Collateral Agent Agreement

COLLATERAL AGENT AGREEMENT


COLLATERAL AGENT AGREEMENT dated October 17, 1997 among DLJ MORTGAGE CAPITAL, INC., as agent for the Investors (as hereinafter defined) (in such capacity, the "AGENT"), NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association (the "COLLATERAL AGENT"), ARCADIA RECEIVABLES FINANCE CORP. III, a Delaware corporation (the "BORROWER"), and ARCADIA FINANCIAL LTD., a Minnesota corporation ("ARCADIA"), as servicer and as originator.


WHEREAS, Arcadia is the owner of certain Receivables (as hereinafter defined);


WHEREAS, Borrower desires to purchase certain of such Receivables;


WHEREAS, DLJ Mortgage Capital, Inc. (in its individual capacity, "DLJ") has agreed, and other "Lenders" (as hereinafter defined) may from time to time hereafter agree, to finance the purchase of such Receivables pursuant to the Receivables Funding and Servicing Agreement (as hereinafter defined);


WHEREAS, Arcadia will service the Receivables transferred to Borrower pursuant to the Receivables Funding and Servicing Agreement (as hereinafter defined).


NOW, THEREFORE, Arcadia, the Borrower, the Collateral Agent and the Agent, intending to be legally bound, hereby agree as follows:


Section 1. DEFINITIONS. For all purposes of this Agreement, the following terms shall have the meanings set forth below, unless the context clearly indicates otherwise. Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Receivables Funding and Servicing Agreement.


"AGENT" has the meaning specified in the PREAMBLE.


"AGREEMENT" means this Collateral Agent Agreement, as it may be amended, supplemented or otherwise modified from time to time.


"AMOUNT AVAILABLE" means, with respect to any Distribution Date, the sum of (a) the amount on deposit in the Collection Account as of the end of the preceding Settlement Period plus (b) the amount transferred from the Reserve Account on such Distribution Date pursuant to SECTION 4(a) or 4(b), if any, and (c) any investment income earned on amounts on deposit in the Collection Account and the Reserve Account since the prior Distribution Date (or the Closing Date in the case of the first Distribution Date).


"ARCADIA" has the meaning specified in the PREAMBLE.


"AUTHORIZED REPRESENTATIVE" is defined in SECTION 11.


"BACKUP SERVICER FEE" means, with respect to any Distribution Date, the fee set forth in a separate agreement of even date herewith between the Borrower and the Backup Servicer.


"BORROWER" has the meaning specified in the PREAMBLE.


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"COLLATERAL AGENT" means Norwest Bank Minnesota, National Association, not in its individual capacity, but solely as Collateral Agent under this Agreement, and any successors thereto.


"COLLATERAL AGENT FEE" is defined in SECTION 5.


"EXCESS SERVICING FEE" means the amount of any servicing compensation payable to any successor Servicer in excess of the Servicing Fee pursuant to Section 13.3 of the Receivables Funding and Servicing Agreement.


"INCREASED COSTS" means collectively, any increased cost, loss or liability owing to the Agent and/or any other Person under Article VI of the Receivables Funding and Servicing Agreement.


"INDEMNITY AMOUNTS" means collectively, all indemnity obligations owing to the Agent, any Investor and/or any entity which enters into a commitment to make Advances or purchase interests therein under Article XVIII of the Receivables Funding and Servicing Agreement.


"RECEIVABLES FUNDING AND SERVICING AGREEMENT" means the Receivables Funding and Servicing Agreement, dated as of October 17, 1997, by and among the Borrower, Arcadia, as Servicer and Custodian, DLJ, the Agent, and Norwest Bank Minnesota, National Association, as Backup Servicer and Collateral Agent.


"RESERVE ACCOUNT REQUIRED AMOUNT" means, with respect to a Distribution Date, the product of (a) the principal amount of the Advances outstanding on such date (after giving effect to any payments of principal made on such date in respect of such Advances) and (b) 2%.


SECTION 2. APPOINTMENT OF COLLATERAL AGENT. Subject to the terms and conditions hereof, the Agent, on behalf of the Investors, hereby appoints, Norwest Bank Minnesota, National Association, as Collateral Agent hereunder, and Norwest Bank Minnesota, National Association hereby accepts such appointment.


Section 3. DISTRIBUTIONS. () On each Distribution Date prior to the Facility Termination Date, the Collateral Agent shall distribute, in accordance with the applicable Servicer's Certificate, the Amount Available in the following order of priority:


() FIRST, to the extent not previously paid by or on behalf of
the Borrower (A) to the Servicer, from the Amount Available, the
Servicing Fee for the related Settlement Period; (B) to the Collateral
Agent, the Collateral Agent Fee and other expenses due to the Collateral
Agent under the Transaction Documents; (C) to the Backup Servicer, the
Backup Servicer Fee and other expenses due to the Backup Servicer
pursuant to the Receivables Funding and Servicing Agreement and (D) to
the Agent, on behalf of itself and the Investors, the Fees payable on
such Distribution Date pursuant to the Fee Letter (and any Fees due and
not paid on a prior Distribution Date);


() SECOND, to the Agent, on behalf of the Investors, in an amount
equal to Yield on the Advances accrued during the preceding Settlement
Period (and any Yield with respect to any prior Settlement Period to the
extent not paid on a prior Distribution Date);


() THIRD, to the Agent, on behalf of the Investors, the principal
amount of Advances which are to be paid or prepaid to the extent then due
and owing including,


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without limitation, any amount of such principal
required to prevent the existence of a Borrowing Base Deficiency;


() FOURTH, to the Reserve Account, until the amount on deposit
therein is equal to the Reserve Account Required Amount;


() FIFTH, to the Agent, for the benefit of the Investors, any
Increased Costs then due and owing, and to each Indemnified Party, any
Indemnification Amounts then due and owing to each such Indemnified
Party; and


() SIXTH, to the Borrower, the remaining portion of the Amount
Available.


