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Amended And Restated Security Agreement

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Sectors: Banking
Governing Law: New York, View New York State Laws
Effective Date: July 21, 1998
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AMENDED AND RESTATED SECURITY AGREEMENT
(Amending and Restating the Security Agreement
dated as of December 3, 1996)


among


ARCADIA FINANCIAL LTD.,


ARCADIA RECEIVABLES FINANCE CORP.,


ARCADIA RECEIVABLES CONDUIT CORP.,


ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST


FINANCIAL SECURITY ASSURANCE INC.,


BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION


and


NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee and as Collateral Agent


Dated as of July 21, 1998


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TABLE OF CONTENTS


PAGE
----
ARTICLE I
DEFINITIONS Section 1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . 2 Section 1.2. Rules of Interpretation. . . . . . . . . . . . . . . . 4


ARTICLE II
THE COLLATERAL


Section 2.1. Grant of Security Interest by the Issuer . . . . . . . 4 Section 2.2. No Transfer of Duties. . . . . . . . . . . . . . . . . 5 Section 2.3. Termination and Release of Rights. . . . . . . . . . . 5 Section 2.4. Effectiveness. . . . . . . . . . . . . . . . . . . . . 6


ARTICLE III
THE COLLATERAL AGENT


Section 3.1. Appointment and Powers . . . . . . . . . . . . . . . . 6 Section 3.2. Performance of Duties. . . . . . . . . . . . . . . . . 7 Section 3.3. Limitation on Liability. . . . . . . . . . . . . . . . 7 Section 3.4. Reliance upon Documents. . . . . . . . . . . . . . . . 7 Section 3.5. Successor Collateral Agent . . . . . . . . . . . . . . 8 Section 3.6. Indemnification. . . . . . . . . . . . . . . . . . . . 9 Section 3.7. Compensation and Reimbursement . . . . . . . . . . . . 9 Section 3.8. Representations and Warranties of the Collateral Agent 9 Section 3.9. Waiver of Setoffs. . . . . . . . . . . . . . . . . . . 10 Section 3.10. Control by the Controlling Party . . . . . . . . . . . 10


ARTICLE IV
COVENANTS OF THE ISSUER


Section 4.1. Preservation of Collateral . . . . . . . . . . . . . . 10 Section 4.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . 11 Section 4.3. Waiver of Stay or Extension Laws; Marshalling of
Assets . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 4.4. Noninterference, Etc.. . . . . . . . . . . . . . . . . 11 Section 4.5. Issuer Changes . . . . . . . . . . . . . . . . . . . . 11


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TABLE OF CONTENTS
(continued)


PAGE
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ARTICLE V
CONTROLLING PARTY; INTERCREDITOR PROVISIONS


Section 5.1. Appointment of Controlling Party . . . . . . . . . . . 12 Section 5.2. Controlling Party's Authority. . . . . . . . . . . . . 12 Section 5.3. Rights of Secured Parties. . . . . . . . . . . . . . . 13 Section 5.4. Degree of Care . . . . . . . . . . . . . . . . . . . . 13


ARTICLE VI
REMEDIES UPON DEFAULT


Section 6.1. Remedies upon a Default. . . . . . . . . . . . . . . . 14 Section 6.2. Restoration of Rights and Remedies . . . . . . . . . . 15 Section 6.3. No Remedy Exclusive. . . . . . . . . . . . . . . . . . 16


ARTICLE VIII
MISCELLANEOUS


Section 7.1. Further Assurances . . . . . . . . . . . . . . . . . . 16 Section 7.2. Waiver . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 7.3. Amendments; Waivers. . . . . . . . . . . . . . . . . . 16 Section 7.4. Severability . . . . . . . . . . . . . . . . . . . . . 17 Section 7.5. Nonpetition Covenant . . . . . . . . . . . . . . . . . 17 Section 7.6. Notices. . . . . . . . . . . . . . . . . . . . . . . . 17 Section 7.7. Term of this Security Agreement. . . . . . . . . . . . 20 Section 7.8. Assignments; Third-Party Rights; Reinsurance . . . . . 20 Section 7.9. Consent of Controlling Party . . . . . . . . . . . . . 20 Section 7.10. Trial by Jury Waived . . . . . . . . . . . . . . . . . 21 Section 7.11. Governing Law. . . . . . . . . . . . . . . . . . . . . 21 Section 7.12. Consents to Jurisdiction . . . . . . . . . . . . . . . 21 Section 7.13. Limitation of Liability. . . . . . . . . . . . . . . . 21 Section 7.14. Determination of Adverse Effect. . . . . . . . . . . . 22 Section 7.15. Counterparts . . . . . . . . . . . . . . . . . . . . . 22 Section 7.16. Headings . . . . . . . . . . . . . . . . . . . . . . . 22


