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                               ARCADIA FINANCIAL LTD.
                                          
                        NON-STATUTORY STOCK OPTION AGREEMENT


     Arcadia Financial Ltd., a Minnesota corporation (the "Company"), hereby 
grants to Warren Kantor (the "Optionee"), an option (the "Option") to 
purchase a total of 125,000 shares of the $.01 par value common stock 
("Common Stock") of the Company (the "Shares"), at the price determined as 
provided herein, and in all respects subject to the terms, definitions and 
provisions hereof.  The grant of this Option is subject to the approval 
thereof by the shareholders of the Corporation (if such approval is required 
by applicable laws or regulations) and by the Board of Directors of the 
Corporation.

     1.   NATURE OF THE OPTION.  This Non-Statutory Stock Option is not intended
to qualify as an Incentive Stock Option as defined in Section 422A of the Code.

     2.   EXERCISE PRICE.  The exercise price is $4.00 for each share of 
Common Stock, which price the Board of Directors of the Company (the "Board') 
has determined is not less than the fair market value per share of the Common 
Stock on the date of grant.

     3.   EXERCISE OF OPTION.  The Option shall be exercisable during its 
term as follows:

          (i)  RIGHT TO EXERCISE.

               (a)  Subject to subsections 3(i)(b), (c) and (d) below, this 
Option shall be exercisable to the extent of one hundred percent (100%) of 
the Shares subject to the Option commencing on December 31, 1999.  
Notwithstanding the previous sentence of this subsection 3(i)(a), this Option 
shall be exercisable cumulatively to the extent of one hundred percent (100%) 
of the Shares subject to the Option regardless of whether otherwise 
exercisable by the Optionee as of the date of the occurrence of the first to 
occur of any of the following events prior to December 31, 1999:

                    x)   the death or disability of Optionee; or

                    y)   the termination by the Company of the Consulting
          Agreement dated as of January 20, 1999, by and between the Company and
          the Optionee (the "Consulting Agreement") without Cause as such term
          is defined in the Consulting Agreement; or the termination of the
          Consulting Agreement by Optionee due to the material breach thereof by
          the Company; or
                    
                    z)   a "Change of Control" of the Company.  As used herein
          the term "Change of Control" shall mean the closing of any transaction
          or series of transactions by which the Company shall merge with
          (whether or not the Company is the surviving entity) or consolidate
          into any other person or lease or sell substantially all of its and
          its subsidiaries assets (other than asset sales in connection with
          automobile loan securitization transactions) substantially as an



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          entirety to any other person or by which any person or group (within
          the meaning of Rule 13d-5 under the Securities Exchange Act of 1934)
          acquires, directly or indirectly, 51% or more of the Company's
          outstanding common stock (calculated on a fully diluted basis); or

and, provided further, in the event the Consulting Agreement is terminated prior
to December 31, 1999 by the mutual agreement of the Company and the Optionee,
notwithstanding the previous sentence of this subsection 3(i)(a), this Option
shall be exercisable cumulatively to the extent of that fraction of the Shares
subject to the Option the numerator of which shall be the number of days elapsed
in 1999 as of the date of such termination and the denominator of which shall be
365, rounded down to the next lower full share amount.

               (b)  This Option may not be exercised for a fraction of a share.

               (c)  In the event of Optionee's death, disability or other
termination of the Consulting Agreement, the exercisability of the Option is
governed by Sections 7, 8 and 9 below, subject to the limitations contained in
subsection 3(i)(d).

               (d)  In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in Section 11 below.

         (ii)  METHOD OF EXERCISE.  This Option shall be exercisable by written
notice which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such shares of Common Stock as may be required by the Company.  Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company.  The written notice shall be
accompanied by payment of the exercise price.  Until certificates for the Shares
are issued to the Optionee, such Optionee shall not have any rights as a
shareholder of the Company.

     No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.

     4.   OPTIONEE'S REPRESENTATIONS.  In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, deliver to the Company his Investment Representation Statement in the
form reasonably required by the Company.

     5.   METHOD OF PAYMENT.  Payment of the exercise price shall be by (i)
cash; (ii) check; or (iii) if authorized by the Board of Directors of the
Company, the surrender of other shares of Common Stock of the Company which (A)
either have been owned by the Optionee for more that six (6) months on the date
of surrender or were not acquired, directly or indirectly, from the 


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Company and (B) have a fair market value (as determined by the Board) on the 
date of surrender equal to the exercise price of the Shares as to which the 
Option is being exercised.

