Exhibit 10.3
SECURITY AGREEMENT
June 30, 1998
Ladies and Gentlemen:
Please refer to (i) the First Tier Receivables Purchase Agreement, dated
as of the date hereof (the "First Tier Receivables Purchase Agreement"), between
Compass Bank, an Alabama state banking corporation ("Compass Bank"), Compass
Bank, a Texas state bank ("Compass Bank-Texas"; and together with Compass Bank,
the "Sellers"), and Compass Auto Receivables Corporation, a Delaware corporation
("Compass Auto"), (ii) the Second Tier Receivables Purchase Agreement, dated as
of June 24, 1998 (the "Second Tier Receivables Purchase Agreement"), between
Compass Auto and Asset Backed Securities Corporation (the "Company"), (iii) the
Sale and Servicing Agreement, dated as of the Closing Date (the "Sale and
Servicing Agreement"), between the Company, Compass Auto Receivables Trust 1998-
A, an Alabama business trust (the "Trust"), Compass Bank and The Chase Manhattan
Bank, in its capacity as indenture trustee (the "Indenture Trustee"), and (iv)
the Indenture, dated as of the date hereof (the "Indenture"), between the Trust
and the Indenture Trustee. Capitalized terms used herein but not otherwise
defined herein shall have the definitions assigned to such terms in Appendix X
to the Sale and Servicing Agreement.
Pursuant to the First Tier Receivables Purchase Agreement, each Seller
will, on the date hereof, transfer to Compass Auto all of such Seller's right,
title and interest in and to the Collateral (as defined below). Compass Auto
will in turn transfer the Collateral to the Company pursuant to the Second Tier
Receivables Purchase Agreement. Pursuant to the Sale and Servicing Agreement,
the Company will transfer the Collateral to the Trust, which in turn will grant
a security interest in such Collateral to the Indenture Trustee for the benefit
of the Holders of the Notes to be issued by the Trust.
It is each Seller's intent that the transfer to Compass Auto pursuant to
the First Tier Receivables Purchase Agreement be an absolute sale, and not
merely a pledge, of the Collateral. If, however, such transfer is for any
purpose construed not to be an absolute sale, then such transfer, together with
the other transactions effected by the Basic Documents, shall constitute a loan
to each
Seller from the Noteholders. The terms of such loan shall entitle each
Noteholder to receive payment in full of the Secured Obligations (as defined
below) owed to it.
To secure the Secured Obligations, each Seller hereby grants to the
Indenture Trustee, in trust for the benefit of all Secured Parties (as defined
below), a security interest in and to, all right, title, and interest of such
Seller in and to (i) the Receivables, (ii) all monies received thereon and
allocable to principal on and after the Cutoff Date, (iii) all monies received
thereon and allocable to interest on and after July 1, 1998, (iv) the security
interests in the Financed Vehicles granted by Obligors pursuant to the
Receivables and, to the extent permitted by law, any accessions thereto, (v) any
proceeds with respect to the Receivables from claims on any Insurance Policies
covering Financed Vehicles or the Obligors, (vi) any recourse against Dealers
with respect to the Receivables under the Dealer Agreements and (vii) any and
all proceeds of the foregoing (collectively, the "Collateral); provided, that
no holder of a Secured Obligation shall be entitled to receive proceeds of the
security interest created hereunder in excess of the amount such Person would
have received if the transfer of Collateral under the First Tier Receivables
Purchase Agreement were determined to be an absolute sale of the Collateral by
the Sellers to Compass Auto.
"Secured Obligations" means (i) the rights of each Secured Party to be paid
its share of the Noteholders' Principal Distributable Amount under the
Indenture, interest on the Notes held by it at the rate specified in the
Indenture, and any other amounts owed to it under the terms of the Indenture,
and (ii) all other obligations of each Seller under the Basic Documents if such
obligations are to or for the benefit of any Secured Party.
"Secured Parties" means all Noteholders, excluding in each case any such
Person that is an Affiliate of a Seller.
Each Seller agrees that the Indenture Trustee (for the benefit of the
Secured Parties) shall have all of the rights of a secured creditor under the
New York Uniform Commercial Code. Additionally, each Seller agrees that the
Indenture Trustee shall have all of the rights with respect to the foregoing
collateral that the Indenture Trustee would have under the Indenture, the First
Tier Receivables Purchase Agreement and the other Basic Documents.
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This letter agreement shall be construed in accordance with the laws of
the State of New York, without reference to its conflict of law provisions, and
the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
COMPASS BANK, an Alabama state
banking corporation
/s/ Xxxxxxx X. Xxxxx
By:_____________________________________
Name: Xxxxxxx X. Xxxxx
Title: Chief Financial Officer
COMPASS BANK, a Texas state bank
/s/ Xxxxxxx X. Xxxxx
By:_____________________________________
Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President and Treasurer
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Acknowledged and Agreed as of the date
first written above:
COMPASS AUTO RECEIVABLES CORPORATION
/s/ Xxxxxxx X. Xxxxxx
By:___________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
ASSET BACKED SECURITIES CORPORATION
/s/ Xxxxxx X. Xxxxxxxx
By:___________________________________
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
COMPASS AUTO RECEIVABLES TRUST 1998-A
By: The Bank of New York Trust Company of
Florida, N.A., a national banking association,
not in its individual capacity but solely as
Owner Trustee
/s/ Xxxxx X. Xxxxxxx
By:___________________________________
Name: Xxxxx X. Xxxxxxx
Title: Vice President
THE CHASE MANHATTAN BANK, a New York
banking corporation, not in its individual capacity
but solely as Indenture Trustee
/s/ Jo Xxx Xxxxxxx
By:___________________________________
Name: Jo Xxx Xxxxxxx
Title: Trust Officer
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