure that all corporate procedures
required by its and the Buyer's respective certificates of incorporation and
by-laws are duly and validly taken; (v) keeping correct and complete records and
books of account and corporate minutes; and (vi) not acting in any other manner
that could foreseeably mislead others with respect to the Buyer's separate
identity.

(j) COLLECTIONS. The Originator shall instruct all Obligors to cause
all Collections to be mailed directly to the Lock-Box. The Originator shall
hold in trust, and deposit within two (2) Business Days after receipt thereof to
the Collection Account, all Collections received from time to time by the
Originator.

(k) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS. The
Originator at its expense will timely and fully perform and comply with all
material provisions, covenants and other promises required to be observed by it
under the Contracts related to the Purchased Receivables.

(l) ERISA. The Originator will promptly give the Buyer written

<PAGE>

notice upon becoming aware that the Originator is not in compliance in all
material respects with ERISA or that any ERISA lien on any of the Receivables,
Related Security, Collections or proceeds with respect thereto exists.

SECTION 5.2. NEGATIVE COVENANTS OF THE ORIGINATOR. The Originator
will not at any time:

(a) SALES, LIENS, ETC. AGAINST RECEIVABLES AND RELATED ASSETS.
Except pursuant to the Facility Documents and a Permitted Securitization
Transaction or Permitted Originator Transaction and as otherwise provided
herein, sell, assign (by operation of law or otherwise) or otherwise dispose of,
or create or suffer to exist, any Lien upon or with respect to, any Purchased
Receivable, Related Security, Collections or proceeds with respect thereto, or
upon or with respect to the Lock-Box or the Lock-Box Account, or assign any
right to receive income in respect thereof.

(b) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as otherwise
expressly contemplated by the Credit and Collection Policy and/or the Additional
Credit Guidelines, compromise, extend, release or adjust payments on any
Contracts or Receivables, accept a conveyance of a Financed Vehicle in full or
partial satisfaction of any Contract or Receivable, or release the Lien noted on
any Title to any Financed Vehicle securing any Receivable.

(d) CHANGE IN CORPORATE NAME. Make any change to its corporate name
or use any trade names, fictitious names, assumed names or "doing business as"
names unless, prior to the effective date of any such name change or use, the
Originator has taken all actions required with respect thereto under Section 6.3
and has delivered to the Buyer such other financing statements (Form UCC-1 and
UCC-3) executed by the Originator which the Buyer may reasonably request to
reflect such name change or use, together with such other documents and
instruments that the Buyer may request in connection therewith.

(e) ACCOUNTING TREATMENT. Prepare any financial statements or other
statements which shall account for the transactions contemplated by this
Agreement in any manner other than as the sale of the Purchased Assets by the
Originator to the Buyer.

(f) NONPETITION COVENANT. Notwithstanding any prior termination of
this Agreement, the Originator shall not, prior to the date which is one year
and one

<PAGE>

day after the termination of this Agreement, with respect to the Buyer,
acquiesce, petition or otherwise invoke or cause the Buyer to invoke the process
of any governmental authority for the purpose of commencing or sustaining a case
against the Buyer under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Buyer or any substantial part of
its property or ordering the winding-up or liquidation of the affairs of the
Buyer.

(g) MERGER. Any Person (i) into which the Originator may be merged
or consolidated, (ii) resulting from any merger or consolidation to which the
Originator shall be a party, (iii) which acquires by conveyance, transfer or
lease substantially all of the assets of the Originator, or (iv) succeeding to
the business of the Originator, shall execute an agreement of assumption to
perform every obligation of the Originator under this Agreement and, whether or
not such assumption agreement is executed, shall be the successor to the
Originator 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 Originator from any obligation
hereunder.

(h) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Amend the Lock-Box
Agreement (except to add additional Program Parties (as defined therein)) or
terminate Harris Trust and Savings Bank (or any successor or assign) as the
Lock-Box Bank or make any change in its instructions to Obligors regarding
payments to be made to the Seller or payments to be made to the Lock-Box Bank,
unless the Buyer shall have received (1) ten (10) Business Days' prior notice of
such amendment, termination or change and (2) prior to the effective date of
such amendment, termination or change, an executed copy of the Lock-Box
Agreement executed by the Lock-Box Bank, the Funding Agent, AFL and the Seller.