     6.   RESTRICTIONS ON EXERCISE.  This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board.  As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.

     7.   TERMINATION OF CONSULTING AGREEMENT.  In the event of termination of
the Consulting Agreement prior to January 1, 2000 (i) by Optionee other than due
to the material breach of the terms thereof by the Company or (ii) by the
Company for Cause, the Option shall terminate.

     8.   DISABILITY OF OPTIONEE.  In the event of termination of the 
Consulting Agreement, as a result of Optionee's disability, he may, but only 
within one year from the date of such termination (but in no event later than 
the date of expiration of the term of this Option as set forth in Section 11 
below), exercise his Option to the extent he was entitled to exercise it at 
the date of such termination.  To the extent that Optionee was not entitled 
to exercise the Option at the date of termination, or if he does not exercise 
such Option (which he was entitled to exercise) within the time specified 
herein, the Option shall terminate.

     9.   DEATH OF OPTIONEE.  In the event of the death of Optionee during 
the term of this Option, the Option may be exercised, at any time within one 
(1) year following the date of death (but in no event later than the date of 
expiration of the term of this Option as set forth in Section 11 below), by 
Optionee's estate or by a person who acquired the right to exercise the 
Option by bequest or inheritance, but only to the extent Optionee was 
entitled to exercise the Option at the date of death.

     10.  NON-TRANSFERABILITY OF OPTION.  Without the prior written consent 
of the Company, this Option may not be transferred in any manner otherwise 
than by will or by the laws of descent or distribution and may be exercised 
during the lifetime of Optionee only by him.  The terms of this Option shall 
be binding upon the Optionee and his or her personal representatives, heirs, 
successors and assigns.

     11.  TERM OF OPTION.  This Option may not be exercised after January 20, 
2009, and may be exercised only in accordance with the terms of this Option.

     12.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.  The number of
shares of Common Stock covered by this Option and the exercise price shall be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that 


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conversion of any convertible securities of the Company shall not be deemed 
to have been "effected without receipt of consideration."  Such adjustment 
shall be made by the Board, whose determination in that respect shall be 
final, binding and conclusive.  Except as expressly provided herein, no 
issuance by the Company of shares of stock of any class, or securities 
convertible into shares of stock of any class, or options or rights to 
purchase shares of stock of any class shall affect, and no adjustment by 
reason thereof shall be made with respect to, the number or price of shares 
of Common Stock subject to this Option.

     In the event of the proposed dissolution or liquidation of the Company, 
the Option will terminate immediately prior to the consummation of such 
proposed action, unless otherwise provided by the Board.  The Board may, in 
the exercise of its sole discretion in such instances, declare that the 
Option shall terminate as of a date fixed by the Board and give the Optionee 
the right to exercise his Option as to all or any part of the Shares.  In the 
event of a change of control of the Company, the Board shall notify the 
Optionee that the Option shall be fully exercisable for a period of ten (10) 
days from the date of such notice, and the Option will terminate upon the 
expiration of such period.

     13.  NO RIGHTS AS SHAREHOLDER.  The Optionee shall have no rights as a 
shareholder with respect to any Shares subject to this Option prior to the 
date of issuance to him of a certificate or certificates for such shares.

DATE OF GRANT: January 20, 1999

                                        ARCADIA FINANCIAL LTD.


                                        By:  __________________________
                                             Richard A. Greenawalt
                                             Title: Chief Executive Officer



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     OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE OPTION AGREEMENT AND 
CERTAIN INFORMATION RELATED THERETO AND REPRESENTS THAT HE IS FAMILIAR WITH 
THE TERMS AND PROVISIONS THEREOF, AND HEREBY ACCEPTS THIS OPTION SUBJECT TO 
ALL OF THE TERMS AND PROVISIONS THEREOF.  OPTIONEE HAS REVIEWED THIS OPTION 
IN ITS ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR 
TO EXECUTING THIS OPTION AND FULLY UNDERSTANDS ALL PROVISIONS OF THE OPTION. 
OPTIONEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL 
DECISIONS OR INTERPRETATIONS OF THE BOARD UPON ANY QUESTIONS ARISING UNDER 
THE OPTION. OPTIONEE FURTHER AGREES TO NOTIFY THE COMPANY UPON ANY CHANGE IN 
THE RESIDENCE ADDRESS INDICATED BELOW.

                                        Optionee:

Dated:  January 20, 1999                ______________________________________
                                        Warren Kantor
                                        Residence Address:
                                        720 Springmill Road 
                                        Villanova, PA  19185