EXECUTION COPY
SERIES 1997-C SUPPLEMENT
dated as of September 18, 1997
to
SPREAD ACCOUNT AGREEMENT
dated as of March 25, 1993,
as amended and restated
as of June 1, 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-C 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-C Spread Account; Initial Deposit
into Series 1997-C 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-C SUPPLEMENT
SERIES 1997-C SUPPLEMENT, dated as of September 18, 1997 (the "Series
1997-C 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 June 1,
1997 (the "Spread Account Agreement"), and, as contemplated by Section 2.02 of
the Spread Account Agreement, this Series 1997-C Supplement constitutes a Series
Supplement to the Spread Account Agreement so that hereafter this Series 1997-C
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-C (the "Series 1997-C
Trust") is being formed contemporaneously herewith pursuant to the Series 1997-C
Trust Agreement (as defined herein).
3. Pursuant to the Series 1997-C Sale and Servicing Agreement, the Seller
is selling to the Series 1997-C Trust all of its right, title and interest in
and to the Initial Receivables (as defined in the Series 1997-C Sale and
Servicing Agreement) and certain other Trust Property (as defined in the Series
1997-C Trust Agreement).
4. Pursuant to the Series 0000-X Xxxxxxxxx, the Series 1997-C Trust is
issuing the Series 1997-C Notes (as defined herein).
5. The Seller has requested that Financial Security issue the Series
1997-C 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-C
Notes.
6. In partial consideration of the issuance of the Series 1997-C 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 0000-X Xxxxxxxxx.
7. The Seller is a wholly owned special purpose subsidiary of Arcadia
Financial. The Series 1997-C Trust has agreed to pay the Series 1997-C 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-C Insurance Agreement (such obligations forming part of the
Series 1997-C Insurer Secured Obligations as referred to herein). The Series
1997-C Insurer Secured Obligations form part of the consideration to Financial
Security for its issuance of the Series 1997-C Policies.
8. In order to secure the performance of the Series 1997-C Secured
Obligations, to further effect and enforce the subordination provisions to which
the Series 1997-C Credit Enhancement Fee is subject, and in consideration of the
receipt of the Series 1997-C Credit Enhancement Fee, Arcadia Financial and the
Seller have agreed to pledge the Series 1997-C 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-C SALE AND SERVICING AGREEMENT SHALL HAVE THE SAME MEANING WITH
RESPECT TO THIS SERIES 1997-C SUPPLEMENT. THE FOLLOWING TERMS SHALL HAVE THE
FOLLOWING MEANINGS:
"COLLECTION ACCOUNT SHORTFALL" means, with respect to Series 1997-C and any
Distribution Date, the Deficiency Claim Amount, as defined in the Series 1997-C
Sale and Servicing Agreement, with respect to such Distribution Date.
"DEEMED CURED" means with respect to Series 1997-C, (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-C, 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-C
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 $775,000,000 with respect to Series
1997-C.
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"INITIAL SPREAD ACCOUNT DEPOSIT" means $0 for Series 1997-C.
"INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series
1997-C and any Distribution Date, an amount equal to the greater of (i) 7% of
the Series 1997-C 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 0000-X XXXXXXX" means, with respect to Series 1997-C and any
Distribution Date, the aggregate principal amount of the Series 1997-C 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-C COLLATERAL" has the meaning specified in Section 2.3(a)
hereof.
"SERIES 1997-C CREDIT ENHANCEMENT FEE" means the amount distributable on
each Distribution Date pursuant to Section 4.6(viii) and (ix) of the Series
1997-C Sale and Servicing Agreement.
"SERIES 0000-X XXXXXXXXX" means the Indenture, dated as of September 1,
1997, among the Series 1997-C Trust, the Trustee and the Indenture Collateral
Agent.
"SERIES 1997-C NOTE POLICY" means the financial guaranty insurance policy
issued by Financial Security with respect to the Series 1997-C Notes.
"SERIES 1997-C NOTES" means the Class A-1, Class A-2, Class A-3, Class A-4
and Class A-5 Notes issued pursuant to the Series 0000-X Xxxxxxxxx.
"SERIES 1997-C 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-C Trust
Agreement.
"SERIES 1997-C RECEIVABLE" means each Receivable referenced on the Schedule
of Receivables attached to the Series 1997-C Sale and Servicing Agreement, as
supplemented from time to time during the Funding Period by one or more
Subsequent Transfer Agreements.
"SERIES 1997-C RESERVE ACCOUNT" means the Reserve Account established
pursuant to Section 4.1(d) of the Series 1997-C Sale and Servicing Agreement.
"SERIES 1997-C SALE AND SERVICING AGREEMENT" means the Sale and Servicing
Agreement, dated as of September 1, 1997, among the Series 1997-C 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-C SECURED OBLIGATIONS" means the Insurer Secured Obligations
and the Trustee Secured Obligations with respect to Series 1997-C.
3
"SERIES 1997-C SPREAD ACCOUNT" means the Spread Account established
pursuant to Section 3.1(a) hereof.
"SERIES 1997-C SUPPLEMENT" means this Series 1997-C Supplement which
constitutes a Series Supplement to the Spread Account Agreement.