<PAGE>

ARTICLE VI

ADMINISTRATION AND COLLECTION

SECTION 6.1. DESIGNATION OF SERVICER. Upon the execution and
delivery of the Receivables Transfer Agreement, the Originator will be appointed
as Servicer thereunder and will accept such appointment thereunder. As part of
the consideration for the Purchases hereunder, the Originator hereby
acknowledges and consents to such appointments as Servicer and agrees to perform
each of the duties and obligations of the Servicer pursuant to the terms of the
Receivables Transfer Agreement, as applicable. In the event the Originator or
any successor Servicer is replaced as Servicer under any other Facility
Document, the Originator or such successor Servicer shall automatically be
replaced as Servicer hereunder by the applicable successor Servicer.

SECTION 6.2. RIGHTS OF THE BUYER.

(a) After a Servicer Termination Event, the Buyer may notify the
Obligors of Purchased Receivables, or any of them, of the Buyer's ownership
interest in Purchased Assets and direct such Obligors, or any of them, that
payment of all amounts payable under any Purchased Receivable be made directly
to the Buyer or its designee.

(b) After a Servicer Termination Event, the Originator shall, at the
Servicer's or Buyer's request and at the Originator's expense, give notice of
the Buyer's interest in Purchased Receivables to each Obligor and direct that
payments be made directly to the Buyer or its designee.

(c) After a Servicer Termination Event, the Originator shall, at the
Buyer's request, assemble all Records which the Buyer reasonably believes are
necessary or appropriate for the administration and enforcement of the Purchased
Receivables, and shall make the same available to the Buyer at a place selected
by the Buyer or its designee.

(d) At any time, the Originator hereby authorizes the Buyer and the
Servicer to take any and all steps in the Originator's name and on behalf of the
Originator necessary or desirable, in the determination of the Buyer and/or the
Servicer, to collect all amounts due under any and all Purchased Receivables,
including, without limitation, endorsing the Originator's name on checks and
other instruments representing Collections and enforcing such Purchased
Receivables and the Related Security.

SECTION 6.3. FURTHER ACTION EVIDENCING TRANSFERS. The Originator
agrees that from time to time, at its expense, it will promptly execute and
deliver all

<PAGE>

further instruments and documents and take all further action necessary or
advisable, or that the Buyer may reasonably request, in order to perfect,
protect or more fully evidence the Buyer's interest in the Purchased Assets
(including, without limitation, the security interest of the Buyer in the
Financed Vehicles securing the Purchased Receivables), or to enable the Buyer to
exercise or enforce any of its rights hereunder. Without limiting the
generality of the foregoing, the Originator will mark its master data processing
records evidencing such Purchased Receivables and Related Security with a
legend, acceptable to the Buyer, evidencing that the Buyer has acquired an
ownership interest therein as provided in this Agreement and, upon the request
of the Buyer, will execute and file such financing or continuation statements,
or amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate or as the Buyer may reasonably
request. The Originator hereby authorizes the Buyer to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Purchased Receivables and the Purchased
Assets now existing or hereafter arising without the signature of the Originator
where permitted by law. A carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Purchased Receivables and the
other Purchased Assets, or any part thereof, shall be sufficient as a financing
statement. If the Originator fails to perform any of its agreements or
obligations under this Agreement, the Buyer may (but shall not be required to)
itself perform, or cause performance of, such agreement or obligation, and the
expenses of the Buyer incurred in connection therewith shall be payable by the
Originator upon the Buyer's demand therefor; PROVIDED that, prior to taking any
such action, the Buyer shall give notice of such intention to the Originator and
shall provide the originator with a reasonable opportunity to take such action
itself.

SECTION 6.4. TRANSFERS BY BUYER. The Originator acknowledges and
agrees with the Buyer that (a) the Buyer will, pursuant to the Receivables
Transfer Agreement, sell the Purchased Assets and assign its rights under this
Agreement to the PARCO, the APA Banks and the Funding Agent, as applicable, and
their respective assignees (and the Originator hereby consents to such
assignments) and (b) the Funding Agent, PARCO, and each of the APA Banks are
intended to be, and hereby are, third-party beneficiaries of this Agreement.