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TABLE OF CONTENTS
(continued)


PAGE
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Section 7.17. Limited Recourse . . . . . . . . . . . . . . . . . . . 22 Section 7.18. Respective Rights of the Issuer and the Secured
Parties in the Collateral. . . . . . . . . . . . . . . 22


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AMENDED AND RESTATED SECURITY AGREEMENT


AMENDED AND RESTATED SECURITY AGREEMENT, dated as of July 21, 1998, by and among ARCADIA FINANCIAL LTD., a Minnesota corporation ("AFL"), ARCADIA RECEIVABLES FINANCE CORP., a Delaware corporation (the "Seller"), ARCADIA RECEIVABLES CONDUIT CORP., a Delaware corporation (the "Original Issuer"), ARCADIA AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the "Issuer"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company (the "Security Insurer"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Administrative Agent") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as collateral agent (in such capacity, the "Collateral Agent") and as indenture trustee (in such capacity, the "Indenture Trustee").


W I T N E S E T H


WHEREAS, pursuant to the Amended and Restated Receivables Purchase Agreement and Assignment dated as of July 21, 1998 (the "Purchase Agreement") between AFL and the Seller, AFL is selling to the Seller from time to time all of its right, title and interest in and to certain Receivables and the other property specified therein; and


WHEREAS, pursuant to the Amended and Restated Sale and Servicing Agreement dated as of July 21, 1998 (the "Sale and Servicing Agreement"), among the Seller, the Issuer, the Original Issuer, AFL, in its individual capacity and as Servicer, Bank of America National Trust and Savings Association, as RCC Agent and as Administrative Agent, Morgan Guaranty Trust Company of New York, as DFC Agent, and Norwest Bank Minnesota, National Association, as Backup Servicer, Indenture Trustee and Collateral Agent, the Seller is selling to the Issuer from time to time all of its right, title and interest in and to certain Receivables and the other property specified therein; and


WHEREAS, pursuant to the Amended and Restated Indenture dated as of July 21, 1998 (the "Indenture"), between the Issuer and the Indenture Trustee, the Issuer is issuing from time to time its Floating Rate Variable Funding Automobile Receivables-Backed Notes (the "Notes"); and


WHEREAS, the Seller has requested that the Security Insurer issue the Note Policy to the Indenture Trustee to guarantee payment of the Scheduled Payments (as defined in such Note Policy) on each Distribution Date in respect of the Notes; and


WHEREAS the parties hereto (other than the Issuer) have entered into a Security Agreement dated as of December 3, 1996 (as amended and in effect on the date hereof, the "Original Security Agreement"), and the parties hereto wish to replace the Original Issuer with the Issuer hereunder and to amend and restate the Original Security Agreement as herein provided;


NOW THEREFORE, in order to secure the performance of the Secured Obligations and for other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:


ARTICLE I


DEFINITIONS


Section 1.1. DEFINED TERMS.


Terms defined in the Sale and Servicing Agreement (including by way of reference to other documents), unless otherwise defined herein, shall have such defined meanings when used herein, and the following terms shall have such following meanings:


"AUTHORIZED OFFICER" shall mean, (i) with respect to Financial Security, the Chairman of the Board, the President, the Chief Executive Officer, Chief Operating Officer, or any Managing Director of Financial Security, (ii) with respect to the Indenture Trustee or the Collateral Agent, any Vice President or Trust Officer thereof, (iii) with respect to either AFL or the Seller, the President, any Vice President or the Treasurer thereof and (iv) with respect to the Issuer, any officer of the Owner Trustee who is authorized to act for the Owner Trustee in matters relating to the Issuer and who is identified on the list of Authorized Officers delivered by the Owner Trustee to the Indenture Trustee on the Effective Date (as such list may be modified or supplemented from time to time thereafter).


"COLLATERAL" shall have the meaning assigned to such term in Section 2.1(a) hereof.


"COLLATERAL AGENT" shall mean, initially, Norwest Bank Minnesota, National Association, in its capacity as Collateral Agent on behalf of the Secured Parties, including its successors in interest, until a successor Person shall have become the Collateral Agent pursuant to Section 3.1, and thereafter "Collateral Agent" shall mean such successor Person.


