EXECUTION COPY
SERIES 1998-E SUPPLEMENT
dated as of December 22, 1998
to
SPREAD ACCOUNT AGREEMENT
dated as of March 25, 1993,
as amended and restated
as of November 19, 1998
among
ARCADIA FINANCIAL LTD.
ARCADIA RECEIVABLES FINANCE CORP.
FINANCIAL SECURITY ASSURANCE INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
TABLE OF CONTENTS
Page
Article I.
DEFINITIONS
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Rules of Interpretation. . . . . . . . . . . . . . . . . 5
Article II.
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.1 Series 1998-E 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-E Spread Account; Initial
Deposit into Series 1998-E 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
Schedule I
SERIES 1998-E SUPPLEMENT
SERIES 1998-E SUPPLEMENT, dated as of December 22, 1998 (the "Series
1998-E 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 November
19, 1998 (the "Spread Account Agreement"), and, as contemplated by Section
2.02 of the Spread Account Agreement, this Series 1998-E Supplement
constitutes a Series Supplement to the Spread Account Agreement so that
hereafter this Series 1998-E 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-E (the "Series 1998-E
Trust") is being formed contemporaneously herewith pursuant to the Series
1998-E Trust Agreement (as defined herein).
3. Pursuant to the Series 1998-E Sale and Servicing Agreement, the
Seller is selling to the Series 1998-E Trust all of its right, title and
interest in and to the Initial Receivables (as defined in the Series 1998-E
Sale and Servicing Agreement) and certain other Trust Property (as defined in
the Series 1998-E Trust Agreement).
4. Pursuant to the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇, the Series 1998-E Trust is
issuing the Series 1998-E Notes (as defined herein).
5. The Seller has requested that Financial Security issue the Series
1998-E 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-E Notes.
6. In partial consideration of the issuance of the Series 1998-E 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 ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇.
7. The Seller is a wholly-owned special purpose subsidiary of Arcadia
Financial. The Series 1998-E Trust has agreed to pay the Series 1998-E
Credit
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-E Insurance
Agreement (such obligations forming part of the Series 1998-E Insurer Secured
Obligations as referred to herein). The Series 1998-E Insurer Secured
Obligations form part of the consideration to Financial Security for its
issuance of the Series 1998-E Note Policy.
8. In order to secure the performance of the Series 1998-E Secured
Obligations, to further effect and enforce the subordination provisions to
which the Series 1998-E Credit Enhancement Fee is subject, and in
consideration of the receipt of the Series 1998-E Credit Enhancement Fee,
Arcadia Financial and the Seller have agreed to pledge the Series 1998-E
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-E Sale and Servicing Agreement shall have the same meaning
with respect to this Series 1998-E Supplement. The following terms shall have
the following meanings:
"COLLECTION ACCOUNT SHORTFALL" means, with respect to Series 1998-E and
any Distribution Date, the Deficiency Claim Amount, as defined in the Series
1998-E Sale and Servicing Agreement, with respect to such Distribution Date.
"DEEMED CURED" means with respect to Series 1998-E, (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-E, 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-E 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.
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"INITIAL PRINCIPAL AMOUNT" means $225,000,000 with respect to Series
1998-E.
"INITIAL SPREAD ACCOUNT DEPOSIT" means $0 for Series 1998-E.
"INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series
1998-E and any Distribution Date, an amount equal to the greater of (i) 9% of
the Series 1998-E 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 ▇▇▇▇-▇ ▇▇▇▇▇▇▇" means, with respect to Series 1998-E and any
Distribution Date, the aggregate principal amount of the Series 1998-E 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-E COLLATERAL" has the meaning specified in Section 2.3(a)
hereof.
"SERIES 1998-E CREDIT ENHANCEMENT FEE" means the amount distributable on
each Distribution Date pursuant to Section 4.6(vi) and (vii) of the Series
1998-E Sale and Servicing Agreement.
"SERIES 1998-E INDENTURE" means the Indenture, dated as of December 1,
1998, among the Series 1998-E Trust, the Trustee and the Indenture Collateral
Agent.
"SERIES 1998-E NOTE POLICY" means the financial guaranty insurance
policy issued by Financial Security with respect to the Series 1998-E Notes.
"SERIES 1998-E NOTES" means the Class A-1, Class A-2 and Class A-3 Notes
issued pursuant to the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇.
"SERIES 1998-E 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-E Trust Agreement.
"SERIES 1998-E RECEIVABLE" means each Receivable referenced on the
Schedule of Receivables attached to the Series 1998-E Sale and Servicing
Agreement, as supplemented from time to time during the Funding Period by one
or more Subsequent Transfer Agreements.
"SERIES 1998-E RESERVE ACCOUNT" means the Reserve Account established
pursuant to Section 4.1(d) of the Series 1998-E Sale and Servicing Agreement.
"SERIES 1998-E SALE AND SERVICING AGREEMENT" means the Sale and
Servicing Agreement, dated as of December 1, 1998, among the Series 1998-E
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.