() On each Distribution Date on or after the Facility Termination Date, the Collateral Agent shall distribute, in accordance with the applicable Servicer's Certificate, the Amount Available in the following order of priority:


() FIRST, to the extent not previously paid by or on behalf of
the Borrower (A) to the Servicer, from the Amount Available, the
Servicing Fee for the related Collection Period; (B) to the Collateral
Agent the Collateral Agent Fee and other expenses due to the Collateral
Agent under the Transaction Documents; (C) to the Backup Servicer, the
Backup Servicer Fee and other expenses due to the Backup Servicer
pursuant to the Receivables Funding and Servicing Agreement; and (D) to
the Agent, on behalf of itself, the Investors and certain other Persons
named in the Fee Letter, any Fees payable on such Distribution Date
pursuant to the Fee Letter (and any Fees due and not paid on a prior
Distribution Date);


() SECOND, to the Agent on behalf of the Investors, an amount
equal to Yield on the Advances accrued during the preceding Settlement
Period (and any Yield with respect to any prior Settlement Period to the
extent not paid on a prior Distribution Date);

() THIRD, to the Agent, on behalf of the Investors, the principal
amount of all outstanding Advances;


() FOURTH, to the Agent, for the benefit of the Investors, any
Increased Costs then due and owing, and to each Indemnified Party, any
Indemnification Amounts then due and owing to each such Indemnified Party;


() FIFTH, to the Servicer, the Excess Servicing Fee, if any; and


() SIXTH, to the Borrower, the remaining portion of the Amount
Available.


() On each Settlement Date, the Collateral Agent shall, at the direction of the Agent, withdraw from the Collection Account and distribute the following amounts in the following order of priority:

() FIRST, to the Agent, on behalf of the Investors, Yield in
respect of any Advances being paid or prepaid on such date;


() SECOND, to the Agent, on behalf of the Investors, an amount
equal to the Advances being paid or prepaid on such date; and


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() THIRD, to the Borrower, the remaining amount, if any, of the
sum of the proceeds of any sale on such date of Pledged Receivables and
all amounts deposited into the Collection Account from the Reserve
Account pursuant to SECTION 4(b).


Section 4. THE RESERVE ACCOUNT AND THE COLLECTION ACCOUNT.() On each Distribution Date, the Collateral Agent shall withdraw and deposit in the Collection Account from the Reserve Account, in the following order of priority based solely on information contained in the Servicer's Certificate for the preceding Determination Date, amounts needed (after application of the Amount Available to be made on such Distribution Date) to pay the amounts described in clauses (i), (ii) and (iii) of paragraph (a) of SECTION 3. On the first Distribution Date following the Facility Termination Date, the Collateral Agent shall withdraw all amounts on deposit in the Reserve Account and deposit such amounts in the Collection Account and at such time the Reserve Account shall be closed.


() On each Settlement Date, the Collateral Agent shall, at the direction of the Agent, withdraw from the Reserve Account the amount on deposit in the Reserve Account in excess of the Reserve Account Required Amount (after giving effect to all distributions to be made on such Settlement Date pursuant to SECTION 3(a), (b) or (c), as applicable, and any withdrawals to be made from the Reserve Account pursuant to paragraph (a) of this SECTION 4) and deposit such amount into the Collection Account.


() All or a portion of the amounts on deposit in the Collection Account and the Reserve Account shall be invested and reinvested by the Collateral Agent at the direction of the Servicer in one or more Permitted Investments. No such investment shall mature later than the next Distribution Date. All income or other gains from investment of moneys on deposit in the applicable account shall be deposited by the Collateral Agent in the applicable account immediately upon receipt, and any loss resulting from such investment shall be deducted from the amount on deposit in the applicable account. If any amounts are needed for disbursement from the Collection Account or the Reserve Account and sufficient uninvested funds are not available therein to make such disbursement, the Collateral Agent shall cause to be sold or otherwise converted to cash a sufficient amount of the investments in such account to make such disbursement upon the direction of the Agent.


() If at any time the Collection Account or the Reserve Account ceases to be an Eligible Account, the Agent shall transfer such account to another institution such that such account shall meet the requirements of an Eligible Account.


Section 5. FEES AND EXPENSES OF THE COLLATERAL AGENT. It is understood that the Collateral Agent shall be entitled to charge fees and receive reimbursement for expenses (such fees and reimbursement are referred to hereinafter as the "COLLATERAL AGENT FEE") and such Collateral Agent Fee shall be solely an obligation of the Borrower and not of any other Person. Such agreed upon Collateral Agent Fee shall be set forth in a separate fee letter submitted by the Collateral Agent to the Borrower.


SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT. The Collateral Agent represents and warrants as of the date hereof that:


() It is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America;


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() It has full power, authority ...