<PAGE>

ARTICLE VII

INDEMNIFICATION; REPURCHASES

SECTION 7.1. INDEMNITIES BY THE ORIGINATOR. Without limiting any
other rights which the Buyer may have hereunder or under applicable law, the
Originator hereby agrees to indemnify the Buyer and its officers, directors,
agents and assigns (collectively, the "INDEMNIFIED PARTIES"), from and against
any and all damages, losses, claims, liabilities and related costs and expenses,
including reasonable attorneys' fees and disbursements (all of the foregoing
being collectively referred to as "INDEMNIFIED AMOUNTS") awarded against or
incurred by an Indemnified Party relating to or resulting from any of the
following (excluding, however, (i) Indemnified Amounts to the extent resulting
from gross negligence or willful misconduct on the part of such Indemnified
Party or (ii) recourse (except as otherwise provided for in this Agreement) for
uncollectible Purchased Receivables):

(i) reliance on any representation or warranty made or deemed
made by the Originator (or any of its officers) under or in connection with
this Agreement, any Purchase Notice or any other information or report
delivered by the Originator pursuant hereto, which shall have been false or
incorrect in any material respect when made or deemed made or delivered;

(ii) the failure by the Originator to comply with any term,
provision or covenant contained in this Agreement, or any agreement
executed in connection with this Agreement or with any applicable law, rule
or regulation with respect to any Purchased Receivable, the Related
Security or the other Purchased Assets, or the nonconformity of any
Purchased Receivable, the Related Security or the other Purchased Assets
with any such applicable law, rule or regulation;

(iii) the failure to vest and maintain vested in the Buyer or to
transfer to the Buyer an interest in the Receivables which are, or are
purported to be, Purchased Receivables, together with all Collections,
Related Security and the other Purchased Assets, free and clear of any Lien
(except in favor of the Buyer or its assignees) whether existing at the
time of the Purchase of such Receivable or at any time thereafter;

(iv) the failure to file, or any delay in filing (other than
solely as a result of the action or inaction of an Indemnified Party),
financing statements or other similar instruments or documents under the
UCC of any applicable jurisdiction or other applicable laws against the
Originator with respect to any Receivables or Related Security

<PAGE>

which are, or are purported to be, Purchased Assets, whether at the time of
any Purchase or at any subsequent time;

(v) any failure of the Originator, as Servicer or otherwise, to
perform its duties or obligations in accordance with the provisions of
Article VI; and

(vi) any products liability claim or personal injury or property
damage suit or other similar or related claim or action of whatever sort
arising out of or in connection with the Financed Vehicle that is the
subject of any Contract.

Any amounts subject to the indemnification provisions of this Section 7.1 shall
be paid by the Originator to the applicable Indemnified Party within two (2)
Business Days following such Indemnified Party's demand therefor.

SECTION 7.2. REPURCHASE OF RECEIVABLES. If, with respect to any
Purchased Receivable, such Receivable did not constitute an Eligible Receivable
on the date such Receivable became a Purchased Receivable (or if the Buyer
notifies the Originator that any Receivable which became a Purchased Receivable
on the date of such Purchase is not an Eligible Receivable) or the Originator
shall have breached any representation or warranty made hereunder with respect
to such Receivable, then the Originator shall, on the next succeeding Purchase
Date, repurchase such Purchased Receivable for the repurchase price specified in
the following sentence. The Originator shall, on the Purchase Date coinciding
with such repurchase, pay to the Buyer an amount equal to the Outstanding
Balance of such Purchased Receivable plus accrued interest thereon as of such
Purchase Date. The proceeds of any such repurchase shall be paid to the Buyer
by depositing such proceeds into the Collection Account. Any such repurchase
shall be made without recourse or warranty, express or implied, by the Buyer.
Immediately following each repurchase, the Originator shall make available to
the Buyer an updated schedule of all Purchased Receivables, which schedule, as
amended from time to time, shall be incorporated into, and made a part of, this
Agreement as Exhibit D hereto.

<PAGE>

ARTICLE VIII

MISCELLANEOUS

SECTION 8.1. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Agreement nor consent to any departure by the Originator or
the Buyer, shall in any event be effective unless the same shall be in writing
and signed by (i) the Originator and the Buyer (with respect to an amendment) or
(ii) the Buyer (with respect to a waiver or consent by it) or the Originator
(with respect to a waiver or consent by it), as the case may be, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; PROVIDED that no such amendment or waiver or
consent shall be effective without the prior written consent of the Funding
Agent. This Agreement contains a final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
shall constitute the entire agreement (together with the exhibits hereto) among
the parties hereto with respect to the subject matter hereof, superseding all
prior oral or written understandings.

