EXECUTION COPY
SERIES 1997-D SUPPLEMENT
dated as of December 16, 1997
to
SPREAD ACCOUNT AGREEMENT
dated as of March 25, 1993,
as amended and restated
as of December 16, 1997
among
ARCADIA FINANCIAL LTD.
ARCADIA RECEIVABLES FINANCE CORP.
FINANCIAL SECURITY ASSURANCE INC.
THE CHASE MANHATTAN BANK
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
TABLE OF CONTENTS
Page
Article I.
DEFINITIONS
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Rules of Interpretation. . . . . . . . . . . . . . . . . 5
Article II.
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.1 Series 1997-D Credit Enhancement Fee . . . . . . . . . . 5
Section 2.2 Series Supplements . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Grant of Security Interest by Arcadia Financial and the
Seller.. . . . . . . . . . . . . . . . . . . . . . . . . 6
Article III.
SPREAD ACCOUNT
Section 3.1 Establishment of Series 1997-D Spread Account; Initial
Deposit into Series 1997-D Spread Account. . . . . . . . 7
Section 3.2 Spread Account Additional Deposits . . . . . . . . . . . 7
Article IV.
MISCELLANEOUS
Section 4.1 Further Assurances . . . . . . . . . . . . . . . . . . . 7
Section 4.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . 7
Section 4.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . 8
Schedule I
SERIES 1997-D SUPPLEMENT
SERIES 1997-D SUPPLEMENT, dated as of December 16, 1997 (the "Series
1997-D Supplement"), by and among ARCADIA FINANCIAL LTD., a Minnesota
corporation ("Arcadia Financial"), ARCADIA RECEIVABLES FINANCE CORP., a
Delaware corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New
York stock insurance company ("Financial Security"), THE CHASE MANHATTAN BANK,
a national banking association, in its capacity as Indenture Trustee under the
Indenture and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Collateral
Agent hereunder.
RECITALS
1. The parties hereto have previously entered into a Spread Account
Agreement, dated as of March 25, 1993, as amended and restated as of December
16, 1997 (the "Spread Account Agreement"), and, as contemplated by
Section 2.02 of the Spread Account Agreement, this Series 1997-D Supplement
constitutes a Series Supplement to the Spread Account Agreement so that
hereafter this Series 1997-D Supplement shall form a part of the Spread
Account Agreement for all purposes thereof, and all references herein and
hereafter to the Spread Account Agreement shall mean the Spread Account
Agreement, as supplemented hereby.
2. Arcadia Automobile Receivables Trust, 1997-D (the "Series 1997-D
Trust") is being formed contemporaneously herewith pursuant to the
Series 1997-D Trust Agreement (as defined herein).
3. Pursuant to the Series 1997-D Sale and Servicing Agreement, the
Seller is selling to the Series 1997-D Trust all of its right, title and
interest in and to the Initial Receivables (as defined in the Series 1997-D
Sale and Servicing Agreement) and certain other Trust Property (as defined in
the Series 1997-D Trust Agreement).
4. Pursuant to the Series 1997-D Indenture, the Series 1997-D Trust is
issuing the Series 1997-D Notes (as defined herein).
5. The Seller has requested that Financial Security issue the Series
1997-D Note Policy to the Trustee to guarantee payment of the Scheduled
Payments (as deemed in such Policy) on each Payment Date in respect of the
Series 1997-D Notes.
6. In partial consideration of the issuance of the Series 1997-D Note
Policy, the Seller has agreed that Financial Security shall have certain
rights as Controlling Party, to the extent set forth in the Spread Account
Agreement and the Series 1997-D Indenture.
7. The Seller is a wholly owned special purpose subsidiary of Arcadia
Financial. The Series 1997-D Trust has agreed to pay the Series 1997-D Credit
Enhancement Fee to the Seller in
consideration of the obligations of the Seller and Arcadia Financial pursuant
hereto and in consideration of the obligations of Arcadia Financial pursuant
to the Series 1997-D Insurance Agreement (such obligations forming part of the
Series 1997-D Insurer Secured Obligations as referred to herein). The Series
1997-D Insurer Secured Obligations form part of the consideration to Financial
Security for its issuance of the Series 1997-D Policy.