"CONTROLLING PARTY" shall mean at any time the Person designated as the Controlling Party at such time pursuant to Section 5.1.


"EFFECTIVE DATE" shall mean July 21, 1998.


"FINAL TERMINATION DATE" shall mean the date that is the later of (i) the Insurer Termination Date and (ii) the Trustee Termination Date.


"INSURER SECURED OBLIGATIONS" shall mean all amounts and obligations that may at any time be owed or required to be performed to or on behalf of the Security Insurer (or any agents, accountants or attorneys for the Security Insurer), including the Security Insurer as third party beneficiary, under the Insurance Agreement or under any other Transaction Document,


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regardless of whether such amounts are owed or performance is due now or in the future, whether liquidated or unliquidated, contingent or non-contingent.


"INSURER TERMINATION DATE" shall mean the date that is the latest of (i) the date of the expiration of the Note Policy, (ii) the date on which the Security Insurer shall have received payment and performance in full of all Insurer Secured Obligations and (iii) the latest date on which any payment referred to in clause (ii) above could be avoided as a preference under the United States Bankruptcy Code or any other similar federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, as specified in an Opinion of Counsel delivered to the Collateral Agent.


"NON-CONTROLLING PARTY" shall mean at any time a Secured Party that is not the Controlling Party at such time.


"OPINION OF COUNSEL" shall mean a written opinion of counsel acceptable, as to form, substance and issuing counsel, to the Controlling Party.


"PROCEEDING" means any suit in equity, action at law or other judicial or administrative proceeding.


"SECURED OBLIGATIONS" shall mean the Insurer Secured Obligations and the Trustee Secured Obligations.


"SECURED PARTIES" shall mean each of the Indenture Trustee, in respect of the Trustee Secured Obligations, and the Security Insurer, in respect of the Insurer Secured Obligations.


"SECURITY AGREEMENT" shall mean, prior to the Effective Date, the Original Security Agreement; and from and after the Effective Date, this Amended and Restated Security Agreement, as the same may from time to time be amended, supplemented, waived or modified.


"TRANSACTION DOCUMENTS" shall mean the Indenture, this Security Agreement, the Sale and Servicing Agreement, the Trust Agreement, the Administration Agreement, the Note Purchase Agreement, the Purchase Agreement and any Assignment Agreements (but only with respect to the Collateral), the Spread Account Agreement, the Insurance Agreement, the Custodian Agreement and the Lockbox Agreement.


"TRUSTEE SECURED OBLIGATIONS" shall mean all amounts and obligations that the Issuer may at any time owe or be required to perform to or for the benefit of the Indenture Trustee or the Noteholders under the Indenture.


"TRUSTEE TERMINATION DATE" shall mean the date on which the Indenture Trustee shall have received on behalf of the Noteholders payment and performance in full of all Trustee Secured Obligations.


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"UNIFORM COMMERCIAL CODE" or "UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial Code, or any successor statute, or any comparable law, as the same may from time to time be amended, supplemented or otherwise modified and in effect.


Section 1.2. RULES OF INTERPRETATION. The terms "hereof," "herein" or "hereunder," unless otherwise modified by more specific reference, shall refer to this Security Agreement in its entirety. Unless otherwise indicated in context, the terms "Article" or "Section" shall refer to an Article or Section of this Security Agreement. The definition of a term shall include the singular, the plural, the past, the present, the future, the active and the passive forms of such terms.


ARTICLE II


THE COLLATERAL


Section 2.1. GRANT OF SECURITY INTEREST BY THE ISSUER.


(a) The Issuer hereby grants to the Collateral Agent at the Effective Date and on each Purchase Date, on behalf of and for the benefit of the Secured Parties to secure the performance of the respective Secured Obligations, a security interest in all of the Issuer's right, title and interest, whether now owned or hereafter acquired, in and to all accounts, contract rights, general intangibles, chattel paper, instruments, documents, money, deposit accounts, certificates of deposit, goods, letters of credit, advices of credit and authenticated securities consisting of, arising from or relating to any of the following property: (i) the Receivables; (ii) the Other Conveyed Property related thereto; (iii) the rights of the Seller under the Purchase Agreement and each Assignment Agreement assigned to the Issuer pursuant to the Sale and Servicing Agreement, including the right to cause AFL to repurchase Receivables from Seller under certain circumstances; (iv) all amounts required to be deposited, or deposited, or delivered to the Collateral Agent for deposit, to the Collection Account by the Seller in respect of the WAC Deficiency Amount or the Collateral Test; (v) all funds on deposit from time to time in the Secured Accounts, and in all investments and proceeds thereof (including all income thereon); (vi) the Sale and Servicing Agreement; and (vii) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any and all of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivables, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in theproceeds of any of the foregoing (collectively, the "Collateral").