SECTION 8.2. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex communication and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at its address set
forth below or at such other address as shall be designated by such party in a
written notice to the other parties hereto. All such notices and communications
shall be effective, upon receipt, or in the case of delivery by mail, five days
after being deposited in the mails, or, in the case of notice by telex, when
telexed against receipt of answer back, or in the case of notice by facsimile
copy, when verbal communication of receipt is obtained, in each case addressed
as aforesaid, except that notices and communications pursuant to Article II
shall not be effective until received.

IF TO THE BUYER:

ARCADIA RECEIVABLES FINANCE CORP. V
7825 Washington Avenue South
Suite 902
Minneapolis, Minnesota 55439-2444
Attention: Treasurer
Telephone: (612) 942-9880
Telecopy: (612) 942-6620

IF TO THE ORIGINATOR:

ARCADIA FINANCIAL LTD.
7825 Washington Avenue South

<PAGE>

Suite 500
Minneapolis, Minnesota 55439-2444
Attention: Treasurer
Telephone: (612) 942-9880
Telecopy: (612) 942-6620

SECTION 8.3. NO WAIVER; REMEDIES. No failure on the part of the
Buyer to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.

SECTION 8.4. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be
binding upon and inure to the benefit of the Originator, the Buyer and their
respective successors and permitted assigns (which successors of the Originator
shall include a trustee in bankruptcy). The Originator may not assign any of
its rights and obligations hereunder or any interest herein without the prior
written consent of the Buyer and the Funding Agent. The Buyer may assign at any
time its rights and obligations hereunder and interests herein to any other
Person without the consent of the Originator. The Originator agrees that any
assignee of the Buyer (including the Funding Agent, PARCO and the APA Banks
under the Receivables Transfer Agreement) shall, to the extent of its interest
so assigned, have the right to enforce this Agreement and to exercise directly
all of the Buyer's rights and remedies under this Agreement, and the Originator
agrees to cooperate fully with any such assignee in the exercise of such rights
and remedies. This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until such time, after the Purchase Termination Date,
as the Purchased Receivables shall have been collected or charged off as
uncollectible; PROVIDED, HOWEVER, that the rights and remedies with respect to
any breach of any representation and warranty made by the Originator pursuant to
Article IV and the indemnification and payment provisions of Article VII and
this Article VIII shall be continuing and shall survive any termination of this
Agreement.

SECTION 8.5. GOVERNING LAW; WAIVER OF JURY TRIAL. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York. The Originator hereby agrees to the jurisdiction of any state or
federal court located within the State of New York, and waives personal service
of any and all process upon it and consents that all such service of process be
made by registered mail directed to the originator at the address set forth on
the signature page hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been deposited in the U.S. mails,
postage prepaid. The Originator

<PAGE>

hereby waives any right to have a jury participate in resolving any dispute,
whether sounding in contract, tort, or otherwise between the originator and the
buyer arising out of, connected with, related to, or incidental to the
relationship between them in connection with this agreement. Instead, any
dispute resolved in court will be resolved in a bench trial without a jury.
With respect to the foregoing consent to jurisdiction, the Originator hereby
waives any objection based on FORUM NON CONVENIENS, and any objection to venue
of any action instituted hereunder and consents to the granting of such legal or
equitable relief as is deemed appropriate by the court. Nothing in this section
8.5 shall affect the right of the buyer to serve legal process in any other
manner permitted by law or affect the right of the Buyer to bring any action or
proceeding against the originator or its property in the courts of any other
jurisdiction.

SECTION 8.6. COSTS, EXPENSES AND TAXES. (a) In addition to the
rights of indemnification under Article VII hereof, the Originator agrees to pay
on demand all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic auditing and any
requested amendments, waivers or consents) of this Agreement and the other
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Buyer (and the
Funding Agent) with respect thereto and with respect to advising the Buyer (and
the Funding Agent) as to its rights and remedies under this Agreement, and the
other agreements executed pursuant hereto and all costs and expenses, if any
(including reasonable counsel fees and expenses), in connection with the
enforcement of this Agreement and the other agreements and documents to be
delivered hereunder.