8. In order to secure the performance of the Series 1997-D Secured
Obligations, to further effect and enforce the subordination provisions to
which the Series 1997-D Credit Enhancement Fee is subject, and in
consideration of the receipt of the Series 1997-D Credit Enhancement Fee,
Arcadia Financial and the Seller have agreed to pledge the Series 1997-D
Collateral as Collateral to the Collateral Agent for the benefit of Financial
Security and for the benefit of the Trustee on behalf of the Trust, upon the
terms and conditions set forth herein.
AGREEMENTS
In consideration of the premises, and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 DEFINITIONS. All terms defined in Section 1.1 of the
Series 1997-D Sale and Servicing Agreement shall have the same meaning with
respect to this Series 1997-D Supplement. The following terms shall have the
following meanings:
"COLLECTION ACCOUNT SHORTFALL" means, with respect to Series 1997-D and
any Distribution Date, the Deficiency Claim Amount, as defined in the Series
1997-D Sale and Servicing Agreement, with respect to such Distribution Date.
"DEEMED CURED" means with respect to Series 1997-D, (a) with respect to
an event that has occurred pursuant to clause (A)(i) of the definition of
Trigger Event, as of a Determination Date with respect to Series 1997-D, that
no event as specified in clause (A)(i) of the definition thereof with respect
to such Series shall have occurred as of such Determination Date or as of any
of the five consecutively preceding Determination Dates, and (b) with respect
to an event that has occurred pursuant to clause (A)(ii) or clause (A)(iii) of
the definition of Trigger Event, as of the next Determination Date which
occurs in a calendar month which is a multiple of three months succeeding the
Series 1997-D Closing Date, that no event specified in clause (A)(ii) or
clause (A)(iii) of the definition of Trigger Event with respect to such Series
shall have occurred as of such Determination Date.
"INITIAL PRINCIPAL AMOUNT" means $600,000,000 with respect to Series
1997-D.
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"INITIAL SPREAD ACCOUNT DEPOSIT" means $0 for Series 1997-D.
"INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series
1997-D and any Distribution Date, an amount equal to the greater of (i) 7% of
the Series 1997-D Balance as of the close of business on such Distribution
Date and (ii) the Spread Account Minimum Amount as of the close of business on
such Distribution Date.
"SERIES 1997-D BALANCE" means, with respect to Series 1997-D and any
Distribution Date, the aggregate principal amount of the Series 1997-D Notes
as of such Distribution Date (after giving effect to the distributions in
respect of principal on the Notes made on such Distribution Date).
"SERIES 1997-D COLLATERAL" has the meaning specified in Section 2.3(a)
hereof.
"SERIES 1997-D CREDIT ENHANCEMENT FEE" means the amount distributable on
each Distribution Date pursuant to Section 4.6(viii) and (ix) of the Series
1997-D Sale and Servicing Agreement.
"SERIES 1997-D INDENTURE" means the Indenture, dated as of December 1,
1997, among the Series 1997-D Trust, the Trustee and the Indenture Collateral
Agent.
"SERIES 1997-D NOTE POLICY" means the financial guaranty insurance policy
issued by Financial Security with respect to the Series 1997-D Notes.
"SERIES 1997-D NOTES" means the Class A-1, Class A-2, Class A-3 and Class
A-4 Notes issued pursuant to the Series 1997-D Indenture.
"SERIES 1997-D OWNER TRUSTEE" means Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee, or its successor in interest,
and any successor Owner Trustee appointed as provided in the Series 1997-D
Trust Agreement.
"SERIES 1997-D RECEIVABLE" means each Receivable referenced on the
Schedule of Receivables attached to the Series 1997-D Sale and Servicing
Agreement, as supplemented from time to time during the Funding Period by one
or more Subsequent Transfer Agreements.
"SERIES 1997-D RESERVE ACCOUNT" means the Reserve Account established
pursuant to Section 4.1(d) of the Series 1997-D Sale and Servicing Agreement.
"SERIES 1997-D SALE AND SERVICING AGREEMENT" means the Sale and Servicing
Agreement, dated as of December 1, 1997, among the Series 1997-D Trust,
Arcadia Financial, in its individual capacity and as Servicer, the Seller and
the Backup Servicer, as such agreement may be supplemented, amended or
modified from time to time.
"SERIES 1997-D SECURED OBLIGATIONS" means the Insurer Secured Obligations
and the Trustee Secured Obligations with respect to Series 1997-D.
