INSURANCE AND INDEMNITY AGREEMENT among FINANCIAL SECURITY ASSURANCE INC., ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-B, ARCADIA RECEIVABLES FINANCE CORP. and ARCADIA FINANCIAL LTD. Dated as of June 23, 1998

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INSURANCE AND INDEMNITY AGREEMENT

among

FINANCIAL SECURITY ASSURANCE INC.,

ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-B,

ARCADIA RECEIVABLES FINANCE CORP.

and

ARCADIA FINANCIAL LTD.

Dated as of June 23, 1998

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Arcadia Automobile Receivables Trust, 1998-B

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

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

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

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

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

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TABLE OF CONTENTS

Page

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

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

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

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

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

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

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

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

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

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

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

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

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

SCHEDULE 1

INSURANCE AND INDEMNITY AGREEMENT

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

INTRODUCTORY STATEMENTS

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

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

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

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

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

ARTICLE I.

DEFINITIONS

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

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

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

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

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

"COMMISSION" means the Securities and Exchange Commission.

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

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

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

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

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

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

"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

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.

"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 Xxxxxxxxxxx Xxxxx,
0000-X, Xxxxxxx Automobile Receivables Trust, 1997-B, Arcadia Automobile
Receivables Trust 1997-C, Arcadia Automobile Receivables Trust, 1997-D,
Arcadia Automobile Receivables Trust, 1998-A and the Warehousing Notes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"UNDERWRITERS" means, X.X. Xxxxxx Securities Inc., BancAmerica
Xxxxxxxxx Xxxxxxxx, Xxxxx Securities Inc. and Xxxxxxxxx, Lufkin & Xxxxxxxx
Securities Corporation.

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

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

ARTICLE II.

REPRESENTATIONS, WARRANTIES AND COVENANTS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(o) SPECIAL PURPOSE ENTITY.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(j) SPECIAL PURPOSE ENTITY.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(h) OTHER ACTIVITIES. The Trust shall not:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(m) SPECIAL PURPOSE ENTITY.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(j) SPECIAL PURPOSE ENTITY.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(i) OTHER ACTIVITIES. The Seller shall not:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE III.

THE NOTE POLICY; REIMBURSEMENT; INDEMNIFICATION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 Xxxxx'x is no longer rating the Notes, in
which case the cost for such agency shall be paid by Arcadia Financial.

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 3.05 INDEMNIFICATION.

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

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

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

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

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

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

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

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

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

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

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

ARTICLE IV.

FURTHER AGREEMENTS; MISCELLANEOUS

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

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

Section 4.03 OBLIGATIONS ABSOLUTE.

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

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

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

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

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

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

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

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

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

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

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

Section 4.04 ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS.

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

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

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

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

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

ARTICLE V.

EVENTS OF DEFAULT; REMEDIES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 5.02 REMEDIES; WAIVERS.

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

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

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

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

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

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

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

ARTICLE VI.

MISCELLANEOUS

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

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

(a) To Financial Security:

Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Surveillance Department
Confirmation: (000) 000-0000
Telecopy Nos.: (000) 000-0000
(000) 000-0000

(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.
0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000

Arcadia Financial Ltd.
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000

(d) To the Trust:

Arcadia Automobile Receivables Trust, 1998-B
c/o Wilmington Trust Company,
as Owner Trustee
Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
Telephone: (000) 000-0000
Telecopier: (000) 000-0000

with a copy to:

Wilmington Trust Company, as Owner Trustee
Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000

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 XXX XXXX XXX

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

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

(c) Arcadia Financial and the Seller hereby irrevocably appoints
and designates CT Corporation System, whose address is 0000 Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, 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.

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

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

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

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.

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/ Xxxxxxx Xxxxxxxxx
--------------------------------------
Authorized Officer

ARCADIA AUTOMOBILE RECEIVABLES TRUST,
1998-B

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

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

ARCADIA FINANCIAL LTD.

By:
--------------------------------------
Xxxx X. Xxxxxx
Executive Vice President and
Chief Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By:
--------------------------------------
Xxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer

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

FINANCIAL SECURITY ASSURANCE INC.

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

ARCADIA AUTOMOBILE RECEIVABLES TRUST,
1998-B

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

By: /s/ Xxxxxx Xxxxx
---------------------------------

ARCADIA FINANCIAL LTD.

By:
--------------------------------------
Xxxx X. Xxxxxx
Executive Vice President and
Chief Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By:
--------------------------------------
Xxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer

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

FINANCIAL SECURITY ASSURANCE INC.

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

ARCADIA AUTOMOBILE RECEIVABLES TRUST,
1998-B

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

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

ARCADIA FINANCIAL LTD.

By: /s/ Xxxx X. Xxxxxx
--------------------------------------
Xxxx X. Xxxxxx
Executive Vice President and
Chief Financial Officer

ARCADIA RECEIVABLES FINANCE CORP.

By: /s/ Xxxx X. Xxxxxx
--------------------------------------
Xxxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer

SCHEDULE I

Determination Date* Cumulative Default Rate Cumulative Net Loss Rate
(month) (Column A) (Column B)

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

__________________

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

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INSURANCE AND INDEMNITY AGREEMENT among FINANCIAL SECURITY ASSURANCE INC., ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-B, ARCADIA RECEIVABLES FINANCE CORP. and ARCADIA FINANCIAL LTD. Dated as of June 23, 1998

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