(b) In addition, the Originator shall pay any and all stamp, sales,
excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement
or the other agreements and documents to be delivered hereunder, and agrees to
indemnify the Buyer and its assignees against any liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.

SECTION 8.7. EXECUTION IN COUNTERPARTS; SEVERABILITY. This
Agreement 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
to be an original and all of which when taken together shall constitute one and
the same agreement. In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

SECTION 8.8. TERM; EFFECT OF TERMINATION. (a) This Agreement shall
commence as of the first day on which all of the conditions precedent have been

<PAGE>

satisfied and shall continue in full force and effect until the earlier of (i)
the date designated by the Buyer or the Originator as the Purchase Termination
Date at any time following ten (10) days' written notice to the other (with a
copy thereof to the Funding Agent), (ii) the occurrence of a Purchase
Termination Event, (iii) the occurrence of the Termination Date pursuant to the
Receivables Transfer Agreement, (iv) the occurrence of an Event of Bankruptcy
with respect to either the Buyer or the Originator or (v) the date on which
either the Buyer or the Originator becomes unable for any reason to purchase or
repurchase the interest of the Originator or the Buyer, as the case may be, in
any Receivable in accordance with the provisions of this Agreement or defaults
on its obligations hereunder, which default continues unremedied for more than
ten (10) days after written notice (any such date specified in clauses (i)
through (v) above being a "PURCHASE TERMINATION DATE"); PROVIDED, HOWEVER, that
the termination of this Agreement pursuant to this Section 8.8 shall not
discharge any Person from any obligations incurred prior to such termination,
including, without limitation, any obligations to make any payments with respect
to the interest of the Buyer in any Receivable sold prior to such termination.

(b) Following the termination of this Agreement pursuant to this
Section 8.8, the Originator shall not sell, and the Buyer shall not purchase,
any interests in any Receivables. No termination, rejection or failure to
assume the executory obligations of this Agreement in any Event of Bankruptcy
with respect to the Originator or the Buyer shall be deemed to impair or affect
the obligations pertaining to any executed sale or executed obligations,
including, without limitation, pre-termination breaches of representations and
warranties by the Originator. Without limiting the foregoing, prior to
termination, the failure of the Originator to deliver computer records of
Receivables or any reports regarding the Receivables shall not render such
transfer or obligation executory, nor shall the continued duties of the parties
pursuant to this Agreement render an executed sale executory.

<PAGE>

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

ARCADIA RECEIVABLES FINANCE CORP. V, as Buyer

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

Name:
Title:

ARCADIA FINANCIAL LTD.,
as Originator

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

Acknowledged as of the date
first above written:

THE CHASE MANHATTAN BANK,
as Funding Agent for the benefit
of PARCO and APA Banks

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

<PAGE>

EXHIBIT A

FORM OF PURCHASE NOTICE

ARCADIA RECEIVABLES FINANCE CORP. V
7825 Washington Avenue South
Suite 902
Minneapolis, Minnesota 55439-2444
Attention: Treasurer

[Initial Purchase Date]
[Purchase Date]

Ladies and Gentlemen:

In accordance with Section 2.2 of the Receivables Purchase Agreement
dated as of October 16, 1998 (as amended, supplemented or otherwise modified and
in effect from time to time, the "Receivables Purchase Agreement") between
Arcadia Financial Ltd. (the "Originator") and Arcadia Receivables Finance Corp.
V (the "Buyer"), the Originator hereby offers to sell to the Buyer on the date
hereof pursuant to the terms and conditions of the Receivables Purchase
Agreement the Eligible Receivables listed on Schedule I hereto at an aggregate
Purchase Price of $_____.

Capitalized terms used herein shall have the respective meanings
assigned to them in, or incorporated by reference into, the Receivables Purchase
Agreement.