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"SERIES 1997-D SPREAD ACCOUNT" means the Spread Account established
pursuant to Section 3.1(a) hereof.
"SERIES 1997-D SUPPLEMENT" means this Series 1997-D Supplement which
constitutes a Series Supplement to the Spread Account Agreement.
"SERIES 1997-D TRUST AGREEMENT" means the Trust Agreement, dated as of
December 1, 1997, among the Seller, Financial Security and the Series 1997-D
Owner Trustee.
"SPREAD ACCOUNT ADDITIONAL DEPOSIT" means, with respect to Series 1997-D
and any Subsequent Transfer Date, an amount equal to 0.00% of the aggregate
Principal Balance (as of the related Subsequent Cutoff Date) of the Subsequent
Receivables being transferred to the Series 1997-D Trust on such Subsequent
Transfer Date or such greater amount as required by the Rating Agencies to
confirm that the rating assigned to the Series 1997-D Notes will be in the
highest category by such Rating Agencies.
"SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1997-D and
any Distribution Date:
(i) if no Insurance Agreement Event of Default with respect to
Series 1997-D has occurred and is continuing, no Capture Event has
occurred and is continuing, no Trigger Event has occurred on the related
Determination Date, and if any Trigger Event with respect to Series
1997-D has occurred as of a prior Determination Date, such Trigger Event
is Deemed Cured as of the related Determination Date, the Initial Spread
Account Maximum Amount with respect to Series 1997-D and such
Distribution Date;
(ii) if an event specified in clause (A) of the definition of
Trigger Event with respect to Series 1997-D has occurred as of the
Determination Date or has occurred as of a prior Distribution Date (and
whether or not a Trigger Event shall occur or shall have occurred in
connection with such event), and such event is not Deemed Cured as of the
related Determination Date and no Insurance Agreement Event of Default
with respect to Series 1997-D has occurred and is continuing and no
Capture Event has occurred and is continuing, the Spread Account Maximum
Amount shall be equal to the greater of (i) 10% of the Series 1997-D
Balance as of the close of business on such Distribution Date and
(ii) the Spread Account Minimum Amount as of the close of business on
such Distribution Date; or
(iii) if (A) an Insurance Agreement Event of Default with respect to
Series 1997-D has occurred and is continuing or (B) a Capture Event has
occurred and is continuing as of the related Determination Date, the
Spread Account Maximum Amount shall be equal to the greater of (i) 25% of
the Series 1997-D Balance as of the close of business on such
Distribution Date and (ii) the Spread Account Minimum Amount as of the
close of business on such Distribution Date.
"SPREAD ACCOUNT MINIMUM AMOUNT" means, with respect to Series 1997-D and
any Distribution Date, an amount equal to the greater of:
4
(i) $100,000, and
(ii) the lesser of:
(A) 1.5% of the Initial Principal Amount of Series 1997-D, and
(B) the Series 1997-D Balance.
"TRIGGER EVENT" means, with respect to Series 1997-D and as of a
Determination Date, the occurrence of any of the events specified in clause
(A) together with the occurrence of the event specified in clause (B):
(A) (i) the Average Delinquency Ratio for such Determination Date shall
be 7.75% or greater;
(ii) with respect to any Determination Date, the Cumulative Default
Rate shall be equal to or greater than the percentage set forth
in Column A of Schedule I attached hereto corresponding to such
Determination Date;
(iii) with respect to any Determination Date, the Cumulative Net
Loss Rate shall be equal to or greater than the percentage set
forth in Column B of Schedule I attached hereto corresponding
to such Determination Date;
(B) The amount specified with respect to such Series in the last
sentence of Section 2.09(d) of the Spread Account Agreement is
positive on such Determination Date, and such amount has not been
deposited in the related Tag Account on such Determination Date.
Section 1.2 RULES OF INTERPRETATION. The terms "hereof,"
"herein," "hereto" or "hereunder," unless otherwise modified by more specific
reference, shall refer to this Series 1997-D Supplement. Unless otherwise
indicated in context, the terms "Article," "Section" or "Exhibit" shall refer
to an Article or Section of, or Exhibit to, this Series 1997-D Supplement. The
definition of a term shall include the singular, the plural, the past, the
present, the future, the active and the passive forms of such term. A term
defined herein and used herein preceded by a Series designation, shall mean
such term as it relates to the Series designated.