"SERIES 1997-C TRUST AGREEMENT" means the Trust Agreement, dated as of
September 1, 1997, among the Seller, Financial Security and the Series 1997-C
Owner Trustee.
"SPREAD ACCOUNT ADDITIONAL DEPOSIT" means, with respect to Series 1997-C
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-C 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-C Notes will be in the
highest category by such Rating Agencies.
"SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1997-C and
any Distribution Date:
(i) if no Insurance Agreement Event of Default with respect to
Series 1997-C 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-C
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-C and such Distribution Date;
(ii) if an event specified in clause (A) of the definition of
Trigger Event with respect to Series 1997-C 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-C 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-C 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-C 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-C 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-C 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-C,
and
(B) the Series 1997-C Balance.
"TRIGGER EVENT" means, with respect to Series 1997-C 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 6.53% 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-C 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-C 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-C CREDIT ENHANCEMENT FEE. The Series
1997-C Sale and Servicing Agreement provides for the payment to the Seller of
the Series 1997-C 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-C Credit Enhancement Fee in the manner and
subject to the conditions set forth herein and in the Series 1997-C 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-C) and pursuant to the Series
1997-C Insurance Agreement. The Seller and Arcadia Financial hereby agree with
the Trustee and with Financial Security that payment of the Series 1997-C Credit
Enhancement Fee to the Seller is expressly conditioned on subordination of the
Series 1997-C 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-C Collateral is intended to effect and enforce such subordination
and to provide security for the Series 1997-C 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-C Supplement with respect to
the Series 1997-C 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-C Collateral"):
(i) the Series 1997-C Credit Enhancement Fee and all rights and
remedies that the Seller may have to enforce payment of the Series 1997-C
Credit Enhancement Fee whether under the Series 1997-C Sale and Servicing
Agreement or otherwise;
(ii) the Series 1997-C Spread Account established pursuant to
Section 3.1 of this Series 1997-C 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-C Spread
Account; and
(iv) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the foregoing.
6
(b) In order to effectuate the provisions and purposes of this Series
1997-C 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-C 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-C Collateral which
can be perfected by the filing of a financing statement.
ARTICLE III.
SPREAD ACCOUNT
Section 3.1 ESTABLISHMENT OF SERIES 1997-C SPREAD ACCOUNT; INITIAL
DEPOSIT INTO SERIES 1997-C SPREAD ACCOUNT.
(a) On or prior to the Closing Date, the Collateral Agent shall
establish with respect to Series 1997-C, at its office or at another depository
institution or trust company, an Eligible Account, designated "Spread
Account-Series 1997-C-Norwest Bank Minnesota, National Association, as
Collateral Agent for Financial Security Assurance Inc. and another Secured
Party" (the "Series 1997-C Spread Account").
(b) On the Closing Date relating to Series 1997-C, the Collateral
Agent shall deposit the Initial Spread Account Deposit with respect to Series
1997-C received from the Seller into the Series 1997-C Spread Account.
Section 3.2 SPREAD ACCOUNT ADDITIONAL DEPOSITS. ON EACH SUBSEQUENT
TRANSFER DATE, THE SERIES 1997-C TRUST WILL, PURSUANT TO SECTION 2.4 OF THE
SERIES 1997-C 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-C TRUST INTO THE SERIES 1997-C
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-C Supplement or to confirm or perfect any transaction described or
contemplated herein.
Section 4.2 GOVERNING LAW. This Series 1997-C 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.
7
Section 4.3 COUNTERPARTS. This Series 1997-C 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-C Supplement are provided
for convenience only. they form no part of this Series 1997-C Supplement and
shall not affect its construction or interpretation.
8
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS SERIES 1997-C
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/ Xxxxx Xxxxx
-------------------------------------
Authorized Officer
THE CHASE MANHATTAN BANK, as Trustee
By /s/ Marcus Gustafsan
-------------------------------------
Name: Marcus Gustafsan
Title: Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Corporate Trust Officer
SCHEDULE I
Determination Date* Cumulative Default Rate Cumulative Net Loss Rate
(month) (Column A) (Column B)
0 to 3 2.60% 1.37%
3 to 6 4.82% 2.39%
6 to 9 6.80% 3.23%
9 to 12 8.47% 3.83%
12 to 15 9.29% 4.20%
15 to 18 10.41% 4.54%
18 to 21 11.42% 4.79%
21 to 24 12.15% 4.98%
24 to 27 12.82% 5.12%
27 to 30 13.37% 5.26%
30 to 33 13.81% 5.36%
33 to 36 14.14% 5.46%
36 to 39 14.44% 5.54%
39 to 42 14.61% 5.62%
42 to 45 14.78% 5.70%
45 to 48 14.91% 5.74%
48 to 51 14.99% 5.78%
51 to 54 15.06% 5.82%
54 to 57 15.09% 5.85%
57 to 60 15.13% 5.87%
60 to 63 15.14% 5.89%
63 to 66 15.16% 5.91%
66 to 69 15.17% 5.92%
69 to 72 15.19% 5.94%
--------------------------
* Such Determination Date occurring after the designated calendar months
succeeding the Series 1997-C Closing Date appearing first in the column below,
and prior to or during the designated calendar months succeeding the Series
1997-C Distribution Date appearing second in the column below.