ARCADIA FINANCIAL LTD.,
as Originator

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

<PAGE>

SCHEDULE I

ELIGIBLE RECEIVABLES

OUTSTANDING BALANCE CONTRACT NUMBER

<PAGE>

EXHIBIT B

FORM OF DEMAND NOTE

[Attached]

<PAGE>

EXHIBIT C

LIST OF THE LOCK-BOX BANK AND THE LOCK-BOX

LOCATION OF LOCKBOX (AS DEFINED IN THE LOCK-BOX AGREEMENT

The Chicago Post Office
P.O. Box 95907
Chicago, Illinois 60694-5907

LOCATION OF AGENT ACCOUNT (AS DEFINED IN THE LOCK-BOX AGREEMENT)

Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illlinois 60603

Account Number: 1474709

<PAGE>

EXHIBIT D

SCHEDULE OF PURCHASED RECEIVABLES

[Intentionally Omitted]

<PAGE>

EXHIBIT E

LIST OF OFFICES OF ORIGINATOR
WHERE RECORDS ARE KEPT

[Attached]

<PAGE>

EXHIBIT F

LIST OF TRADENAMES AND ASSUMED NAMES

[Attached]

<PAGE>

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

RECEIVABLES PURCHASE AGREEMENT

between

ARCADIA RECEIVABLES FINANCE CORP. V

as the Buyer

and

ARCADIA FINANCIAL LTD.

as the Originator

Dated as of October 16, 1998

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

<PAGE>

TABLE OF CONTENTS

SECTION Page
<C> <S> <C>
ARTICLE I

DEFINITIONS

SECTION 1.1. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . .2
SECTION 1.2. Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 1.3. Computation of Time Periods. . . . . . . . . . . . . . . . . .5

ARTICLE II

AMOUNTS AND TERMS OF THE PURCHASERS

SECTION 2.1. General Terms. . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 2.2. Purchases from the Originator. . . . . . . . . . . . . . . . .7
SECTION 2.3. Collections; Lock-Box Account. . . . . . . . . . . . . . . . .7
SECTION 2.4. Transfer of Records to the Buyer . . . . . . . . . . . . . . .7
SECTION 2.5. Perfection of Liens; Further Assurances. . . . . . . . . . . .8

ARTICLE III

CONDITIONS OF PURCHASES

SECTION 3.1. Conditions Precedent to Initial Purchase . . . . . . . . . . .9
SECTION 3.2. Conditions Precedent to All Purchases. . . . . . . . . . . . 10
SECTION 3.3. Effect of Payment of Purchase Price. . . . . . . . . . . . . 10

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.1. Representations and Warranties of the Originator . . . . . . 11
SECTION 4.2. Reaffirmation of Representations and Warranties by
the Originator; Notice of Breach. . . . . . . . . . . . . . 15

<PAGE>

ARTICLE V

GENERAL COVENANTS OF THE ORIGINATOR

SECTION 5.1. Affirmative Covenants of the Originator. . . . . . . . . . . 16
SECTION 5.2. Negative Covenants of the Originator . . . . . . . . . . . . 18

ARTICLE VI

ADMINISTRATION AND COLLECTION

SECTION 6.1. Designation of Servicer. . . . . . . . . . . . . . . . . . . 20
SECTION 6.2. Rights of the Buyer. . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.3. Further Action Evidencing Transfers. . . . . . . . . . . . . 21
SECTION 6.4. Transfers by Buyer . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE VII

INDEMNIFICATION; REPURCHASES

SECTION 7.1. Indemnities by the Originator. . . . . . . . . . . . . . . . 22
SECTION 7.2. Repurchase of Receivables. . . . . . . . . . . . . . . . . . 23

ARTICLE VIII

MISCELLANEOUS

SECTION 8.1. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.2. Notices, Etc.. . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 8.3. No Waiver; Remedies. . . . . . . . . . . . . . . . . . . . . 25
SECTION 8.4. Binding Effect; Assignability. . . . . . . . . . . . . . . . 25
SECTION 8.5. Governing Law; Waiver of Jury Trial. . . . . . . . . . . . . 25
SECTION 8.6. Costs, Expenses and Taxes. . . . . . . . . . . . . . . . . . 26
SECTION 8.7. Execution in Counterparts; Severability. . . . . . . . . . . 26
SECTION 8.8. Term; Effect of Termination. . . . . . . . . . . . . . . . . 27