ARTICLE II.
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.1 SERIES 1997-D CREDIT ENHANCEMENT FEE. The Series
1997-D Sale and Servicing Agreement provides for the payment to the Seller of
the Series 1997-D Credit Enhancement Fee, to be paid to the Seller by
distribution of such amounts to the Collateral Agent for deposit and
distribution pursuant to this Agreement. The Seller and Arcadia Financial
hereby agree that payment of the Series 1997-D Credit Enhancement Fee in the
manner and subject to the conditions set forth herein and in the Series 1997-D
Sale and Servicing Agreement is
5
adequate consideration and the exclusive consideration to be received by the
Seller or Arcadia Financial for the obligations of the Seller pursuant hereto
and the obligations of Arcadia Financial pursuant hereto (including, without
limitation, the transfer by the Seller to the Collateral Agent of the Initial
Spread Account Deposit with respect to Series 1997-D) and pursuant to the
Series 1997-D Insurance Agreement. The Seller and Arcadia Financial hereby
agree with the Trustee and with Financial Security that payment of the Series
1997-D Credit Enhancement Fee to the Seller is expressly conditioned on
subordination of the Series 1997-D Credit Enhancement Fee to payments on the
Notes (if any) and Certificates of any Series, payments of amounts due to
Financial Security and the other obligations of the Trusts, in each case to
the extent provided in Section 4.6 of the Standard Terms and Conditions or
Section 4.6 of the related Sale and Servicing Agreement, as applicable, and
Section 3.03 of the Spread Account Agreement, and the Security Interest of the
Secured Parties in the Series 1997-D Collateral is intended to effect and
enforce such subordination and to provide security for the Series 1997-D
Secured Obligations and subject to the terms hereof the Secured Obligations
with respect to other Series.
Section 2.2 SERIES SUPPLEMENTS. As provided in and subject to
the conditions specified in Section 2.02 of the Spread Account Agreement, the
parties hereto are entering into this Series 1997-D Supplement with respect to
the Series 1997-D Securities.
Section 2.3 GRANT OF SECURITY INTEREST BY ARCADIA FINANCIAL AND
THE SELLER.
(a) In order to secure the performance of the Secured Obligations
with respect to each Series, the Seller (and Arcadia Financial, to the extent
it may have any rights therein) hereby pledges, assigns, grants, transfers and
conveys to the Collateral Agent, on behalf of and for the benefit of the
Secured Parties to secure the Secured Obligations, a lien on and security
interest in (which lien and security interest is intended to be prior to all
other liens, security interests or other encumbrances), all of its right,
title and interest in and to the following (all being collectively referred to
herein as the "Series 1997-D Collateral"):
(i) the Series 1997-D Credit Enhancement Fee and all rights and
remedies that the Seller may have to enforce payment of the Series 1997-D
Credit Enhancement Fee whether under the Series 1997-D Sale and Servicing
Agreement or otherwise;
(ii) the Series 1997-D Spread Account established pursuant to
Section 3.1 of this Series 1997-D Supplement and Section 3.01 of the
Spread Account Agreement, and each other account owned by the Seller and
maintained by the Collateral Agent (including, without limitation, all
monies, checks, securities, investments and other documents from time to
time held in or evidencing any such accounts);
(iii) all of the Seller's right, title and interest in and to
investments made with proceeds of the property described in clauses
(i) and (ii) above, or made with amounts on deposit in the Series 1997-D
Spread Account; and
(iv) all distributions, revenues, products, substitutions, benefits,
profits and proceeds, in whatever form, of any of the foregoing.
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(b) In order to effectuate the provisions and purposes of this
Series 1997-D Supplement, including for the purpose of perfecting the security
interests granted hereunder, the Seller represents and warrants that it has,
prior to the execution of this Series 1997-D Supplement, executed and filed an
appropriate Uniform Commercial Code financing statement in Minnesota
sufficient to ensure that the Collateral Agent, as agent for the Secured
Parties, has a first priority perfected security interest in all Series 1997-D
Collateral which can be perfected by the filing of a financing statement.
ARTICLE III.
SPREAD ACCOUNT
Section 3.1 ESTABLISHMENT OF SERIES 1997-D SPREAD ACCOUNT;
INITIAL DEPOSIT INTO SERIES 1997-D SPREAD ACCOUNT.