The Collateral Agent, for the benefit of the Indenture Trustee on behalf of the Holders of the Notes and for the benefit of the Security Insurer acknowledges such grant of a security interest.


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(b) In order to effectuate the provisions and purposes of this Security Agreement, including for the purpose of perfecting the security interests granted hereunder, the Issuer represents and warrants that it has, prior to the execution of this Security Agreement, executed and filed appropriate UCC-1 financing statements in Minnesota and Delaware sufficient to ensure that the Collateral Agent, as agent for the Secured Parties, has a first priority perfected security interest in all of the Collateral that can be perfected by the filing of a financing statement.


Section 2.2. NO TRANSFER OF DUTIES. The security interests granted hereby are granted as security only and shall not (i) transfer or in any way affect or modify, or relieve the Issuer from, any obligation to perform or satisfy any term, covenant, condition or agreement to be performed or satisfied by the Issuer under or in connection with this Security Agreement or any other Transaction Document to which it is a party or (ii) impose any obligation on any of the Secured Parties or the Collateral Agent to perform or observe any such term, covenant, condition or agreement or impose any liability on any of the Secured Parties or the Collateral Agent for any act or omission on its part relative thereto or for any breach of any representation or warranty on its part contained therein or made in connection therewith except, in each case, to the extent specifically provided herein and in the other Transaction Documents.


Section 2.3. TERMINATION AND RELEASE OF RIGHTS.


(a) On the Insurer Termination Date, the rights, remedies, powers, duties, authority and obligations conferred upon the Security Insurer pursuant to this Security Agreement in respect of the Collateral shall terminate and be of no further force and effect and all rights, remedies, powers, duties, authority and obligations of the Security Insurer with respect to the Collateral shall be automatically released; PROVIDED, that any indemnity provided to or by the Security Insurer herein shall survive such Insurer Termination Date. If the Security Insurer is acting as Controlling Party on the Insurer Termination Date, the Security Insurer agrees, at the expense of AFL, to execute and deliver such instruments as the successor Controlling Party may reasonably request to effectuate such release, and any such instruments so executed and delivered shall be fully binding on the Security Insurer and any Person claiming by, through or under the Security Insurer.


(b) On the Trustee Termination Date, the rights, remedies, powers, duties, authority and obligations, if any, conferred upon the Indenture Trustee pursuant to this Security Agreement in respect of the Collateral shall terminate and be of no further force and effect and all such rights, remedies, powers, duties, authority and obligations of the Indenture Trustee with respect to such Collateral shall be automatically released; PROVIDED, that any indemnity provided to the Indenture Trustee herein shall survive such Trustee Termination Date. If the Indenture Trustee is acting as Controlling Party on the related Trustee Termination Date, the Indenture Trustee agrees, at the expense of AFL, to execute and deliver such instruments as AFL may reasonably request to effectuate such release, and any such instruments so executed and delivered shall be fully binding on the Indenture Trustee.


(c) On the Final Termination Date, the rights, remedies, powers, duties, authority and obligations conferred upon the Collateral Agent and each Secured Party pursuant to this Security Agreement shall terminate and be of no further force and effect and all rights,


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remedies, powers, duties, authority and obligations of the Collateral Agent and each Secured Party with respect to the Collateral shall be automatically released. On the Final Termination Date, the Collateral Agent and each Secured Party agrees, at the expense of AFL, to execute such instruments of release, in recordable form if necessary, in favor of the Seller or AFL as the Seller or AFL may reasonably request, to deliver any Collateral in its possession to the Issuer, and to otherwise release the lien of this Security Agreement and release and deliver to the Issuer the Collateral.


(d) To the extent required of the Issuer and its assignees by the terms of any Transaction Document and permitted by the terms hereof, each of the Collateral Agent and the Controlling Party shall, and otherwise upon the prior written instructions of an Authorized Officer of the Controlling Party, the Collateral Agent shall, at the expense of AFL take (in each case) such steps as may be necessary, or as the Issuer, in a manner consistent with the Transaction Documents, may reasonably request, to release the interests of the Secured Parties in the Collateral, including but not limited to redelivering and reassigning to the Issuer any releases necessary to permit the Issuer to release its interest in the Collateral in accordance with the terms thereof and of the Sale and Servicing Agreement.