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"SERIES 1998-E SECURED OBLIGATIONS" means the Insurer Secured
Obligations and the Trustee Secured Obligations with respect to Series 1998-E.
"SERIES 1998-E SPREAD ACCOUNT" means the Spread Account established
pursuant to Section 3.1(a) hereof.
"SERIES 1998-E SUPPLEMENT" means this Series 1998-E Supplement which
constitutes a Series Supplement to the Spread Account Agreement.
"SERIES 1998-E TRUST AGREEMENT" means the Trust Agreement, dated as of
December 1, 1998, among the Seller, Financial Security and the Series 1998-E
Owner Trustee.
"SPREAD ACCOUNT ADDITIONAL DEPOSIT" means, with respect to Series 1998-E
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-E 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-E Notes will
be in the highest category by such Rating Agencies.
"SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1998-E and
any Distribution Date:
(i) if no Insurance Agreement Event of Default with respect to
Series 1998-E 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-E
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-E and such Distribution Date;
(ii) if an event specified in clause (A) of the definition of
Trigger Event with respect to Series 1998-E 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-E 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-E 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-E 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
Maximum Amount shall be equal to the greater of (i) 25% of the Series
1998-E 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-E 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-E,
and
(B) the Series 1998-E Balance.
"TRIGGER EVENT" means, with respect to Series 1998-E 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 8.25% 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(f) 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-E 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-E 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
ARTICLE II.
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.1 SERIES 1998-E CREDIT ENHANCEMENT FEE. The Series
1998-E Sale and Servicing Agreement provides for the payment to the Seller of
the Series 1998-E 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-E Credit Enhancement Fee in the
manner and subject to the conditions set forth herein and in the Series
1998-E 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-E) and pursuant to the Series 1998-E Insurance
Agreement. The Seller and Arcadia Financial hereby agree with the Trustee and
with Financial Security that payment of the Series 1998-E Credit Enhancement
Fee to the Seller is expressly conditioned on subordination of the Series
1998-E Credit Enhancement Fee to payments on the Notes and Certificates (if
any) 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-E Collateral is intended to effect and enforce such
subordination and to provide security for the Series 1998-E 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-E Supplement with respect
to the Series 1998-E 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-E Collateral"):
(i) the Series 1998-E Credit Enhancement Fee and all rights and
remedies that the Seller may have to enforce payment of the Series 1998-E
Credit
6
Enhancement Fee whether under the Series 1998-E Sale and Servicing
Agreement or otherwise;
(ii) the Series 1998-E Spread Account established pursuant to
Section 3.1 of this Series 1998-E 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-E 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-E 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-E 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-E Collateral which can be perfected by the filing of a financing
statement.
ARTICLE III.
SPREAD ACCOUNT
Section 3.1 ESTABLISHMENT OF SERIES 1998-E SPREAD ACCOUNT;
INITIAL DEPOSIT INTO SERIES 1998-E SPREAD ACCOUNT.
(a) On or prior to the Closing Date, the Collateral Agent
shall establish with respect to Series 1998-E, at its office or at another
depository institution or trust company, an Eligible Account, designated
"Spread Account -Series 1998-E - Norwest Bank Minnesota, National
Association, as Collateral Agent for Financial Security Assurance Inc. and
another Secured Party" (the "Series 1998-E Spread Account").
(b) On the Closing Date relating to Series 1998-E, the
Collateral Agent shall deposit the Initial Spread Account Deposit with
respect to Series 1998-E received from the Seller into the Series 1998-E
Spread Account. Notwithstanding anything to the contrary contained in the
Spread Account Agreement, commencing on the January 15, 1998 Distribution
Date, amounts which would otherwise be released to the Seller pursuant to
Section 3.03(b), priority EIGHTH, clause SECOND of the Spread Account
Agreement shall instead be deposited into the Series 1998-E Spread Account
until cash amounts on deposit therein shall equal $1,687,500.00.
7
Section 3.2 SPREAD ACCOUNT ADDITIONAL DEPOSITS. On each
Subsequent Transfer Date, the Series 1998-E Trust will, pursuant to Section
2.4 of the Series 1998-E 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-E Trust into
the Series 1998-E 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-E Supplement or to confirm or perfect any
transaction described or contemplated herein.
Section 4.2 GOVERNING LAW. This Series 1998-E 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-E 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-E Supplement are
provided for convenience only. They form no part of this Series 1998-E
Supplement and shall not affect its construction or interpretation.
8
IN WITNESS WHEREOF, the parties hereto have executed this Series 1998-E
Supplement as of the date set forth on the first page hereof.
ARCADIA FINANCIAL LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
ARCADIA RECEIVABLES FINANCE CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------
Authorized Officer
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Corporate Trust Officer
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Collateral Agent
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Corporate Trust Officer
SCHEDULE I
Determination Date* Cumulative Default Rate Cumulative Net Loss Rate
(month) (Column A) (Column B)
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%
--------
* Such Determination Date occurring after the designated calendar months
succeeding the Series 1998-E Closing Date appearing first in the column below,
and prior to or during the designated calendar months succeeding the Series
1998-E Distribution Date appearing second in the column below.