(a) On or prior to the Closing Date, the Collateral Agent shall
establish with respect to Series 1997-D, at its office or at another
depository institution or trust company, an Eligible Account, designated
"Spread Account-Series 0000-X-Xxxxxxx Xxxx Xxxxxxxxx, National Association, as
Collateral Agent for Financial Security Assurance Inc. and another Secured
Party" (the "Series 1997-D Spread Account").
(b) On the Closing Date relating to Series 1997-D, the Collateral
Agent shall deposit the Initial Spread Account Deposit with respect to Series
1997-D received from the Seller into the Series 1997-D Spread Account.
Section 3.2 SPREAD ACCOUNT ADDITIONAL DEPOSITS. On each
Subsequent Transfer Date, the Series 1997-D Trust will, pursuant to Section
2.4 of the Series 1997-D Sale and Servicing Agreement, deliver on behalf of
the Seller the Spread Account Additional Deposit for such Subsequent Transfer
Date to the Collateral Agent. The Collateral Agent shall deposit each such
Spread Account Additional Deposit received from the Series 1997-D Trust into
the Series 1997-D Spread Account.
ARTICLE IV.
MISCELLANEOUS
Section 4.1 FURTHER ASSURANCES. Each party hereto shall take
such action and deliver such instruments to any other party hereto, in
addition to the actions and instruments specifically provided for herein, as
may be reasonably requested or required to effectuate the purpose or
provisions of this Series 1997-D Supplement or to confirm or perfect any
transaction described or contemplated herein.
Section 4.2 GOVERNING LAW. This Series 1997-D Supplement shall
be governed by and construed, and the obligations, rights and remedies of the
parties hereunder shall be determined, in accordance with the laws of the
State of New York.
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Section 4.3 COUNTERPARTS. This Series 1997-D Supplement may be
executed in two or more counterparts by the parties hereto, and each such
counterpart shall be considered an original and all such counterparts shall
constitute one and the same instrument.
Section 4.4 HEADINGS. The headings of sections and paragraphs
and the Table of Contents contained in this Series 1997-D Supplement are
provided for convenience only. They form no part of this Series 1997-D
Supplement and shall not affect its construction or interpretation.
8
IN WITNESS WHEREOF, the parties hereto have executed this Series 1997-D
Supplement as of the date set forth on the first page hereof.
ARCADIA FINANCIAL LTD.
By /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Executive Vice President and Chief
Financial Officer
ARCADIA RECEIVABLES FINANCE CORP.
By /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Senior Vice President and Chief
Financial Officer
FINANCIAL SECURITY ASSURANCE INC.
By /s/ illegible
------------------------------------------
Authorized Officer
THE CHASE MANHATTAN BANK, as Trustee
By /s/ Xxxx Xxxxxx
------------------------------------------
Xxxx Xxxxxx
Assistant Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By /s/ Xxxx X. Xxxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Corporate Trust Officer
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SCHEDULE I
Determination Date(*) Cumulative Default Rate Cumulative Net Loss Rate
(month) (Column A) (Column B)
0 to 3 2.11% 0.88%
3 to 6 4.21% 1.76%
6 to 9 6.10% 2.55%
9 to 12 7.79% 3.26%
12 to 15 10.03% 4.20%
15 to 18 12.07% 5.05%
18 to 21 13.85% 5.80%
21 to 24 15.40% 6.44%
24 to 27 16.21% 6.78%
27 to 30 16.86% 7.05%
30 to 33 17.43% 7.29%
33 to 36 17.92% 7.50%
36 to 39 18.15% 7.60%
39 to 42 18.34% 7.67%
42 to 45 18.49% 7.74%
45 to 48 18.62% 7.79%
48 to 51 18.73% 7.84%
51 to S4 18.81% 7.87%
54 to 57 18.88% 7.90%
57 to 60 18.93% 7.92%
60 to 63 18.96% 7.93%
63 to 66 18.98% 7.94%
66 to 69 18.99% 7.95%
69 and higher 19.00% 7.95%
--------------------------
(*) Such Determination Date occurring after the designated calendar months
succeeding the Series 1997-D Closing Date appearing first in the column below,
and prior to or during the designated calendar months succeeding the Series
1997-D Distribution Date appearing second in the column below.