Section 2.4. EFFECTIVENESS.


This Amended and Restated Security Agreement amends and restates the Original Security Agreement, and on the Effective Date replaces the Original Security Agreement and substitutes the Issuer for the Original Issuer, in each case without interruption of the parties' performance thereunder or hereunder.


ARTICLE III


THE COLLATERAL AGENT


Section 3.1. APPOINTMENT AND POWERS. Subject to the terms and conditions hereof, each of the Secured Parties hereby appoints Norwest Bank Minnesota, National Association as the Collateral Agent, and Norwest Bank Minnesota, National Association hereby accepts such appointment and agrees to act as Collateral Agent with respect to the Collateral for the Secured Parties, to maintain custody and possession of the Collateral (except as otherwise provided hereunder and under the Custodian Agreement) and to perform the other duties of the Collateral Agent in accordance with the provisions of this Security Agreement. Each Secured Party hereby authorizes the Collateral Agent to take such action on its behalf, and to exercise such rights, remedies, powers and privileges hereunder and under the other Transaction Documents, as the Controlling Party may direct and as are specifically authorized to be exercised by the Collateral Agent by the terms hereof or by the terms of any Transaction Document, together with such actions, rights, remedies, powers and privileges as are reasonably incidental thereto. The Collateral Agent shall act upon and in compliance with the written instructions of the Controlling Party delivered pursuant to this Security Agreement promptly following receipt of such written instructions; PROVIDED, that the Collateral Agent shall not act in accordance with any instructions (i) which are not authorized by, or are in violation of the provisions of, this Security Agreement or any Transaction Document, (ii) which are in violation of any applicable


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law, rule or regulation or (iii) for which the Collateral Agent has not received reasonable indemnity. Receipt of such instructions shall not be a condition to the exercise by the Collateral Agent of its express duties hereunder or under any Transaction Document, except where this Security Agreement provides that the Collateral Agent is permitted to act only following and in accordance with such instructions.


Section 3.2. PERFORMANCE OF DUTIES. The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Security Agreement and the other Transaction Documents to which the Collateral Agent is a party or as directed by the Controlling Party in accordance with this Security Agreement. The Collateral Agent shall not be required to take any discretionary actions hereunder except at the written direction and with the indemnification of the Controlling Party.


Section 3.3. LIMITATION ON LIABILITY. Neither the Collateral Agent nor any of its directors, officers or employees, shall be liable for any action taken or omitted to be taken by it or them hereunder, or in connection herewith, except that the Collateral Agent shall be liable for its negligence, bad faith or willful misconduct; nor shall the Collateral Agent be responsible for the validity, effectiveness, value, sufficiency or enforceability against the Issuer, the Seller or AFL of this Security Agreement or any of the Collateral (or any part thereof). Notwithstanding any term or provision of this Security Agreement, the Collateral Agent shall incur no liability to the Seller, AFL, the Issuer or the Secured Parties for any action taken or omitted by the Collateral Agent in connection with the Collateral, except for the negligence or willful misconduct on the part of the Collateral Agent, and shall incur no liability to the Seller, AFL, the Issuer or the Secured Parties except for negligence or willful misconduct in carrying out its duties. Subject to Section 3.4, the Collateral Agent shall be protected and shall incur no liability to any such party in relying upon the genuineness of any notice, demand, certificate, signature, instrument or other document reasonably believed by the Collateral Agent to be genuine and to have been duly executed by the appropriate signatory, and (absent actual knowledge to the contrary) the Collateral Agent shall not be required to make any independent investigation with respect thereto. The Collateral Agent shall at all times be free independently to establish to its reasonable satisfaction, but shall have no duty to independently verify, the existence or nonexistence of facts that are a condition to the exercise or enforcement of any right or remedy hereunder or under any of the Transaction Documents. The Collateral Agent may consult with counsel, and shall not be liable for any action taken or omitted to be taken by it hereunder in good faith and in accordance with the written advice of such counsel. The Collaeral Agent shall not be under any obligation to exercise any of the remedial rights or powers vested in it by this Security Agreement or to follow any direction from the Controlling Party unless it shall have received reasonable security or indemnity satisfactory to the Collateral Agent against the costs, expenses and liabilities which might be incurred by it.


Section 3.4. RELIANCE UPON DOCUMENTS. In the absence of bad faith or negligence on its part, the Collateral Agent shall be entitled to rely on any communication, instrument, paper or other document reasonably believed by it to be genuine and correct and to have been signed or sent by the
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