</TABLE>

<PAGE>

EXHIBITS

<C> <S>
EXHIBIT A Form of Purchase Notice

EXHIBIT B Form of Demand Note

EXHIBIT C List of the Lock-Box Bank and the Lock-Box

EXHIBIT D Schedule of Purchased Receivables

EXHIBIT E List of Offices of Originator where Records Are Kept

EXHIBIT F List of Tradenames and Assumed Names

</TABLE>

<PAGE>

Exhibit 10.7

The following amendments to the referenced sections of the Restricted Stock
Election Plan were adopted by the Board of Directors of Arcadia Financial LTD.
Effective as of January 29, 1998:

2.2 "AWARD CYCLE" means the period of time from the first day of a Plan
Year in which a Participant is granted a Restricted Stock Award until
the last day of that Plan Year in which restrictions on that
Restricted Stock Award may lapse due to the accelerated vesting of the
Restricted Stock Award as a result of meeting annual target
performance goals for the Company's fiscal years between July 1, 1994
and December 31, 2000.

4.1 INCENTIVE BONUS. Each eligible associate shall be eligible for a
bonus each fiscal year of the Company from July 1, 1994 through
December 31, 2000 in an amount determined by the Board of Directors or
its delegee. Each of these annual bonuses is intended to reward
eligible associates for achieving pre-determined performance targets
determined by the Board of Directors or its delegee.

<PAGE>

4.2 ELECTION. Each eligible associate shall be permitted to make an
irrevocable election that a portion of such associate's bonuses for
fiscal years 1994-2000 shall be received in the form of Common Stock.
To participate in the Plan, the associate shall execute and submit to
the Committee or its representative an election form no later than
thirty (30) days following the date the associate was first informed
of his or her eligibility to participate.

5.2 ACCELERATED VESTING. If at the end of 1994, 1995, 1996 or 1997 any
Active , Retired or Deceased Participant has achieved the annual
target performance goals established by the Board of Directors or its
delegee for the relevant fiscal year, vesting of a portion of the
Participant's Restricted Stock Awards shall be accelerated. For each
such fiscal year of the Company, an Active Participant shall vest in
the number of shares determined under the following formula: the
lesser of (i) the target cash bonus for such year, or (ii) the cash
bonus actually earned for that year, times the percentage elected to
be received in the form of Common Stock pursuant to Section 4.2
hereof, divided by the market price of the Common Stock used to
determine the number of Restricted Stock Award shares granted to such
Active Participant (rounded down to the nearest whole number of
shares).

All Restricted Stock Award shares of an Active Participant which have
not vested as of the end of 1997 (the "Unvested Shares") shall remain
subject to accelerated vesting pursuant to the terms of this
paragraph. For each of 1998, 1999 and 2000, an Active Participant
shall vest in the number of shares of the Unvested Shares determined
by the Committee as follows: (i) such accelerated vesting shall be
based upon Participants' achievement of criteria established by the
Committee and management, the Company's overall performance and such
other criteria as the Committee shall from time to time determine;
(ii) the targeted vesting thereof shall be in thirds; provided
however, more or less than such thirds may be vested at the
Committee's discretion; (iii) all such shares not vested in 1998, 1999
or 2000 shall vest upon the expiration of ten years from the date of
the grant thereof subject to the provisions of the Plan, as amended,
and (iv) such vesting shall be subject to forfeiture as required by
the terms of the Plan, as amended.

<PAGE>

Exhibit 10.8

The following amendments to the referenced sections of the 1998-2000
Restricted Stock Election Plan were adopted by the Board of Directors of Arcadia
Financial LTD. Effective as of January 29, 1998.

4.1 TARGET BONUS. The Committee may select Participants who shall be
eligible to receive incentive bonuses for the Plan Years 1998, 1999
and 2000 in amounts determined by the Committee. The amount of any
such bonus which may be earned by a Participant shall be determined as
a percentage of the Participant's base salary as of the Effective Date
or such later date determined by the Committee. Such Participant's
aggregate bonuses for the three Plan Years or a portion thereof
("Target Bonus") shall be calculated by (i) multiplying the
Participant's base salary as of the Effective Date or such later date
determined by the Committee times his or her bonus percentage as
determined by the Committee; (ii) dividing that product by three
hundred sixty-five (365), and (iii) multiplying that quotient times
the number of days from and including the Effective Date of the Award
through and including December 31, 2000. Each Plan Year the Committee
may establish an annual performance target for each Participant which
target must be achieved by the Participant as a condition to earning
all or any portion of his or her bonus for the relevant Plan Year.

4.3 [Deleted.]

4.4 NUMBER OF RESTRICTED SHARES. Subject to the provisions of this Plan,
the Committee may grant a Restricted Stock Award to each Participant
who has elected to participate in the Plan ("Award Recipient"). The
initial Restricted Stock Award shall be equal to the number of shares
of the Company's Common Stock (rounded down to the nearest whole
number) calculated by (i) multiplying the Target Bonus times the
Elected Percentage and (ii) dividing the product thereof by the market
price of the Common Stock as of the Effective Date. The Committee may
make replacement and supplemental grants to Participants in such
numbers and based upon such criteria and prices as determined by the
Committee in its sole discretion.

5.2 ACCELERATED VESTING. As soon as reasonably practical after the end of
1998, 1999, 2000, 2001 and 2002, the Committee shall determine the
extent to which each Active, Retired or deceased Participant has
earned his or her annual target bonus for the relevant fiscal year.
As of the date the Committee makes such determination, vesting of a
portion of the Participant's Restricted Stock Awards shall be
accelerated. For each such Plan Year, an Active Participant shall
vest in the number of shares determined by multiplying the
Participant's total Restricted

<PAGE>

Stock Award shares allocated for that year times the percentage
of the annual target bonus achieved by the Participant. In the
event the percentage determined pursuant to the prior sentence
exceeds 100%, the Active Participant shall be entitled to
accelerated vesting of an additional number of the unvested
Restricted Stock Award shares allocated as to prior or subsequent
fiscal years.

<PAGE>

Exhibit 10.9

The following amendments to the referenced sections of the 1992 Director
Stock Option Plan were adopted by the following amendments to the referenced
sections of the Board of Directors of Arcadia Financial LTD. Effective as of
January 29, 1998:

4 (b) Commencing with calendar 1998, each Outside Director shall be
automatically granted an option to purchase that number of Shares
determined by multiplying 25,000 times a fraction, the numerator
of which is the number of days from the grant date to the next
successive January 28th and the denominator is 365 (the "First
Option") upon the date on which such person first becomes an
Outside Director, whether through election by the shareholders of
the Company or appointment by the Board to fill a vacancy;
provided, however, for the calendar years prior to 1998 such
automatic grant shall be of an option to purchase 15,000 shares
(except for calendar year 1996 for which the grant shall be an
option to purchase 5,000 shares).

4 (c) Subject to the following, after the First Option has been granted
to an Outside Director, such Outside Director shall thereafter be
automatically granted an Option to purchase 25,000 Shares on
January 28th of each successive year. Provided however, for the
calendar years prior to 1998 each Outside Director shall be
automatically granted an Option to purchase 15,000 shares on each
successive anniversary of the grant of the First Option (except
as to calendar 1996 as to which the automatic grant shall be of
an option to purchase 5,000 shares). Notwithstanding the
foregoing, that in no event shall an Outside Director be granted
options to purchase in the aggregate more than 250,000 shares
pursuant to the Plan.

11. NON-TRANSFERABILITY OF OPTIONS. Without the prior written
consent of the Board, the Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and
may be exercised, during the lifetime of the Optionee, only by
the Optionee.

12. [First paragraph unchanged.] [second paragraph:] In the event of
the proposed dissolution or liquidation of the Company, each
Option will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board.
The Board may, in the exercise of its sole discretion in such
instances, declare that any Option shall terminate as of a date
fixed by the Board and give each Optionee the right to exercise
his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be
exercisable. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor
corporation.

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATION 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,328
<SECURITIES> 0
<RECEIVABLES> 716,650
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 31,367
<DEPRECIATION> 14,227
<TOTAL-ASSETS> 770,446
<CURRENT-LIABILITIES> 0
<BONDS> 419,040
0
0
<COMMON> 392
<OTHER-SE> 267,453
<TOTAL-LIABILITY-AND-EQUITY> 770,446
<SALES> 0
<TOTAL-REVENUES> 81,226
<CGS> 0
<TOTAL-COSTS> 143,878
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,619
<INCOME-PRETAX> (101,271)
<INCOME-TAX> (18,846)
<INCOME-CONTINUING> (82,425)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,425)
<EPS-PRIMARY> (2.11)
<EPS-DILUTED> (2.11)

</TABLE>